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What do you mean "stored"? The fiat used to buy bitcoins went to sellers, so they have it. The current "valuation" suffers from the same issues as the valuatio

What do you mean "stored"? The fiat used to buy bitcoins went to sellers, so they have it. The current "valuation" suffers from the same issues as the valuation of any asset.

PeterisP 9y ago
A significant part (literal billions of dollars) of fiat used to buy bitcoins went to miners direct electricity expenses, and those extreme amounts of resources were permanently spent, possibly wasted. It's not a zero-sum game, as sustaining the current system costs a lot. A quick, rough calculation - if ~30 TWh were spent on mining Bitcoin, and the marginal rate of death for electricity generation is at least 100 per TWh (https://www.forbes.com/sites/jamesconca/2012/06/10/energys-deathprint-a-price-always-paid https://www.forbes.com/sites/jamesconca/2012/06/10/energys-d... or https://www.nextbigfuture.com/2016/06/update-of-death-per-terawatt-hour-by.html https://www.nextbigfuture.com/2016/06/update-of-death-per-te...), this means that we have sacrificed the lives of at least 3000 people to make this happen. Are the benefits worth this cost?
- chrisdbaldwin 9y ago
  Are the costs of the current paradigm any different?
  - PeterisP 9y ago
    Yes, any other international electronic payment system (Fedwire, SEPA, SWIFT, Visa, Mastercard, etc) requires much, much less (Thousandfold? more? It's tricky to estimate) energy resources per transaction. Bitcoin consumes more electricity than whole small nations, and in each of those small nations that electricity is sufficient to run a financial industry that processes much more transactions than Bitcoin, and leaves enough energy for other industries as well. Bitcoin proof-of-work principle means that the power wasted (intentionally, to prove that work has been done) on a single transaction is absolutely ridiculous. Clearing transactions, the (comparably small) part of a financial transfer that Bitcoin does, is comparably simple and easy and constitutes a minority of both the effort and cost of financial transactions. Things like dispute resolution, fraud control, client-side tools, customer service and acquisition, etc take more than that, but that's not included in the standard Bitcoin transaction fee / miner's expense.
- gonvaled 9y ago
  The problem is the death rate of electricity generation. Because you are killing as many people playing computer games, or turning on your microwave, or ... Or, said another way: what service does bitcoin provide, as opposed to say banking? Because that is what it is "trying" to replace. How many deaths does banking produce? Will replacing a part of the banking activities with bitcoin increase or decrease the death rate?
  - PeterisP 9y ago
    Bitcoin is not trying to replace banking - the set of services that it's trying to replace is a (not so big) part of payments processing, and a tiny part of whole banking (for example, lending is a much larger function than payments). If I look at the headcount structure of a typical bank or at the tasks where the wider financial industry employs people, the settlement of payments takes 1%, perhaps 2% depending on how widely you interpret the area. So total worldwide adoption of Bitcoin (or some newcoin) might replace at most 1%-2% of the current banking employment and energy cost. As far as I understand, this energy cost is already smaller than Bitcoin's despite processing multiple orders of magnitude more transactions.
    - gonvaled 9y ago
      First, what bitcoin tries to replace in the banking industry is not so clear cut. It could be payments, but also investment (value store), funding, and even credit. This very much depends on how successful and flexible the technology turns out to be. It is very early to say. Second, the resources used by the banking industry to provide the services they do are not limited to the direct associated costs: we also have technology development, personnel costs (including energy used by the banking personnel to reach their workplace, the costs of turning on the lights in all the bank offices, and the fuel consumed by the bank managers to attend the party on the other side of the country without which the industry can not function, since, you know, you need some fun in order to sign the required contracts), the fuel consumed by the customers to reach the branch where, for the third time, they are going to evaluate their mortgage application, ... A long list. In summary, yes, you are probably right that bitcoin is currently inefficient, and that currently it is not providing much value. But the sector is ripe for disruption, it is easy to disrupt, and any change in the current status quo will be an improvement, since the banking industry is so hugely inefficient for society as a whole. At the core, the banking industry is just information processing, and that is the cake that technology is eating at the moment.

What do you mean "stored"? The fiat used to buy bitcoins went to sellers, so they have it. The current "valuation" suffers from the same issues as the valuation of any asset.

PeterisP 9y ago

A significant part (literal billions of dollars) of fiat used to buy bitcoins went to miners direct electricity expenses, and those extreme amounts of resources were permanently spent, possibly wasted. It's not a zero-sum game, as sustaining the current system costs a lot. A quick, rough calculation - if ~30 TWh were spent on mining Bitcoin, and the marginal rate of death for electricity generation is at least 100 per TWh (https://www.forbes.com/sites/jamesconca/2012/06/10/energys-deathprint-a-price-always-paid https://www.forbes.com/sites/jamesconca/2012/06/10/energys-d... or https://www.nextbigfuture.com/2016/06/update-of-death-per-terawatt-hour-by.html https://www.nextbigfuture.com/2016/06/update-of-death-per-te...), this means that we have sacrificed the lives of at least 3000 people to make this happen. Are the benefits worth this cost?

chrisdbaldwin 9y ago
Are the costs of the current paradigm any different?
- PeterisP 9y ago
  Yes, any other international electronic payment system (Fedwire, SEPA, SWIFT, Visa, Mastercard, etc) requires much, much less (Thousandfold? more? It's tricky to estimate) energy resources per transaction. Bitcoin consumes more electricity than whole small nations, and in each of those small nations that electricity is sufficient to run a financial industry that processes much more transactions than Bitcoin, and leaves enough energy for other industries as well. Bitcoin proof-of-work principle means that the power wasted (intentionally, to prove that work has been done) on a single transaction is absolutely ridiculous. Clearing transactions, the (comparably small) part of a financial transfer that Bitcoin does, is comparably simple and easy and constitutes a minority of both the effort and cost of financial transactions. Things like dispute resolution, fraud control, client-side tools, customer service and acquisition, etc take more than that, but that's not included in the standard Bitcoin transaction fee / miner's expense.
gonvaled 9y ago
The problem is the death rate of electricity generation. Because you are killing as many people playing computer games, or turning on your microwave, or ... Or, said another way: what service does bitcoin provide, as opposed to say banking? Because that is what it is "trying" to replace. How many deaths does banking produce? Will replacing a part of the banking activities with bitcoin increase or decrease the death rate?
- PeterisP 9y ago
  Bitcoin is not trying to replace banking - the set of services that it's trying to replace is a (not so big) part of payments processing, and a tiny part of whole banking (for example, lending is a much larger function than payments). If I look at the headcount structure of a typical bank or at the tasks where the wider financial industry employs people, the settlement of payments takes 1%, perhaps 2% depending on how widely you interpret the area. So total worldwide adoption of Bitcoin (or some newcoin) might replace at most 1%-2% of the current banking employment and energy cost. As far as I understand, this energy cost is already smaller than Bitcoin's despite processing multiple orders of magnitude more transactions.
  - gonvaled 9y ago
    First, what bitcoin tries to replace in the banking industry is not so clear cut. It could be payments, but also investment (value store), funding, and even credit. This very much depends on how successful and flexible the technology turns out to be. It is very early to say. Second, the resources used by the banking industry to provide the services they do are not limited to the direct associated costs: we also have technology development, personnel costs (including energy used by the banking personnel to reach their workplace, the costs of turning on the lights in all the bank offices, and the fuel consumed by the bank managers to attend the party on the other side of the country without which the industry can not function, since, you know, you need some fun in order to sign the required contracts), the fuel consumed by the customers to reach the branch where, for the third time, they are going to evaluate their mortgage application, ... A long list. In summary, yes, you are probably right that bitcoin is currently inefficient, and that currently it is not providing much value. But the sector is ripe for disruption, it is easy to disrupt, and any change in the current status quo will be an improvement, since the banking industry is so hugely inefficient for society as a whole. At the core, the banking industry is just information processing, and that is the cake that technology is eating at the moment.