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You are focusing on the wrong thing. Energy production is the issue, not energy use. There is an equilibrium to be found in the free market based on the value o

You are focusing on the wrong thing. Energy production is the issue, not energy use. There is an equilibrium to be found in the free market based on the value of BTC that is provided and the economic expenditure to mine it with the cost of electricity used to get there. Oh wait! I found the link in the causal economic chain! We don't put a price on carbon! Put your energy into yelling there and not at yelling at Bitcoin. Maybe Bitcoin will help shed a light on this overtly obvious problem.

deleted 8y ago
[deleted]
almostApatriot1 8y ago
Chinese miners and other state subsidized miners will mine bitcoin at a loss to push out the competition and gain marketshare. An obvious problem, sure, but no easy solution.
hudon 8y ago
Nations and corporations already compete at finding means of cheap or sustainable energy production. How does Bitcoin provide an efficiency here? Furthermore, if we can't find a stable use case for the blockchain and there are no more greater fools investing--the bubble collapses and all the ASICs end up in landfills--does society suddenly stop innovating in energy production? Can you point me to any good literature on this? I don't understand the point.
- hndamien 8y ago
  I'm not saying anything about finding cheap electricity. And the greater fool theory isn't true as you could apply this theory to fiat money as well (except it is more foolish since new money is constantly created without the consent of the holders). The point is that the free market and algorithm finds an efficient equilibrium between what the users value it at (which is a reflection of its utility to them), what it costs to secure the network in relation to the reward paid for it. In these costs are electricity costs, for which miners will find the most efficient means such that they are profitable. The energy prices are determined by the economic actors producing it. The will charge what the market will bear such that they are profitable and competitive. All this is a wonderfully efficient system except for the fact that the externality you are worried about (pollution from energy production) is not accounted for anywhere in the system. In fact, it is almost incentivised, since it is likely that I can produce dirty power cheaper than I can clean power (although this is changing). If you did account for this, dirty power would become more expensive, miner using it would disappear or choose clean energy. Hence, the problem is not "It uses too much energy! So wasteful!!!!" The problem is "We don't account for externalities!!!! So bad!!!"
  - hudon 8y ago
    Actually, recent research found that even when considering externalities, proof-of-work is considered wasteful: "Another issue relates to the negative externalities arising in proof-of-work blockchains. First, as shown above, when choosing individually optimal computing capacity, miners fail to internalise the negative externality their investment generates for other miners by increasing difficulty. This implies that equilibrium capacity acquisition in proof-of-work mining is excessive. Second, proof-of-work mining generates greenhouse-effect negative externalities, whose order of magnitude is significant. As of January 2018, the electricity consumed for Bitcoin mining was equal to the electricity consumption of over 3,400,000 US households, with an average consumption per transaction of around 300 KWh. Pigovian taxation could curb overinvestment in mining, but it might also be difficult to put in place, given the international decentralisation of mining." source: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2017/wp_tse_817.pdf https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/...
    - hndamien 8y ago
      I fail to see your point here. I'm not sure how much clearer I can be. "proof-of-work mining generates greenhouse-effect negative externalities" is incorrect. Power production creates these externalities, and they are unaccounted for.
      - hudon 8y ago
        You’re proposing we fix energy production instead of fixing Bitcoin AFAIU. However, until we know how to do that OR until we have strong use cases for Bitcoin, why not put tight controls on proof-of-work mining to reduce electricity consumption? The “let the market find equilibrium” philosophy is reckless when we’re talking about global environmental concerns IMO.
        hndamien 8y ago
        No, I am suggesting that the only problem here is accounting. If you have a price on carbon, the rest will sort itself out. The lack of this cost being accounted for creates the false equilibrium where we plunder the environment to efficiently meet our needs within an otherwise well designed economic system - that is only made better by Bitcoin.
jMyles 8y ago
Somehow, I had never encountered this argument before. This makes great sense. It's not entirely clear how to put a price on carbon, though. And, bitcoin's censorship-resistance (which of course I laud as an amazing and important innovation) might make it harder to force everyone to account for externalities. Is someone doing serious research, writing, and thinking on the relationship between crypto-blockchain tech and the economics of environmental externalities?
- hndamien 8y ago
  It isn't really crypto specific. It is energy producing utility economics. If we had a price on carbon it would effect this equilibrium everywhere. If you accept that we have to change, and sooner rather than later due to inevitability - see Elon's turd in a punchbowl reference, and you accept we aren't going to curtail the things that we find useful that cost us energy, then a price on carbon would bring this about much quicker than without it and is really the only sensible option. Compared with the status quo, burn more dirty fuel faster and cheaply to prevent the economics of green tech coming online, and then, hoping we can innovate our way out of the shitty punchbowl.

deleted 8y ago

[deleted]

almostApatriot1 8y ago

Chinese miners and other state subsidized miners will mine bitcoin at a loss to push out the competition and gain marketshare. An obvious problem, sure, but no easy solution.

hudon 8y ago

Nations and corporations already compete at finding means of cheap or sustainable energy production. How does Bitcoin provide an efficiency here? Furthermore, if we can't find a stable use case for the blockchain and there are no more greater fools investing--the bubble collapses and all the ASICs end up in landfills--does society suddenly stop innovating in energy production? Can you point me to any good literature on this? I don't understand the point.

hndamien 8y ago
I'm not saying anything about finding cheap electricity. And the greater fool theory isn't true as you could apply this theory to fiat money as well (except it is more foolish since new money is constantly created without the consent of the holders). The point is that the free market and algorithm finds an efficient equilibrium between what the users value it at (which is a reflection of its utility to them), what it costs to secure the network in relation to the reward paid for it. In these costs are electricity costs, for which miners will find the most efficient means such that they are profitable. The energy prices are determined by the economic actors producing it. The will charge what the market will bear such that they are profitable and competitive. All this is a wonderfully efficient system except for the fact that the externality you are worried about (pollution from energy production) is not accounted for anywhere in the system. In fact, it is almost incentivised, since it is likely that I can produce dirty power cheaper than I can clean power (although this is changing). If you did account for this, dirty power would become more expensive, miner using it would disappear or choose clean energy. Hence, the problem is not "It uses too much energy! So wasteful!!!!" The problem is "We don't account for externalities!!!! So bad!!!"
- hudon 8y ago
  Actually, recent research found that even when considering externalities, proof-of-work is considered wasteful: "Another issue relates to the negative externalities arising in proof-of-work blockchains. First, as shown above, when choosing individually optimal computing capacity, miners fail to internalise the negative externality their investment generates for other miners by increasing difficulty. This implies that equilibrium capacity acquisition in proof-of-work mining is excessive. Second, proof-of-work mining generates greenhouse-effect negative externalities, whose order of magnitude is significant. As of January 2018, the electricity consumed for Bitcoin mining was equal to the electricity consumption of over 3,400,000 US households, with an average consumption per transaction of around 300 KWh. Pigovian taxation could curb overinvestment in mining, but it might also be difficult to put in place, given the international decentralisation of mining." source: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2017/wp_tse_817.pdf https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/...
  - hndamien 8y ago
    I fail to see your point here. I'm not sure how much clearer I can be. "proof-of-work mining generates greenhouse-effect negative externalities" is incorrect. Power production creates these externalities, and they are unaccounted for.
    - hudon 8y ago
      You’re proposing we fix energy production instead of fixing Bitcoin AFAIU. However, until we know how to do that OR until we have strong use cases for Bitcoin, why not put tight controls on proof-of-work mining to reduce electricity consumption? The “let the market find equilibrium” philosophy is reckless when we’re talking about global environmental concerns IMO.
      - hndamien 8y ago
        No, I am suggesting that the only problem here is accounting. If you have a price on carbon, the rest will sort itself out. The lack of this cost being accounted for creates the false equilibrium where we plunder the environment to efficiently meet our needs within an otherwise well designed economic system - that is only made better by Bitcoin.

jMyles 8y ago

Somehow, I had never encountered this argument before. This makes great sense. It's not entirely clear how to put a price on carbon, though. And, bitcoin's censorship-resistance (which of course I laud as an amazing and important innovation) might make it harder to force everyone to account for externalities. Is someone doing serious research, writing, and thinking on the relationship between crypto-blockchain tech and the economics of environmental externalities?

hndamien 8y ago
It isn't really crypto specific. It is energy producing utility economics. If we had a price on carbon it would effect this equilibrium everywhere. If you accept that we have to change, and sooner rather than later due to inevitability - see Elon's turd in a punchbowl reference, and you accept we aren't going to curtail the things that we find useful that cost us energy, then a price on carbon would bring this about much quicker than without it and is really the only sensible option. Compared with the status quo, burn more dirty fuel faster and cheaply to prevent the economics of green tech coming online, and then, hoping we can innovate our way out of the shitty punchbowl.