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> And if you've heard the talks and economic theories, then you didn't fully grasp them, or you listened to the wrong people. It's hard for me to imagine that y

> And if you've heard the talks and economic theories, then you didn't fully grasp them, or you listened to the wrong people. It's hard for me to imagine that you've ever watched a full Michael Saylor interview. "Repeat the experiment until you get a different result." > I now have my entire net worth stored in it Again, not really relevant to our conversation, but to anyone else reading, this is why you're never going to convince someone in this position by argument or talking online, the best you can do is publicly demonstrate that the arguments are worthless for other people. Someone who has their entire net worth invested into a coin is never going to be swayed by technical arguments about how it works or by economic arguments, or really by anything. We could talk about the fact that the lightning network also has privacy problems, we could talk about the misconceptions here about how mining works and how the underlying technology for verifying transactions works, but it's not going to change anything.. There is no way to sway someone in that position because "I have my entire net worth in something that is a failed experiment" is going to be resisted by every single emotional neuron in the brain. So the defense becomes "you just need to spend more time looking, if you spent more time you'd see I'm right, if you don't believe I'm right, it just means you haven't repeated the experiment enough times until it yielded the result I want." Because it has to, the brain has to react that way. I don't mean this as an insult, if I was in the same position I would act the exact same way because that's just how human brains work, and I would be no exception. Once you invest into something on that scale, it is extremely difficult not to have blind faith in it.

npoc 3y ago
> "Someone who has their entire net worth invested into a coin is never going to be swayed by technical arguments about how it works or by economic arguments, or really by anything." This isn't true. I can buy back fiat with my bitcoin within an hour if you convince me that I've made a mistake - I have no commitment, sunk costs etc. I think it more strongly applies to you - think how much bitcoin you could have owned. You've missed out on life changing wealth forever because of the opinion you've formed. It would hard to accept that you're wrong now. I actively seek out criticisms of bitcoin where ever I can. So far I've not found a single person who I can see understands bitcoin but doesn't own any, but I've also failed to convince any of those people who don't get it. If you're open-minded, I'm happy to talk about the misconceptions and will happily be corrected if I'm wrong - please go ahead - hopefully one of us will learn something. Lets keep it simple and forget about using bitcoin as a currency for now. Let's focus on bitcoin as a superior alternative to gold. > "we could talk about the misconceptions here about how mining works and how the underlying technology for verifying transactions works, but it's not going to change anything.." Let's start with that - what are the misconceptions?
- danShumway 3y ago
  > I think it more strongly applies to you - think how much bitcoin you could have owned. For anyone following along, this is the FOMO strategy. It's a little weak? I kind figured you'd argue that I had emotional investment in USD, which would have been a much stronger argument for you to make (albeit, not an argument in favor of Bitcoin). To skip over that right to "but think about how much you're missing out" is... I don't know, I've seen people make this pitch better. > So far I've not found a single person who I can see understands bitcoin but doesn't own any It does seem like your definition of "understands Bitcoin" is "agrees with you", so that's not particularly compelling as an argument. > what are the misconceptions? Okay, sure, I'll bite. ---- > You'll learn that miners don't validate the transactions ($100 nodes people can run at home do that). This is straight up wrong. Bitcoin proves chain validity using a system called proof of work. Singular nodes are never enough to complete a transaction, the whole point of proof of work is that lots of people race and that enough people spend enough compute power at the same time that someone trying to rewrite the chain or double-spend can't keep up with the network. This is a huge misunderstanding of an extremely basic fundamental part of the technology. When people say that Bitcoin allows for distributed consensus, this is what they mean -- the network is trusted because there are a ton of people wasting energy and no singular actor can get enough energy or resources to outspend enough of the network to launch an attack. This is not me making something up, Satshi talks about this in the introduction of the Bitcoin whitepaper (https://www.bitcoin.com/satoshi-archive/whitepaper https://www.bitcoin.com/satoshi-archive/whitepaper, emphasis mine): > Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions. The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes. To be fair, it is true that individual nodes can validate whether or not a proposed chain is completely incorrect, but so heckin what, that's not really the important part of how the Blockchain works. The important part is that the network specifically trusts whatever the longest blockchain is, and that entire security system is based on the entire network constantly racing itself to increase the chain's length. The inefficiency is the point, the point is that the network can spend more energy than you individually can. It outspends your access to compute power. "The network outspends your attack" is basically the definition of a proof of work blockchain. So at a purely technical level, your explanation here already has issues. But let's ignore that and talk about economics: ---- > That rather than waste energy, bitcoin will increasingly use waste energy (by definition energy that no one wants and so are not competing for) This is not really a thing. I don't know if you think Bitcoin mines aren't hooked up to the normal power grid or something? They are, they use the same power grid as residents. They run 24x7, they use power at market rates for the areas that they operate. That's why areas with cheaper electricity are more attractive to miners, because they have to buy the electricity, they don't get given to them for free because it was going to be thrown away otherwise. Bitcoin mines purchase energy from the market and very obviously that affects prices. It is true that there are situations in the power market where power drops into negative prices during low-usage, but Bitcoin mines don't restrict themselves to those areas/times and use far too much power to be operating entirely on that excess electricity. This is a pretty basic economics error -- for what you're saying to be true there would need to be a huge excess of energy that cannot be harvested or sold to the market other than to Bitcoin mines. But Bitcoin mines aren't special, they're GPUs. The power they're using isn't some special format, it's just electricity, and it could be used for any computing tasks or power expenditure. This is obviously true just from first principles of economics and how markets work, but because I know you won't believe me when I say that, it's also something you can see in the real world: a 2022 study estimated that Bitcoin mining cost upstate NY residents upwards of $250 million dollars in increased electricity costs (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779720 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779720). It's also demonstrable within the Bitcoin market itself, part of the reason why China is attractive to miners is because it has fixed-price energy regulated by the government. This means that miners can ignore the price externalities because they're not operating in a free market, the electricity is price-controlled. So Bitcoin proponents love to say that the energy used on Bitcoin would just be wasted if it wasn't used for mining. But it's obviously not true, both from a market perspective and from the even simpler argument that we could be running those GPUs to do any number of more useful activities. Moving on: ---- > That the value can double every 4 years with no increase in energy use. This is not how the economics of mining work. The amount of mining that happens is a function of the cost of mining and the potential value from mining. The cost of mining is the regulatory cost, the electricity cost, the cost of buying GPUs, etc... The benefit of mining is the payout rate and the market value of the coins that get payed out. If the value doubles and the other prices or the payout rate stays the same, the amount of mining will increase. This is, once again, extremely basic economics; supply and demand. If I can spend X dollars to get Y dollars worth of Bitcoin, and Y doubles, then the mining will go up until the costs increase again. Now, maybe your argument is that energy isn't the specific cost that's going to go up, maybe your argument is that the bottleneck on mining is going to be GPU availability. Which, cool, but massively inflating the GPU market and driving up prices is also a pretty big negative externality and also pretty bad for the environment given how those GPUs get made. So I can't stress this enough, the reason people mine Bitcoin is so they can make money. It's because they get money out of mining. If the price goes up, the mining will increase until either the costs go up or until enough new people are mining that the payout rate decreases. You might disagree with those economics, so once again, let's look at the real world. Have the number of Bitcoin miners increased as the price of Bitcoin has increased? Yes. Is that just a very strange weird coincidence? Probably not. Probably not, because getting back to the technical side, this is by design. Remember how the network is secured -- if it is cheap enough for a dedicated attacker (even at a nation-state level) to buy up enough electricity and GPUs to perform a 51% attack, then the network isn't secure. The way the network stays secure is that as the benefit of such an attack goes up, it becomes harder to perform because more and more people get involved in mining and that natural increase keeps the resources involved in mining constrained. I want to say this as clearly as possible: it is a necessary part of Bitcoin's security that it waste resources. PoW only secures a network if it uses so many resources in its computation that attackers cannot get access to enough resources to launch a worthwhile attack. Once again, this is not coming from critics, the original Bitcoin whitepaper describes mining incentives like so: > The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended. Satashi specifically calls out electricity as an expended resource in the creation of new coins. They go on to describe coin price as a contributing factor to encouraging attackers to mine instead of to attack the network: > If a greedy attacker is able to assemble more CPU power than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins. He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth. From the very beginning, Bitcoin was designed to scale mining volume with coin price and to soak up available CPU and energy resources to prevent them from falling into the hands of attackers. But again, you don't have to take me at my word for that, you can also just look out your window at GPU prices and look at just how much mining has affected them and how much those prices fell after Bitcoin crashed from its all-time-high. Why did they fall? Because there was less demand for them from miners, because the amount of computer power miners are expending to secure the network is influenced by Bitcoin's exchange rate. ---- Anyway, none of this is going to convince you of anything. But all this to say, if you come into a conversation telling me that I don't understand Bitcoin, and the examples you give directly contradict the founding whitepaper of Bitcoin, you're not making a very strong argument.

npoc 3y ago

> "Someone who has their entire net worth invested into a coin is never going to be swayed by technical arguments about how it works or by economic arguments, or really by anything." This isn't true. I can buy back fiat with my bitcoin within an hour if you convince me that I've made a mistake - I have no commitment, sunk costs etc. I think it more strongly applies to you - think how much bitcoin you could have owned. You've missed out on life changing wealth forever because of the opinion you've formed. It would hard to accept that you're wrong now. I actively seek out criticisms of bitcoin where ever I can. So far I've not found a single person who I can see understands bitcoin but doesn't own any, but I've also failed to convince any of those people who don't get it. If you're open-minded, I'm happy to talk about the misconceptions and will happily be corrected if I'm wrong - please go ahead - hopefully one of us will learn something. Lets keep it simple and forget about using bitcoin as a currency for now. Let's focus on bitcoin as a superior alternative to gold. > "we could talk about the misconceptions here about how mining works and how the underlying technology for verifying transactions works, but it's not going to change anything.." Let's start with that - what are the misconceptions?

danShumway 3y ago
> I think it more strongly applies to you - think how much bitcoin you could have owned. For anyone following along, this is the FOMO strategy. It's a little weak? I kind figured you'd argue that I had emotional investment in USD, which would have been a much stronger argument for you to make (albeit, not an argument in favor of Bitcoin). To skip over that right to "but think about how much you're missing out" is... I don't know, I've seen people make this pitch better. > So far I've not found a single person who I can see understands bitcoin but doesn't own any It does seem like your definition of "understands Bitcoin" is "agrees with you", so that's not particularly compelling as an argument. > what are the misconceptions? Okay, sure, I'll bite. ---- > You'll learn that miners don't validate the transactions ($100 nodes people can run at home do that). This is straight up wrong. Bitcoin proves chain validity using a system called proof of work. Singular nodes are never enough to complete a transaction, the whole point of proof of work is that lots of people race and that enough people spend enough compute power at the same time that someone trying to rewrite the chain or double-spend can't keep up with the network. This is a huge misunderstanding of an extremely basic fundamental part of the technology. When people say that Bitcoin allows for distributed consensus, this is what they mean -- the network is trusted because there are a ton of people wasting energy and no singular actor can get enough energy or resources to outspend enough of the network to launch an attack. This is not me making something up, Satshi talks about this in the introduction of the Bitcoin whitepaper (https://www.bitcoin.com/satoshi-archive/whitepaper https://www.bitcoin.com/satoshi-archive/whitepaper, emphasis mine): > Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions. The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes. To be fair, it is true that individual nodes can validate whether or not a proposed chain is completely incorrect, but so heckin what, that's not really the important part of how the Blockchain works. The important part is that the network specifically trusts whatever the longest blockchain is, and that entire security system is based on the entire network constantly racing itself to increase the chain's length. The inefficiency is the point, the point is that the network can spend more energy than you individually can. It outspends your access to compute power. "The network outspends your attack" is basically the definition of a proof of work blockchain. So at a purely technical level, your explanation here already has issues. But let's ignore that and talk about economics: ---- > That rather than waste energy, bitcoin will increasingly use waste energy (by definition energy that no one wants and so are not competing for) This is not really a thing. I don't know if you think Bitcoin mines aren't hooked up to the normal power grid or something? They are, they use the same power grid as residents. They run 24x7, they use power at market rates for the areas that they operate. That's why areas with cheaper electricity are more attractive to miners, because they have to buy the electricity, they don't get given to them for free because it was going to be thrown away otherwise. Bitcoin mines purchase energy from the market and very obviously that affects prices. It is true that there are situations in the power market where power drops into negative prices during low-usage, but Bitcoin mines don't restrict themselves to those areas/times and use far too much power to be operating entirely on that excess electricity. This is a pretty basic economics error -- for what you're saying to be true there would need to be a huge excess of energy that cannot be harvested or sold to the market other than to Bitcoin mines. But Bitcoin mines aren't special, they're GPUs. The power they're using isn't some special format, it's just electricity, and it could be used for any computing tasks or power expenditure. This is obviously true just from first principles of economics and how markets work, but because I know you won't believe me when I say that, it's also something you can see in the real world: a 2022 study estimated that Bitcoin mining cost upstate NY residents upwards of $250 million dollars in increased electricity costs (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779720 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779720). It's also demonstrable within the Bitcoin market itself, part of the reason why China is attractive to miners is because it has fixed-price energy regulated by the government. This means that miners can ignore the price externalities because they're not operating in a free market, the electricity is price-controlled. So Bitcoin proponents love to say that the energy used on Bitcoin would just be wasted if it wasn't used for mining. But it's obviously not true, both from a market perspective and from the even simpler argument that we could be running those GPUs to do any number of more useful activities. Moving on: ---- > That the value can double every 4 years with no increase in energy use. This is not how the economics of mining work. The amount of mining that happens is a function of the cost of mining and the potential value from mining. The cost of mining is the regulatory cost, the electricity cost, the cost of buying GPUs, etc... The benefit of mining is the payout rate and the market value of the coins that get payed out. If the value doubles and the other prices or the payout rate stays the same, the amount of mining will increase. This is, once again, extremely basic economics; supply and demand. If I can spend X dollars to get Y dollars worth of Bitcoin, and Y doubles, then the mining will go up until the costs increase again. Now, maybe your argument is that energy isn't the specific cost that's going to go up, maybe your argument is that the bottleneck on mining is going to be GPU availability. Which, cool, but massively inflating the GPU market and driving up prices is also a pretty big negative externality and also pretty bad for the environment given how those GPUs get made. So I can't stress this enough, the reason people mine Bitcoin is so they can make money. It's because they get money out of mining. If the price goes up, the mining will increase until either the costs go up or until enough new people are mining that the payout rate decreases. You might disagree with those economics, so once again, let's look at the real world. Have the number of Bitcoin miners increased as the price of Bitcoin has increased? Yes. Is that just a very strange weird coincidence? Probably not. Probably not, because getting back to the technical side, this is by design. Remember how the network is secured -- if it is cheap enough for a dedicated attacker (even at a nation-state level) to buy up enough electricity and GPUs to perform a 51% attack, then the network isn't secure. The way the network stays secure is that as the benefit of such an attack goes up, it becomes harder to perform because more and more people get involved in mining and that natural increase keeps the resources involved in mining constrained. I want to say this as clearly as possible: it is a necessary part of Bitcoin's security that it waste resources. PoW only secures a network if it uses so many resources in its computation that attackers cannot get access to enough resources to launch a worthwhile attack. Once again, this is not coming from critics, the original Bitcoin whitepaper describes mining incentives like so: > The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended. Satashi specifically calls out electricity as an expended resource in the creation of new coins. They go on to describe coin price as a contributing factor to encouraging attackers to mine instead of to attack the network: > If a greedy attacker is able to assemble more CPU power than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins. He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth. From the very beginning, Bitcoin was designed to scale mining volume with coin price and to soak up available CPU and energy resources to prevent them from falling into the hands of attackers. But again, you don't have to take me at my word for that, you can also just look out your window at GPU prices and look at just how much mining has affected them and how much those prices fell after Bitcoin crashed from its all-time-high. Why did they fall? Because there was less demand for them from miners, because the amount of computer power miners are expending to secure the network is influenced by Bitcoin's exchange rate. ---- Anyway, none of this is going to convince you of anything. But all this to say, if you come into a conversation telling me that I don't understand Bitcoin, and the examples you give directly contradict the founding whitepaper of Bitcoin, you're not making a very strong argument.