4 ms·

Is Cryptocurrency a form of entropy exchange from Energy (increasing entropy via heat) to information entropy (decreasing information entropy by hashing)? I am

Is Cryptocurrency a form of entropy exchange from Energy (increasing entropy via heat) to information entropy (decreasing information entropy by hashing)? I am thinking more broadly in terms of thermodynamics. I understand classical Thermodynanamics but I don't understand information entropy well. From the standpoint of physics, Energy is the ultimate currency and it seems like we are trading it to decrease information entropy. Typically, entropy is the tax when performing work (for e.g in a heat engine) if that process is irreversible. I wonder if this kind of theory applies to Cryptocurrencies?

inimino 9y ago
Proof of work is about consensus among mutually distrusting parties. It has approximately nothing to do with entropy. Of course there is some connection, but the simple "exchange" you're looking for does not exist.
- fermienrico 9y ago
  >> Proof of work is about consensus among mutually distrusting parties. It has approximately nothing to do with entropy. Think more abstractly - at the end of the day, Energy is being consumed to compute some problem. That solution has intrinsic value precisely because it took energy to solve it. Extrinsic value is the market economy of CC, and that's where the 'proof of work' and 'consensus amongst distrusting parties' comes into play - that concept of a currency is only valuable if sufficient number of parties agree to its value. I am weeding into the underlying fabric that holds Crytocurrency together. Imagine if Energy was free, despite of 'consensus', the supply of such currency would be virtually unlimited and it would be worthless.
  - Armisael16 9y ago
    None of that makes entropy any more relevant.
  - inimino 9y ago
    Energy is consumed and that is why there is a cost. I'm not sure there is any such thing as "intrinsic value", but there is a cost. Because of that cost, the larger system works, because that is how the system keeps itself honest, by making it expensive to lie. But there are other ways to have an honest system that don't involve wasting energy, so there's no direct connection between the energy that's wasted and any value the system has. If energy was free, silicon would be more expensive, mining difficulty would go up, and bitcoin would still "work" just like it does today.
  - TeMPOraL 9y ago
    > Imagine if Energy was free, despite of 'consensus', the supply of such currency would be virtually unlimited and it would be worthless. They would just ramp up the network difficulty. Soon mining would be counted in exhausted stars per second. Cryptocurrencies are the perfect example of the maxim that "just because you can, doesn't mean you should". They're funny in theory, proof of work being an interesting solution to a particular mathematical problem. In the real world, with problems determined by laws of physics and (in consequence) the structure of human minds, this is about the worst imaginable way to run the economy. The constraints of the problem solved by cryptocurrencies are not very meaningful in reality.
- bandrami 9y ago
  > It has approximately nothing to do with entropy. Err.. it's removing surprisal from bit sequences. That's exactly what Shannon entropy is. There's even a boundary trade-off (which we're obviously trading well, well above) between Boltzmann and Shannon on this.
  - inimino 9y ago
    Yes, that's the "work". The value of that work is as part of a mechanism for enforcing consensus. To the question "does entropy tell us anything about the larger system" I am arguing that it does not (in any non-trivial way). Obviously entropy is related to any computation we perform. It's just not going to give us any special insight into cryptocurrencies to point that out.

inimino 9y ago

Proof of work is about consensus among mutually distrusting parties. It has approximately nothing to do with entropy. Of course there is some connection, but the simple "exchange" you're looking for does not exist.

fermienrico 9y ago
>> Proof of work is about consensus among mutually distrusting parties. It has approximately nothing to do with entropy. Think more abstractly - at the end of the day, Energy is being consumed to compute some problem. That solution has intrinsic value precisely because it took energy to solve it. Extrinsic value is the market economy of CC, and that's where the 'proof of work' and 'consensus amongst distrusting parties' comes into play - that concept of a currency is only valuable if sufficient number of parties agree to its value. I am weeding into the underlying fabric that holds Crytocurrency together. Imagine if Energy was free, despite of 'consensus', the supply of such currency would be virtually unlimited and it would be worthless.
- Armisael16 9y ago
  None of that makes entropy any more relevant.
- inimino 9y ago
  Energy is consumed and that is why there is a cost. I'm not sure there is any such thing as "intrinsic value", but there is a cost. Because of that cost, the larger system works, because that is how the system keeps itself honest, by making it expensive to lie. But there are other ways to have an honest system that don't involve wasting energy, so there's no direct connection between the energy that's wasted and any value the system has. If energy was free, silicon would be more expensive, mining difficulty would go up, and bitcoin would still "work" just like it does today.
- TeMPOraL 9y ago
  > Imagine if Energy was free, despite of 'consensus', the supply of such currency would be virtually unlimited and it would be worthless. They would just ramp up the network difficulty. Soon mining would be counted in exhausted stars per second. Cryptocurrencies are the perfect example of the maxim that "just because you can, doesn't mean you should". They're funny in theory, proof of work being an interesting solution to a particular mathematical problem. In the real world, with problems determined by laws of physics and (in consequence) the structure of human minds, this is about the worst imaginable way to run the economy. The constraints of the problem solved by cryptocurrencies are not very meaningful in reality.
bandrami 9y ago
> It has approximately nothing to do with entropy. Err.. it's removing surprisal from bit sequences. That's exactly what Shannon entropy is. There's even a boundary trade-off (which we're obviously trading well, well above) between Boltzmann and Shannon on this.
- inimino 9y ago
  Yes, that's the "work". The value of that work is as part of a mechanism for enforcing consensus. To the question "does entropy tell us anything about the larger system" I am arguing that it does not (in any non-trivial way). Obviously entropy is related to any computation we perform. It's just not going to give us any special insight into cryptocurrencies to point that out.