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Run that one by me again? If tomorrow, a manufacturer announced the new Super Duper Quantum ASIC for Bitcoin that can perform hashes at 10 times less energy co

Run that one by me again? If tomorrow, a manufacturer announced the new Super Duper Quantum ASIC for Bitcoin that can perform hashes at 10 times less energy cost, everybody would switch over to it, and the total hashrate would increase 10x. Neither the number of miners, the proportion of mining held by each person, the distribution of mining rewards accumulated, or the total power consumption would be affected at all. Therefore, the amount of trust in the system would not be changed at all. Cryptocurrencies are not secured by the hashrate, but by the cost of exceeding the hashrate of the network.

c22 8y ago
I'm probably way out of my element here (I don't own bitcoin or play video games). Are you telling me that the power consumption of the bitcoin network is constant and based solely on the most popular bitcoin mining hardware?
- MereInterest 8y ago
  I wouldn't say that it is constant, as the energy consumption has been increasing. However, it does not depend on the efficiency of the hardware being used. Think of bitcoin mining as a raffle. You can buy as many raffle tickets as you want, and so can everybody else. Each raffle ticket costs $1, and so people buy tickets until the prizes start getting spread out too much. The next day, though, the raffle tickets are only 10 cents apiece. However, the prizes are still the same, so the break-even point is still the same when expressed in dollar value. As a result, the same amount of money is spent, just buying 10x as many raffle tickets. In this analogy, each hash performed by the miners is buying a raffle ticket. The block reward is the prize at the end of the raffle. Going from CPU mining to GPU mining to ASIC mining each increase the efficiency of performing a hash, analogous to lowering the price of a raffle ticket. Just as lowering the price of each raffle ticket results in an increase in the number of ticket sales without changing the total value of ticket sales, so decreasing the cost of each hash results in an increased number of hashes performed, without changing the total amount of electricity spent to perform those hashes.
  - c22 8y ago
    Okay, I think I get it. So the power consumption of the network is based only on the power available to miners, which is probably reasonably constant since the mining pool doesn't change much? So putting aside market hype the main thing impacting the value of a bitcoin should be the cost of this power? I agree it doesn't sound like the most efficient system and these incentives are somewhat perverse, but there weren't any systems like this before bitcoin. If cryptocurrencies do have valuable attributes that cannot be attained by conventional currencies and bitcoin introduced these concepts to the world in the first viable way and the popularity of these networks has lead to people researching more efficient analogues such as proof of stake and the techniques mentioned in the original article then can't we still say that the existence of bitcoin had a utilitarian benefit for the world? If the popularity of bitcoin goes down and these more efficient networks supplant it then the total energy-expenditure should be minuscule compared to the total energy usage of all humans over all time. Given the the rate at which these technologies seem to be maturing it will likely still be a lower expenditure than bootstrapping many other equally useless human endeavors.
    - MereInterest 8y ago
      It is a new application, but I'm not sold on it at all. I don't see anything that cryptocurrencies do that fiat currencies do not do better. Irreversible transactions, for example, is touted as a benefit, but I believe is a major disadvantage. As a result of them, consumer protections against theft and fraud are impossible to implement. Any reverse payment requires the cooperation of the fraudulent actor. Furthermore, the decentralized nature of bitcoin cannot last indefinitely, and arguably has already ended. All mining nodes need to have a record of all balances, in order to verify that incoming transactions are valid. This places a limit on the ability to contribute to trust by mining, and will result in further centralization of miners. If a cryptocurrency were to replace fiat currency, it would not be a change from centralized currency to decentralized. Rather, it would be a from a centralized currency controlled by an elected government to a centralized currency controlled by conglomerations of miners. I have done my best to understand their use, their applications, and their limits. With that in mind, I believe cryptocurrencies to be a obfuscated form of pyramid scheme, with additional externalities of heavy power use.
ric2b 8y ago
The trust in the system doesn't scale with hashrate, it scales with required cost to attack it.

c22 8y ago

I'm probably way out of my element here (I don't own bitcoin or play video games). Are you telling me that the power consumption of the bitcoin network is constant and based solely on the most popular bitcoin mining hardware?

MereInterest 8y ago
I wouldn't say that it is constant, as the energy consumption has been increasing. However, it does not depend on the efficiency of the hardware being used. Think of bitcoin mining as a raffle. You can buy as many raffle tickets as you want, and so can everybody else. Each raffle ticket costs $1, and so people buy tickets until the prizes start getting spread out too much. The next day, though, the raffle tickets are only 10 cents apiece. However, the prizes are still the same, so the break-even point is still the same when expressed in dollar value. As a result, the same amount of money is spent, just buying 10x as many raffle tickets. In this analogy, each hash performed by the miners is buying a raffle ticket. The block reward is the prize at the end of the raffle. Going from CPU mining to GPU mining to ASIC mining each increase the efficiency of performing a hash, analogous to lowering the price of a raffle ticket. Just as lowering the price of each raffle ticket results in an increase in the number of ticket sales without changing the total value of ticket sales, so decreasing the cost of each hash results in an increased number of hashes performed, without changing the total amount of electricity spent to perform those hashes.
- c22 8y ago
  Okay, I think I get it. So the power consumption of the network is based only on the power available to miners, which is probably reasonably constant since the mining pool doesn't change much? So putting aside market hype the main thing impacting the value of a bitcoin should be the cost of this power? I agree it doesn't sound like the most efficient system and these incentives are somewhat perverse, but there weren't any systems like this before bitcoin. If cryptocurrencies do have valuable attributes that cannot be attained by conventional currencies and bitcoin introduced these concepts to the world in the first viable way and the popularity of these networks has lead to people researching more efficient analogues such as proof of stake and the techniques mentioned in the original article then can't we still say that the existence of bitcoin had a utilitarian benefit for the world? If the popularity of bitcoin goes down and these more efficient networks supplant it then the total energy-expenditure should be minuscule compared to the total energy usage of all humans over all time. Given the the rate at which these technologies seem to be maturing it will likely still be a lower expenditure than bootstrapping many other equally useless human endeavors.
  - MereInterest 8y ago
    It is a new application, but I'm not sold on it at all. I don't see anything that cryptocurrencies do that fiat currencies do not do better. Irreversible transactions, for example, is touted as a benefit, but I believe is a major disadvantage. As a result of them, consumer protections against theft and fraud are impossible to implement. Any reverse payment requires the cooperation of the fraudulent actor. Furthermore, the decentralized nature of bitcoin cannot last indefinitely, and arguably has already ended. All mining nodes need to have a record of all balances, in order to verify that incoming transactions are valid. This places a limit on the ability to contribute to trust by mining, and will result in further centralization of miners. If a cryptocurrency were to replace fiat currency, it would not be a change from centralized currency to decentralized. Rather, it would be a from a centralized currency controlled by an elected government to a centralized currency controlled by conglomerations of miners. I have done my best to understand their use, their applications, and their limits. With that in mind, I believe cryptocurrencies to be a obfuscated form of pyramid scheme, with additional externalities of heavy power use.

ric2b 8y ago

The trust in the system doesn't scale with hashrate, it scales with required cost to attack it.