3 ms·

Some articles' job is to spark a great rebuttal. This is a great read, and great debating. Nerd-bait-ey information density so high. The economic equilibrium

Some articles' job is to spark a great rebuttal. This is a great read, and great debating. Nerd-bait-ey information density so high. The economic equilibrium of the Bitcoin economic model is as follows: the total cost of all electricity invested into the network over a 10-minute period strives to be equal to the present financial value of 6.25 Bitcoins. If electricity becomes cheaper, then more electricity gets poured into the system, producing the exact same output. That is why Bitcoin is not a battery — Bitcoin is a sink: its economic output is constant, regardless of the amount of resources poured into it.³ When miners pour more electricity into Bitcoin, they don’t get more Bitcoin; instead, the entirety of the Bitcoin network becomes more secure. Security is not a commodity,.. .. Bitcoin is indeed incentivizing the creation of cheap power sources, but those sources are not going to be used for anything... I learned more about bitcoin in a few minutes than so many hours of people talking while saying so little. Glass of ice water in hell. I can now deduce that the "equilibrium energy cost" of bitcoin is currently $45m per day.

nadahalli 6y ago
I am curious why the author thinks that security is not a commodity.
- xapata 6y ago
  How about explaining why it might be -- How do I store it and trade it; and does it have provenance?
- tim333 6y ago
  If you look at the definition security doesn't really fit. See for example https://en.wikipedia.org/wiki/Commodity https://en.wikipedia.org/wiki/Commodity
- dalbasal 6y ago
  Read on. The counterexample is aluminium, which is a commodity. It can be stored, resold. Security cannot. You output the same number of bitcoins regardless of electricity input. There's no storage or saving that can be recovered later. With aluminium, you would have more aluminium. The reason it's like this is because the price of bitcoin isn't affected by electricity prices and electricity prices aren't affected by bitcoin prices.
  - splintercell 6y ago
    You're storing and recovering capital, i. e. value across time.
    - eladv 6y ago
      Yes, but the amount of capital that gets stored has nothing to do with the amount of electricity that goes into the system. Bitcoin is a "battery for value" (AKA a currency). But it's not a "battery for electricity" (AKA a battery :) ).
eladv 6y ago
Thank you! When I wrote the blog post, I felt it's not clearly written, and that the point might get lost. I'm heartened to see that at least one person understood what I was trying to convey. I'm doing some edits of the post for clarity, if you don't mind I'll steal some of your emphasis back into the text.
- dalbasal 6y ago
  Thank you. Great writing. I think the subject matter falls into a tricky space. You need to start with some sort of economist-ey bias to even think that bitcoin could be a battery... considering that it does not store energy or physically exist. Either way, it can be interesting to consider why or why not. To me, it's interesting that this is a type example for mistake that knowing just enough economics makes you more prone to. Anyway... I expected a bitcoin-ey article, so I came in with an eye roll. OTOH, I was kind of curious about the energy economics of bitcoin. You blazed through a great, concise explanation of the key facts en route to winning your argument. As a through-away, you perfectly framed the energy debate between bitcoin and etherium's approaches... trying not to start a fight with either of them before you finish the previous one.

nadahalli 6y ago

I am curious why the author thinks that security is not a commodity.

xapata 6y ago
How about explaining why it might be -- How do I store it and trade it; and does it have provenance?
tim333 6y ago
If you look at the definition security doesn't really fit. See for example https://en.wikipedia.org/wiki/Commodity https://en.wikipedia.org/wiki/Commodity
dalbasal 6y ago
Read on. The counterexample is aluminium, which is a commodity. It can be stored, resold. Security cannot. You output the same number of bitcoins regardless of electricity input. There's no storage or saving that can be recovered later. With aluminium, you would have more aluminium. The reason it's like this is because the price of bitcoin isn't affected by electricity prices and electricity prices aren't affected by bitcoin prices.
- splintercell 6y ago
  You're storing and recovering capital, i. e. value across time.
  - eladv 6y ago
    Yes, but the amount of capital that gets stored has nothing to do with the amount of electricity that goes into the system. Bitcoin is a "battery for value" (AKA a currency). But it's not a "battery for electricity" (AKA a battery :) ).

eladv 6y ago

Thank you! When I wrote the blog post, I felt it's not clearly written, and that the point might get lost. I'm heartened to see that at least one person understood what I was trying to convey. I'm doing some edits of the post for clarity, if you don't mind I'll steal some of your emphasis back into the text.

dalbasal 6y ago
Thank you. Great writing. I think the subject matter falls into a tricky space. You need to start with some sort of economist-ey bias to even think that bitcoin could be a battery... considering that it does not store energy or physically exist. Either way, it can be interesting to consider why or why not. To me, it's interesting that this is a type example for mistake that knowing just enough economics makes you more prone to. Anyway... I expected a bitcoin-ey article, so I came in with an eye roll. OTOH, I was kind of curious about the energy economics of bitcoin. You blazed through a great, concise explanation of the key facts en route to winning your argument. As a through-away, you perfectly framed the energy debate between bitcoin and etherium's approaches... trying not to start a fight with either of them before you finish the previous one.