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Krugman obviously don't know what he is talking about. The resources he is talking about are used to process the transactions between bitcoin owners. The mining

by lucasrp 13y ago

Krugman obviously don't know what he is talking about. The resources he is talking about are used to process the transactions between bitcoin owners. The mining is just a side effect. How did a nobel prize winner made a so basic mistake on a topic that has been covered before by him so many times? Bet one Btc that he did that on purpose.

bbbhn 13y ago
Krugman is an arrogant ass. He makes sweeping generalizations about topics he knows little to nothing about all the time.
slg 13y ago
In theory, yes you are correct. But you can't tell me all the computer resources that are spent on mining are required to process transactions. There are a whole lot of wasted cycles, electricity, and other resources.
- teraflop 13y ago
  The resources are required to process transactions securely in a distributed network. You could do the same thing much more efficiently by putting all your trust in a central authority; it's called a bank. But that's not solving the same problem.
  - slg 13y ago
    Ok, let me rephrase my prior point. If I have my PC mining and then disconnect it, does the Bitcoin network suffer in any noticeable way? If there is no noticeable benefit from my single PC then the resources being used by that PC aren't contributing to anything of value. Yes, resources are required, but the amount of resources used far and away exceeds the amount of resources required.
    - bcoates 13y ago
      > If I have my PC mining and then disconnect it, does the Bitcoin network suffer in any noticeable way? Yes, there's a computational power threshold to perform certain attacks against the network, and removing your node marginally decreases that threshold. Is it necessary? That depends on your priorities and your threat model.
    - smosher 13y ago
      There is a correspondence between the output and the resources consumed. If your output is negligible, then your resource usage was proportionally negligible to the end of providing the network with monetary units. Your argument neatly cancels out your conclusion.
    - emiliobumachar 13y ago
      If you stop paying taxes in a typically sized country, the country's finances do not suffer in a noticeable way, either. The network is made of the nodes.
stfu 13y ago
Whatever Kurgman says, it is good to keep in mind that he is an economist turned partisan-politics hack. Whatever he looks at, he looks at it from his lens of ideological reasoning. His ideology clearly aligns with the status quo of economic policy, promoting quantitative easing and keeping up the artificial smokescreen of the superiority of the US dollar. Therefore any competing ideas (e.g. gold, bitcoin) need to be disregarded, especially as economists by now have realized the importance of trust and its cognitive impact on markets.
- penny500 13y ago
  Krugman isn't being a political partisan hack here. Every mainstream economist from the Republican and Democratic administrations agree that a currency backed similarly to gold (as opposed to a central bank) is not a good idea.
  - think33 13y ago
    Prove it. Also, using the word "mainstream" is equivocation, you'll just say anyone who doesn't agree with this position isn't "mainstream". Further, in support of your claim that he's not being partisan, you name a partisan spectrum of "economists". Both democrats and republicans are partisans.
  - smokeyj 13y ago
    Central planners like central banking? Get out.
    - penny500 13y ago
      Mainstream economists aren't central planners. I don't mean just economists from both administrations. I meant mainstream economists from every school on the US News and beyond.
      - bcoates 13y ago
        But Krugman isn't complaining about Bitcoin's monetary policy here; he's complaining about the operation of the network itself. It's a pretty weak argument; he's claiming that the network costs too much without doing any kind of serious cost-benefit analysis, just an inapt comparison to gold coins.
think33 13y ago
In his defense, it was Krugman who identified in 2003, that we really needed to have a housing bubble, and advocated that we create one, because it would stimulate the economy. And he was right- it did! Until it popped. At the end of the day, Krugman is more a spokesperson for liberal politics than an economist. The liberals want to believe that unlimited spending is not bad, and so they put forth this narrative that it is actually good. They look to Keynes for support, but have to be very selective when they do. Bitcoin is a currency that is not inflationary. Since unlimited spending is enabled with inflation, they see it as a threat. What's kinda surprising, and amusing, is just how vocal and vociferous the objections to bitcoin have become in the last couple weeks. This is not because economists recognize it will be a failure- after all, if it were to fail, they could just let it fail, no need to comment on it. All of these stories, including this one, are indicators that the establishment economists feel threatened by bitcoin. The reason is one they will never mention publicly - they can't control bitcoin, and they can't stop its adoption, short of draconian measures, and so it threatens their monetary regime. Ironically if it wasn't for the mismanagement of the dollar, there wouldn't be much need for bitcoin anyway. PS - Whenever you see someone pointing out that bitcoin dropped %XX in one day, remember the dollar has already failed twice in US history (eg: gone to zero!) and even the latest incarnation is down %98!
- fennecfoxen 13y ago
  So you've gone and pointed out that the dollar is worth about 2% of what it used to be. Sure. A currency's real value is always moving relative to the underlying goods and services produced and exchanged in the economy - if it's not inflating, it's deflating, and it's never really standing still. The key is a low volatility in that interest rate itself. The dollar's historical average inflation rate, since such records were kept, has been 3.35%-ish, and that rate has gotten much less volatile over time (e.g. 1920 saw monthly rates as high as +23% and 1921 saw rates as low as -15.8%). But since about 1980, it's been pretty level all around. Bitcoin's value has experienced more volatility during the course of one day as the US dollar had in a whole year DURING THE GREAT CRASH OF 1929 AND LAUNCH OF THE GREAT DEPRESSION. Maybe some day Bitcoin will come to be the same bastion of stability that the US dollar has been and more. That day is not today. -- Postscript. If Bitcoin is a currency, its rise in value is deflationary. Deflation can be kind of bad sometimes. If you think back to your high school history courses when they were talking about the days that "bimetallism" was a thing during the Panic of 1893, it was because ordinary peoples' gold-backed-dollar-denominated debts and mortgages were becoming more expensive to pay off. "You shall not crucify mankind upon a cross of gold!" -- TLDR: Price stability or STFU
msellout 13y ago
Not so obvious. The critique is also of the fact that the resources to process a bitcoin transaction are intensive. Yes, I know this is part of the elegance of bitcoin. Elegance by one measure is cumbersome by another.
bradleyland 13y ago
Can you explain this in more detail for those of us who don't fully understand how bitcoins come in to existence, because it sounds like one of those things that violate some laws of thermodynamics, like the "hydrogen generator" that you strap to your car to increase fuel economy. I ask because I know I've heard about people building huge computers with lots of expensive video cards for the purpose of mining bitcoins. Why would so much computing power be required to perform a simple task like processing transactions? Isn't there additional work necessitated by the intentional complexity of the mechanics of bitcoin mining? I don't know very much about how bitcoins are mined, so I'm speaking from ignorance here, but I'm hoping you can see why the layman observer would need more of an explanation than "Because, of course!"
- think33 13y ago
  A bitcoin faq would give you more details, but the short answer is that bitcoin is built on cryptography. Every transaction in the system is stored in a chain of blocks. These blocks are created whenever someone discovers the answer to a very hard mathematical problem. When they do this, the new block is created, and that block contains all the transactions that were done since the last block was created. To make the next block, you have to have the previous block, so the entire chain of blocks can be authenticated, thus the entire history of transactions can be authenticated. As a reward for securing the system in this way, that is, providing a secure distributed transaction history, the miners are rewarded with some bitcoins whenever they discover a new answer and create a new block. Thus they are providing the security of the system and as a reward are given bitcoins. To keep the rate of new blocks contstant, the difficulty of the mathematical problem is adjusted up and down. Over time, the number of bitcoins you get for finding a new solution will diminish to zero. To keep miners finding new answers, even after the reward in BTC hits zero (in the year 2140) the system has transaction fees. These are an incentive to keep finding blocks, and the person who finds the next block gets the fees for the transactions that go into that block. Since blocks are discovered once every 10 minutes, you'd get 10 minutes worth of fees for the whole system-- which could be quite a bit in the future.
- icebraining 13y ago
  The section on Wikipedia on Bitcoin mining is fairly informative: https://en.wikipedia.org/wiki/Bitcoin_mining#Bitcoin_mining https://en.wikipedia.org/wiki/Bitcoin_mining#Bitcoin_mining In short: no, it doesn't really need so much computing power; miners upgrade to improve their relative chances of finding the solution first (which gives them the newly minted coins), and the software automatically increases the difficulty of the process in response. The result is an arms race among miners.

by lucasrp 13y ago

bbbhn 13y ago

Krugman is an arrogant ass. He makes sweeping generalizations about topics he knows little to nothing about all the time.

slg 13y ago

In theory, yes you are correct. But you can't tell me all the computer resources that are spent on mining are required to process transactions. There are a whole lot of wasted cycles, electricity, and other resources.

teraflop 13y ago
The resources are required to process transactions securely in a distributed network. You could do the same thing much more efficiently by putting all your trust in a central authority; it's called a bank. But that's not solving the same problem.
- slg 13y ago
  Ok, let me rephrase my prior point. If I have my PC mining and then disconnect it, does the Bitcoin network suffer in any noticeable way? If there is no noticeable benefit from my single PC then the resources being used by that PC aren't contributing to anything of value. Yes, resources are required, but the amount of resources used far and away exceeds the amount of resources required.
  - bcoates 13y ago
    > If I have my PC mining and then disconnect it, does the Bitcoin network suffer in any noticeable way? Yes, there's a computational power threshold to perform certain attacks against the network, and removing your node marginally decreases that threshold. Is it necessary? That depends on your priorities and your threat model.
  - smosher 13y ago
    There is a correspondence between the output and the resources consumed. If your output is negligible, then your resource usage was proportionally negligible to the end of providing the network with monetary units. Your argument neatly cancels out your conclusion.
  - emiliobumachar 13y ago
    If you stop paying taxes in a typically sized country, the country's finances do not suffer in a noticeable way, either. The network is made of the nodes.

stfu 13y ago

Whatever Kurgman says, it is good to keep in mind that he is an economist turned partisan-politics hack. Whatever he looks at, he looks at it from his lens of ideological reasoning. His ideology clearly aligns with the status quo of economic policy, promoting quantitative easing and keeping up the artificial smokescreen of the superiority of the US dollar. Therefore any competing ideas (e.g. gold, bitcoin) need to be disregarded, especially as economists by now have realized the importance of trust and its cognitive impact on markets.

penny500 13y ago
Krugman isn't being a political partisan hack here. Every mainstream economist from the Republican and Democratic administrations agree that a currency backed similarly to gold (as opposed to a central bank) is not a good idea.
- think33 13y ago
  Prove it. Also, using the word "mainstream" is equivocation, you'll just say anyone who doesn't agree with this position isn't "mainstream". Further, in support of your claim that he's not being partisan, you name a partisan spectrum of "economists". Both democrats and republicans are partisans.
- smokeyj 13y ago
  Central planners like central banking? Get out.
  - penny500 13y ago
    Mainstream economists aren't central planners. I don't mean just economists from both administrations. I meant mainstream economists from every school on the US News and beyond.
    - bcoates 13y ago
      But Krugman isn't complaining about Bitcoin's monetary policy here; he's complaining about the operation of the network itself. It's a pretty weak argument; he's claiming that the network costs too much without doing any kind of serious cost-benefit analysis, just an inapt comparison to gold coins.

think33 13y ago

In his defense, it was Krugman who identified in 2003, that we really needed to have a housing bubble, and advocated that we create one, because it would stimulate the economy. And he was right- it did! Until it popped. At the end of the day, Krugman is more a spokesperson for liberal politics than an economist. The liberals want to believe that unlimited spending is not bad, and so they put forth this narrative that it is actually good. They look to Keynes for support, but have to be very selective when they do. Bitcoin is a currency that is not inflationary. Since unlimited spending is enabled with inflation, they see it as a threat. What's kinda surprising, and amusing, is just how vocal and vociferous the objections to bitcoin have become in the last couple weeks. This is not because economists recognize it will be a failure- after all, if it were to fail, they could just let it fail, no need to comment on it. All of these stories, including this one, are indicators that the establishment economists feel threatened by bitcoin. The reason is one they will never mention publicly - they can't control bitcoin, and they can't stop its adoption, short of draconian measures, and so it threatens their monetary regime. Ironically if it wasn't for the mismanagement of the dollar, there wouldn't be much need for bitcoin anyway. PS - Whenever you see someone pointing out that bitcoin dropped %XX in one day, remember the dollar has already failed twice in US history (eg: gone to zero!) and even the latest incarnation is down %98!

fennecfoxen 13y ago
So you've gone and pointed out that the dollar is worth about 2% of what it used to be. Sure. A currency's real value is always moving relative to the underlying goods and services produced and exchanged in the economy - if it's not inflating, it's deflating, and it's never really standing still. The key is a low volatility in that interest rate itself. The dollar's historical average inflation rate, since such records were kept, has been 3.35%-ish, and that rate has gotten much less volatile over time (e.g. 1920 saw monthly rates as high as +23% and 1921 saw rates as low as -15.8%). But since about 1980, it's been pretty level all around. Bitcoin's value has experienced more volatility during the course of one day as the US dollar had in a whole year DURING THE GREAT CRASH OF 1929 AND LAUNCH OF THE GREAT DEPRESSION. Maybe some day Bitcoin will come to be the same bastion of stability that the US dollar has been and more. That day is not today. -- Postscript. If Bitcoin is a currency, its rise in value is deflationary. Deflation can be kind of bad sometimes. If you think back to your high school history courses when they were talking about the days that "bimetallism" was a thing during the Panic of 1893, it was because ordinary peoples' gold-backed-dollar-denominated debts and mortgages were becoming more expensive to pay off. "You shall not crucify mankind upon a cross of gold!" -- TLDR: Price stability or STFU

msellout 13y ago

Not so obvious. The critique is also of the fact that the resources to process a bitcoin transaction are intensive. Yes, I know this is part of the elegance of bitcoin. Elegance by one measure is cumbersome by another.

bradleyland 13y ago

Can you explain this in more detail for those of us who don't fully understand how bitcoins come in to existence, because it sounds like one of those things that violate some laws of thermodynamics, like the "hydrogen generator" that you strap to your car to increase fuel economy. I ask because I know I've heard about people building huge computers with lots of expensive video cards for the purpose of mining bitcoins. Why would so much computing power be required to perform a simple task like processing transactions? Isn't there additional work necessitated by the intentional complexity of the mechanics of bitcoin mining? I don't know very much about how bitcoins are mined, so I'm speaking from ignorance here, but I'm hoping you can see why the layman observer would need more of an explanation than "Because, of course!"

think33 13y ago
A bitcoin faq would give you more details, but the short answer is that bitcoin is built on cryptography. Every transaction in the system is stored in a chain of blocks. These blocks are created whenever someone discovers the answer to a very hard mathematical problem. When they do this, the new block is created, and that block contains all the transactions that were done since the last block was created. To make the next block, you have to have the previous block, so the entire chain of blocks can be authenticated, thus the entire history of transactions can be authenticated. As a reward for securing the system in this way, that is, providing a secure distributed transaction history, the miners are rewarded with some bitcoins whenever they discover a new answer and create a new block. Thus they are providing the security of the system and as a reward are given bitcoins. To keep the rate of new blocks contstant, the difficulty of the mathematical problem is adjusted up and down. Over time, the number of bitcoins you get for finding a new solution will diminish to zero. To keep miners finding new answers, even after the reward in BTC hits zero (in the year 2140) the system has transaction fees. These are an incentive to keep finding blocks, and the person who finds the next block gets the fees for the transactions that go into that block. Since blocks are discovered once every 10 minutes, you'd get 10 minutes worth of fees for the whole system-- which could be quite a bit in the future.
icebraining 13y ago
The section on Wikipedia on Bitcoin mining is fairly informative: https://en.wikipedia.org/wiki/Bitcoin_mining#Bitcoin_mining https://en.wikipedia.org/wiki/Bitcoin_mining#Bitcoin_mining In short: no, it doesn't really need so much computing power; miners upgrade to improve their relative chances of finding the solution first (which gives them the newly minted coins), and the software automatically increases the difficulty of the process in response. The result is an arms race among miners.