It means orders of magnitude less. The part of the blockchain that proves your transaction was valid is now (oversimplifying here) just a boolean check instead of running a hash algo over and over
I think a better way to say it is that it moves from a trustless system to a system that trusts based on some criteria. That criteria is usually how many coins one has.
Since the original bitcoin concept was solving the byzantine generals problem, the entire point of all the cryptographic work was to be trustless.
If you are cool with trust, you can have reversibility, lost password retrieval, anti-money laundering checks, and all the other features of the existing financial system.
It would be a carbon copy of that, of course, which would raise the question of what problem this system is solving for people.
But I understand that Ethereum is about distributed computing, not transactions, so the calculus may be different. The point being to replace AWS, not Western Union.
I'm personally not sold on why a distributed trust algorithm would be superior to trusting AWS or Azure, given that those services can give you a refund for errors, are subject to the legal system, have a brand reputation to maintain, and so on.
I guess I don't understand how proof of stake uses trust while proof of work doesn't. They seem very similar to me. I could argue that with Bitcoin you have to trust all of these large pools that are constantly flirting with 50% of the hashing power.
With PoW, we trust that the mining algorithm is going to take X amount of time given Y amount of computation. That arguably removes trust from people and puts it in the properties of tech.
PoS argues that PoW is just a proxy indicator of stake, where the stake is computing resources that are committed to mining. With PoS, rather than reifying your resources into CPUs that churn wastefully, we reify the resources into in-ledger coins which are held in escrow. Block-writers are selected randomly from a pool of miners which are weighted by the amount of stake in escrow. If the miner violates the protocol, they lose their escrowed stake.
So PoS moves from "trust in algorithm runtime on modern hardware" to "trust in economic game theory," I figure.
I wouldn't call Bitcoin's POW as "trust in algorithm runtime on modern hardware".
Just think about it. The algorithm can be changed by anybody. What does prevent the miners from changing the source code to allow them double spending or even extra coins?
But if they do that and don't have a significant hashrate that do the same, they are on a blockchain fork that is worthless to anybody else.
So we trust in the economic game theory that miners don't tamper with the code.
> Just think about it. The algorithm can be changed by anybody.
It can. But the key point is if you change the algorithm by say reducing the number of hashes required (so you increase your chance of winning) it can be detected by just inspecting the block. You don't need access to the code, or be able to watch it running, or trust some hardware, or the person running it, or anything else beyond inspecting the output block and trusting calculating the hash is as hard as it appears. The easy of doing that check that is ultimately what keeps the system safe. Everybody can trivially determine you've cheated, so everybody knows you've behaved in a way that helps you and hurts them, so everybody rejects your block. I guess you could call it game theory, but it is a drop simple game that is easy to analyse and see it gets the desired end result - your bitcoins trade has been immutably recorded in the block chain.
I don't understand how PoS stake works, but the parents description ("reify the resources into in-ledger coins ... block-writers are selected randomly ... weighted by the amount of stake in escrow") makes it sound much more complex. So complex that I wonder if it can be verified by just taking a quick peek at the output block it produced. If it can't, and it's something that relies on trusting code, people or hardware, and within that complexity may well lie a hidden flaw that leads to everyone realising they lost control of their Ethereum days or weeks after it happened. The importance of days or weeks is it's already been cashed out before you realised what was happening.
But I guess that's all wild speculation, and I should look at the algorithm.
You have to differentiate between consensus rules and how the blockchain is secured.
Verifying if the consensus rules hold is equally simple in both POS and POW. But with Bitcoin's POW, the hashrate is part of the consensus rules by requiring the hash of the output block having a certain property which can only be attained in a timely manner with enough processing power and luck (in that sense, also in POW a block proposer is chosen "randomly").
With POS, you don't have the hashrate. But you have the stake which (in Ethereum's POS) is lost if you try to vote for more than one possible new block for the chain. Which is a direct economic incentive to behave correctly.
You could have 99% of the Bitcoin hashrate and start mining blocks that give you double the reward, but every other miner and node on the network would just ignore you because you aren't following the rules.
That is a good point. Although, in principle Proof of Stake could use any number of algorithms, and thus the trust could be based on something other than who has the most resources. In general for distributed systems, trusting based on reputation is a common idea. "Circles of trust" was how the original Ripple concept was explained.
The important question is not which of these ideas is better than each other, but which is better than existing infrastructure.
Mining does not validate transactions. It settles them. Even in proof-of-work cryptocurrencies proving the validity of a transaction is a mere signature and unspent outputs check.
Just to riff on this idea, despite inevitable pushback:
Bitcoin's proof-of-work is basically a conversion of energy directly into money. This pushes competition towards cheaper and cheaper sources of energy. First it's finding jurisdictions that subsidize it, then it's creating your own cheaper energy sources. Proof-of-work incentivizes cheap & renewable energy investment.
The penultimate phase is custom off-grid mining farms that power themselves via their own renewables. The endgame is that all energy companies will primarily be Bitcoin mining companies, feeding their excess renewable energy into the grid to power homes, etc.
> Proof-of-work incentivizes cheap & renewable energy investment.
Cheap yes, renewable no. Complete non sequitur there.
> The endgame is that all energy companies will primarily be Bitcoin mining companies, feeding their excess renewable energy into the grid to power homes, etc.
Absolute insanity straight out of postapocalyptic SF.
"The ancients destroyed their civilization by funelling an ever increasing share of resources towards some kind of elaborate game of numbers".
>> Proof-of-work incentivizes cheap & renewable energy investment.
> Cheap yes, renewable no. Complete non sequitur there.
That's the main point. There's no inherent incentive to use clean energy for mining. There's opposite stories about obsolete aluminum plants staying alive in China by just using their energy allocations to mine Bitcoin.
We use hydropower because it is clean and cheap. Those are the incentives.
The aluminum plants shut down... not stay running. Both mining and plants use huge amounts of continuous power. Bitcoin mining is far more profitable... no need to keep the aluminum going.
I have to call this out as google didn’t back this claim up readily. Do you have a source? I Cabot believe an aluminum plant could make
Enough money off of Bitcoin mining to subsidize its operations like that at first blush.
I've read it some time ago. I recalled it as less speculative than it seems now.
The premise is that energy is a large part of aluminium production cost and the plants work on small margins. An over-investment into energy production provides cheap energy and allows the aluminium plants to improve their margins via crypto mining.
Coinmint took over a very large, shut down, aluminum plant in upstate NY. This plant is powered by a dam that was built to provide power to that plant.
These dams are built in such a way that they need to continue to provide power or the equipment starts to fail.
It is also literally too expensive to build and maintain the lines to ship the power elsewhere.
Alcoa was more than happy to lease their space to someone who was going to use the power going to their facilities. There isn't much industry at this point that would fit.
All of the successful facilities that I know of (including my own) seek out cheap power... which happens to also be clean power. Hydropower. Most use existing facilities that were otherwise going to waste.
There is genuine value in that, a similar operation has been performed using silver & gold for thousands of years. Gold is an almost exactly the same in that respect - energy gets burned on the owners behalf, and they can prove it happened.
The difference that I'm keeping an interested eye on is even if gold mining ceases, the energy required to produce a new gram of gold doesn't really change so a gram of gold still proves as much as it ever did. It isn't so clear yet that Bitcoin proves anything without an active mining network.
> the energy required to produce a new gram of gold
Gold is valuable because people buy it. People don't buy it because of some hypothetical amount of energy that went into producing it, they buy it mostly because it's shiny and rare (and sometimes because it doesn't corrode much or conducts well).
The energy cost to produce is relevant to its price only in so far as it feeds into the supply / demand equation.
If it took little to no effort to get gold, then it wouldn't be valuable. The only reason something like gold is valuable is because it's scarce, and it's scarce because it requires a lot of work to extract. Am I missing something here?
> The only reason something like gold is valuable is because it's scarce, and it's scarce because it requires a lot of work to extract.
These things are true but not necessarily so. Things can be scarce without being difficult to refine from raw materials (a stamp). Things can be difficult to extract without being particularly scarce (aluminium). Things can be valuable without being scarce (TVs), things can be scarce and not valuable (an original artwork by my 4 year old daughter).
The only thing that makes something valuable is that it is valued by people. People are weird and have lots of different reasons for valuing things. There are lots of things I could burn an insane amount of energy and money on that would not result in anything valued by others.
The idea that something should be valued based on the work that went into creating it is interesting as a hypothetical idea but not something that is very relevant to the actual world we live in.
If anything, you've got it backwards:
> it's scarce because it requires a lot of work to extract
It requires a lot of work to extract because it was so valuable that all the easy-to-extract gold was taken and put in jewelry and vaults.
As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties:
– boring grey in colour
– not a good conductor of electricity
– not particularly strong, but not ductile or easily malleable either
– not useful for any practical or ornamental purpose
and one special, magical property:
– can be transported over a communications channel
If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it.
Prices depend on supply and demand.
Gold is scarce, thus supply is low, and is useful (beautiful, can conduct electricity), thus demand is high.
Bitcoin is scarce, yeah, as it requires a lot of energy to produce it. But it's not really useful for now, people buy it only for speculation. So demand exists, but it might fluctuate a lot.
I would argue that gold also derives most of its value from speculation, not its physical properties. There are metals with even more favorable properties that are even scarcer, yet they are valued less.
Platinum for instance was at one point considered the level "above gold", but it has since been overtaken. Gold simply is the better brand. It's the same for Bitcoin versus all other digital currencies.
> But it's not really useful for now, people buy it only for speculation.
Speculation itself is useful. Bypassing the financial system is useful.
A price of $18,000 per unit of Bitcoin might sound ridiculous, but it needs to be considered that the market cap of Bitcoin, representing most of the world's cryptocurrency market, is only $200 billion. That is comparable to the assets of a medium-sized US bank.
One of the wrinkles is that bitcoin mining is an adaptive system. If mining becomes entirely unprofitable, then miners will drop out, and mining will become easier. This process will continue until equilibrium is achieved where participating miners are making only a very small amount of money based on their energy costs.
Of course, what you say about transaction fees is true too - if miners are receiving less in 'mined' bitcoins, then they are likely to demand more in fees. You can already see this happening - when I first used bitcoin, nobody charged any fees at all, relying only on the mining rewards for covering their mining costs.
Necessarily renewable because it is the cheapest possible energy long-term; you only need to pay for upkeep, not for resources to convert. Maybe this depends on whether you think renewables will become cheaper than coal/gas, and maybe you're pessimistic about that. I'm not.
Robust because the phenomenon can begin detached from the energy grid by profit-seeking entities with capital to invest. Doesn't need permission, can be smaller, independent and eventually have something to offer back to the grid, but don't require it initially. Ability to bootstrap outside of regulation as a result. More nodes, more competition, shared excess. Fewer singular points of failure, more redundant, less fragile.
"Future," because that's a great vision for the future.
What has even higher potential to be cheap is nuclear energy - when you don't care as much about (operation, storage) safety, a lot of costs fall out ...
Nuclear energy has high fixed costs but then scales pretty well. As crypto currencies with PoW become a major industry, it's not difficult to imagine it might be cost-effective to build huge nuclear plants in some corrupt African country. (Africa has also huge untapped uranium ore deposits)
Cost of capital is higher in less stable countries though - the backers need insurance against unexpected outcomes either way, corrupt African countries (or some future equivalent) would require less community buy-in but what makes that true would cause other worries to the owners of capital.
Nuclear works in stable, rules-following countries like France where its high energy paybacks subsidise good salaries for an army of bureaucrats enforcing the rules.
Nuclear can and will work with far fewer rules and fix cost once you next generation reactors with totally different operational safety requirements.
We are literally stuck with 50 year old technology in nuclear energy, as unfortunately progress has been slow.
With the fuel cost being basically free (thorium), the and the operational cost low because the system runs with little human intervention energy should actually end up incredibly cheap once we engineer these system in a better way.
> Bitcoin's proof-of-work is basically a conversion of energy directly into money.
Nope! Putting more energy is not going to make more money into the system, is just makes it more likely that you get to be in the front of a firehose that drips money into the system in a constant rate.
Putting more energy into the system just increases the cost of money itself. But no one wants money, what people want is the what money can buy. Instead of spending ever more energy to get into the front of the line, one could just use the energy for something productive and then sell it.
> Putting more energy is not going to make more money into the system, is just makes it more likely that you get to be in the front of a firehose that drips money into the system in a constant rate.
This doesn't negate what I'm trying to say. That the energy amount is variable but the currency units output on the other side are static doesn't change the fact that energy is being turned into money. By contributing a higher fraction of the input, you get a higher fraction of the output.
If anything, higher energy input can only be justified when the money being made as a result has an equivalent value or purchasing power. You're confusing units of currency for the actual purchasing power they represent, which actually is variable.
> no one wants money, what people want is the what money can buy
This is wrong. People want the option to have things in the future, which is exactly what money is.
You are treating this is a some function of fundamental physics. It's not. We are only talking about "conversion of energy into money" because that is what the best current implementation of a BFT system is using.
It's accidental. You are focused on the "Work" part of "Proof-of-Work", when what we care about for solving consensus in distributed part is the "Proof".
> We are only talking about "conversion of energy into money" because that is what the best current implementation of a BFT system is using.
Yes, that's my point isn't it? I said "Bitcoin's proof of work is basically a conversion of energy directly into money." I did not say "all systems for ensuring the soundness of proofs in blockchains are a conversion of energy directly into money."
What we care about is trust minimization. It just happens that the first system utilized, proof-of-work, provides the best-yet incentives for ensuring trust minimization, and the most equitable distribution of coin. It being accidental does not mean it is not the the best method for securing "proof." (Which isn't to say that it is necessarily the best of all possible methods, only that the simple fact of it being first and accidental does not negate that it may be.)
I think you have it backwards. The price of the asset being mined determines the costs of the energy put in to mine it.
By equitable distribution, I mean that mining is on average only marginally profitable; the bulk of mined coin needs to be sold on the open market, which means there is always liquidity and availability to those seeking to enter or exit.
Hashing power centralization and coin distribution are different topics. Decentralization of hashing power will continue to increase as the renewable energy costs continue to lower, because they will eventually match and then lower beneath the subsidized rates currently available only in specific jurisdictions. Costs will shift to initial capital investment rather than energy supply.
> The price of the asset being mined determines the costs of the energy put in to mine it.
No, you have it backwards. A BTC that is already mined has as much value as a BTC that is yet to be mined, whether now or twenty years in the future.
Again, the fact that we spend energy to get more BTC is just accidental. There is no absolute law that postulates that the cost of energy and price of the asset need to be correlated.
> Decentralization of hashing power will continue to increase as the renewable energy costs continue to lower.
You are talking about spherical cows, I am talking about actual implementation of the system. Renewable energy costs mean jack shit when you have big central entities subsidizing dirty energy and if no one pays for the externalities. Also, it doesn't matter how "clean" a source of energy is. Unless you find a way to break the law of thermodynamics, the best way to be sustainable is to not consume the energy in the first place.
There are already plenty of market incentives for us to be more efficient and produce energy, we don't need to have an artificial component added to this system for it to work.
There actually is a fundamental linkage between the computational work of mining (which the Bitcoin network treats as money) and energy. E = kB T ln 2, Landauer's Principle [1].
> The endgame is that all energy companies will primarily be Bitcoin mining companies, feeding their excess renewable energy into the grid to power homes, etc.
You're choosing to consider the case when the price is very high, but not when it's very low. The flip-side of that coin would be that energy not worth being put into mining, which would be sold at a loss to the grid, would instead be put into batteries and saved, to be sold when when market prices were high again.
But I think by the time Bitcoin becomes so universal that all energy companies are mining companies, it is likely to already be at the scale of USD/EUR, or even become the reserve currency of the world, in which case it would not fluctuate nearly as much as it does now.
Yes, I'm choosing the case where the price is too high, because most people rely on energy being available and that's why there's a number of laws (depending on the country) that protect from disconnection. In practical terms, I prefer my freezer not to stop working and spoil stored food rather than having universal world currency which fluctates less.
Why would anyone run an energy storage system for general population in that system? If they can undercut the energy companies at some times and sell to the Bitcoin miners, why would they even bother with residential customers?
Sure, people who can afford energy storage themselves would be sorted. (Most of the time) Anyone below that wealth threshold would be at the mercy of "am I more important than the monetary gain today".
It could be profitable. But miners will buy energy as long as the price is lower than the expected return, regardless if it comes from excess renewable or from storage, do it may be more profitable not to. This means a bidding market between the miners and tenants for the stored energy. And that's not the uncertainty I want to live with every day. (Because that market is no longer realistically possible to regulate given the energy producers become the bank, the mint, and the business running them)
Do you really think that Bitcoin, the first prototype of a decentralized currency, will be the primary electronic currency ever? We've only just begun exploring the design space, and it's terribly arrogant to believe that we'll be stuck with this prototype even just 20 years down the line.
I don't think there's anything particularly arrogant about it. My ego doesn't depend on Bitcoin's success. You could say that expecting it to still be around then is naïvité, maybe. But of course, I still disagree.
Bitcoin's success has more to do with its monetary policy and hard-money aspects than with the way it consumes energy. Monetary policy isn't something we've seen any innovation with at all in the crypto space. Different coins have different inflation curves, but inflation curves exist in all currencies. They're not a new concept, they've just got specific variants.
But also, Bitcoin isn't static. It's still being developed. And I think its focus on slow stability and payments makes it more attractive, not less, in the long-term.
It's already been here 11 years, 20 is not so many more. I fully expect it to still be around then, and almost certainly in the top position in crypto, if not globally among all currencies.
If you can't see why it would be a bad idea to attach the price of electricity to a speculation-based crypto coin, or how the prospect of mining bitcoin would be a joke in nearly every location on Earth except a few small regions that happen to have just the right conditions, I'm sorry but you're beyond salvation brainwashed in your cult.
> Proof-of-work incentivizes cheap & renewable energy investment.
Energy will become cheap even for malicious actors, so bitcoin hash difficulty will have to go up in order to keep it costly for them to fake transactions. Which means energy usage goes up too. There's no way to avoid "work" in a proof-of-work scheme.
> The endgame is that all energy companies will primarily be Bitcoin mining companies, feeding their excess renewable energy into the grid to power homes, etc.
I guess you could. But the presence of Bitcoin and proof-of-work actually speeds up the competition in the renewable energy space by making it more profitable than it otherwise would be. That's a good thing, it gets us to the world we want more quickly.
Building more renewable energy capacity only to have that capacity immediately used to mine Bitcoin rather than replace some existing fossil fuel use is not progress.
I don't see why not. One consequence is investment in renewable efficiency, which applies to the energy industry generally outside of crypto mining specifically. Another consequence is needing something to do with excess energy, which leads to more competition amongst sellers in the grid, making energy cheaper. This does marginally reduce dependence on fossil fuel.
If conversion directly into money through bitcoin is so damn liquid that this is what we're doing, what is this 'excess' energy you're talking about?
In this scenario there is NO SUCH THING as 'excess' energy. Or reducing dependence on fossil fuel, so long as that can still be used to produce energy to mine bitcoin with.
You're right about competition and market dynamics, but it is utterly and completely dedicated to converting ALL the energy into money without any left over. To fail to do so is to fail to be competitive. I really do not understand this talk about 'excess' energy.
Could that energy go to better (which is subjective of course) things? Sure, but if it's not and there is demand as well as excess supply it incentivises energy companies to at least _keep up_ with what they currently provide.
The problems with that are: 1. Newly built renewable energy goes to mining rigs, while the original demand still exists so coal mines remain. 2. Usage at peak generation means fewer reasons to build energy storage systems for quiet times (they're still handled by non-renewables).
The whole "this costs too much power!" movement is disingenuous, it generally relies upon comparisons to Visa or similar networks. These networks are built upon the suffering of millions (which you can I suppose equate to rampant CO2 production, if you really wanted to) and should not be used at all. Any alternative is better than that.
Then of course there is the whole notion that using a lot of power is in and of itself a big evil, which is ridiculous. Even from an environmental perspective, big industries are by far the biggest offenders. By shifting the perspective of the discourse away from the real offenders towards other "problems", we are doing a disservice to the actual issues.
At this point I'm convinced it's a movement composed primarily of people who don't understand what they're talking about, sprinkled with a light dash of actual malicious actors. This makes sense, as that's a realistic cross-section of the internet at large.
There are only two payment networks (when you go all the way down), namely the one backed by Visa and the one backed by Mastercard. These two companies are fundamentally creditcard companies, which are a predatory instruments meant to lure people into spending more than they can really afford.
Even if you want to put predatory lending practices that are at the very heart of those networks aside (why would you, but hypothetically) you are left with networks that disproportionately disadvantage certain classes of people: a good example is sex workers, it being the case that these networks are managed inside the US they are fundamentally puritanical. Usually these arguments are couched in environmental euphemisms such as "there is higher risk". These measures are proxied into networks that run on top of the lowest network, but they are positively stimulated to keep them that way.
If those things don't bother you, you may be swayed by the fact that they're both based inside the US. Broadly speaking, we don't need to get into why that is an entity that tends to spread suffering around.
Well, not directly the mastercard, but current banking system - lots of people.
TLDR; custody banking model keeps people out of control of their own property.
There is a big problem with private property rights and safety guaranties of your capital today in most of the world. There are three problems: unstable govs in 3rd world countries, capital moving restrictions and QEs.
I'm, for example, not from developed country, so I have several restrictions on my own money, some of which may be applied to US/Europe citizens and some may not:
1) my gov, speaking softly, is not stable. I have no guarantee on my bank accounts in the long term (eg 20+ years). I can assume that funds can be at least inflated in several times, if not withdrawn in the name of some "patriotic" gov initiative. It would be much better to have my funds away from such jurisdiction. It's safer to have the funds out of **any** jurisdiction due to some political conflicts and attacks. US and their banks are likely to freeze Russian/China/Iran citizens funds as well when another conflict will arise.
2) Capital moving. Even if someone assume that some jurisdiction is safe - there is another problem - not any country makes capital flowing outside its border legal. You just **can't** move your **own** funds somewhere where you see it fit the most. Domestic banks may be completely controlled by the gov and too much cash can be easily arrested on its way by customs.
3) QEs, which is my favorite part and applied to any human on the earth today. Your money is used to "save" someone without your direct permission even if you live in good country, paid your taxes and did nothing wrong. Just by printing more money - practically making your hard-earned money cheaper and less useful. They'd say that you can move your money to stocks (US, by the way, there is no stable stocks but theirs), but you both will need to pay tax from your so called profits (the hell, on SP500 I won't even earn on the long run, I barely save initial funds considering inflation!) and forced to invest in american economy, which not everyone (surprise!) want to do. And stocks can fail badly.
With some assumptions, crypto solves all three problems very efficiently.
Bitcoin lost more purchasing power between midnight and midday on Sunday than the USD did during the unprecedented QE stimuluses of 2009-2011. So either QE isn't actually that bad, or BTC is far too far from being a solution to be worth spending the entire energy requirements of a largish developing country or small developed country on.
These are all really good points, but there's some nuance missing in this view. There is actually a fairly narrow slice of the financial world that you don't like, specifically central banking and fiat currency.
Currently, crypto traders are busy learning that all the rest of the financial world, including things like credit and financial derivatives (encapsulated in smart contracts), can still apply to cryptocurrencies.
Things like consumer credit and fractional reserve banking will show up in crypto soon (if they haven't already). It's just a matter of trusted entities offering specific smart contracts.
The one thing I really dislike about most crypto is the traceability: unless you use privacy coins (which themselves have dubious security claims), every transaction is 100% traceable.
I think it's too simple to say someone only dislikes part of the financial world. Even in the blockchain money space these financial instruments are not positive aspects. The fact that they can be ported into this new space is not a reason to assume they are good.
As you rightly point out, whether something is considered to cost too much power properly depends on what you compare it with.
Before there was a viable alternative to POW for achieving the goals of a decentralised currency, it was at least debateable about whether the benefits of the decentralised currency were worth the cost of POW compared to the alternatives, but now that it appears POS is a viable alternative, there can be no question - POW costs too much power.
If it turns out PoS is actually a good idea, I think you will have a very good point. Until it's been running and is used right (and doesn't get exploited hard and early) I think it is premature to say this.
Yes, let's revolutionise the financial system by making sure it takes up 95% of our energy use! That's only 5 orders of magnitude more than currently. I don't think there's actually enough energy on the planet for even renewables to make that work, not without seriously disrupting the global ecosystem even worse than global warming already is.
> The endgame is that all energy companies will primarily be Bitcoin mining companies, feeding their excess renewable energy into the grid to power homes, etc.
Wasteful, why not put all their power output into Bitcoin mining then? Sounds like a version of the nano machines story multiplying and eating the planet, in this case for the sole purpose to mine Bitcoin, leaving a carcass of the Earth and nobody to spend those coins.
Well put. Furthermore, humanities demand for energy is capped by its capacity to economically convert energy into useful work (e.g. through the production of durable goods, commodities, transportation services, etc). The Bitcoin network effectively gives us a new category of useful work and uncaps our demand for energy by decoupling it from the physical economy. Thus Bitcoin presents us with a viable pathway to becoming a Kardashev level 1 society by removing this bound. Energy will become abundant, the real price of energy will decrease due to the action of this scale-out and the innovations that entails, and the real price of bitcoin will march upward in accordance with the stock-to-flow model. Thinking of energy as priced against bitcoin and remembering how the network difficulty adjustment operates should help to elucidate how these two price actions can occur simultaneously for those of you scratching your head on that one. The feature you pointed out about mining being the most direct conversion between energy and value is an important one for people to grok in order to "get bitcoin". I would argue that energy itself is the only thing in the universe with intrinsic value. The intrinsic value of energy transcends constructs of human society. For instance, consider the animal kingdom and the flow of energy through the food web. By intimately linking the value of the bitcoin to the aggregate joules of energy flowing into the network, Satoshi delivered the most important financial innovation in the history of mankind; a digitally transactable surrogate for the intrinsic value embodied within energy.
Cool, except so-called renewable energy sources still built using non-renewable materials.
There also physical limits to efficiency of energy transformation and slightly less heat loss per unit of energy with much more energy production is not exactly what climate needs right now.
"The estimated calculations presented in this work prove that the total power produced by us was 0.0414% in 2000 and 0.0577% in 2017 of the global solar power reaching the Earth’s surface"[0].
So even if Bitcoin mining were to cause global electricity production to increase by an order of magnitude, it would still be a rounding error compared to the amount of global warming caused by the Sun directly.
Thinking about it thermodynamically, though, in a future where Bitcoin mining uses only excess solar and wind energy, it wouldn't be adding any heat to the planet because that energy would have become heat anyway.
Ok, of course true that sum of heat from sun that reaches earth remains constant no matter whether we use it. However, how it’s stored/used on the earth is another matter. E.g. if it’s absorbed by plants/fungi/other life forms and stored as biomass, part of it doesn’t contribute to heating of the atmosphere/oceans, contrarily to when it’s converted to electricity (where large part is lost due to heating of the solar panels) and then used to computing, where from physics perspective it’s mostly heating (only tiny part is converted to useful work).
Also what about the Manufacruring/production of devices to convert solar/wind energy to electricity and to mine bitcoins? It’s based on non-renewable elements (of course any chemical process is reversible given enough energy but Entropy still grows mercilessly) and requires a lot of extra energy.
EDIT: as far as we know, thermodynamically all energy will become heat at the end (although not sure if it should be called heat, since there will be no flux). However, we as humanity are/should be quite concerned first about decades and earth’s atmosphere/oceans (and connected parts) not millennia and energetically balance Earth as whole to come.
In principle energy from sun could also be stored in form of chemical bonds energy (as it’s the case for biomass) or even nuclear energy (yup, sun-powered nuclear fusion sounds unlikely but why not ;). Then biomass (less efficiently) or nuclei/atoms could be ejected from earth allowing to disperse sun’s thermal energy somewhere else.
There are many existing processes that basically turn energy into money. It's called energy intensive industry. So far instead of pushing for renewables, companies making their money this way were a major hindrance in clean energy investments.
I'm not sure which energy intensive industries you're thinking of, but bitcoin mining has the potential advantage that it can be turned on and off at a moment's notice, and doesn't require constant human supervision. That's not true of a lot of industrial processes.
It can’t be turned off at will if you’ve got a huge investment in mining infrastructure that needs to pay for itself and the margins are so thin you can’t afford downtime.
I mean, you tell me. I don't mean to sound snarky. But it seemed to be your point that existing processes which turn energy into money are a hindrance to clean energy investments. The previous commenter offered an example of aluminum smelting. Which is not exactly what I meant, because I was being more literal when I was talking about an energy-into-money process, and that example appears to really mean energy-to-aluminum-to-money. I understood this example to mean that the reason other existing "energy-to-money" processes have been a hindrance to clean energy investments is that they have byproducts which negate clean efforts. In contrast to this, renewable crypto mining has no physical byproducts. Dunno if I misunderstood something.
>The endgame is that all energy companies will primarily be Bitcoin mining companies, feeding their excess renewable energy into the grid to power homes, etc.
Yes.
For comparison, multiplying the value of total block rewards for btc (inflation + fees) by 365, bitcoin extracts about $6.2B per year from buyers just to exist.
Eth2 is going to be extremely light, and is going to run fine on a ~$600 NUC that consumes about 10W. At 20% annual amortization, $0.15/kWh and 10k different validators (people), the total cost of running eth2 is... $1.3M. That's a mind-boggling difference of 4700x.
Real costs may be a bit larger as some individual stakers can be less efficient (like running on a 150W average power pc) but compared to what bitcoin consumes - still a rounding error.
Not to mention GPUs! Can you believe how many GPUs have been cooked by this scheme? I got a water-cooled GTX 1080 almost 5 years ago on Craigslist for $500. Usually old things like that get cheaper as time goes by, but not GPUs. Nowadays those things are going for like $800. I was hoping to upgrade to an RTX2080 or something (also a few years old now) but they're like $1000!
I can't help but think that cryptocurrency mining is mostly responsible. And supposedly long term mining just fries GPUs, so the used market is dubious anyway.
Most serious mining operations will typically undervolt their GPUs for increased efficiency and don't experience nearly as much temperature fluctuation. Buying a used mining GPU isn't nearly as bad of an idea as it sounds on the surface.
I was amazed that my 5 y/o GPU is still selling for half it's original price. I was considering buying a second one for Crossfire, but maybe selling it is a better idea.
Out of stock around these parts. It has been for weeks. All stores, all brands. There are a few units left from dubious brands if I order them all the way from Amazon Germany.
The electricity is used to verify transactions, which has a massive added value many times exceeding the cost of the electricity invested.
Calling this a waste of electricity is the same as calling the hundreds of thousands (if not more than a million) of employess of central banks, regulation authorities, payment processors, etc waste of air. Really really naive and childish.
P.S. Did anyone ever calculate the carbon footprint of all these people whose jobs are going to be taken over and compared it? I haven't done the approximation/calculation, but I am pretty sure that cryptocurrencies are going to be a massive improvement over the current system in that aspect as well.
zero electricity is wasted on PoW cryptocurrencies. energy consumption is equivalent to constant maintenance of security at the level demanded by market.
I mean I guess this depends on how one defines waste but under definitions I generally come across, if you could get the same level of security for less electricity in a new scheme, then the old scheme is wasting electricity.
sure, if you could. but the value is in the eyes of the beholder. if the market genuinely believed that to be the case - PoW currencies wouldn't be worth anything, so far that isn't the case, so claiming that PoW is wasteful is disingenuous at best.
p.s. somebody really dislikes my opinions, as i'm banned from commenting on HN for the last couple hours or so :D
You write about markets like they are omnipotent, benevolent gods which they aren't. Markets fail all the time. It's a large part of what economists spend their time studying. Take an intro to game theory course and you can find all sorts of structures that lead to non-socially beneficial outcomes, the prisoner's dilemma being a classic example.
There's nothing about markets nor cryptocurrencies that guarantees that they efficiently select for the currency that requires the least electricity. You completely ignore social alignment issues as well as inertia.
Yes, markets can be wrong, but baselessly dismissing market data is plain dumb. Until market is shown wrong, the value that market assigns to something is at least some evidence of it’s true value.
Also, sorry to burst your bubble, but universe doesn’t care about socially beneficial outcomes. If a thing has valuable characteristics, no matter how socially harmful you may perceive it to be - those characteristics will not go anywhere.
So right now you’re basically arguing that bitcoin isn’t valuable because you don’t like what it’s valued for. There’s nothing wrong with that, but at least admit how highly subjective and contrary to available evidence that opinion is.
> Yes, markets can be wrong, but baselessly dismissing market data is plain dumb. Until market is shown wrong, the value that market assigns to something is at least some evidence of it’s true value.
Do you have the ability to show that PoS is NOT as secure as PoW?
> Also, sorry to burst your bubble, but universe doesn’t care about socially beneficial outcomes.
No shit. Never said it was. In fact when I mentioned market failures I made it explicit that I believe this to be true.
> So right now you’re basically arguing that bitcoin isn’t valuable because you don’t like what it’s valued for. There’s nothing wrong with that, but at least admit how highly subjective and contrary to available evidence that opinion is.
What the fuck are you talking about?? I never said anything remotely related to this. I said that your idea of "PoW is never wasteful" was meaningless. Maybe you were paused from posting on HN for straw manning?
> Do you have the ability to show that PoS is NOT as secure as PoW?
yes. if you spend enough time offline - there is no possible way for you to be sure that you've synchronised to genuine chain without trusting a third party. that problem is not solvable under PoS and that problem is exactly what PoW was designed to solve.
> I never said anything remotely related to this.
you did, by implying that markets value bitcoin incorrectly.
you also didn't show that "PoW is not wasteful" is incorrect (note that i never said "PoW is never wasteful", it's wasteful when nobody needs the proof that is being produced, but as long as bitcoin price is not zero, that proof is useful and therefore not wasteful), the statement that "if somebody can do what PoW does for less energy then PoW is wasteful" requires you to prove that somebody can actually do that before you can claim that PoW is wasteful.
It's pretty simple, if it costs you 1 dollar to mine a bitcoin and someone (the market) wants to buy that bitcoin for 2 dollars, that cost is worth it.
It doesn't matter what that cost is, if it's 1 dollar in energy or 1 dollar in wages or whatever, it costs $1 and you sell by $2, you profit, the cost was worth it.
Funny nobody complains about the energy consumed by actual banks and other services Bitcoin would replace, which is much higher. In those circumstances they can understand it's not a waste at all, but a cost of providing a valuable service.
I don't think POS is an adequate replacement. POW was an intentional design choice because of the highly competitive environment that it creates.
Do you have some modelling, or any credible reference to back up your assertion that the energy used by banks would be higher than a Bitcoin blockchain?
Even if I did provide you some report showing banks use more than Bitcoin (which is still true for now) it's only a fraction of the big picture. Although banks are a good example of this effect, Bitcoin doesn't JUST improve banking. As this plays out, mining infrastructure provides a shared resource that can be used by MILLIONS of companies, among which are banks who manage massive datacenters requiring humans and their associated energy consumption, the cost for audits, compliance, card readers, and other things that Bitcoin makes effortless. Surely unlocking efficiency offsets power consumption, and at scale the efficiency improvements can be astronomical. An accurate figure on this probably does not even exist, especially considering the lack of imagination with respect to Bitcoin use-cases. Not to mention the biggest energy consumers are also the best in the world at reducing their consumption out of competitive necessity.
And if so, would you provide a projection for the relative energy useage of traditional banking vs. bitcoin for a linearly expanding money supply extended out indefinitely?
I agree. I think makes them more efficient, and less important for some of their common use-cases. All of that mining equipment is infrastructure they don't need.
Eventually yes, but mining isn’t a “waste” of electricity any more than any electricity used for any essential service is. Isn’t all electricity effectively wasted if the same service can be offered for less electricity? Ethereum (and bitcoin) provide a service, and that service is protected using electricity.
If there were refrigerators that could work without electricity with no the same set of capabilities, then any refrigerator still using electricity would be considered wasteful.
I'm not saying that proof-of-stake is bad, but it does change the way the network functions, because it locks capital and therefore affects the velocity of money in the network.
It also changes the distribution of mined coin. Whereas currently it takes an equal mining cost to reap an equal reward, proof-of-stake rewards those who already have enough to stake. This is essentially a recreation of the inflation system we have in the fiat world, where printed money first goes to the government, who can spend it at its current value, eventually having it entropy out to other users through spending, at reduced purchasing power. This makes the rich richer, and increases inequality of savings in the network.
So it's not exactly the same refrigerator, so to speak.
Yes, that's how most businesses work. You start with a capital investment, often times through a loan, and through smart management, make a profit on the margin, that you can choose to reinvest to stay competitive.
Proof-of-stake is completely unlike this. People who "have" are not required to exchange any effort to reap new reward. They retain purchasing power while the "have-nots" lose purchasing power.
I dunno if I struck a nerve with you with these points about proof of stake or something. I'm not completely against it - I think it should be tried, and Ethereum is a great network to try it with. But I also don't think it's completely perfect. I also think proof-of-work is very defensible and likely to succeed in unexpected ways.
This is a very poor analysis. What matters for the "haves" and "have nots", to keep using your terminology, are the entry costs. That's what separates the ability to become a "have" or "have not".
Entry costs in PoS are significantly lower; you just need a consumer-grade computer, broadband and the electricity to power a consumer-grade computer (i.e. of the order of 100 W). In PoW, you need specialized equipment (ASICs), larger amounts of energy (of the order of 1000s W) and broadband, this equipment will also need be renewed every few years.
The minimum stake of 32 ETH (in the case of Ethereum) can be avoided by using pooled mining, so that's not a true barrier of entry.
Being a validator still requires effort, you need to set-up and maintain the infrastructure and guarantee sufficient availability (higher than 2/3 of the time) to avoid being penalized. As with any economic activity where there is ample competition in the end the profit margins will be quite thin, so presenting this as free-money for the "haves" is just dishonest. If staking rewards are too high, more people will be tempted to stake, reducing the staking rewards, if they get too low some people will be disincentivized to stake and stop doing so, raising the rewards. This will tend to balance around just marginally profitable. This also happens in PoW mining. Main difference being that due to the low entry costs in PoS this economic activity is accessible to a much larger amount of people.
Thank you for the insight! I wasn't being dishonest. I was actually unaware that staking rewards were variable based on the amount staked, such that more ETH staked means fewer rewards per ETH staked. It makes sense, guess I just didn't think about it. I might have thoughts on it but I'd need to process first.
I wouldn't say it's completely unlike. I don't think renting out some mining hardware for near-guaranteed return is any different in effort. It's about the same as putting money in an investment fund. PoW, PoS, and other investments practically end up with: until you withdraw the money you can invest your existing wealth to get returns, without real effort.
Proof-of-stake requires the majority of what is mined has to be sold on the open market. This redistributes mined coin to any user anywhere, rich or poor. If you mine and do not sell, you perpetually consume and fail in short order.
Proof-of-stake doesn't require this natural, market-driven redistribution. It exchanges it for an inflationary process that further separates the rich and the poor.
You are completely ignoring second-order effects for these systems. You can quite easily turn resources obtained from a PoW system into a PoS financial system and have the worst of both worlds.
Do you want an example?
> If you mine and do not sell, you perpetually consume and fail in short order.
With ETH you can mine ETH, lock in a MakerDAO vault and pay your operations with very low-interest DAI and use that to finance all your operational costs.
As long as your profit from mining is higher than the interest from minting DAI (which is very easy to do), you can mine forever without ever giving up the original ETH. Your only limitation would be in how many people would be willing to buy all the DAI you will be minting.
This is no different than a PoS system, except that it still has to bear all the PoW costs and externalities.
> they're just not the point being discussed here.
In other words, you are ignoring (not paying attention, leaving aside) an aspect that should be considered.
(You asked for a good-faith conversation, but after these types of replies it gets hard to take you seriously. The quote "It is hard to get a man to understand something when his salary depends on not understanding it" becomes more and more apt with each response you give.)
Read again. I described an mechanism that you can be a miner of a PoW mechanism and still be able to finance your operation without selling the asset you mined, effectively turning the economic model of it from PoW into PoS, while keeping the horrible externalities and costs of PoW.
> proof-of-stake rewards those who already have enough to stake.
Don't forget, those that do not have enough to stake can pool their resources together.
P.s: tell me where in the world you can open a bank (not a bank account, but an actual bank which can receive deposits from Central Banks) with only 10-20k USD.
P.P.s: There is growing talk about existing central banks that are considering issuing their own blockchain version of their currencies, bypass large banks and have money go directly to people through controlled accounts. It would be basically be a Government-sanctioned version of Tether/USDC/EURS.
> Don't forget that do not have enough to stake can pool their resources together.
That's great! And makes a lot of sense. However, it still requires locking capital. Those who do not have a lot of money, spend a much higher percentage of their money, and therefore need it to be liquid. So though pooling may reduce the effect of inflationary rich-poor inequality increases, I don't think it would eliminate it.
Well, duh. No system will ever be perfect and there will always be costs associated with BFT systems. The question is knowing how these systems compare with one another and what kind of trade-offs are there.
It is impossible to dispute that the costs of keeping a PoS-based system is overall lower than the current state-of-the-art, yet you try to knock PoS while ignoring all the analog issues with PoW? Your cognitive dissonance is showing.
If that happened then we'd just start using the electricity for something non-essential instead. Humanity is not interested in efficiency for the sake of reducing footprint. Humanity is only interested in more. If anything, fridges using more electricity means less electricity wasted (assuming refrigeration is essential and not a waste).
This pattern seems to be everywhere. Cheaper electricity: more electricity used. Bigger roads: more miles travelled. More efficient engines: bigger, more powerful cars. Plastic recycling: more plastic used. I challenge you to find any improvement in efficiency which has led to a reduced footprint.
The problem is that mining can never reduce its energy usage. Any efficiency gains are necessarily eaten by increased difficulty. And in fact, energy usage has to incease in proportion with the value of the network.
what if i told you that the constant level of energy spent is the level of security bitcoin users demand by virtue of buying it at current price level?
would you say constant provision of certain level of security is waste?
> what if i told you that the constant level of energy spent is the level of security bitcoin users demand by virtue of buying it at current price level?
I'd say that you're wrong because security is not the primary thing they're buying.
> would you say constant provision of certain level of security is waste?
I would say that doing so through a constantly increasing level of energy use is indeed a waste.
> security is not the primary thing they're buying
sounds like speculation. it's a major desirability factor in bitcoin.
> constantly increasing level of energy use is indeed a waste
the more money you store in a vault - the more security it needs for you to sleep well. you wouldn't lock a $5000 bike with $5 lock. so difficulty increase correlates very much with amount of wealth poured into bitcoin.
> sounds like speculation. it's a major desirability factor in bitcoin.
No, that's a plain fact. Nobody ever buys security as an end unto itself. You buy security to protect the thing you really want. Which in the case of Bitcoin is by a vast majority "getting rich".
> you wouldn't lock a $5000 bike with $5 lock. so difficulty increase correlates very much with amount of wealth poured into bitcoin.
It correlates, but not in direct proportion. With any other kind of security, you don't need to spend 10 times as much to protect a 10 times higher value, and there is a possibility of security getting cheaper due to advances in technology.
> No, that's a plain fact. Nobody ever buys security as an end unto itself.
a thing that can't be taken away from you due to security characteristics of the medium - that's very much a factor in purchasing decision. among many other factors. different people value different factors, so just be reasonable and admit that you can't know how are those factors valued by all the purchasers.
> Which in the case of Bitcoin is by a vast majority "getting rich".
you may be out of touch a little. there are phases in every investment vehicle and while bitcoin is still in price discovery, there definitely are people who are in it to get rich quick, but as volatility goes down and actually valuable characteristics are becoming more widely known, the proportion of those people goes down.
> With any other kind of security, you don't need to spend 10 times as much to protect a 10 times higher value
why not? maybe the coefficients are off, but the more value you want to secure - the more you have to pay. that's how it works literally everywhere in the world.
> there is a possibility of security getting cheaper due to advances in technology.
maybe there are and maybe we will discover them in future, but the thing at hand that we're discussing is whether or not to call "wasteful" the process via which wealth ownership is secured by energy consumption.
Probably not. Proof of work seems to be essential for a successful currency. Go visit the City of London or the Financial District of Manhattan to check out the proof of work of the current financial industry. Millions of people busying around and spending time in huge buildings that are---quite evidently now during the pandemic---completely unnecessary.
If you really want to stop waste then try to convince people to stop worrying about whether others have more stuff than they do. John Lennon wrote a well-known song about this idea. You could try imagining it too. Unfortunately you've got billions of years of evolution against you, but good luck!
Alternatively, if you can figure out a way to do it without proof of work then you'll stop all of this waste while still appealing to our animalistic instincts.
But, then again, who are you to talk about waste anyway? What makes your life not a waste of energy? Don't you consume food every single day?
This is, to put it mildly, bollocks. Bitcoin uses more energy than the entire finance industry to supervise far less capital and conduct far fewer transactions (by multiple orders of magnitude). You are equivocating by equating levels of inefficiency which differ so drastically you are either deliberately misleading people or have been mislead yourself.
