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I think this is an interesting point however, banks today aren't just their IT infrastructure. For banks to function there are so many things that have to work,

I think this is an interesting point however, banks today aren't just their IT infrastructure. For banks to function there are so many things that have to work, right down to the local branches and ATMs (and physically moving money around). I think this burning enormous amounts of resources argument isn't fully fleshed out yet. You almost have to think about the entire banking system and compare that to the entire crypto system. Has that been done? It would be interesting to see how this compares.

microtherion 6y ago
I'm sure the existing banking system takes energy+other resources to maintain. But the incentives in the existing banking system are to look for ways to use LESS of these. Each Kilowatt-hour a bank doesn't use shows up in their bottom line. Proof of works is DESIGNED to waste energy. If tomorrow, you'd make hash computations 1000x as energy efficient, the hashing difficult is designed to adjust to make sure that 1000x as many computations are performed and the same amount of energy is wasted. Think of it this way: Currently, 900 bitcoins are mined per day. At a price of $40K per bitcoin, whoever mines those bitcoins earns a combined $36M. So miners are incentivized to invest approximately that much money into energy & equipment per day (minus some profit margin). If they invested substantially less, somebody could invest more and pick off their coins. (And that's counting only mining profits. There are also transaction rewards, and, if you were to control a majority of mining, more nefarious sources of profit). This means that PoW has some truly perverse incentives: * Industry wide energy efficiency does not matter, because the difficulty will adjust accordingly. * The higher the bitcoin price rises, the MORE energy gets wasted (That's a big difference with e.g. Gold. Sure, rising prices lead to more marginal deposits being exploited, but it's not like pickaxe prices for a given prices rose proportionally with gold prices).
- pcthrowaway 6y ago
  What you've just said here is the reason PoS cryptocurrencies are the way forward. I don't think bitcoin is sustainable as a global currency. The bitcoin network currently uses 1-2% of global energy production, which is already too much! The mean wealth of an adult on Earth (in USD) is ~$70,849 [1]. For all adults (let's say 70% of the global population, or 5.46 billion), on average, to have even 1% of their wealth stored in bitcoin, and assuming 14.8 million bitcoin in circulation (as 18.5 million have been mined, ~20% have been lost [2]), the bitcoin market rate would have to be $258,243 USD/BTC. This would mean an increase in mining incentive which will likely outpace advances in renewable energy technologies. With ballooning transaction fees, Bitcoin is not even useful for 90% of the world, for the scale of their transactions. With Ethereum's 2.0 network (which uses PoS), we will have a much more sustainable cryptocurrency that can hopefully be adopted at a global scale without devastating impact on the planet. Perhaps Bitcoin Cash or some other contender with negligible fees will play an important role as well (I'm not sure what the Eth 2.0 transition will mean for mining fees on the Eth network, which are also undesirably high). I'm overall optimistic on blockchain technology as a whole, but I really hope Bitcoin isn't the dominant cryptocurrency in 10 years time [1] https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult#By_region https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe... [2] https://www.investopedia.com/news/20-all-btc-lost-unrecoverable-study-shows/ https://www.investopedia.com/news/20-all-btc-lost-unrecovera...

microtherion 6y ago

I'm sure the existing banking system takes energy+other resources to maintain. But the incentives in the existing banking system are to look for ways to use LESS of these. Each Kilowatt-hour a bank doesn't use shows up in their bottom line. Proof of works is DESIGNED to waste energy. If tomorrow, you'd make hash computations 1000x as energy efficient, the hashing difficult is designed to adjust to make sure that 1000x as many computations are performed and the same amount of energy is wasted. Think of it this way: Currently, 900 bitcoins are mined per day. At a price of $40K per bitcoin, whoever mines those bitcoins earns a combined $36M. So miners are incentivized to invest approximately that much money into energy & equipment per day (minus some profit margin). If they invested substantially less, somebody could invest more and pick off their coins. (And that's counting only mining profits. There are also transaction rewards, and, if you were to control a majority of mining, more nefarious sources of profit). This means that PoW has some truly perverse incentives: * Industry wide energy efficiency does not matter, because the difficulty will adjust accordingly. * The higher the bitcoin price rises, the MORE energy gets wasted (That's a big difference with e.g. Gold. Sure, rising prices lead to more marginal deposits being exploited, but it's not like pickaxe prices for a given prices rose proportionally with gold prices).

pcthrowaway 6y ago
What you've just said here is the reason PoS cryptocurrencies are the way forward. I don't think bitcoin is sustainable as a global currency. The bitcoin network currently uses 1-2% of global energy production, which is already too much! The mean wealth of an adult on Earth (in USD) is ~$70,849 [1]. For all adults (let's say 70% of the global population, or 5.46 billion), on average, to have even 1% of their wealth stored in bitcoin, and assuming 14.8 million bitcoin in circulation (as 18.5 million have been mined, ~20% have been lost [2]), the bitcoin market rate would have to be $258,243 USD/BTC. This would mean an increase in mining incentive which will likely outpace advances in renewable energy technologies. With ballooning transaction fees, Bitcoin is not even useful for 90% of the world, for the scale of their transactions. With Ethereum's 2.0 network (which uses PoS), we will have a much more sustainable cryptocurrency that can hopefully be adopted at a global scale without devastating impact on the planet. Perhaps Bitcoin Cash or some other contender with negligible fees will play an important role as well (I'm not sure what the Eth 2.0 transition will mean for mining fees on the Eth network, which are also undesirably high). I'm overall optimistic on blockchain technology as a whole, but I really hope Bitcoin isn't the dominant cryptocurrency in 10 years time [1] https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult#By_region https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe... [2] https://www.investopedia.com/news/20-all-btc-lost-unrecoverable-study-shows/ https://www.investopedia.com/news/20-all-btc-lost-unrecovera...