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The point of Bitcoin is to consume as much electricity, roughly, as a block is worth. Consuming this electricity, and using it to calculate a proof of the consu

by runeks 10y ago

The point of Bitcoin is to consume as much electricity, roughly, as a block is worth. Consuming this electricity, and using it to calculate a proof of the consumed electricity, means that the blockchain becomes immutable: no one can change the past, because it would require re-doing the proof-of-work. So, out of this -- seemingly meaningless -- activity of burning off energy, arises the trustless property of the Bitcoin blockchain: with digital currencies that use proof-of-stake, or an SQL backend, every participant could -- theoretically -- have mutually agreed on assigning themselves 100x as many currency units, right before you enter and buy $1000 worth. There's no way to prove that this didn't happen, as it takes little effort to change history. This is unacceptable for a digital currency, hence the need for proof-of-work, and Bitcoin.

ben_w 10y ago
On the one hand, if each coin is worth 1/10th its cost, nobody will mint them. On the other hand, if each coin is worth 10x as much as it cost to make, people make their own and the price collapses. That applies equally to gold coins as bitcoins. I suspect bitcoin is, in its current form, incapable of replacing a major currency, because if it become a dominant currency then someone would beg, borrow, and steal just enough bitcoin to buy just enough compute power to get half of the bitcoin computer pool, from there using their new power to double-spend their way to getting even more computer power (while blocking other transactions that might try to out-bid them), and ultimately using that power to rewrite the consensus reality of the blockchain to say they now own as much as they want to say they own. Even if the bitcoin wiki is correct to expect no rational miner will attempt this, there are plenty of irrational actors when enough money is dangled in front of them, even when it is only a mirage (citation: every lottery).
- mrb 10y ago
  "if each coin is worth 1/10th its cost, nobody will mint them" No. What will happen is as the miners with the highest mining costs drop out of the network, the difficulty target will decrease and decrease... until people stop dropping out of the network. "people make their own and the price collapses" No, again the difficulty target would adjust to regulate the rate of coin rewards. See https://en.bitcoin.it/wiki/Difficulty https://en.bitcoin.it/wiki/Difficulty
nhaehnle 10y ago
It's easy to change history with a plain SQL backend. But in any approach that stores the ledger in anything that boils down to a publicly distributed Merkle DAG, changing history or other manipulation like generating assets from nothing is impossible to do in secret. The only potential issue is double-spending, or to be more precise, invalidating a transaction after the fact by pretending that a different, conflicting one, came first. This problem could be solved much more cheaply than in Bitcoin by using signatures by a trusted (e.g. elected) well-known council. The only problem with that approach is how to bootstrap the value of such an alternative currency. Bitcoin somehow achieved that by appealing to a mixture of cypherpunk and libertarian ideology, and from there it developed to the current status which is an entirely circular origin to the value. I don't know what the alternatives for bootstrapping are. Fiat currencies can bootstrap via taxation, but that's not really an option here. Perhaps something like getting Valve to use such a system for their card trading :)
- runeks 10y ago
  > The only problem with that approach is how to bootstrap the value of such an alternative currency The problem of "bootstrapping the value" of a centralized, digital currency is that no one wants it, because of the reason I mentioned (too easy to change history). Working hard in order to earn an entry in some database, that can be deleted in a second, makes little sense for people. Bitcoin had no bootstrapping problem because it can be used tustlessly (deleting past transactions is simply not possible), while your solution is just another type of credit. Why would I ever, voluntarily, start using your credit as money? It makes no sense from my perspective; hence the "bootstrapping problem". In short: reducing the energy consumption of Bitcoin while reducing security is easy (use credit). It's keeping the trustless property while reducing energy usage that's the challenge.
  - nhaehnle 10y ago
    I'm not sure what you mean by centralized, digital currency, but it's probably not what I was talking about, which involves a publicly distributed Merkle DAG. Also, it's disingenious to pretend that Bitcoin had no bootstrapping problem. Bitcoin existed for a long time without significant value, and it seems stunts like spending what would now be millions of dollars for pizza were necessary pieces of solving the bootstrapping puzzle.

by runeks 10y ago

ben_w 10y ago

On the one hand, if each coin is worth 1/10th its cost, nobody will mint them. On the other hand, if each coin is worth 10x as much as it cost to make, people make their own and the price collapses. That applies equally to gold coins as bitcoins. I suspect bitcoin is, in its current form, incapable of replacing a major currency, because if it become a dominant currency then someone would beg, borrow, and steal just enough bitcoin to buy just enough compute power to get half of the bitcoin computer pool, from there using their new power to double-spend their way to getting even more computer power (while blocking other transactions that might try to out-bid them), and ultimately using that power to rewrite the consensus reality of the blockchain to say they now own as much as they want to say they own. Even if the bitcoin wiki is correct to expect no rational miner will attempt this, there are plenty of irrational actors when enough money is dangled in front of them, even when it is only a mirage (citation: every lottery).

mrb 10y ago
"if each coin is worth 1/10th its cost, nobody will mint them" No. What will happen is as the miners with the highest mining costs drop out of the network, the difficulty target will decrease and decrease... until people stop dropping out of the network. "people make their own and the price collapses" No, again the difficulty target would adjust to regulate the rate of coin rewards. See https://en.bitcoin.it/wiki/Difficulty https://en.bitcoin.it/wiki/Difficulty

nhaehnle 10y ago

It's easy to change history with a plain SQL backend. But in any approach that stores the ledger in anything that boils down to a publicly distributed Merkle DAG, changing history or other manipulation like generating assets from nothing is impossible to do in secret. The only potential issue is double-spending, or to be more precise, invalidating a transaction after the fact by pretending that a different, conflicting one, came first. This problem could be solved much more cheaply than in Bitcoin by using signatures by a trusted (e.g. elected) well-known council. The only problem with that approach is how to bootstrap the value of such an alternative currency. Bitcoin somehow achieved that by appealing to a mixture of cypherpunk and libertarian ideology, and from there it developed to the current status which is an entirely circular origin to the value. I don't know what the alternatives for bootstrapping are. Fiat currencies can bootstrap via taxation, but that's not really an option here. Perhaps something like getting Valve to use such a system for their card trading :)

runeks 10y ago
> The only problem with that approach is how to bootstrap the value of such an alternative currency The problem of "bootstrapping the value" of a centralized, digital currency is that no one wants it, because of the reason I mentioned (too easy to change history). Working hard in order to earn an entry in some database, that can be deleted in a second, makes little sense for people. Bitcoin had no bootstrapping problem because it can be used tustlessly (deleting past transactions is simply not possible), while your solution is just another type of credit. Why would I ever, voluntarily, start using your credit as money? It makes no sense from my perspective; hence the "bootstrapping problem". In short: reducing the energy consumption of Bitcoin while reducing security is easy (use credit). It's keeping the trustless property while reducing energy usage that's the challenge.
- nhaehnle 10y ago
  I'm not sure what you mean by centralized, digital currency, but it's probably not what I was talking about, which involves a publicly distributed Merkle DAG. Also, it's disingenious to pretend that Bitcoin had no bootstrapping problem. Bitcoin existed for a long time without significant value, and it seems stunts like spending what would now be millions of dollars for pizza were necessary pieces of solving the bootstrapping puzzle.