7 ms·

More inefficient than producing and maintaining paper currency? Than mining actual gold? They really are just throwing tons of electricity and hardware at "not

by maxmcd 12y ago

More inefficient than producing and maintaining paper currency? Than mining actual gold? They really are just throwing tons of electricity and hardware at "nothing", but if this kind of activity helps replace the current inefficient systems of currency, then I'm all for it.

tveita 12y ago
Yes? Going either by volume or number of transaction, Bitcoin transactions are currently ludicrously expensive, though this is somewhat hidden by subsidizing the miners. I don't know why you mention paper currencies and gold when most money today is transferred electronically, in a far more efficient way than Bitcoins.
- jacquesm 12y ago
  I'm not sure if by the time you factor in all the costs of banking (including bail-outs) bitcoin is still ludicrously expensive. And one block will include a whole slew of transactions, that's fixed overhead with economies of scale built in.
  - danielweber 12y ago
    Purely in an accounting sense, the bailouts are not a negative, since the government made money on Wall Street bailouts. (If you wish to say they encourage unhealthy behavior, that's another argument.)
  - bduerst 12y ago
    Quid Pro Quo: Bank bailouts had positive returns. Mt. Gox collapsing was a worse wealth loss than bank bail outs, by far.
    - baddox 12y ago
      > Bank bailouts had positive returns. Compared to what? You can't compare it to the results of not having done bailouts, so the comparison is largely a matter of economic prediction, and economic prediction is obviously very controversial. The only non-controversial part is that the bailouts were certainly very good for the banks receiving them.
      - dllthomas 12y ago
        In an accounting sense. The government received more money back then they put in - even, IIRC, adjusted for inflation. I agree that this is not actually a great metric, but then "bailouts" aren't actually a great example of the costs of dollars vs bitcoin - they mostly had to do with debt, and you could certainly still issue debt in a world run on bitcoin.
      - bduerst 12y ago
        Compared to adding to the transnational cost of USD, which is the context of this entire comment thread. The bail outs stabilized the currency in lieu of massive wealth loss (e.g. toxic debt), while not adding to transnational costs because the returns were positive. Most bitcoin evangelists fail to grasp the negative impact that volatility has on currencies, and instead think of bitcoins like assets, even hording them.
    - adventured 12y ago
      The bank bailouts had a huge negative return in real terms, just not in nominal terms. They required the devaluation of the dollar via Fed 'printing.' The Fed had to take trillions in nuked assets off the balance sheet of Bank of America, Citi, and others. The primary bailout was not the Treasury program TARP, but the Fed programs. That stole purchasing power from everyone that uses the US Dollar. That purchasing power will never be returned. Trillions in real wealth were destroyed, that is gone. Even if you supposed all assets returned to their previous value, the time cost, wrecked credit ratings, debt accumulation, etc. that was involved in that loss of wealth is still massive when it has to do with tens of trillions in total asset value. The collapse of Mt Gox isn't even a rounding error compared to the real wealth destroyed by the Fed in the last five years through dollar devaluation. It's equivalent to about ten hours, from one day, of QE the past year. Not to mention, any bitcoins lost in the collapse of Mt Gox, increases the value of all other bitcoins over time due to the reduction in supply. To be like the bank bailouts ala the Fed, Mt Gox would have had to create a lot of new bitcoins in the process of being destroyed.
  - VikingCoder 12y ago
    > economies of scale built in. You've chosen a particularly odd phrase here, since BitCoin mining was fundamentally designed to get computationally more expensive over time. So, no, an economy of THE OPPOSITE OF SCALING was built in.
    - dllthomas 12y ago
      The cost of mining blocks is designed to remain roughly consistent as technology advances. The "economy of scale" comes in when you use one block (which costs about the same regardless) to secure more transactions. As an aside, "economy of THE OPPOSITE OF SCALING" is probably better termed "diseconomy of scale" (http://en.wikipedia.org/wiki/Diseconomies_of_scale http://en.wikipedia.org/wiki/Diseconomies_of_scale).
- dllthomas 12y ago
  "I don't know why you mention paper currencies and gold when most money today is transferred electronically, in a far more efficient way than Bitcoins." Revenues of Brink's alone, sayeth Google, are roughly $4 billion. My understanding is that a substantive portion of that represents cost of transporting cash and gold, and of course they are only one of several such companies.
UweSchmidt 12y ago
Bitcoin could become a means for payment and other things, but can not possibly replace the current systems of currency, since those are essential political instruments. Consider the impact of minimal fluctuations of exchange and interest rates. No one could just say "fuck it" and buy into a completely unpredictable new system. Governments would give up control, and random people who happened to have mined Bitcoin until that point would hold the world's wealth? I don't think so.
- fennecfoxen 12y ago
  Governments have given up control before... small governments, where after running their existing currencies into the ground with hyperinflation they adopted the US dollar. Currencies can only be political instruments up until a point -- and then people get tired of it and start looking for other mediums of exchange, units of account, and stores of value. Bitcoin is theoretically something people could turn to for one or more of those, though it would have to be a pretty bad situation to make Bitcoin's volatility look good. (Disclaimer. The overall likelihood of this happening at a large scale is not something endorsed by this post.)
bunderbunder 12y ago
The vast majority of fiat currency in circulation isn't in the form of banknotes or coins. (Gold isn't really a currency anymore, so let's ignore that one.) It exists electronically. In a fractional-reserve system, it's also mostly created by its users, but that happens as a by-product of normal economic activity. And it takes a lot less computer work per economic transaction for a fractional-reserve system to create money than it does in a cryptocurrency.
- nmjohn 12y ago
  You are completely ignoring the issue. Just because a majority of money exists electronically doesn't mean a lot of money isn't spent on paper and metal versions. The United States alone spends tens of millions of dollars a year on producing pennies - beyond the face value of the pennies. So the entirety spent on mining bitcoin is not too far off from what one country spends just on minting pennies.
  - bduerst 12y ago
    It's interesting that you mention pennies because there's a push to have them eliminated. It's almost a cultural phenomenon that they still exist. http://en.wikipedia.org/wiki/Penny_debate_in_the_United_States http://en.wikipedia.org/wiki/Penny_debate_in_the_United_Stat...
  - bunderbunder 12y ago
    No, I'm trying to focus on the forest instead of the trees. It's true, pennies are a horrible waste. It costs almost $0.02 to make one, and nobody even likes them very much, but the mint still churns out billions of the things ever year. That should probably stop. But overall, coinage is a tiny fraction of the overall dollar economy. And Bitcoin isn't really comparable to coinage, anyway, since BTC is not a fast, convenient, anonymous, peer-to-peer mechanism for exchange that's appropriate for use in small transactions. Compared on that level, BTC seems sub-optimal long before we start worrying about details like energy efficiency of production. What BTC really compares to is a currency in general, such as the dollar. There BTC at least has a chance of comparing on a vaguely level playing field. And at that scale, pennies are insignificant.
angersock 12y ago
That's a pretty big if, sir or madam.

by maxmcd 12y ago

tveita 12y ago

Yes? Going either by volume or number of transaction, Bitcoin transactions are currently ludicrously expensive, though this is somewhat hidden by subsidizing the miners. I don't know why you mention paper currencies and gold when most money today is transferred electronically, in a far more efficient way than Bitcoins.

jacquesm 12y ago
I'm not sure if by the time you factor in all the costs of banking (including bail-outs) bitcoin is still ludicrously expensive. And one block will include a whole slew of transactions, that's fixed overhead with economies of scale built in.
- danielweber 12y ago
  Purely in an accounting sense, the bailouts are not a negative, since the government made money on Wall Street bailouts. (If you wish to say they encourage unhealthy behavior, that's another argument.)
- bduerst 12y ago
  Quid Pro Quo: Bank bailouts had positive returns. Mt. Gox collapsing was a worse wealth loss than bank bail outs, by far.
  - baddox 12y ago
    > Bank bailouts had positive returns. Compared to what? You can't compare it to the results of not having done bailouts, so the comparison is largely a matter of economic prediction, and economic prediction is obviously very controversial. The only non-controversial part is that the bailouts were certainly very good for the banks receiving them.
    - dllthomas 12y ago
      In an accounting sense. The government received more money back then they put in - even, IIRC, adjusted for inflation. I agree that this is not actually a great metric, but then "bailouts" aren't actually a great example of the costs of dollars vs bitcoin - they mostly had to do with debt, and you could certainly still issue debt in a world run on bitcoin.
    - bduerst 12y ago
      Compared to adding to the transnational cost of USD, which is the context of this entire comment thread. The bail outs stabilized the currency in lieu of massive wealth loss (e.g. toxic debt), while not adding to transnational costs because the returns were positive. Most bitcoin evangelists fail to grasp the negative impact that volatility has on currencies, and instead think of bitcoins like assets, even hording them.
  - adventured 12y ago
    The bank bailouts had a huge negative return in real terms, just not in nominal terms. They required the devaluation of the dollar via Fed 'printing.' The Fed had to take trillions in nuked assets off the balance sheet of Bank of America, Citi, and others. The primary bailout was not the Treasury program TARP, but the Fed programs. That stole purchasing power from everyone that uses the US Dollar. That purchasing power will never be returned. Trillions in real wealth were destroyed, that is gone. Even if you supposed all assets returned to their previous value, the time cost, wrecked credit ratings, debt accumulation, etc. that was involved in that loss of wealth is still massive when it has to do with tens of trillions in total asset value. The collapse of Mt Gox isn't even a rounding error compared to the real wealth destroyed by the Fed in the last five years through dollar devaluation. It's equivalent to about ten hours, from one day, of QE the past year. Not to mention, any bitcoins lost in the collapse of Mt Gox, increases the value of all other bitcoins over time due to the reduction in supply. To be like the bank bailouts ala the Fed, Mt Gox would have had to create a lot of new bitcoins in the process of being destroyed.
- VikingCoder 12y ago
  > economies of scale built in. You've chosen a particularly odd phrase here, since BitCoin mining was fundamentally designed to get computationally more expensive over time. So, no, an economy of THE OPPOSITE OF SCALING was built in.
  - dllthomas 12y ago
    The cost of mining blocks is designed to remain roughly consistent as technology advances. The "economy of scale" comes in when you use one block (which costs about the same regardless) to secure more transactions. As an aside, "economy of THE OPPOSITE OF SCALING" is probably better termed "diseconomy of scale" (http://en.wikipedia.org/wiki/Diseconomies_of_scale http://en.wikipedia.org/wiki/Diseconomies_of_scale).
dllthomas 12y ago
"I don't know why you mention paper currencies and gold when most money today is transferred electronically, in a far more efficient way than Bitcoins." Revenues of Brink's alone, sayeth Google, are roughly $4 billion. My understanding is that a substantive portion of that represents cost of transporting cash and gold, and of course they are only one of several such companies.

UweSchmidt 12y ago

Bitcoin could become a means for payment and other things, but can not possibly replace the current systems of currency, since those are essential political instruments. Consider the impact of minimal fluctuations of exchange and interest rates. No one could just say "fuck it" and buy into a completely unpredictable new system. Governments would give up control, and random people who happened to have mined Bitcoin until that point would hold the world's wealth? I don't think so.

fennecfoxen 12y ago
Governments have given up control before... small governments, where after running their existing currencies into the ground with hyperinflation they adopted the US dollar. Currencies can only be political instruments up until a point -- and then people get tired of it and start looking for other mediums of exchange, units of account, and stores of value. Bitcoin is theoretically something people could turn to for one or more of those, though it would have to be a pretty bad situation to make Bitcoin's volatility look good. (Disclaimer. The overall likelihood of this happening at a large scale is not something endorsed by this post.)

bunderbunder 12y ago

The vast majority of fiat currency in circulation isn't in the form of banknotes or coins. (Gold isn't really a currency anymore, so let's ignore that one.) It exists electronically. In a fractional-reserve system, it's also mostly created by its users, but that happens as a by-product of normal economic activity. And it takes a lot less computer work per economic transaction for a fractional-reserve system to create money than it does in a cryptocurrency.

nmjohn 12y ago
You are completely ignoring the issue. Just because a majority of money exists electronically doesn't mean a lot of money isn't spent on paper and metal versions. The United States alone spends tens of millions of dollars a year on producing pennies - beyond the face value of the pennies. So the entirety spent on mining bitcoin is not too far off from what one country spends just on minting pennies.
- bduerst 12y ago
  It's interesting that you mention pennies because there's a push to have them eliminated. It's almost a cultural phenomenon that they still exist. http://en.wikipedia.org/wiki/Penny_debate_in_the_United_States http://en.wikipedia.org/wiki/Penny_debate_in_the_United_Stat...
- bunderbunder 12y ago
  No, I'm trying to focus on the forest instead of the trees. It's true, pennies are a horrible waste. It costs almost $0.02 to make one, and nobody even likes them very much, but the mint still churns out billions of the things ever year. That should probably stop. But overall, coinage is a tiny fraction of the overall dollar economy. And Bitcoin isn't really comparable to coinage, anyway, since BTC is not a fast, convenient, anonymous, peer-to-peer mechanism for exchange that's appropriate for use in small transactions. Compared on that level, BTC seems sub-optimal long before we start worrying about details like energy efficiency of production. What BTC really compares to is a currency in general, such as the dollar. There BTC at least has a chance of comparing on a vaguely level playing field. And at that scale, pennies are insignificant.

angersock 12y ago

That's a pretty big if, sir or madam.