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I was not familiar with the original argument but it's so ridiculous at face value that I wonder if a rebuttal was necessary. Mining Bitcoins is like Iceland s

by simias 6y ago

I was not familiar with the original argument but it's so ridiculous at face value that I wonder if a rebuttal was necessary. Mining Bitcoins is like Iceland smelting aluminum? Mining bitcoin "converts electricity into value"? Preposterous. The value of bitcoin is driven by speculation, and in turns that increases the incentive for the miners, not the other way around. There's no value created by crunching random SHA-256. As a thought experiment, let's assume that tomorrow a breakthrough slashes in half the cost of energy worldwide. Nuclear fusion reactors become viable or something. That would probably make aluminum cheaper, since processing it is so energy-incentive. But what about bitcoin? It'd just lower the bar for mining to be profitable, and it'll temporarily increase the size of the mining pool as the difficulty adjusts, but that's about it. There's simply no direct relationship between the cost of electricity and that of bitcoin that I can see. There's not even a direct relationship between the cost of electricity and the service provided by bitcoin. Bitcoin doesn't become more or less useful based on the cost of mining, it's always one block every 10 minutes give or take.

exdsq 6y ago
Bitcoin becomes more secure from 51% attacks the more electricity (cost) that is required
- derefr 6y ago
  But the network is only incentivized to be exactly secure enough from Sybil attacks that nobody bothers to try one. There’s no added value in being more secure to Sybil attacks beyond that. Just like there’s no added value in hiring extra fire-fighers once every fire gets an instant + effective response. ————— The problem with Proof-of-Work systems that prevents this logic from actually translating to a sigmoid curve in number-of-miners, though, is that any left-over electricity that isn’t going into “good” mining, could instead be going into Sybil attacks. It’s as if every potential fire-fighter who isn’t hired as a fire-fighter, instead has a chance of being recruited by “Big Fire” to one day work together to all set fires at once. If-and-when governments actually establish their own cryptocurrencies, massive distributed purchases of electrical capacity for the sake of mounting a Sybil attack are exactly the sort of thing that state intelligence agencies will try to track and prevent ahead-of-time, such that nobody will ever be able to gain that capacity in the first place. Just like right now nobody can really build a stockpile of plutonium. But as long as governments don’t care, and attackers are free to be economic actors buying up electrical capacity, then there is a specific effect we see today: rather than the network’s electricity consumption just growing to a certain absolute amount, the set of all Proof-of-Work networks are incentivized together to consume a certain percentile amount of global excess electricity consumption — 51% of it, specifically. Such that, at any point, there’s not enough electricity left over to even theoretically mount a Sybil attack against the largest network. (The smaller PoW networks? Basically screwed.)
  - exdsq 6y ago
    Sure but there’s also the benefit of mining coins right? So depending on the cost of Bitcoin it may be worth Alice spending an extra £100 on mining power to beat Bob, if the payoff is great enough. Saying this I do agree with you about proof-of-work, I work on a proof-of-stake chain myself.
    - derefr 6y ago
      Yeah, that property is what would create the sigmoid curve in the ideal case: PoW chains aren’t inflationary (rather the opposite) so competition reduces mining margins to effectively zero, which translates to fewer and fewer people bothering to grab at surplus profit as the number of miners grows and that surplus profit goes to zero. It’s why you see consolidation into mining consortiums. An inflationary PoW chain wouldn’t have that — everyone would be incentivized to mine for themselves (like a gold rush.)
- tovster 6y ago
  Probably a dumb question, but would that also theoretically increase the likelihood of someone to doing a 51% attack as there would be fewer unique users mining as electricity becomes more cost prohibitive?
  - exdsq 6y ago
    There are some economic and game theoretic elements in play here. Say you wanted to reverse a trade and could afford a 51% attack, the cost of the chain would drop massively so you’d not benefit by having a load of Bitcoin. The whole community could just fork from that point and pretend it never happened. And people with skin in the game would fund mining to keep the security up to avoid this happening. Overall though the number of miners will reduce to a small group because the cost is prohibitive, however it should still be secure.
- ajmurmann 6y ago
  Could this be addressed more cheaply by moving from proof of work to proof of stake?
  - exdsq 6y ago
    Yes, although I believe technically proof of stake isn't as secure as proof of work (although it's secure enough) because you're essentially picking randomly from a weighted sample based on how much the sample owe of the underlying token.
dandanua 6y ago
That's how free speech works in the modern world. You have to waste your time, energy, nerves to refute a total nonsense that zombie-like mob find useful in supporting. An egocentric profit heavily overweights truth and sense.
- agumonkey 6y ago
  > An egocentric profit heavily overweights truth and sense. nice saying
  - Xunjin 6y ago
    Indeed. IMHO, this phrase really got the essence about the pandemic and disinformation. I could go further, it captures the essence of "lying for profit" no matter the economic/political system.
    - agumonkey 6y ago
      I wouldn't say lying for profit but that profit somehow defines truth.
- LAMike 6y ago
  I know it's exhausting! HN readers have been a zombie-like mob when it comes to ignoring Bitcoin, it's sad to see a otherwise smart group of people miss out on the biggest thing since the Internet.
- ForHackernews 6y ago
  There's a name for this phenomenon: "The Unbearable Asymmetry of Bullshit"[0] It's orders of magnitude easier to put forth some total horseshit ideas than it is to refute them. [0] https://quillette.com/2016/02/15/the-unbearable-asymmetry-of-bullshit/ https://quillette.com/2016/02/15/the-unbearable-asymmetry-of...
  - Kyro38 6y ago
    Also known as Brandolini's Law. https://en.wikipedia.org/wiki/Brandolini%27s_law https://en.wikipedia.org/wiki/Brandolini%27s_law
e-clinton 6y ago
The price of Bitcoin is determined by speculation, not its value.
- fastball 6y ago
  It's both. Bitcoin had value before there was rampant speculation on the value of Bitcoin.
  - Closi 6y ago
    What value? In terms of defining the 'value' of an asset in real finance terms you would look at future cash flows (In fact - in some finance circles the definition of an asset itself is a collection of future cash flows). A bitcoin doesn't create cash, it just becomes more valuable if you find someone else that is willing to pay more for it than you did (i.e. the 'greater fool theory'). This is why it is speculative - i.e. in the absence of it generating revenues, people are just assuming that someone will buy it for more than they did in the future because of scarcity.
    - fastball 6y ago
      Something does not need to be an asset to have value. Does the US dollar not have value?
      - Closi 6y ago
        Fair, I thought we were talking about some sort of intrinsic/actual value, rather than purely speculative value. Clearly anything that someone is willing to trade for something else has some sort of 'value'.
        fastball 6y ago
        Right, I think a problem with a lot of these discussions is that people are using (at least) three different conceptions of what "value" means. - value based on intrinsic utility (gold/oil) - value based on potential future utility (stocks) - value based on extrinsic utility (USD/coordination) The issue, of course, is that people disagree which category Bitcoin (and other cryptos) belong to. The other problem is that a singular thing doesn't necessarily only belong to one category. For example, I put gold in the intrinsic category, but it probably belongs in the extrinsic category too, as gold is used as a medium of exchange that is not directly tied to its intrinsic properties, but merely has intrinsic properties that are useful in that regard (fairly scarce, not varnishing, etc).
colechristensen 6y ago
Well there is a value, albeit a small one. Bitcoin is a ledger. If you hired an accounting firm to keep track of who had which assets and handled transactions, there is value being created... valuable work being done. This value probably isn't being generated very efficiently (there's an interesting study to do, actually figure this out and don't rely on somebody's intuition) and the "value" isn't being actually utilized very widely: how much of bitcoin being used doesn't fall into the categories of A) generally morally objectionable B) toy uses fiat -> BTC -> txn -> fiat which didn't need the BTC middleman or C) speculation. [ not much ] Mining bitcoin would seem to transform a lot of electricity into a little accounting, not free of value, but likely demonstrably of low value.
- nly 6y ago
  Keeping a ledger of billions of participants making billions of transactions is a solved problem, and has basically zero cost when amortized over its utility. In 2020 VISA handled 3.5 billion accounts (cards), 140 billion transactions and $11.3 trillion in volume. Total operating expenses were $7.7bn, so just 0.07% of transaction volume. At current prices, just the block rewards make the Bitcoin network running cost something like $37bn/year. As a ledger it's strictly inferior in every way. (The ability to take bitcoin 'offline' by holding your private key, or exchanging it on secondary markets, is not a feature of the blockchain itself. These features can exist without a blockchain).
  - berkes 6y ago
    How does a Somali web dev get a Visa to pay for her servers or domain registrations? How will a Syrian restaurant owner accept Mastercard payments from his custumers? How can Wikileaks accept donations? Do you not consider those 'economic value'?
    - nly 6y ago
      Sure it's valuable, but it's hardly significant. You're talking about tiny fractions of a % of the global economy.
  - 6y ago
lmilcin 6y ago
> I was not familiar with the original argument but it's so ridiculous at face value that I wonder if a rebuttal was necessary. Apparently a huge number of blinded people run in amok preaching how Bitcoin is saving the world. It is not. There is no single reason for bitcoin to exist other than perpetuate value for people who are invested in it while also burning energy at a rate of not a very small country. It needs to be repeated until enough people inept in financial or technical matters understand it.
- LAMike 6y ago
  > Bitcoin is saving the world. It saved my world, and millions of others. All the things HN pundits love to talk about, but when it comes to actually making the world a better place, people like you become Luddites and naysayers. HFSP
  - adwn 6y ago
    > It saved my world, and millions of others. How? Be specific. > [...] but when it comes to actually making the world a better place [...] How is Bitcoin making the world a better place? Be specific. > HFSP I had to look this one up. For anyone wondering, apparently it means "Have Fun Staying Poor".
    - LAMike 6y ago
      How is Bitcoin making the world a better place? Be specific. Improving the lives of 100 million people by giving them a way to save money without a government agency. If you can't figure out why that has value, you're probably are a beneficiary of anglo centric privilege, and in that case I hope you NEVER buy any BTC. > I had to look this one up. Remember it. It won't be the last time someone says this to you
  - pessimizer 6y ago
    > It saved my world, and millions of others. It definitely didn't. It may have made you money, or given you a creative programming outlet, or friends. You could also get that from dealing large amounts of cocaine, but you wouldn't be able to pretend you were a revolutionary.
fredfoobar 6y ago
Mining bitcoin does convert electricity into value though (it's just O(1) as you said it, doesn't scale with more electricity added). Mining bitcoin allows you to exchange value on the network, THAT is what is valuable.
- loup-vaillant 6y ago
  Mining bitcoin does not convert electricity into value. It converts electricity into currency. Currencies don't have value, they represent value. Their only intrinsic value lies in their ability to allow exchanges of goods. Take regular currencies for instance ($€¥…): they do not convert paper into value, they use paper to represent value. Now does printing more of it makes it better at enabling exchanges? Not necessarily. There's a point beyond which you just get over-inflation (a little inflation can be very beneficial, though). Now Bitcoin is definitely not at the point where it does causes over-inflation (else its valuation would drop). But you do need to compare it with other currencies, and its energy consumption is a big fat drawback. A deal breaker in my opinion. Barring perhaps some extreme cases, using proof-of-work crypto currencies is simply unethical: too much harm, not enough good.
  - dragonwriter 6y ago
    > Take regular currencies for instance ($€¥…): they do not convert paper into value, they use paper to represent value Mostly, they use mostly-electronic ledger entries to represent value.
  - fredfoobar 6y ago
    I'm sorry, but I don't think you understand bitcoin mining at all. Bitcoin mining is not just "making currency", the miners get a reward for minting a block, which is just a bundle of transactions. The new bitcoin they get as a reward is theirs to spend.
    - loup-vaillant 6y ago
      I'm aware of this clever mechanism, thank you very much. Bitcoin needs a reliable way for transactions to work in a single thread (so the block chain doesn't turn into a block tree), and we avoid stuff like double spends. That's proof of work, coupled with a reward (in currency). To avoid hyper inflation, Bitcoin automatically sets the difficulty so we create one new block every 10 minutes. That limits the number of transactions, but we can remedy that by just making making blocks bigger. Now the value of a successful block mining is the transactions it represents. Without them, you wouldn't have a means of exchange to begin with. But the reward is a new Bitcoin. And that new Bitcoin by itself does not add any value. It just inflates the currency a little bit, effectively taking value from all other bitcoins. The total value represented by all bitcoins stays the same. Now we can discuss pros and cons: on the bright side, mining a block enables a bunch of transactions. With a maximum block size of 1MB and 1 block every 10 minutes, we get 7 transactions per second. That's the real value of Bitcoin to humanity: 7 transactions per second, give or take. As for how much those 7 transactions per second cost, well… there's all the hardware and the resources required to make it, and there's energy. A back of the envelope calculation tells me Bitcoin spent about 8 Gigawatts of power in early 2020, and now it's more like 14. That's 2 Gigajoules per transaction, or about 500KWh. That's way too much energy for way too little value. Hence my thesis that Bitcoin as a whole is so wasteful that actively participating in it (especially if you're a miner), is unethical.
vbezhenar 6y ago
> There's simply no direct relationship between the cost of electricity and that of bitcoin that I can see. Miners get 12.5 BTC every 10 minutes. That's the direct relationship between the cost of bitcoin and the cost of electricity. If miners (total combined) spend less electricity, they'll buy more hardware. If they're spending more electricity, some of them will go bankrupt reducing total electricity consumption. I'm simplifying it a little bit, because miners also get transaction fees, but those are similar to the main reward and logic still works.
runeks 6y ago
> There's no value created by crunching random SHA-256. Sure there is. It’s a way to reach consensus on a sequence of transactions that defines the history of Bitcoin. This is what enables Bitcoin to be decentralized, digital money. Unless you believe this has no value then crunching random SHA-256 hashes does indeed have value.
- jagger27 6y ago
  There’s value created from every watt of electricity used to smelt aluminum. Almost all of the electricity used to crunch SHA256 hashes computes the wrong hash for the block.
- estaseuropano 6y ago
  The only value in bitcoin mining is bitcoin. The value of aluminium remains outside of speculation as it has inherent utility, while the value of bitcoin only comes from speculation and a very very minimal use case as currency which has been solved hundreds of times in more coat effective ways (even with other crypto, but most importantly outside crypto).
  - fastball 6y ago
    Where has borderless money been solved more cost-effectively than Bitcoin outside of cryptocurrency? Have you done a study into how expensive existing fiat systems are, when all is said and done?
  - Andrew_nenakhov 6y ago
    But bitcoin has tremendous value. Just ask anyone who can't get bank account for some reason. Now you can transfer funds from abroad cheaper and faster than before.
  - splintercell 6y ago
    Nothing has inherent value, all value is subjective. This bad economic theory has been dismantled for over two centuries now. Replace inherent value with non-monetary value if that's what you mean.
deleted 6y ago
[deleted]
kerng 6y ago
Saying it has no value is incorrect. It's seemingly the price to pay for securing $1 trillion. Maybe the better way to look at it is, how expensive is it to secure $1 trillion with other means in a decentralized and permission-less fashion? There is no alternative to compare it too even. So I think we are still in price discovery phase for Bitcoin.
golergka 6y ago
> There's no value created by crunching random SHA-256. You can't buy drugs in modern world without Bitcoin. That's the value. And regardless of whether we see it as "good" or "bad", in the eyes of the people who are buying drugs, it's pretty significant.
xxxxxyy1 6y ago
> There's no value created by crunching random SHA-256. So I shouldn't have to pay high wages if my employees aren't creating anything of value? People seem to pick and choose when they believe the labor theory of value. The point of the matter is that value *is* what people are willing to pay for something. You could argue that a Van Gogh is just arbitrary colors applied to a canvas, it's not worth anything inherently other than through the subjective valuations of other people.
- prox 6y ago
  I think the big problem is the amount of energy this thing is costing, and the huge load it puts on the GPU market, which could very much be a speculative bubble. There is a lot of difference between your examples and Bitcoin : The labour of your employees hopefully adds something you can show to your clients : it’s a lot less speculation on your part. Van Gogh is a name in the art world, and has a well documented place in art theory. Van Gogh is hardly speculative.
  - yaa_minu 6y ago
    >... and the huge load it puts on the GPU market Point of correction: Bitcoin is mined with ASICS not GPUs
- mempko 6y ago
  Van Gogh has a value to rich people who have most of the money. Ask yourself this, is it ok to have a world that caters to what a few people care about?
  - xxxxxyy1 6y ago
    > has a value to rich people who have most of the money so you're agreeing that value is entirely dependent on subjectivity and circumstance?
    - mempko 6y ago
      Only if you consider money as the only measure of value, which I disagree. Just because someone has all the magic government credits (money) doesn't mean they are the end all of measuring value no? There are plenty of things people value but would never pay money for it, or in most cases just don't have the money.
LAMike 6y ago
You have a lot to say for someone who has no idea about BTC
slickrick216 6y ago
Enjoy staying poor.
runarberg 6y ago
> Mining Bitcoins is like Iceland smelting aluminum? It can be argued that producing new aluminum with cheap power is also kind of a sink. There is plenty of aluminum that has already been produced, if we keep producing new cheap aluminum we are in fact incentivizing using aluminum for cheap single use products and decentivizing recycling. A lot of this new cheap aluminum will end up in landfills, hence the sink.
toyg 6y ago
> There’s no value created by crunching random SHA-256 I wonder if crackers and cryptoanalysts could put some of that to good use, generating massive rainbow tables and the likes. It would be a bit like using spent plutonium for weapons. I guess someone who knows the subject already looked into it...?
pier25 6y ago
> The value of bitcoin is driven by speculation I agree, but isn't that how all fiat money behaves?
UShouldBWorking 6y ago
Lol, you people are idiots.
bingbong70 6y ago
>The value of bitcoin is driven by speculation, and in turns that increases the incentive for the miners, not the other way around. There's no value created by crunching random SHA-256. So you are saying increasing security, uncounterfietability, censorship-resistance, and decentralization of money distribution has no value? The central banks/treasuries spending $$$$ yearly to secure their money and governments spending $$$$ on militaries, intelligence, LEO, etc... to add layers of security would disagree with you. Increased hash rate leads to higher prices and increased prices lead to higher hash rate. Both are true here, this loop is a key component of the NGU (Number Go Up) technology in Bitcoin.
kleer001 6y ago
> There's no value created by crunching random SHA-256. They're not random. There's randomness in their construction, yes, but they're encoding trust.
Izkata 6y ago
Original argument posted earlier: https://news.ycombinator.com/item?id=26609247 https://news.ycombinator.com/item?id=26609247

by simias 6y ago

exdsq 6y ago

Bitcoin becomes more secure from 51% attacks the more electricity (cost) that is required

derefr 6y ago
But the network is only incentivized to be exactly secure enough from Sybil attacks that nobody bothers to try one. There’s no added value in being more secure to Sybil attacks beyond that. Just like there’s no added value in hiring extra fire-fighers once every fire gets an instant + effective response. ————— The problem with Proof-of-Work systems that prevents this logic from actually translating to a sigmoid curve in number-of-miners, though, is that any left-over electricity that isn’t going into “good” mining, could instead be going into Sybil attacks. It’s as if every potential fire-fighter who isn’t hired as a fire-fighter, instead has a chance of being recruited by “Big Fire” to one day work together to all set fires at once. If-and-when governments actually establish their own cryptocurrencies, massive distributed purchases of electrical capacity for the sake of mounting a Sybil attack are exactly the sort of thing that state intelligence agencies will try to track and prevent ahead-of-time, such that nobody will ever be able to gain that capacity in the first place. Just like right now nobody can really build a stockpile of plutonium. But as long as governments don’t care, and attackers are free to be economic actors buying up electrical capacity, then there is a specific effect we see today: rather than the network’s electricity consumption just growing to a certain absolute amount, the set of all Proof-of-Work networks are incentivized together to consume a certain percentile amount of global excess electricity consumption — 51% of it, specifically. Such that, at any point, there’s not enough electricity left over to even theoretically mount a Sybil attack against the largest network. (The smaller PoW networks? Basically screwed.)
- exdsq 6y ago
  Sure but there’s also the benefit of mining coins right? So depending on the cost of Bitcoin it may be worth Alice spending an extra £100 on mining power to beat Bob, if the payoff is great enough. Saying this I do agree with you about proof-of-work, I work on a proof-of-stake chain myself.
  - derefr 6y ago
    Yeah, that property is what would create the sigmoid curve in the ideal case: PoW chains aren’t inflationary (rather the opposite) so competition reduces mining margins to effectively zero, which translates to fewer and fewer people bothering to grab at surplus profit as the number of miners grows and that surplus profit goes to zero. It’s why you see consolidation into mining consortiums. An inflationary PoW chain wouldn’t have that — everyone would be incentivized to mine for themselves (like a gold rush.)
tovster 6y ago
Probably a dumb question, but would that also theoretically increase the likelihood of someone to doing a 51% attack as there would be fewer unique users mining as electricity becomes more cost prohibitive?
- exdsq 6y ago
  There are some economic and game theoretic elements in play here. Say you wanted to reverse a trade and could afford a 51% attack, the cost of the chain would drop massively so you’d not benefit by having a load of Bitcoin. The whole community could just fork from that point and pretend it never happened. And people with skin in the game would fund mining to keep the security up to avoid this happening. Overall though the number of miners will reduce to a small group because the cost is prohibitive, however it should still be secure.
ajmurmann 6y ago
Could this be addressed more cheaply by moving from proof of work to proof of stake?
- exdsq 6y ago
  Yes, although I believe technically proof of stake isn't as secure as proof of work (although it's secure enough) because you're essentially picking randomly from a weighted sample based on how much the sample owe of the underlying token.

dandanua 6y ago

That's how free speech works in the modern world. You have to waste your time, energy, nerves to refute a total nonsense that zombie-like mob find useful in supporting. An egocentric profit heavily overweights truth and sense.

agumonkey 6y ago
> An egocentric profit heavily overweights truth and sense. nice saying
- Xunjin 6y ago
  Indeed. IMHO, this phrase really got the essence about the pandemic and disinformation. I could go further, it captures the essence of "lying for profit" no matter the economic/political system.
  - agumonkey 6y ago
    I wouldn't say lying for profit but that profit somehow defines truth.
LAMike 6y ago
I know it's exhausting! HN readers have been a zombie-like mob when it comes to ignoring Bitcoin, it's sad to see a otherwise smart group of people miss out on the biggest thing since the Internet.
ForHackernews 6y ago
There's a name for this phenomenon: "The Unbearable Asymmetry of Bullshit"[0] It's orders of magnitude easier to put forth some total horseshit ideas than it is to refute them. [0] https://quillette.com/2016/02/15/the-unbearable-asymmetry-of-bullshit/ https://quillette.com/2016/02/15/the-unbearable-asymmetry-of...
- Kyro38 6y ago
  Also known as Brandolini's Law. https://en.wikipedia.org/wiki/Brandolini%27s_law https://en.wikipedia.org/wiki/Brandolini%27s_law

e-clinton 6y ago

The price of Bitcoin is determined by speculation, not its value.

fastball 6y ago
It's both. Bitcoin had value before there was rampant speculation on the value of Bitcoin.
- Closi 6y ago
  What value? In terms of defining the 'value' of an asset in real finance terms you would look at future cash flows (In fact - in some finance circles the definition of an asset itself is a collection of future cash flows). A bitcoin doesn't create cash, it just becomes more valuable if you find someone else that is willing to pay more for it than you did (i.e. the 'greater fool theory'). This is why it is speculative - i.e. in the absence of it generating revenues, people are just assuming that someone will buy it for more than they did in the future because of scarcity.
  - fastball 6y ago
    Something does not need to be an asset to have value. Does the US dollar not have value?
    - Closi 6y ago
      Fair, I thought we were talking about some sort of intrinsic/actual value, rather than purely speculative value. Clearly anything that someone is willing to trade for something else has some sort of 'value'.
      - fastball 6y ago
        Right, I think a problem with a lot of these discussions is that people are using (at least) three different conceptions of what "value" means. - value based on intrinsic utility (gold/oil) - value based on potential future utility (stocks) - value based on extrinsic utility (USD/coordination) The issue, of course, is that people disagree which category Bitcoin (and other cryptos) belong to. The other problem is that a singular thing doesn't necessarily only belong to one category. For example, I put gold in the intrinsic category, but it probably belongs in the extrinsic category too, as gold is used as a medium of exchange that is not directly tied to its intrinsic properties, but merely has intrinsic properties that are useful in that regard (fairly scarce, not varnishing, etc).

colechristensen 6y ago

Well there is a value, albeit a small one. Bitcoin is a ledger. If you hired an accounting firm to keep track of who had which assets and handled transactions, there is value being created... valuable work being done. This value probably isn't being generated very efficiently (there's an interesting study to do, actually figure this out and don't rely on somebody's intuition) and the "value" isn't being actually utilized very widely: how much of bitcoin being used doesn't fall into the categories of A) generally morally objectionable B) toy uses fiat -> BTC -> txn -> fiat which didn't need the BTC middleman or C) speculation. [ not much ] Mining bitcoin would seem to transform a lot of electricity into a little accounting, not free of value, but likely demonstrably of low value.

nly 6y ago
Keeping a ledger of billions of participants making billions of transactions is a solved problem, and has basically zero cost when amortized over its utility. In 2020 VISA handled 3.5 billion accounts (cards), 140 billion transactions and $11.3 trillion in volume. Total operating expenses were $7.7bn, so just 0.07% of transaction volume. At current prices, just the block rewards make the Bitcoin network running cost something like $37bn/year. As a ledger it's strictly inferior in every way. (The ability to take bitcoin 'offline' by holding your private key, or exchanging it on secondary markets, is not a feature of the blockchain itself. These features can exist without a blockchain).
- berkes 6y ago
  How does a Somali web dev get a Visa to pay for her servers or domain registrations? How will a Syrian restaurant owner accept Mastercard payments from his custumers? How can Wikileaks accept donations? Do you not consider those 'economic value'?
  - nly 6y ago
    Sure it's valuable, but it's hardly significant. You're talking about tiny fractions of a % of the global economy.
- 6y ago

lmilcin 6y ago

> I was not familiar with the original argument but it's so ridiculous at face value that I wonder if a rebuttal was necessary. Apparently a huge number of blinded people run in amok preaching how Bitcoin is saving the world. It is not. There is no single reason for bitcoin to exist other than perpetuate value for people who are invested in it while also burning energy at a rate of not a very small country. It needs to be repeated until enough people inept in financial or technical matters understand it.

LAMike 6y ago
> Bitcoin is saving the world. It saved my world, and millions of others. All the things HN pundits love to talk about, but when it comes to actually making the world a better place, people like you become Luddites and naysayers. HFSP
- adwn 6y ago
  > It saved my world, and millions of others. How? Be specific. > [...] but when it comes to actually making the world a better place [...] How is Bitcoin making the world a better place? Be specific. > HFSP I had to look this one up. For anyone wondering, apparently it means "Have Fun Staying Poor".
  - LAMike 6y ago
    How is Bitcoin making the world a better place? Be specific. Improving the lives of 100 million people by giving them a way to save money without a government agency. If you can't figure out why that has value, you're probably are a beneficiary of anglo centric privilege, and in that case I hope you NEVER buy any BTC. > I had to look this one up. Remember it. It won't be the last time someone says this to you
- pessimizer 6y ago
  > It saved my world, and millions of others. It definitely didn't. It may have made you money, or given you a creative programming outlet, or friends. You could also get that from dealing large amounts of cocaine, but you wouldn't be able to pretend you were a revolutionary.

fredfoobar 6y ago

Mining bitcoin does convert electricity into value though (it's just O(1) as you said it, doesn't scale with more electricity added). Mining bitcoin allows you to exchange value on the network, THAT is what is valuable.

loup-vaillant 6y ago
Mining bitcoin does not convert electricity into value. It converts electricity into currency. Currencies don't have value, they represent value. Their only intrinsic value lies in their ability to allow exchanges of goods. Take regular currencies for instance ($€¥…): they do not convert paper into value, they use paper to represent value. Now does printing more of it makes it better at enabling exchanges? Not necessarily. There's a point beyond which you just get over-inflation (a little inflation can be very beneficial, though). Now Bitcoin is definitely not at the point where it does causes over-inflation (else its valuation would drop). But you do need to compare it with other currencies, and its energy consumption is a big fat drawback. A deal breaker in my opinion. Barring perhaps some extreme cases, using proof-of-work crypto currencies is simply unethical: too much harm, not enough good.
- dragonwriter 6y ago
  > Take regular currencies for instance ($€¥…): they do not convert paper into value, they use paper to represent value Mostly, they use mostly-electronic ledger entries to represent value.
- fredfoobar 6y ago
  I'm sorry, but I don't think you understand bitcoin mining at all. Bitcoin mining is not just "making currency", the miners get a reward for minting a block, which is just a bundle of transactions. The new bitcoin they get as a reward is theirs to spend.
  - loup-vaillant 6y ago
    I'm aware of this clever mechanism, thank you very much. Bitcoin needs a reliable way for transactions to work in a single thread (so the block chain doesn't turn into a block tree), and we avoid stuff like double spends. That's proof of work, coupled with a reward (in currency). To avoid hyper inflation, Bitcoin automatically sets the difficulty so we create one new block every 10 minutes. That limits the number of transactions, but we can remedy that by just making making blocks bigger. Now the value of a successful block mining is the transactions it represents. Without them, you wouldn't have a means of exchange to begin with. But the reward is a new Bitcoin. And that new Bitcoin by itself does not add any value. It just inflates the currency a little bit, effectively taking value from all other bitcoins. The total value represented by all bitcoins stays the same. Now we can discuss pros and cons: on the bright side, mining a block enables a bunch of transactions. With a maximum block size of 1MB and 1 block every 10 minutes, we get 7 transactions per second. That's the real value of Bitcoin to humanity: 7 transactions per second, give or take. As for how much those 7 transactions per second cost, well… there's all the hardware and the resources required to make it, and there's energy. A back of the envelope calculation tells me Bitcoin spent about 8 Gigawatts of power in early 2020, and now it's more like 14. That's 2 Gigajoules per transaction, or about 500KWh. That's way too much energy for way too little value. Hence my thesis that Bitcoin as a whole is so wasteful that actively participating in it (especially if you're a miner), is unethical.

vbezhenar 6y ago

> There's simply no direct relationship between the cost of electricity and that of bitcoin that I can see. Miners get 12.5 BTC every 10 minutes. That's the direct relationship between the cost of bitcoin and the cost of electricity. If miners (total combined) spend less electricity, they'll buy more hardware. If they're spending more electricity, some of them will go bankrupt reducing total electricity consumption. I'm simplifying it a little bit, because miners also get transaction fees, but those are similar to the main reward and logic still works.

runeks 6y ago

> There's no value created by crunching random SHA-256. Sure there is. It’s a way to reach consensus on a sequence of transactions that defines the history of Bitcoin. This is what enables Bitcoin to be decentralized, digital money. Unless you believe this has no value then crunching random SHA-256 hashes does indeed have value.

jagger27 6y ago
There’s value created from every watt of electricity used to smelt aluminum. Almost all of the electricity used to crunch SHA256 hashes computes the wrong hash for the block.
estaseuropano 6y ago
The only value in bitcoin mining is bitcoin. The value of aluminium remains outside of speculation as it has inherent utility, while the value of bitcoin only comes from speculation and a very very minimal use case as currency which has been solved hundreds of times in more coat effective ways (even with other crypto, but most importantly outside crypto).
- fastball 6y ago
  Where has borderless money been solved more cost-effectively than Bitcoin outside of cryptocurrency? Have you done a study into how expensive existing fiat systems are, when all is said and done?
- Andrew_nenakhov 6y ago
  But bitcoin has tremendous value. Just ask anyone who can't get bank account for some reason. Now you can transfer funds from abroad cheaper and faster than before.
- splintercell 6y ago
  Nothing has inherent value, all value is subjective. This bad economic theory has been dismantled for over two centuries now. Replace inherent value with non-monetary value if that's what you mean.

deleted 6y ago

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kerng 6y ago

Saying it has no value is incorrect. It's seemingly the price to pay for securing $1 trillion. Maybe the better way to look at it is, how expensive is it to secure $1 trillion with other means in a decentralized and permission-less fashion? There is no alternative to compare it too even. So I think we are still in price discovery phase for Bitcoin.

golergka 6y ago

> There's no value created by crunching random SHA-256. You can't buy drugs in modern world without Bitcoin. That's the value. And regardless of whether we see it as "good" or "bad", in the eyes of the people who are buying drugs, it's pretty significant.

xxxxxyy1 6y ago

> There's no value created by crunching random SHA-256. So I shouldn't have to pay high wages if my employees aren't creating anything of value? People seem to pick and choose when they believe the labor theory of value. The point of the matter is that value *is* what people are willing to pay for something. You could argue that a Van Gogh is just arbitrary colors applied to a canvas, it's not worth anything inherently other than through the subjective valuations of other people.

prox 6y ago
I think the big problem is the amount of energy this thing is costing, and the huge load it puts on the GPU market, which could very much be a speculative bubble. There is a lot of difference between your examples and Bitcoin : The labour of your employees hopefully adds something you can show to your clients : it’s a lot less speculation on your part. Van Gogh is a name in the art world, and has a well documented place in art theory. Van Gogh is hardly speculative.
- yaa_minu 6y ago
  >... and the huge load it puts on the GPU market Point of correction: Bitcoin is mined with ASICS not GPUs
mempko 6y ago
Van Gogh has a value to rich people who have most of the money. Ask yourself this, is it ok to have a world that caters to what a few people care about?
- xxxxxyy1 6y ago
  > has a value to rich people who have most of the money so you're agreeing that value is entirely dependent on subjectivity and circumstance?
  - mempko 6y ago
    Only if you consider money as the only measure of value, which I disagree. Just because someone has all the magic government credits (money) doesn't mean they are the end all of measuring value no? There are plenty of things people value but would never pay money for it, or in most cases just don't have the money.

LAMike 6y ago

You have a lot to say for someone who has no idea about BTC

slickrick216 6y ago

Enjoy staying poor.

runarberg 6y ago

> Mining Bitcoins is like Iceland smelting aluminum? It can be argued that producing new aluminum with cheap power is also kind of a sink. There is plenty of aluminum that has already been produced, if we keep producing new cheap aluminum we are in fact incentivizing using aluminum for cheap single use products and decentivizing recycling. A lot of this new cheap aluminum will end up in landfills, hence the sink.

toyg 6y ago

> There’s no value created by crunching random SHA-256 I wonder if crackers and cryptoanalysts could put some of that to good use, generating massive rainbow tables and the likes. It would be a bit like using spent plutonium for weapons. I guess someone who knows the subject already looked into it...?

pier25 6y ago

> The value of bitcoin is driven by speculation I agree, but isn't that how all fiat money behaves?

UShouldBWorking 6y ago

Lol, you people are idiots.

bingbong70 6y ago

>The value of bitcoin is driven by speculation, and in turns that increases the incentive for the miners, not the other way around. There's no value created by crunching random SHA-256. So you are saying increasing security, uncounterfietability, censorship-resistance, and decentralization of money distribution has no value? The central banks/treasuries spending $$$$ yearly to secure their money and governments spending $$$$ on militaries, intelligence, LEO, etc... to add layers of security would disagree with you. Increased hash rate leads to higher prices and increased prices lead to higher hash rate. Both are true here, this loop is a key component of the NGU (Number Go Up) technology in Bitcoin.

kleer001 6y ago

> There's no value created by crunching random SHA-256. They're not random. There's randomness in their construction, yes, but they're encoding trust.

Izkata 6y ago

Original argument posted earlier: https://news.ycombinator.com/item?id=26609247 https://news.ycombinator.com/item?id=26609247