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Computational costs of traditional banking goes down in theory (in practice, they seem to easily overcompensate for that with increased complexity), but other c

by 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...
  - XorNot 12y ago
    Irrelevant. A decline in difficulty occurs due to a decline in hashing power. Not a decline in real energy consumption. A decline in hashing power can only happen from people looking at real energy consumption and saying "to hell with this". At which point the network compensates to keep hashing difficulty the same, but does not reduce energy consumption for any of the remaining participants. But correspondingly, the mean difficulty does go up continuously - that's the fixed number of coins. So even when the block to block difficulty is adjusted, the net trend is less coins per unit hash, which means the marginal energy cost of the coins approaches infinity.
    - moe 12y ago
      the net trend is less coins per unit hash, which means the marginal energy cost of the coins approaches infinity. Miners optimise for USD$/kWh, not for coins/hash. The latter is entirely virtual and largely unrelated to the network power consumption. which means the marginal energy cost of the coins approaches infinity You seem to ignore that Miners, too, have to pay for their energy. So, in your model, either the market price of the coins must also approach infinity, or the miners will just stop mining.
- celticninja 12y ago
  > the difficulty goes up, so more and more power is required to preserve the status quo. No. the difficulty goes up so more hashing power is required, whether this means more actual power usage will depend on the machines being used and their efficiency.
TeMPOraL 12y ago
Talking about the cost of energy detracts from the issue at hand. First of all, the market value of energy doesn't reflect the global issues we're facing. Secondly, it invites very bad comparison like "how much power bitcoin uses costs in dollars vs. bank bailout". Dollar price of electricity doesn't matter. You can't magically print out more coal by signing a document, nor you can clear your "kWh used" counter by going to war with someone else. We have something like 50 years to cut down on our energy use and switch to better sources if we want to have a technological civilization alive on this planet; setting up our economy to run on an exponentially-growing resource waster might not be the smartest idea now.

by brazzy 12y ago

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...
- XorNot 12y ago
  Irrelevant. A decline in difficulty occurs due to a decline in hashing power. Not a decline in real energy consumption. A decline in hashing power can only happen from people looking at real energy consumption and saying "to hell with this". At which point the network compensates to keep hashing difficulty the same, but does not reduce energy consumption for any of the remaining participants. But correspondingly, the mean difficulty does go up continuously - that's the fixed number of coins. So even when the block to block difficulty is adjusted, the net trend is less coins per unit hash, which means the marginal energy cost of the coins approaches infinity.
  - moe 12y ago
    the net trend is less coins per unit hash, which means the marginal energy cost of the coins approaches infinity. Miners optimise for USD$/kWh, not for coins/hash. The latter is entirely virtual and largely unrelated to the network power consumption. which means the marginal energy cost of the coins approaches infinity You seem to ignore that Miners, too, have to pay for their energy. So, in your model, either the market price of the coins must also approach infinity, or the miners will just stop mining.
celticninja 12y ago
> the difficulty goes up, so more and more power is required to preserve the status quo. No. the difficulty goes up so more hashing power is required, whether this means more actual power usage will depend on the machines being used and their efficiency.

TeMPOraL 12y ago

Talking about the cost of energy detracts from the issue at hand. First of all, the market value of energy doesn't reflect the global issues we're facing. Secondly, it invites very bad comparison like "how much power bitcoin uses costs in dollars vs. bank bailout". Dollar price of electricity doesn't matter. You can't magically print out more coal by signing a document, nor you can clear your "kWh used" counter by going to war with someone else. We have something like 50 years to cut down on our energy use and switch to better sources if we want to have a technological civilization alive on this planet; setting up our economy to run on an exponentially-growing resource waster might not be the smartest idea now.