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But does Bitcoin really have a floor related to the energy put into the mining? Since the energy cost is paid for by the miners, do other players in Bitcoin "r

by jamroom 13y ago

But does Bitcoin really have a floor related to the energy put into the mining? Since the energy cost is paid for by the miners, do other players in Bitcoin "respect" that floor? I don't see that - there's nothing keeping a Bitcoin from going all the way to zero - regardless of the energy consumed in it's production, and Krugman argues that gold (and the feds) have a bottom that is greater than zero. My understanding could be wrong, as my understanding of Bitcoin would definitely be at the "noob" level :)

sans-serif 13y ago
No, the floor is unrelated to the energy put into mining. The intrinsic value of Bitcoin is the ability to facilitate financial transactions. Brinks' entire CIT vehicle business is based upon just a subset of this function, and we can agree their value is not zero.
- kordless 13y ago
  Bitcoin is able to facilitate transactions because of the power put into the computers running the Bitcoin network. Mining Bitcoin provides the functionality for validating the block chain. So, power into the network provides the value of security.
  - dcc1 13y ago
    Newer mining equipment doesnt use as much electricity. Power is a variable but not an important one.
    - kordless 13y ago
      Regardless, power is used to run the equipment. There's a correlation here.
      - dcc1 13y ago
        Our whole economy relies on energy, which ultimately comes from the sun, theres a correlation, doesnt mean its important as you are trying to imply
  - gnaritas 13y ago
    Bitcoin happens to currently use power that way, other coins don't; mining is not the only way to facilitate transactions and facilitating transactions is where the value is, regardless of the method used to do it. Power is but one of several options so the value can't be there.
- mcguire 13y ago
  So, bitcoin's ability to store value is due to its ability to be a medium of exchange?
chipsy 13y ago
I think Bitcoin does have a soft floor because that cost would form the natural price target for a miner trying to trade, but the cost is avoidable by switching to proof of stake as done in PeerCoin and Nxt. The crypto problems solved in Bitcoin don't have the intrinsic utility of a precious metal; you could make a better argument for something like PrimeCoin, which attacks a major computation problem, having this kind of utility. So as I see it Bitcoin is already obsolete; there are new coins that achieve the transaction capabilities for cheaper - they can be used in more potential applications, thus they're more interesting speculative instruments. The specific benefit of proof of work mining comes in insuring more people have a chance to enter during initial distribution, but it still massively favors the early entrants and especially the people who have the hardware environment to mine efficiently.
- dnautics 13y ago
  "The crypto problems solved in Bitcoin don't have the intrinsic utility of a precious metal." So gold was used extensively 2000-3000 years ago. Exactly what was its intrinsic utility then? Plating astronaut helmets and high-conductivity, corrosion-resistant electronics? The intrinsic utility of gold was that it was eminently verifable. It's got a characteristic ductility and it was a yellow metal. You could easily verify if it was 100%, 80% etc. In other words, to the ancients, the intrinsic utility of gold was "its trust model". Sound familiar?
  - aes 13y ago
    Jewelry.
    - dnautics 13y ago
      that's not in any way "intrinsic" value.
      - thaumasiotes 13y ago
        Yes it is. The intrinsic value of food is that you can eat it; the intrinsic value of art objects is that you like them. All "intrinsic" value refers to is the use you can make of something without exchanging it for something else. If you were the only person in the world, and you appreciated the appearance of gold, than gold would be intrinsically valuable to you.

by jamroom 13y ago

sans-serif 13y ago

No, the floor is unrelated to the energy put into mining. The intrinsic value of Bitcoin is the ability to facilitate financial transactions. Brinks' entire CIT vehicle business is based upon just a subset of this function, and we can agree their value is not zero.

kordless 13y ago
Bitcoin is able to facilitate transactions because of the power put into the computers running the Bitcoin network. Mining Bitcoin provides the functionality for validating the block chain. So, power into the network provides the value of security.
- dcc1 13y ago
  Newer mining equipment doesnt use as much electricity. Power is a variable but not an important one.
  - kordless 13y ago
    Regardless, power is used to run the equipment. There's a correlation here.
    - dcc1 13y ago
      Our whole economy relies on energy, which ultimately comes from the sun, theres a correlation, doesnt mean its important as you are trying to imply
- gnaritas 13y ago
  Bitcoin happens to currently use power that way, other coins don't; mining is not the only way to facilitate transactions and facilitating transactions is where the value is, regardless of the method used to do it. Power is but one of several options so the value can't be there.
mcguire 13y ago
So, bitcoin's ability to store value is due to its ability to be a medium of exchange?

chipsy 13y ago

I think Bitcoin does have a soft floor because that cost would form the natural price target for a miner trying to trade, but the cost is avoidable by switching to proof of stake as done in PeerCoin and Nxt. The crypto problems solved in Bitcoin don't have the intrinsic utility of a precious metal; you could make a better argument for something like PrimeCoin, which attacks a major computation problem, having this kind of utility. So as I see it Bitcoin is already obsolete; there are new coins that achieve the transaction capabilities for cheaper - they can be used in more potential applications, thus they're more interesting speculative instruments. The specific benefit of proof of work mining comes in insuring more people have a chance to enter during initial distribution, but it still massively favors the early entrants and especially the people who have the hardware environment to mine efficiently.

dnautics 13y ago
"The crypto problems solved in Bitcoin don't have the intrinsic utility of a precious metal." So gold was used extensively 2000-3000 years ago. Exactly what was its intrinsic utility then? Plating astronaut helmets and high-conductivity, corrosion-resistant electronics? The intrinsic utility of gold was that it was eminently verifable. It's got a characteristic ductility and it was a yellow metal. You could easily verify if it was 100%, 80% etc. In other words, to the ancients, the intrinsic utility of gold was "its trust model". Sound familiar?
- aes 13y ago
  Jewelry.
  - dnautics 13y ago
    that's not in any way "intrinsic" value.
    - thaumasiotes 13y ago
      Yes it is. The intrinsic value of food is that you can eat it; the intrinsic value of art objects is that you like them. All "intrinsic" value refers to is the use you can make of something without exchanging it for something else. If you were the only person in the world, and you appreciated the appearance of gold, than gold would be intrinsically valuable to you.