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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

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.
PragmaticPulp 6y ago
> (it's just O(1) as you said it, doesn't scale with more electricity added) Worse: It does the inverse of scaling. The more electricity that is added, the less efficient it gets. Even worse: The system is designed to incentivize more people to join and waste electricity, by paying them to do so.
- fredfoobar 6y ago
  I get the "worse" comment, but not the "even worse" one. The system is NOT incentivizing people to join and waste electricity, the returns are diminishing for mining (and it gets worse every 4 years), the amount of up-front capital for a mining operation increases. I think it'll reach a tipping point and stop growing entirely.
kerng 6y ago
It does have value, its the value to secure the Bitcoin network (at the moment worth $1 trillion). No additional tanks, armies and nuclear weapons needed.
- DasIch 6y ago
  > No additional tanks, armies and nuclear weapons needed. Of course not. The existing ones you depend on to protect the necessary infrastructure and servers of bitcoin are already sufficient.
  - kerng 6y ago
    Exactly, the decentralized nature makes this possible.
    - ohgodplsno 6y ago
      ...No, the existing armies of the world make it possible. Why do you think Coinbase, Kraken, etc, are in the US and not in Somalia? Hint: it involves a police and an army.
      - kerng 6y ago
        You are talking about centralized exchanges, which is something built on top of Bitcoin - much like the current banking systems. You are not required to use that with Bitcoin. With Bitcoin someone anywhere can have a "bank account" where the asset doesn't loose its value based on local circumstances. I assume you argue that a single army/government could take out/control miners - which would be the better discussion to have. That's where we would talk about the value of the Bitcoin network.
        ohgodplsno 6y ago
        No, I mean that bitcoin as a whole would be back to 2010 values should these exchanges not exist. The only reason bitcoin has value is that leeches decided to speculate on it, and leeches need a centralized exchange. Centralized exchanges are the reason you don't pay 10000 bitcoin for a pizza. They're the reason why it's even accepter, because there's at least one large place that will exchange your coins for cash.
fennecfoxen 6y ago
> Mining bitcoin allows you to exchange value on the network, THAT is what is valuable. Moving value is valuable, but the resources expended in moving it do not provide value; rather, they come at a cost, like gasoline in your car. And Bitcoin is pathetically inefficient at moving value. The average transaction fee has been floating around, what, $15-$30 USD? This is international-wire-transfer pricing range, if it's a single transaction and you don't do these transactions very regularly with your bank. Don't count the value it provides on the wrong side of the ledger.
- fredfoobar 6y ago
  How long does an international wire transfer take? how much energy does it consume? Seriously, if you are going to make a statement like "pathetically inefficient at moving value", can you at least be honest and actually understand the cost of fiat currency (why is it called fiat? what is a petrodollar?) and the banking system? Bitcoin is a FULL system, you're seeing the whole thing, the mining is for securing the network AND moving value. Can you say that about any other system (that you are already so used to and blind to how it works)
  - fennecfoxen 6y ago
    When the facts are with you, pound on the facts, but when the facts are against you, pound on the table! Facts make Bitcoin look bad, and now someone's trying to witness to me, calling me "blind" and trying to change the topic to "petrodollars," a fantasy bogeyman, and drag in 50 other distractions. I deliberately chose international wire transfers as the worst and most expensive way to move money. I assume everyone knows that you can move large sums of money domestically for mere pennies. Yes, that implies the total cost of the system is less-than-pennies per transaction, including human staff, hardware to run everything, taxes paid to governments which protect the system, everything. Yes, transaction costs are the right way to compare the cost of transactions, believe it or not. Maybe Bitcoin is a FULL system. Big deal. If it's not going to share that FULL system with normal everyday life and its shared institutions, it bears the FULL costs of failing to share, as expensive as that may be.
ohgodplsno 6y ago
We did that before, it's called a banking system, and it doesn't require nearly as much energy per transaction.
- fredfoobar 6y ago
  The banking system is just a part of the puzzle. What makes a particular fiat currency the banking system valuable? Zimbabwe had a banking system too, why isn't their currency worth as much as the US dollar?

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.

PragmaticPulp 6y ago

> (it's just O(1) as you said it, doesn't scale with more electricity added) Worse: It does the inverse of scaling. The more electricity that is added, the less efficient it gets. Even worse: The system is designed to incentivize more people to join and waste electricity, by paying them to do so.

fredfoobar 6y ago
I get the "worse" comment, but not the "even worse" one. The system is NOT incentivizing people to join and waste electricity, the returns are diminishing for mining (and it gets worse every 4 years), the amount of up-front capital for a mining operation increases. I think it'll reach a tipping point and stop growing entirely.

kerng 6y ago

It does have value, its the value to secure the Bitcoin network (at the moment worth $1 trillion). No additional tanks, armies and nuclear weapons needed.

DasIch 6y ago
> No additional tanks, armies and nuclear weapons needed. Of course not. The existing ones you depend on to protect the necessary infrastructure and servers of bitcoin are already sufficient.
- kerng 6y ago
  Exactly, the decentralized nature makes this possible.
  - ohgodplsno 6y ago
    ...No, the existing armies of the world make it possible. Why do you think Coinbase, Kraken, etc, are in the US and not in Somalia? Hint: it involves a police and an army.
    - kerng 6y ago
      You are talking about centralized exchanges, which is something built on top of Bitcoin - much like the current banking systems. You are not required to use that with Bitcoin. With Bitcoin someone anywhere can have a "bank account" where the asset doesn't loose its value based on local circumstances. I assume you argue that a single army/government could take out/control miners - which would be the better discussion to have. That's where we would talk about the value of the Bitcoin network.
      - ohgodplsno 6y ago
        No, I mean that bitcoin as a whole would be back to 2010 values should these exchanges not exist. The only reason bitcoin has value is that leeches decided to speculate on it, and leeches need a centralized exchange. Centralized exchanges are the reason you don't pay 10000 bitcoin for a pizza. They're the reason why it's even accepter, because there's at least one large place that will exchange your coins for cash.

fennecfoxen 6y ago

> Mining bitcoin allows you to exchange value on the network, THAT is what is valuable. Moving value is valuable, but the resources expended in moving it do not provide value; rather, they come at a cost, like gasoline in your car. And Bitcoin is pathetically inefficient at moving value. The average transaction fee has been floating around, what, $15-$30 USD? This is international-wire-transfer pricing range, if it's a single transaction and you don't do these transactions very regularly with your bank. Don't count the value it provides on the wrong side of the ledger.

fredfoobar 6y ago
How long does an international wire transfer take? how much energy does it consume? Seriously, if you are going to make a statement like "pathetically inefficient at moving value", can you at least be honest and actually understand the cost of fiat currency (why is it called fiat? what is a petrodollar?) and the banking system? Bitcoin is a FULL system, you're seeing the whole thing, the mining is for securing the network AND moving value. Can you say that about any other system (that you are already so used to and blind to how it works)
- fennecfoxen 6y ago
  When the facts are with you, pound on the facts, but when the facts are against you, pound on the table! Facts make Bitcoin look bad, and now someone's trying to witness to me, calling me "blind" and trying to change the topic to "petrodollars," a fantasy bogeyman, and drag in 50 other distractions. I deliberately chose international wire transfers as the worst and most expensive way to move money. I assume everyone knows that you can move large sums of money domestically for mere pennies. Yes, that implies the total cost of the system is less-than-pennies per transaction, including human staff, hardware to run everything, taxes paid to governments which protect the system, everything. Yes, transaction costs are the right way to compare the cost of transactions, believe it or not. Maybe Bitcoin is a FULL system. Big deal. If it's not going to share that FULL system with normal everyday life and its shared institutions, it bears the FULL costs of failing to share, as expensive as that may be.

ohgodplsno 6y ago

We did that before, it's called a banking system, and it doesn't require nearly as much energy per transaction.

fredfoobar 6y ago
The banking system is just a part of the puzzle. What makes a particular fiat currency the banking system valuable? Zimbabwe had a banking system too, why isn't their currency worth as much as the US dollar?