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Wasteful compared to what though? How much energy, human capital, and resources are consumed by the banking industry? If (and big if) bitcoin is able to repla

Wasteful compared to what though? How much energy, human capital, and resources are consumed by the banking industry? If (and big if) bitcoin is able to replace a significant fraction of the banking industry it will be extremely efficient in comparison. Per-transaction measures isn't the right metric since the Bitcoin blockchain can still be successful as a reconciliation backbone without being used for small everyday purchases.

shsjxjbsbs 7y ago
There’s no indication I’m aware of that Bitcoin is removing any labor or equipment from the banking system. So far all I’ve seen is traditional banking layering crypto on top.
- iopq 7y ago
  it's cheaper to transfer Bitcoin and immediately convert to fiat than to do a wire transfer from overseas. Then you're using the home banking system like ACH in the US and SEPA in Europe Wires cost me $50+ because of intermediary banks, even if I don't pay anything at my own bank, someone is getting a big cut.
  - shsjxjbsbs 7y ago
    Don’t companies like TransferWise already do international payments electronically without the need for a blockchain? I definitely support lowering the amount of human labor required for payments, but I don’t see the need for many coal plants worth of computers randomly hashing a bunch of junk over and over again when a normal efficient server can do it. Every bitcoin exchange I’ve used required me to physically write something on paper and show it to a human, so it seems like the human labor in the banking system is a regulatory issue, not a technical one.
    - iopq 7y ago
      Maybe to sign up, but to actually make trades it's just taking orders off the book.
      - shsjxjbsbs 7y ago
        Sure, but why do I need a blockchain for that? Can’t the service trusted by the government to enforce KYC regulation also run a normal commodity server to process transactions, without burning the earth?
    - stordoff 7y ago
      > Every bitcoin exchange I’ve used required me to physically write something on paper and show it to a human I'm curious - what did you have to write? Is it just part of proof of identity, or something more?
      - leppr 7y ago
        Usually the date and name of the exchange, to comply with "Know Your Customer" regulations and fight duplicate accounts.
  - spookthesunset 7y ago
    It is only cheaper today because the price of those traditional transfers are set artificially high. Make no mistake if banks had real competition for inter-bank transfers you’d see the price drop to near zero.
- leppr 7y ago
  There's nothing fundamental about this state of affairs. We're simply early in the adoption curve: the network of services around fiat is larger than the one around cryptocurrency, so to use cryptocurrency effectively you have to connect with fiat. The infrastructure required for functional cryptocurrency usage in society is far smaller than for traditional money, so with enough adoption to supersede fiat, there would be efficiency gains. Remember, we used to need the phone network to connect to the internet. 30 years later, the trend is reversed and it's telephone that we layer on top of the internet.
dragontamer 7y ago
> Wasteful compared to what though? How much energy, human capital, and resources are consumed by the banking industry? The article actually answers this to some degree. See the following graphic: https://i.imgur.com/8TdKevG.png https://i.imgur.com/8TdKevG.png
- WillPostForFood 7y ago
  How much energy to mine an ounce of gold?
  - easymodex 7y ago
    Why is this getting downvoted, I'm curious as well.
    - dragontamer 7y ago
      I don't think any modern currency is really using Gold these days. The cost of creating dollars is basically the cost of the Fed signing a few papers. A lot of modern currency is fully virtual. So I don't think "mining gold" is an appropriate analogy. EDIT: Case in point: how much did it cost for Visa + Bank to increase a credit-card from $500 credit limit to $2000 credit limit? $1500 of credit appeared out of thin air.
      - cwkoss 7y ago
        I think your Edit example actually points to the root of the issue with these comparisons. The first credit limit increase "from scratch" costs hundreds of billions of dollars in creating a system of legal compliance, accounting, communication, internal and external risk management, executive compensation, regulatory oversight, credit ratings, cybersecurity, salaries of millions of workers, building public trust in the credit system, writing and passing legislation, even Fed responsibility of building and maintaining a fiat currency. The second credit limit increase once this system exists is essentially free. To what extent do these costs need to be accounted for in creating an accurately comparable 'per transaction' metric? By replacing much of the logic with 'just math', Bitcoin has the potential for a much higher theoretical efficiency than the current banking system. Whether market penetration will ever reach the current banking systems levels - and function without replicating these same structures - is certainly highly debatable and for many of the above items implausible. Bitcoin transactions in isolation are also essentially free - it's the maintenance of the system which keeps it secure and trustworthy that is expensive.
roywiggins 7y ago
> Per-transaction measures isn't the right metric since the Bitcoin blockchain can still be successful as a reconciliation backbone without being used for small everyday purchases. This idea has been around the corner for a while now. How likely is it really, how long will it take, and what will adoption look like? Until it happens and is popular, it seems fair to discuss how much a Bitcoin transaction actually costs...
- aeternum 7y ago
  It's up and running now: https://bitcoinvisuals.com/lightning https://bitcoinvisuals.com/lightning
  - spookthesunset 7y ago
    Too bad lightning network requires bitcoin at the on and off ramps to function. Those transactions alone would kill bitcoins pathetic transaction rate if the ecosystem ever took off.
bitcurious 7y ago
Here's an apples and oranges comparison. According to the article, bitcoin consumes about the same amount of electrical energy as Austria, a nation of 8,857,960. According to Bureau of Labor Statistics, ~8.6 million people are employed in "Financial activities" in the US. BLS: https://www.bls.gov/emp/tables/employment-by-major-industry-sector.htm https://www.bls.gov/emp/tables/employment-by-major-industry-...
skywhopper 7y ago
I mean, the article lays out the energy costs of competing transaction processors. But if Bitcoin is just a clearinghouse for large-scale reconciliation, then... who is the audience exactly? Large banks that have to operate using real money under actual governmental regulation have no use for Bitcoin's naive guarantees, which pretend that the court system and human ambiguity don't exist.
KirinDave 7y ago
Bitcoin physically cannot scale to replace any substantial portion of the financial industry. That is a primary design feature of proof of work systems. It's this wasteful at this level of scaling. That only gets worse.
leppr 7y ago
It's not just the banking industry that trustless cryptocurrencies can do without, but also the whole infrastructure necessary to maintain the value and trust in fiat money. This encompasses a very large part of the responsibilities of the political system, army, secret service, ... Those cost centers can't be ignored if the goal is an honest comparison between the energy efficiency of bitcoin vs. fiat.

shsjxjbsbs 7y ago

There’s no indication I’m aware of that Bitcoin is removing any labor or equipment from the banking system. So far all I’ve seen is traditional banking layering crypto on top.

iopq 7y ago
it's cheaper to transfer Bitcoin and immediately convert to fiat than to do a wire transfer from overseas. Then you're using the home banking system like ACH in the US and SEPA in Europe Wires cost me $50+ because of intermediary banks, even if I don't pay anything at my own bank, someone is getting a big cut.
- shsjxjbsbs 7y ago
  Don’t companies like TransferWise already do international payments electronically without the need for a blockchain? I definitely support lowering the amount of human labor required for payments, but I don’t see the need for many coal plants worth of computers randomly hashing a bunch of junk over and over again when a normal efficient server can do it. Every bitcoin exchange I’ve used required me to physically write something on paper and show it to a human, so it seems like the human labor in the banking system is a regulatory issue, not a technical one.
  - iopq 7y ago
    Maybe to sign up, but to actually make trades it's just taking orders off the book.
    - shsjxjbsbs 7y ago
      Sure, but why do I need a blockchain for that? Can’t the service trusted by the government to enforce KYC regulation also run a normal commodity server to process transactions, without burning the earth?
  - stordoff 7y ago
    > Every bitcoin exchange I’ve used required me to physically write something on paper and show it to a human I'm curious - what did you have to write? Is it just part of proof of identity, or something more?
    - leppr 7y ago
      Usually the date and name of the exchange, to comply with "Know Your Customer" regulations and fight duplicate accounts.
- spookthesunset 7y ago
  It is only cheaper today because the price of those traditional transfers are set artificially high. Make no mistake if banks had real competition for inter-bank transfers you’d see the price drop to near zero.
leppr 7y ago
There's nothing fundamental about this state of affairs. We're simply early in the adoption curve: the network of services around fiat is larger than the one around cryptocurrency, so to use cryptocurrency effectively you have to connect with fiat. The infrastructure required for functional cryptocurrency usage in society is far smaller than for traditional money, so with enough adoption to supersede fiat, there would be efficiency gains. Remember, we used to need the phone network to connect to the internet. 30 years later, the trend is reversed and it's telephone that we layer on top of the internet.

dragontamer 7y ago

> Wasteful compared to what though? How much energy, human capital, and resources are consumed by the banking industry? The article actually answers this to some degree. See the following graphic: https://i.imgur.com/8TdKevG.png https://i.imgur.com/8TdKevG.png

WillPostForFood 7y ago
How much energy to mine an ounce of gold?
- easymodex 7y ago
  Why is this getting downvoted, I'm curious as well.
  - dragontamer 7y ago
    I don't think any modern currency is really using Gold these days. The cost of creating dollars is basically the cost of the Fed signing a few papers. A lot of modern currency is fully virtual. So I don't think "mining gold" is an appropriate analogy. EDIT: Case in point: how much did it cost for Visa + Bank to increase a credit-card from $500 credit limit to $2000 credit limit? $1500 of credit appeared out of thin air.
    - cwkoss 7y ago
      I think your Edit example actually points to the root of the issue with these comparisons. The first credit limit increase "from scratch" costs hundreds of billions of dollars in creating a system of legal compliance, accounting, communication, internal and external risk management, executive compensation, regulatory oversight, credit ratings, cybersecurity, salaries of millions of workers, building public trust in the credit system, writing and passing legislation, even Fed responsibility of building and maintaining a fiat currency. The second credit limit increase once this system exists is essentially free. To what extent do these costs need to be accounted for in creating an accurately comparable 'per transaction' metric? By replacing much of the logic with 'just math', Bitcoin has the potential for a much higher theoretical efficiency than the current banking system. Whether market penetration will ever reach the current banking systems levels - and function without replicating these same structures - is certainly highly debatable and for many of the above items implausible. Bitcoin transactions in isolation are also essentially free - it's the maintenance of the system which keeps it secure and trustworthy that is expensive.

roywiggins 7y ago

> Per-transaction measures isn't the right metric since the Bitcoin blockchain can still be successful as a reconciliation backbone without being used for small everyday purchases. This idea has been around the corner for a while now. How likely is it really, how long will it take, and what will adoption look like? Until it happens and is popular, it seems fair to discuss how much a Bitcoin transaction actually costs...

aeternum 7y ago
It's up and running now: https://bitcoinvisuals.com/lightning https://bitcoinvisuals.com/lightning
- spookthesunset 7y ago
  Too bad lightning network requires bitcoin at the on and off ramps to function. Those transactions alone would kill bitcoins pathetic transaction rate if the ecosystem ever took off.

bitcurious 7y ago

Here's an apples and oranges comparison. According to the article, bitcoin consumes about the same amount of electrical energy as Austria, a nation of 8,857,960. According to Bureau of Labor Statistics, ~8.6 million people are employed in "Financial activities" in the US. BLS: https://www.bls.gov/emp/tables/employment-by-major-industry-sector.htm https://www.bls.gov/emp/tables/employment-by-major-industry-...

skywhopper 7y ago

I mean, the article lays out the energy costs of competing transaction processors. But if Bitcoin is just a clearinghouse for large-scale reconciliation, then... who is the audience exactly? Large banks that have to operate using real money under actual governmental regulation have no use for Bitcoin's naive guarantees, which pretend that the court system and human ambiguity don't exist.

KirinDave 7y ago

Bitcoin physically cannot scale to replace any substantial portion of the financial industry. That is a primary design feature of proof of work systems. It's this wasteful at this level of scaling. That only gets worse.

leppr 7y ago

It's not just the banking industry that trustless cryptocurrencies can do without, but also the whole infrastructure necessary to maintain the value and trust in fiat money. This encompasses a very large part of the responsibilities of the political system, army, secret service, ... Those cost centers can't be ignored if the goal is an honest comparison between the energy efficiency of bitcoin vs. fiat.