> If I see that I'm wrong, I can simply sell my bitcoin at a profit and walk away - my bitcoin ownership is not a psychological barrier to a change of my belief (a hypothesis you made).
This is textbook MLM talk here, and for the benefit of anyone else reading I want to take a minute and walk through it. First, it doubles down on FOMO again after it's been pointed out as FOMO; it just rephrases the same argument again slightly differently. Secondly, it puts forward the absurd notion that investment into a financial vehicle makes one more objective than observers outside of that financial vehicle.
Think that through for a second if you're a reader, if someone came to you and said, "I've invested a huge amount into this company and so my analysis of how the company is doing and its growth potential is more objective than an outside analysis", you would rightly dismiss that person. You would not be persuaded by that person telling you, "well, I can sell my stock if I think the company is doing poorly." This is how most of our financial disclosure systems work, we recognize that people in those positions have huge vested interests in seeing the systems they are invested into succeed.
But MLM-style systems like Bitcoin attempt to invert that argument, claiming that their stake makes them more trustworthy. And they use a specific trick to do it: they argue that de-investment from the system is costless. It's not, for a couple of reasons. First, it's just straight up ignoring barriers: moving really massive amounts of money into and out of crypto is complicated, often requires going through exchanges, and caries tax implications. It also ignores the social and emotional costs of doing so. But most importantly, it's also false in the more basic sense that when markets crash they crash because there is no buyer for an asset at the previous market rate.
So in an MLM scheme, you'll get told that it's risk-free because the company will just buy back any product that you can't sell. Inevitably, you find out that there are some major caveats attached to that, and you'll be stuck with product you can't sell. With Bitcoin, you'll get told that you can just convert your crypto assets back to traditional money at the same price (or even at a higher price, as npoc suggests, get in early enough and who cares if the market goes down, you'll still win). This ignores the fact that observably, when Bitcoin last crashed, a whole lot of people were stuck having bought coins that were worth less than they bought them for.
The FOMO argument is arguably the most toxic element of the Bitcoin community because it encourages people to invest more than they can lose. If you were around for the last Bitcoin crash you might remember that certain parts of the crytpo social sphere needed to basically start doing suicide interventions for their members. All investment caries risk: all of it.
And of course, financial investment into a system does generally decrease objectivity about that system.
> you will also have to come to terms with that fact that through your own mistakes you failed to buy bitcoin at prices probably 10x-100x cheaper than they currently are.
For the record, if Bitcoin actually succeeded in improving the world, I would be thrilled. I would lose nothing; I'm not hurting for money, and some of us genuinely pay attention to these technologies because we want the world to be a better place, not because we're trying to get rich quick.
But once again, this is just FOMO, and I really do think it's the most toxic part of the community, and it's the part that I honestly think irritates me the most because I literally watched people online contemplate suicide after the last Bitcoin crash and I think it's extremely gross to pull people into that system using FOMO without adequately explaining the risks or the extreme financial interest that Bitcoin proponents have in pulling in late adaptors in order to increase the value of their own coins and justify their earlier investments.
----
So, that out of the way:
> Almost, but proof of work doesn't prove anything other than work.
This is like saying that cryptographic signature validation doesn't prove anything other than that the signature is valid. It's an oversimplification of why the system exists and what it's used for.
You have this basically backwards, miners do validate transactions in every sense that matters. The fact is that multiple valid blocks can be appended to the blockchain at any given time. Mining and proof of work is how the network decides which of those blocks will be "canonical".
You move on to talk about governmental decisions and code changes within Bitcoin, but that is an orthogonal concept to what I'm talking about, which is this: that the energy expenditure of Bitcoin is how the network secures itself, not a conversion of electrical energy into value or a byproduct of a separate process. It is used for security and validation of transactions. If this was not the case, the blockchain would not need to be distributed in the first place. But it does, because it uses proof of work to validate transactions.
> So I agree on the fundamental point of "the network outspends your attack". But I don't agree that this makes it inefficient
I understand that under your definition of inefficiency that you might choose to use a different word, and honestly, if you want to, fine. I don't really care that much, I understand you are pushing back against whether that energy expenditure is worthwhile. What I mean is that the expenditure is not being used for anything except as a barrier of entry to network attacks. It is a set of arbitrary calculations that are designed first and foremost to be incredibly difficult to do, not to solve some complicated problem. It is designed to "waste" CPU time (or nowadays, GPU time).
Most people would call that a deliberate inefficiency, in the same way that we would say that peacocks growing large tails that decrease their survival chances in order to attract mates is a "deliberate" inefficiency -- it is worthwhile for the peacock to do, but it is also a system that is not in itself useful, but where the inefficiency itself serves as either a signaling mechanism or a barrier to prevent other actors from competing (in Bitcoin's case, to prevent bad actors from double-spending). I agree that my usage of the word is orthogonal to whether that deliberate inefficiency is worth tolerating, but regardless of whether you'd use a different word than "inefficiency", this is still an important point to understand because it helps us understand that the energy expenditure in Bitcoin is not going away and would in fact need to drastically increase if it ever became a universal global financial market, and in fact is incompatible with goals of cheap or universal access to abundant power or minimization of energy waste -- the security of the network depends on that outcome not happening.
And that is the primary environmental objection to Bitcoin. That it by design is impossible to secure without using so much electricity and compute power that they become scarce resources that cannot be accessed or used on a scale by an attacker to overwhelm the network and double-spend.
----
I want to avoid getting bogged down in definitions because a common rhetorical tactic from Bitcoin advocates that I've seen online is to go deep into specific terminology as a way to distract from the overall points of the conversation.
As an example of where this kind of argument over definition can be a problem: I could say, strictly speaking, your statement ("Miners don't validate the transactions ($100 nodes people can run at home do that)") is technically just wrong even under your own definitions. Miners do validate blocks, that's part of the mining process -- they have to do some validation in order to know whether or not they're being handed a valid blockchain to mine on. So if we wanted to get really technical and nitpick, even under the lightest most minimal definition of validation miners are doing many of the same validation computations that the $100 nodes do, just they're doing other stuff in addition and at a larger scale.
But honestly, I think we both would agree that the above paragraph is unnecessary quibbling, and I think it would be disingenuous and unhelpful for me to argue that technicality. I know you didn't actually mean that miners literally don't run any validation code at all. It's not a gotcha for me to bring that up that they do. You meant something larger about the mining process and its purpose and the role of PoW in the network.
And that is the main thing I'm taking issue with, not individual words or definitions. My reading of your comment is that you describe mining essentially as a method of converting "waste energy" (a thing that largely does not exist at the scale Bitcoin operates) into some kind of value. But in fact, mining is a security measure, it is not a conversion of energy into value, it is a way to secure transactions and to prevent double-spending.
That energy expenditure does not drive the price of Bitcoin up. The opposite is true, the price of Bitcoin drives up that energy expenditure, because by design the amount of energy spent necessarily needs to be high enough to make 51% attacks unprofitable. That energy expenditure also does not go down if the coin price stays steady. Energy continues to be spent in perpetuity in order to continue to secure the network and to prevent double-spend attacks. And that energy expenditure is the most important part of the Bitcoin design. Satashi does not spend the majority of their whitepaper talking about the specific rules of validation, they leave that as an afterthought, suggesting that those problems are trivial. Satashi instead spends the majority of their whitepaper talking about proof of work as a system for providing distributed, trustless validation of transactions without a central authority. It's through that lens that we should understand and think about mining.
At the risk of going on for far too long, I also think it's worth digging into the final question being raised above: what problem is Bitcoin solving and is it important enough to solve to justify the energy expenditure?
----
> And so we first need to agree on what problem bitcoin is solving, before we can determine whether it's efficient or not.
This is a great point and one that I fully agree with. But it's a good opportunity to bring up what might be the primary fatal flaw of the Bitcoin community and why I feel comfortable calling Bitcoin a speculative asset even though I know a significant portion of the community would take issue with that description.
The problem is that there is no consensus answer to this question inside the Bitcoin community. There is no answer you can give me about what problem Bitcoin is solving that everyone in the community will agree on.
On this very thread (and this is a normal occurrence on every HN thread on Bitcoin) I'm seeing different answers from Bitcoin proponents about whether Bitcoin is intended to be a currency. If I go and talk to 20 different Bitcoin proponents and really dig into their beliefs and question them about what the coin is good for or bad for, I will not find a consistent philosophical or ideological position about what Bitcoin is and what it's meant to be and meant to accomplish.
This makes these conversations very frustrating because Bitcoin proponents simultaneously say (as you have) that critics just need to do more research, while ignoring the fact that the research very often disagrees with itself and offers incompatible philosophies about the nature of the coin, and that community consensus or goals are regularly ignored in conversations about Bitcoin. As you yourself put it above, you don't really care what the original goals of the coin were or what its original proponents used to want or predict. This all leads to really cagey and vague answers about what Bitcoin proponents actually believe, and it turns out those beliefs are really flexible. I can promise you that if I bring up your points to another Bitcoin advocate in the future, if they think that dismissing you will help their argument they will in a heartbeat tell me that you're wrong and don't understand the coin. So when talking about Bitcoin, what I've found is that there's no transferring points between discussions because the community isn't in agreement about either the purpose of Bitcoin or about what Bitcoin actually is, but rather each individual faction within the community believes that they are the unique ones who actually understand what's going on.
Note that this is the case even for "experts" in the field. You're coming to me out of the school of Michael Saylor (a man who jumped into the space in 2020 after "allegedly" committing financial fraud in his previous ventures, but whatever, that's maybe a low blow for me to mention). Saylor has made a huge name for himself in the crypto space, and simplifying a bit, my best explanation of his beliefs is that he describes Bitcoin as a democratizing/"fair" financial system that can serve as a base for other systems to build on top of (lightning network for transactions, exchanges to help manage contracts, etc...). And the way he approaches Bitcoin practically in terms of his purchasing and usage is as an investment vehicle; he's proud of the fact that he holds Bitcoin as an asset rather than selling it.
And notably, his views and behavior are not universal or even necessarily mainstream within the entire Bitcoin community. So in a way, there's another question that needs to be asked alongside "what is the purpose of Bitcoin?" That question is, "according to whom?"
----
So given the above, why do I call Bitcoin a speculative asset? Because Bitcoin proponents don't agree with each other about much, but there is a small subset of points that they do mostly agree on: that Bitcoin is going up in value, that its rise is inevitable and should be assumed regardless of what the market indicates, that Bitcoin being deflationary is critically important and that the earliest adopters should be rewarded most heavily, and that FOMO should be a baseline argument for adoption and evangelism.
The philosophy that actually unites the Bitcoin community is that it's going to the moon. Everything else is secondary: agreement on whether Bitcoin should have price stability is not a necessity, agreement on whether it should be regulated is not a necessity in the community. Agreement on whether it should anonymous, on whether exchanges should exist, on whether lightning network is the right approach, the community doesn't even have completely universal consensus on PoW vs PoS -- there is disagreement on all of these issues. What's left is the speculative asset part. The beliefs that align with Bitcoin as a speculative investment are the only beliefs I can count on being present in a conversation with a Bitcoin advocate.
And honestly, it's also basically the only thing Bitcoin is actually good at. Bitcoin is terrible for transactions and has weak privacy guarantees. The rise of regulated exchanges as a chokepoint has made it less useful as a censorship-resistance engine, and it's not particularly reliable during disasters because it depends on a globally connected Internet and ready available power in order to transact. PoW tends to centralize governance; it turns out that "one CPU one vote" is not a great voting system given that both electricity and CPUs are fungible resources that can be purchased with money. It also turns out that leaving governance decisions up to miner consensus is not really the same thing as giving power to actual users. Its use as an independent value-store outside of government control is questionable, coin value appears to fluctuate with economic conditions and with stock market health. And of course as a way of avoiding financial corruption or manipulation Bitcoin has been a complete failure: the space is rife with pop-up companies and financial fraud, and has spawned whole new innovations in the field of pumping and dumping junk coins.
I'll give that it's not completely useless: for medium-value transactions with medium privacy requirements it's better than nothing and there are (proportionally to its energy expenditure) very limited minor instances where people have been able to use Bitcoin to avoid institutional censorship or to transact anonymously -- so it's not that it's literally never managed to to help with problems with fiat. But the issue is that even in those areas it has been surpassed by many other better options in the cryptocurrency space, and the Bitcoin community is actively hostile to efforts to make the coin better for those use-cases. This is part of the reason why there's been increasingly less and less adoption of Bitcoin for transactions that would heavily benefit from low-to-medium anonymity censorship-resistant payment methods like in the sex industry or with activist groups -- despite a clear market desire for additional payment options in those spaces that don't suffer from the many flaws of existing online payment systems.
But despite all of those failures, Bitcoin is and has been really stinking good at being a speculative asset. As a way of transferring money from late adopters to early adopters through a regularly repeating hype cycle that can be planned and influenced by large purchases, press, and evangelism -- Bitcoin excels and has been shown repeatedly to excel in the real world.
And to be fair, value is subjective. To a lot of people (Saylor included) a good speculative asset is probably enormously valuable no matter what the necessary costs are to maintain that asset. I have no doubt that Saylor would happily burn the entire world into dust if it meant he could sell the ashes at a profit. But for everyone else, the enormous energy expenditure is not justified by the creation of yet another speculative investment vehicle for people to gamble on.