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Two things bother me about Bitcoin and other cryptocurrencies: 1. The process of "mining" seems like arbitrary busywork that is ultimately a massive waste of c

Two things bother me about Bitcoin and other cryptocurrencies: 1. The process of "mining" seems like arbitrary busywork that is ultimately a massive waste of computing power and electricity. At least Folding@home was contributing to scientific research. Is there any way around this? Incentivizing a bunch of computer geeks to build massive GPU clusters and waste tons of electricity mining for coins doesn't seem like a great idea. 2. Much of the "wealth" of these coins is concentrated in the hands of early adopters. This seems to be by design (due to the increasing difficulty of mining) and is not the result of actual economic activity, but merely because those early adopters started mining first. Can anyone (more familiar with Bitcoin than I am) comment?

janoside 9y ago
1. This is a common criticism, but probably shouldn't be. It would be nice if the activity of folding proteins offered the same proof-of-work, security attributes as, for example SHA256, but sadly it doesn't. As in all systems there are engineering tradeoffs involved and the mining functionality of a cryptocurrency, which literally secures that network, should probably choose the security-first sides of any tradeoff. Additionally, if the network has "value" (however you might like to define it...they clearly do as denominated in USD), then the activity of securing that value should not be considered a "waste", even if it doesn't also provide some other, secondary value. 2. As in any market, the early risk-takers (who, by virtue of being early in an unproven market, are also the biggest risk-takers) will be those granted the biggest reward if they are "right" (the market/product has value).
kyleschiller 9y ago
Yeah, 1 is exactly right, but hopefully Ethereum will be able to move to Proof of Stake [0]. [0 ]https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ
eduren 9y ago
To your first point: While there are definitely valid concerns with just how much energy we spend maintaining the bitcoin network and the blockchain, it's hard to call it wasted and it's definitely not busy work. The energy we spend doing all the mathematical problems behind proof-of-work can be seen as an investment. In the blockchain there is a mathematically certain record of all transactions that have happened since 2008. While that may not sound all that impressive think of it like this: if a single entity was responsible for building that ledger, it would have taken less "energy", but that entity would have to be trusted by every participant transacting. With the mathematical underpinnings of proof-of-work, we are instead spending energy to create that trust model inside the currency (network+blockchain) itself. Not busy-work. Think of it like adding microchips to paper money for counterfeit detection. That is materials and energy spent creating a more trustworthy system. There are certainly alternatives to the BTC proof-of-work that might make for a more efficient protocol, and they might win out in the end. That should be explored. But BTC mining has value.
- platform 9y ago
  @eduren, WRT "Think of it like adding microchips to paper money for counterfeit detection. That is materials and energy spent creating a more trustworthy system." Building up merkle tree root, distributing the merkle tree, I agree, is like 'adding a microchip'. But what's not clear, at least to me, how does, specifically finding hashes with certain number of 'leading zeroes', helps with counterfeit detection?
  - eduren 9y ago
    Sorry if that confused you. You're right, the analogy kinda falls apart there. I was hoping to illustrate to any less technical readers how integral the blockchain algorithms are to the security and integrity guarantees that bitcoin inherently has.
  - kyboren 9y ago
    It helps detecting counterfeit blocks claiming some transactions never happened. More specifically, it provides confidence that some minimum amount of energy must have been used to calculate that hash. As blocks n+1, n+2, ... are added, the amount of energy that must have been used to create an alternate history of transactions since block n increases. After a certain number of blocks have been added, the cost in energy to forge a longest chain that does not include some transaction (while that transaction does exist on the original chain) will eventually exceed the potential benefit gained by "stealing back" that transaction's BTC. Note that this doesn't guarantee such an attack doesn't happen, it just guarantees such attacks would be uneconomical. Thus, the "energy waste" of mining is really more like a security limit on transaction amounts and latencies. As the energy used--more specifically, the cost of the energy used--for mining increases, Bitcoin becomes more useful for transferring larger amounts more quickly.
tr1ck5t3r 9y ago
1. The blockchain is a concept which can make any audit trail more robust, look at databases which can use a blockchain concept. 2. I've got one of the earliest releases of the bitcoin code, and mined some in the very early days. You cant kill an idea, in a free market Greece and China have shown central banks cant implement capital controls, its far easier copying a wallet onto a microsd card that slips through airport scanners than carrying kilos or tonnes of gold across borders or moving bonds in briefcases which is something that went on during the aftermath of the financial crisis in 2008. Other problem, IT security is very poor as the national institutes in various countries held hostage with ransomware demanding bitcoins has shown, its also interesting no one in the media has suggested the hacks are just to raise the awareness of bitcoins in the wider public's mind, which is why from a psychological pov, targeting those who were targeted helped to raise bitcoins profile. It was a new concept for money, the financial crisis had happened, liquidity and bailouts were needed so by Govt's allowing it to be used as money, an idea became reality. Lets not forget the masters of the universe had got some of the 1930's law in the US repealed which was designed to prevent a repeat of a 1930's depression and whilst we didnt see anything as bad as a 1930's, you still saw Govts via central banks injecting shed loads of money to maintain liquidity as the velocity of money fell sharply. Wealthy individuals were given loans worth millions at zero or close to zero interest rates just to get some trickle down going on in the economy. You cant kill an idea. Its out, other crypto's have shown theres some mileage in the idea, its not perfect and I'm sure crypto's will evolve in time. Who has found out what happens when their wallet gets lost? What happens to those bitcoins, does the system ever release them back for mining after a certain number of days of inactivity? If there is nothing to be recovered, can you see what happens next? Over enough time, the number of bitcoins in use shrink due to "natural" wastage, the system becomes irrelevant, but hopefully in time there will be a superior replacement to use anyway. Either way, cryptocurrencies are here to stay, they make looking after your money your own business, and in a way earlier adopters of technology have been rewarded. So whilst the wealth might be concentrated in the hands of the older generations, in a way the younger generation are taking a pioneering new step towards a fairer more honoest financial system for the future.
taysic 9y ago
On 2 - I completely agree but much of the "validity" or "value" in bitcoin is there due to the incentive to get some. There would be little economic activity if there wasn't a perceived value and there is little to no perceived value if one doesn't think holding onto such a currency is a good investment. I don't think there's a way around it.

janoside 9y ago

1. This is a common criticism, but probably shouldn't be. It would be nice if the activity of folding proteins offered the same proof-of-work, security attributes as, for example SHA256, but sadly it doesn't. As in all systems there are engineering tradeoffs involved and the mining functionality of a cryptocurrency, which literally secures that network, should probably choose the security-first sides of any tradeoff. Additionally, if the network has "value" (however you might like to define it...they clearly do as denominated in USD), then the activity of securing that value should not be considered a "waste", even if it doesn't also provide some other, secondary value. 2. As in any market, the early risk-takers (who, by virtue of being early in an unproven market, are also the biggest risk-takers) will be those granted the biggest reward if they are "right" (the market/product has value).

kyleschiller 9y ago

Yeah, 1 is exactly right, but hopefully Ethereum will be able to move to Proof of Stake [0]. [0 ]https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ

eduren 9y ago

To your first point: While there are definitely valid concerns with just how much energy we spend maintaining the bitcoin network and the blockchain, it's hard to call it wasted and it's definitely not busy work. The energy we spend doing all the mathematical problems behind proof-of-work can be seen as an investment. In the blockchain there is a mathematically certain record of all transactions that have happened since 2008. While that may not sound all that impressive think of it like this: if a single entity was responsible for building that ledger, it would have taken less "energy", but that entity would have to be trusted by every participant transacting. With the mathematical underpinnings of proof-of-work, we are instead spending energy to create that trust model inside the currency (network+blockchain) itself. Not busy-work. Think of it like adding microchips to paper money for counterfeit detection. That is materials and energy spent creating a more trustworthy system. There are certainly alternatives to the BTC proof-of-work that might make for a more efficient protocol, and they might win out in the end. That should be explored. But BTC mining has value.

platform 9y ago
@eduren, WRT "Think of it like adding microchips to paper money for counterfeit detection. That is materials and energy spent creating a more trustworthy system." Building up merkle tree root, distributing the merkle tree, I agree, is like 'adding a microchip'. But what's not clear, at least to me, how does, specifically finding hashes with certain number of 'leading zeroes', helps with counterfeit detection?
- eduren 9y ago
  Sorry if that confused you. You're right, the analogy kinda falls apart there. I was hoping to illustrate to any less technical readers how integral the blockchain algorithms are to the security and integrity guarantees that bitcoin inherently has.
- kyboren 9y ago
  It helps detecting counterfeit blocks claiming some transactions never happened. More specifically, it provides confidence that some minimum amount of energy must have been used to calculate that hash. As blocks n+1, n+2, ... are added, the amount of energy that must have been used to create an alternate history of transactions since block n increases. After a certain number of blocks have been added, the cost in energy to forge a longest chain that does not include some transaction (while that transaction does exist on the original chain) will eventually exceed the potential benefit gained by "stealing back" that transaction's BTC. Note that this doesn't guarantee such an attack doesn't happen, it just guarantees such attacks would be uneconomical. Thus, the "energy waste" of mining is really more like a security limit on transaction amounts and latencies. As the energy used--more specifically, the cost of the energy used--for mining increases, Bitcoin becomes more useful for transferring larger amounts more quickly.

tr1ck5t3r 9y ago

1. The blockchain is a concept which can make any audit trail more robust, look at databases which can use a blockchain concept. 2. I've got one of the earliest releases of the bitcoin code, and mined some in the very early days. You cant kill an idea, in a free market Greece and China have shown central banks cant implement capital controls, its far easier copying a wallet onto a microsd card that slips through airport scanners than carrying kilos or tonnes of gold across borders or moving bonds in briefcases which is something that went on during the aftermath of the financial crisis in 2008. Other problem, IT security is very poor as the national institutes in various countries held hostage with ransomware demanding bitcoins has shown, its also interesting no one in the media has suggested the hacks are just to raise the awareness of bitcoins in the wider public's mind, which is why from a psychological pov, targeting those who were targeted helped to raise bitcoins profile. It was a new concept for money, the financial crisis had happened, liquidity and bailouts were needed so by Govt's allowing it to be used as money, an idea became reality. Lets not forget the masters of the universe had got some of the 1930's law in the US repealed which was designed to prevent a repeat of a 1930's depression and whilst we didnt see anything as bad as a 1930's, you still saw Govts via central banks injecting shed loads of money to maintain liquidity as the velocity of money fell sharply. Wealthy individuals were given loans worth millions at zero or close to zero interest rates just to get some trickle down going on in the economy. You cant kill an idea. Its out, other crypto's have shown theres some mileage in the idea, its not perfect and I'm sure crypto's will evolve in time. Who has found out what happens when their wallet gets lost? What happens to those bitcoins, does the system ever release them back for mining after a certain number of days of inactivity? If there is nothing to be recovered, can you see what happens next? Over enough time, the number of bitcoins in use shrink due to "natural" wastage, the system becomes irrelevant, but hopefully in time there will be a superior replacement to use anyway. Either way, cryptocurrencies are here to stay, they make looking after your money your own business, and in a way earlier adopters of technology have been rewarded. So whilst the wealth might be concentrated in the hands of the older generations, in a way the younger generation are taking a pioneering new step towards a fairer more honoest financial system for the future.

taysic 9y ago

On 2 - I completely agree but much of the "validity" or "value" in bitcoin is there due to the incentive to get some. There would be little economic activity if there wasn't a perceived value and there is little to no perceived value if one doesn't think holding onto such a currency is a good investment. I don't think there's a way around it.