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I believe Bitcoin miners have every incentive to be efficient, as they pay for their hardware and energy. Am I missing something?

wpietri 12y ago
The value of gold mining is gold, which has various personal and technical uses. The value of Bitcoin mining is to support the blockchain. The value of which is, honestly, still unknown, but so far appears mainly to be transferring money. So if we're measuring ecological efficiency of Bitcoin, it'd be something like cents or watt-hours or grams CO2 per financial transaction. I've never seen a rigorous comparison, but I wouldn't be at all surprised if Visa and Paypal are more ecologically efficient than Bitcoin.
- brainburn 12y ago
  And what do we do with most gold? We store it in vaults...
  - wpietri 12y ago
    No, we mostly make it into jewelry. It also has various industrial uses. Like any commodity, some of it ends up getting stored. And some of it also serves as a shelf-stable form of collateral. But mostly it gets used: http://geology.com/minerals/gold/uses-of-gold.shtml http://geology.com/minerals/gold/uses-of-gold.shtml I suspect that even a lot of the "investment" uses of gold are much more about human emotional needs. I helped someone sort out the house of a deceased elderly relative. There was quite a bit of stuff purchased and stored away: coins, silver, gold. A number were of the Franklin Mint variety, where they wildly overprice the metal: http://coins.thefuntimesguide.com/2008/11/franklin_mint_coins-2.php http://coins.thefuntimesguide.com/2008/11/franklin_mint_coin... I'm sure the guy was happy with his purchase, but as investments go it was a terrible idea. He would have been much better off putting his money in index funds.
lmm 12y ago
If bitcoin mining becomes more efficient, miners run more of them, the hashrate increases, the difficulty goes up, and we reach a new equilibrium - with the same overall amount of value being created, and therefore assuming efficient market, the same amount of energy being expended. The blockchain is worth the same whatever the hashrate (at least if we're just talking about more efficient miners - if more effort is being put into mining then the blockchain becomes more secure, but if someone makes a more efficient miner then that same miner also makes attacks easier). In contrast when gold mining gets more efficient, either we expend less energy, or we produce more industrially-useful gold. Admittedly in the limit where people are just buying gold and putting it on the shelf I guess the same considerations as bitcoin apply? Hmm.

wpietri 12y ago

The value of gold mining is gold, which has various personal and technical uses. The value of Bitcoin mining is to support the blockchain. The value of which is, honestly, still unknown, but so far appears mainly to be transferring money. So if we're measuring ecological efficiency of Bitcoin, it'd be something like cents or watt-hours or grams CO2 per financial transaction. I've never seen a rigorous comparison, but I wouldn't be at all surprised if Visa and Paypal are more ecologically efficient than Bitcoin.

brainburn 12y ago
And what do we do with most gold? We store it in vaults...
- wpietri 12y ago
  No, we mostly make it into jewelry. It also has various industrial uses. Like any commodity, some of it ends up getting stored. And some of it also serves as a shelf-stable form of collateral. But mostly it gets used: http://geology.com/minerals/gold/uses-of-gold.shtml http://geology.com/minerals/gold/uses-of-gold.shtml I suspect that even a lot of the "investment" uses of gold are much more about human emotional needs. I helped someone sort out the house of a deceased elderly relative. There was quite a bit of stuff purchased and stored away: coins, silver, gold. A number were of the Franklin Mint variety, where they wildly overprice the metal: http://coins.thefuntimesguide.com/2008/11/franklin_mint_coins-2.php http://coins.thefuntimesguide.com/2008/11/franklin_mint_coin... I'm sure the guy was happy with his purchase, but as investments go it was a terrible idea. He would have been much better off putting his money in index funds.

lmm 12y ago

If bitcoin mining becomes more efficient, miners run more of them, the hashrate increases, the difficulty goes up, and we reach a new equilibrium - with the same overall amount of value being created, and therefore assuming efficient market, the same amount of energy being expended. The blockchain is worth the same whatever the hashrate (at least if we're just talking about more efficient miners - if more effort is being put into mining then the blockchain becomes more secure, but if someone makes a more efficient miner then that same miner also makes attacks easier). In contrast when gold mining gets more efficient, either we expend less energy, or we produce more industrially-useful gold. Admittedly in the limit where people are just buying gold and putting it on the shelf I guess the same considerations as bitcoin apply? Hmm.