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The resources consumed by Bitcoin should be compared with those consumed by other transaction-clearing and store-of-value methods. Credit-card companies consume

by ISL 6y ago

The resources consumed by Bitcoin should be compared with those consumed by other transaction-clearing and store-of-value methods. Credit-card companies consume a few percent of revenue for a large chunk of consumer transactions. Gold mining is an environmental catastrophe [1]. Bitcoin is far from perfect, but it is important to place it in context with other systems that achieve the same ends. As bitcoin-mining technology matures, it is increasingly reasonable to think about home-heating/data-furnace ways to make use of the waste heat. [1] https://www.google.com/maps/place/Cripple+Creek,+CO/@38.729572,-105.157268,6067m/data=!3m1!1e3!4m5!3m4!1s0x8714a4857bc1cc4d:0xd14ac36d2725c603!8m2!3d38.7466555!4d-105.1783149 https://www.google.com/maps/place/Cripple+Creek,+CO/@38.7295...

arcticbull 6y ago
Energy consumption in the classical model is substantially lower because if you scaled up Bitcoin to the size of Visa alone it would exceed the amount of energy generated on earth a few times over and the amount of ewaste generated on earth too. This is a classic pro Bitcoin argument that’s trivially falsifiable. The fact folks here think their transactions in the online economy should heat their homes is so bananas to me. What is this, the industrial revolution? I mean, I know we’ve got our plague doctor masks on but that’s not intentional.
- ISL 6y ago
  It depends upon the scaling algorithm -- as volume goes up, there may be efficiencies that allow the (competing!) miners to reduce their transaction fees. In theory, since there is no notion of a Bitcoin chargeback and no need to extend credit to any party in the transaction, the intrinsic cost of a bitcoin transaction should be lower.
  - arcticbull 6y ago
    The intrinsic cost of a transaction is basically zero, the cost associated with Bitcoin is Smaug-style keeping people off your coins. There is no scaling algorithm and no scaling to date. Believe it or not chargebacks and credit are good things. This you can find out if you ask literally anyone why they use their credit card instead of their debit card.
- gruez 6y ago
  >Energy consumption in the classical model is substantially lower because if you scaled up Bitcoin to the size of visa alone it would exceed the amount of energy generated on earth a few times over and the amount of ewaste generated on earth too. This seems to be a misunderstanding of how mining works. The amount of energy used for mining is largely disconnected from transaction volume. Mining a block with one transaction takes about the same amount of energy (within a few watts) as mining a block with 10000 transactions.
  - arcticbull 6y ago
    There’s no misunderstanding. To the extent that the cap remains 7tx/sec and saturated at that level then my point remains valid. There’s no plan to change it so let’s stay away from hypotheticals.
    - X6S1x6Okd1st 6y ago
      Yup, last I checked there is so much resistance to increasing the block size that there was multiple forks about it. The hope for scaling bitcoin is on stuff like the lightning network and other more esoteric stuff like coinjoin. That being said lighting network could scale arbitrarily in theory, but the security properties depend on being able to tx on the main chain in a timely manner. In the case that there is a wide spread theft attempt on the lighting network we could see many LN channels trying to be closed at the same time and shooting the fees up beyond the attack value.
      - arcticbull 6y ago
        Well a lightning channel requires 1 on chain transaction to open and 1 to close so it’d cost $12 and for everyone on earth to open and close a single channel would take over 70 years. So it’s not really a scaling solution. And L2 isn’t blockchain anyways, you could conceivably implement lightning with classical assets.
        X6S1x6Okd1st 6y ago
- brian_cloutier 6y ago
  You're making two mistakes. The first is that scaling Bitcoin up to the size of visa is not particularly possible. You might be able to match visa's throughput by greatly increasing the block interval (e.x. one block every week) but the protocol cannot reasonably scale past a couple hundred transactions per second without taking a massive hit to transaction latency. So, in this sense the question of how much energy Bitcoin would consume if you scaled it up is meaningless, it cannot be scaled up. The second mistake is that Bitcoin's energy consumption has no relationship with its scale. Say you built a hypothetical MiniBitcoin which was exactly the same except each block was so small they could fit just one transaction, MiniBitcoin would consume almost exactly the same amount of energy as Bitcoin does now. The energy usage goes up as competition between miners increases. The energy usage does not go up as more transactions are processed.
  - arcticbull 6y ago
    > The first is that scaling Bitcoin up to the size of visa is not particularly possible. That’s no mistake, folks are suggesting that on a per transaction basis - today - Bitcoin is cheaper or more efficient if you take into account hand wavey externalities not captured in the classical transaction cost model of a payment processor like visa. What I’ve done is invalidate that argument not by scaling visa down to a single transaction (as that doesn’t capture externalities, per the argument posited) but scale BTC up as the argument is BTC captures all externalities. By then showing that it’s physically impossible I’ve disproved the thesis. You’re making a different argument about avenues for scaling and that deserves its own conversation.
    - brian_cloutier 6y ago
      You haven't shown that it's physically impossible though. Scaling doesn't work that way, not even in the physical world does it work that way. As the side length of a cube increases the surface area increases with the square of the side length, and volume increases with the cube of the side length. When considering the effects of scaling a system it makes no sense to just multiply all numbers by some constant. The question of how much energy Bitcoin would consume if you scaled it up cannot be solved, even in approximation, by blindly multipling it's current energy usage by a constant.
CJefferson 6y ago
Bitcoin costs about 6$ per transaction (based on block reward). That is more than many transactions I make. Also, if you are using electricity to heat a house, heat pumps are about 4x more effective than bitcoin mining. This "mine for heat" meme has no real basis in fact.
- brian_cloutier 6y ago
  I admit $6 is very expensive when compared to credit card fees, but Bitcoin is the only way I know of sending someone in a different country $10k for just a $6 fee. It would still be $6 if you sent $1M.
  - arcticbull 6y ago
    There’s plenty of ways. Consider TransferWise. They generally charge 0.8% for USD-CAD and 0% for USD-INR. Pretty cheap. InteractiveBrokers allows you to exchange at market rates on the multi trillion dollar forex market for 2/10ths of a basis point ($20 per million). You’re also leaving out two steps in your calculus that really tilt the scales. You’re not paid in Bitcoin and your recipient cannot spent Bitcoin, therefore you need to pay a 1-2% fee at origin, $6 for a BTC TX, $90 in electricity socialized across the block reward and a 1-2% fee at destination. Moving $10,000 USD to CAD on the blockchain is roughly $399 not $6.
    - brian_cloutier 6y ago
      I have used Bitcoin to send money internationally. I did not spend any money on turning my dollars into bitcoin, because I already had bitcoin. I did not pay $90 in electricity costs, it seems a little silly to bring the block reward up. You already have a good argument for what you're trying to say, you don't need to pretend that a cost others pay is a cost the transaction sender pays. As far as I know the recipients of my transactions did not pay any fees to convert the bitcoin back into their local currencies, because they were fine with holding on to it as Bitcoin. I am not trying to say that Bitcoin solves every problem. I agree with you that there are many problems it does not solve. The $399 number is disingenuous though, you're ignoring that there are situations where bitcoin really does have lower fees than the alternatives.
mrlala 6y ago
>Credit-card companies consume a few percent of revenue And anyone that "accepts" bitcoin as payment probably takes more than that due to Bitcoin's volatility. If at the moment of a transaction, 1 BTC = 20k USD and I go to buy something that is $20k USD, it's not going to show up as "1 BTC" on the checkout.. it will probably be like 1.05 BTC. Also, credit-card companies give guarantees to both the buyers and sellers, so they are providing a service. Buyers get extra protection with extra warranties, ability to reverse fraudulent/deceptive sellers. Sellers get extra revenue with people buying stuff they don't have cash for, and don't have to worry about fraudulent cash/checks etc. Yeah sellers overall take a bit of a hit, but the argument can be made the couple percent is worth it to never have to worry about getting scammed by a buyer. Anyway.. crypto offers absolutely NONE of that. So comparing it to credit card companies is honestly quite laughable. The only thing you can try to argue is crypto offers anonymity to a degree? Although it sure seems like you have to jump through a lot of hoops for this to even be true since it's a public ledger...
- gruez 6y ago
  >it's not going to show up as "1 BTC" on the checkout.. it will probably be like 1.05 BTC. In my experience the spread is usually under 1% of the 24 avg. >[...] and don't have to worry about fraudulent cash/checks etc. Yeah sellers overall take a bit of a hit, but the argument can be made the couple percent is worth it to never have to worry about getting scammed by a buyer. But how are you going to get scammed accepting bitcoin? It's not like it's easy to forge a bitcoin.
  - mrlala 6y ago
    >In my experience the spread is usually under 1% of the 24 avg. And how does that work? For example, the last 24hr bitcoin is up like 10%.. Let's call 5% below the current price the 24hr average.. are you suggesting that the exchange rate is 1% above the 24avg, or 4% below the current price, meaning the seller is eating 4% of the current price? That certainly does not make any sense. >But how are you going to get scammed accepting bitcoin? It's not like it's easy to forge a bitcoin. I agree the seller can't really get scammed, but the buyer has --zero-- recourse. So sure the seller loves it because there is no recourse and they can add a nice spread (my first point). But the buyer does not. Whereas credit cards- both parties get benefits (even if it skews toward the buyer, however that is a good thing, it shouldn't be equal.. the seller has more information about the transaction thus the buyer should have more recourse).

by ISL 6y ago

arcticbull 6y ago

Energy consumption in the classical model is substantially lower because if you scaled up Bitcoin to the size of Visa alone it would exceed the amount of energy generated on earth a few times over and the amount of ewaste generated on earth too. This is a classic pro Bitcoin argument that’s trivially falsifiable. The fact folks here think their transactions in the online economy should heat their homes is so bananas to me. What is this, the industrial revolution? I mean, I know we’ve got our plague doctor masks on but that’s not intentional.

ISL 6y ago
It depends upon the scaling algorithm -- as volume goes up, there may be efficiencies that allow the (competing!) miners to reduce their transaction fees. In theory, since there is no notion of a Bitcoin chargeback and no need to extend credit to any party in the transaction, the intrinsic cost of a bitcoin transaction should be lower.
- arcticbull 6y ago
  The intrinsic cost of a transaction is basically zero, the cost associated with Bitcoin is Smaug-style keeping people off your coins. There is no scaling algorithm and no scaling to date. Believe it or not chargebacks and credit are good things. This you can find out if you ask literally anyone why they use their credit card instead of their debit card.
gruez 6y ago
>Energy consumption in the classical model is substantially lower because if you scaled up Bitcoin to the size of visa alone it would exceed the amount of energy generated on earth a few times over and the amount of ewaste generated on earth too. This seems to be a misunderstanding of how mining works. The amount of energy used for mining is largely disconnected from transaction volume. Mining a block with one transaction takes about the same amount of energy (within a few watts) as mining a block with 10000 transactions.
- arcticbull 6y ago
  There’s no misunderstanding. To the extent that the cap remains 7tx/sec and saturated at that level then my point remains valid. There’s no plan to change it so let’s stay away from hypotheticals.
  - X6S1x6Okd1st 6y ago
    Yup, last I checked there is so much resistance to increasing the block size that there was multiple forks about it. The hope for scaling bitcoin is on stuff like the lightning network and other more esoteric stuff like coinjoin. That being said lighting network could scale arbitrarily in theory, but the security properties depend on being able to tx on the main chain in a timely manner. In the case that there is a wide spread theft attempt on the lighting network we could see many LN channels trying to be closed at the same time and shooting the fees up beyond the attack value.
    - arcticbull 6y ago
      Well a lightning channel requires 1 on chain transaction to open and 1 to close so it’d cost $12 and for everyone on earth to open and close a single channel would take over 70 years. So it’s not really a scaling solution. And L2 isn’t blockchain anyways, you could conceivably implement lightning with classical assets.
      - X6S1x6Okd1st 6y ago
brian_cloutier 6y ago
You're making two mistakes. The first is that scaling Bitcoin up to the size of visa is not particularly possible. You might be able to match visa's throughput by greatly increasing the block interval (e.x. one block every week) but the protocol cannot reasonably scale past a couple hundred transactions per second without taking a massive hit to transaction latency. So, in this sense the question of how much energy Bitcoin would consume if you scaled it up is meaningless, it cannot be scaled up. The second mistake is that Bitcoin's energy consumption has no relationship with its scale. Say you built a hypothetical MiniBitcoin which was exactly the same except each block was so small they could fit just one transaction, MiniBitcoin would consume almost exactly the same amount of energy as Bitcoin does now. The energy usage goes up as competition between miners increases. The energy usage does not go up as more transactions are processed.
- arcticbull 6y ago
  > The first is that scaling Bitcoin up to the size of visa is not particularly possible. That’s no mistake, folks are suggesting that on a per transaction basis - today - Bitcoin is cheaper or more efficient if you take into account hand wavey externalities not captured in the classical transaction cost model of a payment processor like visa. What I’ve done is invalidate that argument not by scaling visa down to a single transaction (as that doesn’t capture externalities, per the argument posited) but scale BTC up as the argument is BTC captures all externalities. By then showing that it’s physically impossible I’ve disproved the thesis. You’re making a different argument about avenues for scaling and that deserves its own conversation.
  - brian_cloutier 6y ago
    You haven't shown that it's physically impossible though. Scaling doesn't work that way, not even in the physical world does it work that way. As the side length of a cube increases the surface area increases with the square of the side length, and volume increases with the cube of the side length. When considering the effects of scaling a system it makes no sense to just multiply all numbers by some constant. The question of how much energy Bitcoin would consume if you scaled it up cannot be solved, even in approximation, by blindly multipling it's current energy usage by a constant.

CJefferson 6y ago

Bitcoin costs about 6$ per transaction (based on block reward). That is more than many transactions I make. Also, if you are using electricity to heat a house, heat pumps are about 4x more effective than bitcoin mining. This "mine for heat" meme has no real basis in fact.

brian_cloutier 6y ago
I admit $6 is very expensive when compared to credit card fees, but Bitcoin is the only way I know of sending someone in a different country $10k for just a $6 fee. It would still be $6 if you sent $1M.
- arcticbull 6y ago
  There’s plenty of ways. Consider TransferWise. They generally charge 0.8% for USD-CAD and 0% for USD-INR. Pretty cheap. InteractiveBrokers allows you to exchange at market rates on the multi trillion dollar forex market for 2/10ths of a basis point ($20 per million). You’re also leaving out two steps in your calculus that really tilt the scales. You’re not paid in Bitcoin and your recipient cannot spent Bitcoin, therefore you need to pay a 1-2% fee at origin, $6 for a BTC TX, $90 in electricity socialized across the block reward and a 1-2% fee at destination. Moving $10,000 USD to CAD on the blockchain is roughly $399 not $6.
  - brian_cloutier 6y ago
    I have used Bitcoin to send money internationally. I did not spend any money on turning my dollars into bitcoin, because I already had bitcoin. I did not pay $90 in electricity costs, it seems a little silly to bring the block reward up. You already have a good argument for what you're trying to say, you don't need to pretend that a cost others pay is a cost the transaction sender pays. As far as I know the recipients of my transactions did not pay any fees to convert the bitcoin back into their local currencies, because they were fine with holding on to it as Bitcoin. I am not trying to say that Bitcoin solves every problem. I agree with you that there are many problems it does not solve. The $399 number is disingenuous though, you're ignoring that there are situations where bitcoin really does have lower fees than the alternatives.

mrlala 6y ago

>Credit-card companies consume a few percent of revenue And anyone that "accepts" bitcoin as payment probably takes more than that due to Bitcoin's volatility. If at the moment of a transaction, 1 BTC = 20k USD and I go to buy something that is $20k USD, it's not going to show up as "1 BTC" on the checkout.. it will probably be like 1.05 BTC. Also, credit-card companies give guarantees to both the buyers and sellers, so they are providing a service. Buyers get extra protection with extra warranties, ability to reverse fraudulent/deceptive sellers. Sellers get extra revenue with people buying stuff they don't have cash for, and don't have to worry about fraudulent cash/checks etc. Yeah sellers overall take a bit of a hit, but the argument can be made the couple percent is worth it to never have to worry about getting scammed by a buyer. Anyway.. crypto offers absolutely NONE of that. So comparing it to credit card companies is honestly quite laughable. The only thing you can try to argue is crypto offers anonymity to a degree? Although it sure seems like you have to jump through a lot of hoops for this to even be true since it's a public ledger...

gruez 6y ago
>it's not going to show up as "1 BTC" on the checkout.. it will probably be like 1.05 BTC. In my experience the spread is usually under 1% of the 24 avg. >[...] and don't have to worry about fraudulent cash/checks etc. Yeah sellers overall take a bit of a hit, but the argument can be made the couple percent is worth it to never have to worry about getting scammed by a buyer. But how are you going to get scammed accepting bitcoin? It's not like it's easy to forge a bitcoin.
- mrlala 6y ago
  >In my experience the spread is usually under 1% of the 24 avg. And how does that work? For example, the last 24hr bitcoin is up like 10%.. Let's call 5% below the current price the 24hr average.. are you suggesting that the exchange rate is 1% above the 24avg, or 4% below the current price, meaning the seller is eating 4% of the current price? That certainly does not make any sense. >But how are you going to get scammed accepting bitcoin? It's not like it's easy to forge a bitcoin. I agree the seller can't really get scammed, but the buyer has --zero-- recourse. So sure the seller loves it because there is no recourse and they can add a nice spread (my first point). But the buyer does not. Whereas credit cards- both parties get benefits (even if it skews toward the buyer, however that is a good thing, it shouldn't be equal.. the seller has more information about the transaction thus the buyer should have more recourse).