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Yes, bitcoin mining would be worse. Provably worse. As computers get better, traditional applications, like databases, perform better and you can either serve

by TheDong 12y ago

Yes, bitcoin mining would be worse. Provably worse. As computers get better, traditional applications, like databases, perform better and you can either serve more customers, use cheaper (and often more efficient hardware), or do nothing and use your outdated hardware. With bitcoin, your enemy is not the performance of the raw work you are doing (you can hash better), but the fact that everyone else also has these increases. Because of that, the limiting factor is not performance, but cost, and so over time the average cost of the bitcoin network will not go down like the cost of centralized systems do. Let's do a thought experiment: Let's imagine that instantly all computers get 100 times faster but it costs 10 times the energy to run these faster machines (not actually that unrealistic) and the cost becomes 10 times cheaper. Traditional centralized banks can simply use a 10th of their existing hardware to have no energy-cost increase but a 10 times increase in customers they can serve. Sure, it's a bureaucracy, so it'll roll out slowly, but they're saving money too so maybe a little faster. Bitcoin, everyone will simply buy 10 times as much hardware since it's cheaper and they want to get a bigger bit of the pie (mining reward) before everyone else manages to buy all their hardware. You now have an equilibrium in terms of equipment cost reached again, but suddenly the hash-rate is 1000 times more and the energy consumption is 100 times more. The above might sound a little too theoretical, but if you look at the increase in hash rate and estimates for power usage of cpus, then gpus, and then asics, you'll see that in general power consumption for bitcoin constantly increases. You're arguing that the existing cost of banks / the existing system is high because it's legacy. Your argument doesn't say "and it's constantly, and provably, going to waste more energy as hardware gets more cost-efficient". Even if you want to claim that banks are currently less efficient (which I doubt they are), I hope the above convinces you that bitcoin over time will constantly use more energy thus resulting in an obviously more wasteful result, while banks and other centralized systems can take advantage of improvements and thus become more cost and power efficient over time.

zamalek 12y ago
> Yes, bitcoin mining would be worse. Provably worse. ... and exponentially worse as time goes on (by design).
- Daviey 12y ago
  Computation complexity and power consumption do not necessary correlate with emerging technology. If anything, power consumption could decrease.
  - deleted 12y ago
    [deleted]
  - deleted 12y ago
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- moe 12y ago
  ... and exponentially worse as time goes on (by design). Only for people who don't understand the design. Google "bitcoin difficulty".
  - deleted 12y ago
    [deleted]
  - zamalek 12y ago
    I didn't mention "difficulty." I should never have commented on a Bitcoin post. Discussions about Bitcoin always land up exactly the same way. It's impossible to have sensible discussion about it. > Only for people who don't understand the design. Personal attacks all the way because your pet golden hammer was attacked. Always the same result.
    - moe 12y ago
      Personal attacks all the way because your pet golden hammer was attacked Neither is Bitcoin my pet golden hammer (I don't even know that metaphor), nor is my statement a personal attack. It's merely pointing out that your claim is so fundamentally wrong that you can't have a good understanding of the design. If you don't want to learn the protocol then maybe think about it this way: Energy consumption is not an exponential factor in bitcoin simply because miners have to pay for their energy, too. And the number of miners does not grow exponentially.
krrrh 12y ago
This is an excellent analysis, but I would end it with the statement: "Bitcoin will constantly and provably use more energy until it doesn't." The mining infrastructure has been supported by seniorage, or the printing and distribution of new bitcoins to miners at a very high double-digit inflationary rate. Bitcoin adherents talk about the currency as if it has already entered the "paradise" state of zero money growth. It hasn't, and as it approaches that state and miners stop earning enough to pay for their electricity, the hashrate will either fall precipitously or transaction fees will have to be dramatically increased.
brazzy 12y ago
Computational costs of traditional banking goes down in theory (in practice, they seem to easily overcompensate for that with increased complexity), but other costs (payroll, physical infrastructure, security thereof, etc.) do not. Unless you're proposing that the future of money is 100% digital, with minimal physical infrastructure. Admittedly, that is not entirely unrealistic, though I doubt things will go quite that far anytime soon. Your thought experiment misses an important point: the cost of energy. AFAIK that's already dominating hardware costs for miners. That means: since the cost of bitcoin mining will tend to scale up (or down) linearly with the total value of bitcoin, so will energy usage (barring changes in energy price). It will not keep going up when the bitcoin value has reached a plateau (for whatever reason).
- XorNot 12y ago
  Physical infrastructure costs have been declining for decades, with banks actively trying to push them down by prioritizing digital over physical services. Physical security also scales well. The volume of secure space you have increases to the 3rd power with only an approximately 2nd order increase in the costs of creating it (your basic area/space tradeoff working for you in this case). The argument that payroll doesn't scale is also absurd: who are all these Bitcoin entrepreneurs trying to run exchanges, if not payrolled staff? Finally and most importantly: the difficulty factor of Bitcoin does not reduce the computational power required to mine it. It is the exact mechanism of the provably increasing cost: the difficulty goes up, so more and more power is required to preserve the status quo. Any changes in energy cost are thus ignorable, since in a Bitcoin-only world they're constantly eaten up by changes in difficulty factor, whereas in the non-Bitcoin world they become real-wealth for everyone.
  - moe 12y ago
    Finally and most importantly [...] the difficulty goes up, so more and more power is required to preserve the status quo. Except... The difficulty also goes down. But don't let facts get in the way of your flaming argument...
    - 12y ago
moe 12y ago
Yes, bitcoin mining would be worse. Provably worse. Your premise is wrong. Bitcoin has a mechanism called "difficulty". It's very much at the core of the protocol, google it and ponder how it affects your argument. Furthermore, the current economics of mining have a fixed expiration date set to 2140, that's roughly when the last coin would be mined. The protocol will need to be changed fundamentally long before that date. Since we don't know what that change will look like, we also don't know how it will affect the network's power consumption. Any "thought experiments" that naively extrapolate from the current power consumption are as pointless as trying to guess your car's mileage based on its fuel consumption during ignition. The protocol is still in the bootstrap phase. If it prevails then the bitcoin in 10 years will be very different from the bitcoin of today.
celticninja 12y ago
>power usage of cpus, then gpus, and then asics, you'll see that in general power consumption for bitcoin constantly increases. That does not tell the whole story though, power usage per gigahash is a more accurate measure, because the higher the GH the more secure the network. From CPU, to GPU to ASIC the power use per gighash has fallen significantly. If you really want to compare it to the banking sector then you need to include the full and real costs of that banking system, power alone is not the only cost. One bail out, as seen in the last few years, dwarfs the power cost of bitcoin. That is without considering the knock on effects of the banking meltdown on the overall economy. And bitcoin can take advantage of improvements to reduce power consumption of ASICs (as there is no next step tech that will provide an increase in gigahash as ASICs did, so now it goes to refining the power usage. Additionally larger farms are looking at renewable alternatives and uses for the excess heat being produced. It is still a very young sector so there is a lot of working out to do, but it is being done.
- brudgers 12y ago
  The bailout was done with fiat currency. There is no fiat energy.
  - celticninja 12y ago
    This is a pretty dumb comment. The costs associated with bitcoin come down to power and hosting costs, the costs of banking can be huge, difficult to verify and can lead to consumers losing money that banks hold. No one loses bitcoins when a bitcoin miner goes broke or shuts down.
    - deleted 12y ago
      [deleted]
    - lmm 12y ago
      Banks don't fail because of mysterious hidden costs that they didn't know existed. They fail because they get the accounting wrong and/or because people defraud them - i.e., the exact same reasons that lead to mtgox's failure. Difference is, bank deposits are FDIC protected.
MildlySerious 12y ago
You're assuming that we have arrived at the final solution, which is not the case. The proof of work could change as required, even if it's gradually over 10 years to not weaken the network by making current, specialized hardware useless overnight, there is nothing that would stop such a move. If the power consumption became a serious problem, miners would probably consent to modifications to the proof of work algorithm, which is all it takes. And changing over a course of 10 years (there's an incentive to constantly upgrade hardware anyway) is probably still way faster than the banking system would change on a global scale if it was running into a problem. While this is a different story because hardware and the PoW algorithm is involved, Bitcoin has a story of "breaking" changes. There will be more with the increase of the block size, etc. So I doubt this would be aniticipated way before it made it's way into the protocol, so the affected parties could prepare as well.
tlrobinson 12y ago
but suddenly the hash-rate is 1000 times more and the energy consumption is 100 times more. Not really. Eventually electricity will dominate mining costs, not hardware, and people will only invest in more efficient hardware, not cheaper hardware. The total cost of the electricity used in mining will never exceed the total value of the block rewards plus transaction fees, since miners would rather stop mining than mine unprofitably. Whether the total electricity used increases or decreases over time depends on whether the increase in price of bitcoins outpaces the block reward halving every 4 years, or transaction fees become a significant source of miner income (https://en.bitcoin.it/wiki/Funding_network_security https://en.bitcoin.it/wiki/Funding_network_security). A single bitcoin would need to be worth $1 million in 50 years to keep pace, for example. But I think it's more likely we'll transition to better (cheaper, more secure) mining system before then anyway, which is entirely possible to do without having to redistribute bitcoins (it would essentially be a fork that the "economic majority" agrees with: https://en.bitcoin.it/wiki/Economic_majority https://en.bitcoin.it/wiki/Economic_majority)
- TheDong 12y ago
  This is not completely true. There's one other reason to mine than the reward: because you recognize the risk of a hostile entity controlling too much mining power. If you have 300 BTC and you suspect someone else is almost able to mount a 51% attack and thus devalue all your BTC, it makes logical sense for you to put more money into mining, even more than you can gain from the combination of block rewards and electricity, to secure your existing investment. As you do that, others will be forced to as well to avoid you having too much power and to protect their BTC and so on....
deleted 12y ago
[deleted]
CyberDildonics 12y ago
Banking is 8% of the entire GDP of the USA. 8% and it can (almost) all be automated. Centralized systems could be more efficient if their incentives were in line with the incentives of the people they serve. But their incentives are not and they are not fair. You are theorizing about something based on how it feels without really looking into the reality of it. Bitcoin mining is so many orders of magnitude smaller than even fragments of current financial infrastructure it would laughable to talk about, even if electricity usage was any sort of a major issue, which it is not.
trevelyan 12y ago
Look, it's sexy to complain about energy costs, but you are really underestimating the massive inefficiencies involved in the legacy payment system. Because even if bitcoin is less energy efficient in some technical sense, there are enormous efficiency gains it provides by inverting the structure of risk in the payments industry. One of the first things you realize when you try to setup payment processing is that middlemen would not actually exist in the payment processing industry if it was an efficient market. But these companies do exist because the entire industry structure has developed to pass risk from credit card companies to intermediary businesses whose sole function is basically to manage risk and enforce policy compliance. It is a bit like if Google didn't give email addresses to individuals because it couldn't be bothered policing spam, so you got your email through a third party. Anyway, even if we ignore the deadweight losses imposed on the economic system by all of the businesses which cannot get credit accounts (merchant accounts), the costs of supporting this credit-centric system are enormous. PCI compliance costs alone are staggering, and serve no purpose except to lower the risk held by credit card companies. And even with this, the inefficiency of central risk management is so great that VISA doesn't even bother to investigate fraudulent purchases of less than 500 USD. And why should they when costs can simply be pushed back to merchants and turned into a profit center by issuing chargebacks. And this is where bitcoin gets interesting -- by inverting the risk structure and letting anyone accept payments without the need for a payment processor to issue credit, Bitcoin eliminates entire horizontal swathes of the payments industry, while placing competitive pressure on legacy payment providers. If the technology scales to the point you are concerned about, it will decimate the number of people required to be employed managing risk in everyday transactions. Put more succinctly, you need to shift from thinking about the energy costs of bitcoin as a wasted ongoing expense and start considering them the price of eliminating an otherwise intractable trust problem in finance. It is like paying for a standing firefighting force. Expensive in one way, but a lot cheaper than the alternative.

by TheDong 12y ago

zamalek 12y ago

> Yes, bitcoin mining would be worse. Provably worse. ... and exponentially worse as time goes on (by design).

Daviey 12y ago
Computation complexity and power consumption do not necessary correlate with emerging technology. If anything, power consumption could decrease.
- deleted 12y ago
  [deleted]
- deleted 12y ago
  [deleted]
moe 12y ago
... and exponentially worse as time goes on (by design). Only for people who don't understand the design. Google "bitcoin difficulty".
- deleted 12y ago
  [deleted]
- zamalek 12y ago
  I didn't mention "difficulty." I should never have commented on a Bitcoin post. Discussions about Bitcoin always land up exactly the same way. It's impossible to have sensible discussion about it. > Only for people who don't understand the design. Personal attacks all the way because your pet golden hammer was attacked. Always the same result.
  - moe 12y ago
    Personal attacks all the way because your pet golden hammer was attacked Neither is Bitcoin my pet golden hammer (I don't even know that metaphor), nor is my statement a personal attack. It's merely pointing out that your claim is so fundamentally wrong that you can't have a good understanding of the design. If you don't want to learn the protocol then maybe think about it this way: Energy consumption is not an exponential factor in bitcoin simply because miners have to pay for their energy, too. And the number of miners does not grow exponentially.

krrrh 12y ago

This is an excellent analysis, but I would end it with the statement: "Bitcoin will constantly and provably use more energy until it doesn't." The mining infrastructure has been supported by seniorage, or the printing and distribution of new bitcoins to miners at a very high double-digit inflationary rate. Bitcoin adherents talk about the currency as if it has already entered the "paradise" state of zero money growth. It hasn't, and as it approaches that state and miners stop earning enough to pay for their electricity, the hashrate will either fall precipitously or transaction fees will have to be dramatically increased.

brazzy 12y ago

Computational costs of traditional banking goes down in theory (in practice, they seem to easily overcompensate for that with increased complexity), but other costs (payroll, physical infrastructure, security thereof, etc.) do not. Unless you're proposing that the future of money is 100% digital, with minimal physical infrastructure. Admittedly, that is not entirely unrealistic, though I doubt things will go quite that far anytime soon. Your thought experiment misses an important point: the cost of energy. AFAIK that's already dominating hardware costs for miners. That means: since the cost of bitcoin mining will tend to scale up (or down) linearly with the total value of bitcoin, so will energy usage (barring changes in energy price). It will not keep going up when the bitcoin value has reached a plateau (for whatever reason).

XorNot 12y ago
Physical infrastructure costs have been declining for decades, with banks actively trying to push them down by prioritizing digital over physical services. Physical security also scales well. The volume of secure space you have increases to the 3rd power with only an approximately 2nd order increase in the costs of creating it (your basic area/space tradeoff working for you in this case). The argument that payroll doesn't scale is also absurd: who are all these Bitcoin entrepreneurs trying to run exchanges, if not payrolled staff? Finally and most importantly: the difficulty factor of Bitcoin does not reduce the computational power required to mine it. It is the exact mechanism of the provably increasing cost: the difficulty goes up, so more and more power is required to preserve the status quo. Any changes in energy cost are thus ignorable, since in a Bitcoin-only world they're constantly eaten up by changes in difficulty factor, whereas in the non-Bitcoin world they become real-wealth for everyone.
- moe 12y ago
  Finally and most importantly [...] the difficulty goes up, so more and more power is required to preserve the status quo. Except... The difficulty also goes down. But don't let facts get in the way of your flaming argument...
  - 12y ago

moe 12y ago

Yes, bitcoin mining would be worse. Provably worse. Your premise is wrong. Bitcoin has a mechanism called "difficulty". It's very much at the core of the protocol, google it and ponder how it affects your argument. Furthermore, the current economics of mining have a fixed expiration date set to 2140, that's roughly when the last coin would be mined. The protocol will need to be changed fundamentally long before that date. Since we don't know what that change will look like, we also don't know how it will affect the network's power consumption. Any "thought experiments" that naively extrapolate from the current power consumption are as pointless as trying to guess your car's mileage based on its fuel consumption during ignition. The protocol is still in the bootstrap phase. If it prevails then the bitcoin in 10 years will be very different from the bitcoin of today.

celticninja 12y ago

>power usage of cpus, then gpus, and then asics, you'll see that in general power consumption for bitcoin constantly increases. That does not tell the whole story though, power usage per gigahash is a more accurate measure, because the higher the GH the more secure the network. From CPU, to GPU to ASIC the power use per gighash has fallen significantly. If you really want to compare it to the banking sector then you need to include the full and real costs of that banking system, power alone is not the only cost. One bail out, as seen in the last few years, dwarfs the power cost of bitcoin. That is without considering the knock on effects of the banking meltdown on the overall economy. And bitcoin can take advantage of improvements to reduce power consumption of ASICs (as there is no next step tech that will provide an increase in gigahash as ASICs did, so now it goes to refining the power usage. Additionally larger farms are looking at renewable alternatives and uses for the excess heat being produced. It is still a very young sector so there is a lot of working out to do, but it is being done.

brudgers 12y ago
The bailout was done with fiat currency. There is no fiat energy.
- celticninja 12y ago
  This is a pretty dumb comment. The costs associated with bitcoin come down to power and hosting costs, the costs of banking can be huge, difficult to verify and can lead to consumers losing money that banks hold. No one loses bitcoins when a bitcoin miner goes broke or shuts down.
  - deleted 12y ago
    [deleted]
  - lmm 12y ago
    Banks don't fail because of mysterious hidden costs that they didn't know existed. They fail because they get the accounting wrong and/or because people defraud them - i.e., the exact same reasons that lead to mtgox's failure. Difference is, bank deposits are FDIC protected.

MildlySerious 12y ago

You're assuming that we have arrived at the final solution, which is not the case. The proof of work could change as required, even if it's gradually over 10 years to not weaken the network by making current, specialized hardware useless overnight, there is nothing that would stop such a move. If the power consumption became a serious problem, miners would probably consent to modifications to the proof of work algorithm, which is all it takes. And changing over a course of 10 years (there's an incentive to constantly upgrade hardware anyway) is probably still way faster than the banking system would change on a global scale if it was running into a problem. While this is a different story because hardware and the PoW algorithm is involved, Bitcoin has a story of "breaking" changes. There will be more with the increase of the block size, etc. So I doubt this would be aniticipated way before it made it's way into the protocol, so the affected parties could prepare as well.

tlrobinson 12y ago

but suddenly the hash-rate is 1000 times more and the energy consumption is 100 times more. Not really. Eventually electricity will dominate mining costs, not hardware, and people will only invest in more efficient hardware, not cheaper hardware. The total cost of the electricity used in mining will never exceed the total value of the block rewards plus transaction fees, since miners would rather stop mining than mine unprofitably. Whether the total electricity used increases or decreases over time depends on whether the increase in price of bitcoins outpaces the block reward halving every 4 years, or transaction fees become a significant source of miner income (https://en.bitcoin.it/wiki/Funding_network_security https://en.bitcoin.it/wiki/Funding_network_security). A single bitcoin would need to be worth $1 million in 50 years to keep pace, for example. But I think it's more likely we'll transition to better (cheaper, more secure) mining system before then anyway, which is entirely possible to do without having to redistribute bitcoins (it would essentially be a fork that the "economic majority" agrees with: https://en.bitcoin.it/wiki/Economic_majority https://en.bitcoin.it/wiki/Economic_majority)

TheDong 12y ago
This is not completely true. There's one other reason to mine than the reward: because you recognize the risk of a hostile entity controlling too much mining power. If you have 300 BTC and you suspect someone else is almost able to mount a 51% attack and thus devalue all your BTC, it makes logical sense for you to put more money into mining, even more than you can gain from the combination of block rewards and electricity, to secure your existing investment. As you do that, others will be forced to as well to avoid you having too much power and to protect their BTC and so on....

deleted 12y ago

[deleted]

CyberDildonics 12y ago

Banking is 8% of the entire GDP of the USA. 8% and it can (almost) all be automated. Centralized systems could be more efficient if their incentives were in line with the incentives of the people they serve. But their incentives are not and they are not fair. You are theorizing about something based on how it feels without really looking into the reality of it. Bitcoin mining is so many orders of magnitude smaller than even fragments of current financial infrastructure it would laughable to talk about, even if electricity usage was any sort of a major issue, which it is not.

trevelyan 12y ago

Look, it's sexy to complain about energy costs, but you are really underestimating the massive inefficiencies involved in the legacy payment system. Because even if bitcoin is less energy efficient in some technical sense, there are enormous efficiency gains it provides by inverting the structure of risk in the payments industry. One of the first things you realize when you try to setup payment processing is that middlemen would not actually exist in the payment processing industry if it was an efficient market. But these companies do exist because the entire industry structure has developed to pass risk from credit card companies to intermediary businesses whose sole function is basically to manage risk and enforce policy compliance. It is a bit like if Google didn't give email addresses to individuals because it couldn't be bothered policing spam, so you got your email through a third party. Anyway, even if we ignore the deadweight losses imposed on the economic system by all of the businesses which cannot get credit accounts (merchant accounts), the costs of supporting this credit-centric system are enormous. PCI compliance costs alone are staggering, and serve no purpose except to lower the risk held by credit card companies. And even with this, the inefficiency of central risk management is so great that VISA doesn't even bother to investigate fraudulent purchases of less than 500 USD. And why should they when costs can simply be pushed back to merchants and turned into a profit center by issuing chargebacks. And this is where bitcoin gets interesting -- by inverting the risk structure and letting anyone accept payments without the need for a payment processor to issue credit, Bitcoin eliminates entire horizontal swathes of the payments industry, while placing competitive pressure on legacy payment providers. If the technology scales to the point you are concerned about, it will decimate the number of people required to be employed managing risk in everyday transactions. Put more succinctly, you need to shift from thinking about the energy costs of bitcoin as a wasted ongoing expense and start considering them the price of eliminating an otherwise intractable trust problem in finance. It is like paying for a standing firefighting force. Expensive in one way, but a lot cheaper than the alternative.