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> "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, o

• 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
    > "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." To clarify, I was pointing out that you're more invested in your beliefs than I am in mine. 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). But in order for you to change your opinion at this stage, 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. This is the barrier to change of belief that you incorrectly accused me of. > "It does seem like your definition of "understands Bitcoin" is "agrees with you", so that's not particularly compelling as an argument." It's true. The fact is that bitcoin presents itself on the surface as a combination of "Ponzi scheme" alarms bells, combined with massive, wasteful energy use. Most people see this and believe that they've seen through the hype that the dumb people have fallen for and walk away, albeit a bit disgruntled about the waste of energy that is affecting everyone. They'll probably think things like, "I couldn't really care less about this crypto rubbish, but at least do it in an energy efficient way like [insert random shitcoin here]. Almost every bitcoiner has been there, even Michael Saylor!. It actually takes a deep insight into a number of widely differing areas of knowledge/expertise to see the whole picture (which also involves seeing though some of the nonsense of traditional finance/Keynesian economics) and only then does it make sense, and only when it makes sense does it become an excellent use of energy, rather than a waste of energy. If you miss just _one_ piece of the jigsaw, then bitcoin is an enormous waste of energy. So far every point you have made against bitcoin is one that I also made at one point along my learning curve but after 1000's of hours of deeper learning and contemplation, have realised they were wrong. So, let's just start with the first of my misconceptions and at least agree on the facts, rather than any conjecture, before continuing on :"Miners don't validate the transactions ($100 nodes people can run at home do that)" First off: > "Bitcoin proves chain validity using a system called proof of work" Almost, but proof of work doesn't prove anything other than work. The chain validity is proven by the global network of low-cost nodes that check the chain (including the claimed proof of work) against the rules of bitcoin, defined by the individual node itself. If a miner mines a block of transactions in a way that doesn't conform to bitcoin as defined by my node, those transactions didn't happen (according to me). If someone makes a code change that I believe is detrimental enough to bitcoin that I'm willing to take a stand, then I won't apply the change to my node. Assuming I'm correct in my opinion, other bitcoiners will likely do the same and ultimately the network will split into two separate networks of nodes/miners, the best of which will ultimately win. This was seen in the "block-size wars" (were you on the side of the big-blockers?), which showed that the miners can mine according to which ever rules they like, but their work will be ignored by people who think those rules make bitcoin weaker/worse and the work will ultimately be wasted if those people were correct. > "To be fair, it is true that individual nodes can validate whether or not a proposed chain is completely incorrect, but so heckin what" So you agree to certain point, but not that the nodes have any power in defining what bitcoin is. Does my explanation above, including the outcome of the "block-size wars" change that belief in any way? > "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." I agree, but will qualify that the nodes on the network only trust the longest blockchain that confirms to the rules that the nodes' chosen code defines. If my node says the new longest chain is not bitcoin, then it's not bitcoin and I ignore it. > "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:" So I agree on the fundamental point of "the network outspends your attack". But I don't agree that this makes it inefficient and I don't see how it highlights issues in my explanation (could you elaborate?) To me the question of a system's efficiency is "does this system solve the problem while using the lowest amount of energy possible?". And so we first need to agree on what problem bitcoin is solving, before we can determine whether it's efficient or not. If you agree with what I've written in my other points above, then we can move on to that, but let's just get the facts about the blockchain straightened out and agreed on first.