Resources are being utterly and completely wasted on mining bitcoins • Hacker News Board

Re: Resources are being utterly and completely wasted on mining bitcoins

#121

Post by joezydeco » Tue, May 31, 2011, 6:46 PM UTC

DennisP wrote: post #93

joezydeco wrote: post #26

Earlier quoted context omitted.

How much manpower and energy does it take to make a paper US dollar with nothing backing it up? [EDIT] Since I'm getting downvoted, I'll answer my own question: $0.042 every 18 months.

I'm guessing that's the cost of printing a single dollar bill. There are also hundred-dollar bills, which presumably cost the same. It'd be pretty interesting to get the total cost of printing, transport, and storage, and compare to the cost of maintaining a similar amount in bitcoins (which I calculated here: http://news.ycombinator.com/item?id=2602667 ).

Yes, that's a single dollar bill note, quickly grabbed from here:

http://www.enchantedlearning.com/math/money/bills/one/

I didn't count the $100 because I don't believe they're printed/circulated/destroyed/reprinted as heavily as the $1. Who knows about the 5, 10, 20 and 50.

I also don't think this $0.042 covers the labor cost of distributing, collecting, securely shredding and tracking the movement of all these bills through the system every 18 months.

Re: Resources are being utterly and completely wasted on mining bitcoins

#122

Post by abulafia » Tue, May 31, 2011, 6:51 PM UTC

wmf wrote: post #105

abulafia wrote: post #100

Earlier quoted context omitted.

It's not the same as taking early risks; this is a very constrained and artificial environment in which bitcoins are generated. One can be pretty certain that if one generates coins early, one can then make money selling them to others. This is much more similar to a pyramid marketing scenario, where the earlier franchises are inherently worth more, and eventually the value generated for the terminal generation of pa…

One can be pretty certain that if one generates coins early, one can then make money selling them to others. I don't know about that. Back in 2009 or 2010, Bitcoins were worth practically nothing and almost everyone predicted that they'd never be worth anything. And if no one mined, maybe Bitcoin would never have taken off (to the extent that it has) and it would still be worthless.

I'm suggesting that if you believe in the model, and even the most obvious ramifications of such an economy, the value of participating in the system is to be as far upstream as possible. I don't believe in the model, so, I'm not suggesting it has real value now or going forward.

You're also actually assuming something that runs counter to the stated bitcoin model, as described in the FAQ (which seems to be down at the moment). That is that there's an investment in making bitcoins, which they would say is not so. The intent in burning cycles and power is simply to ensure security, while the value comes from faith in the currency. Hence, there is no investment in creation: the investment would instead be in accepting bitcoins in transactions, which iterates the pyramidal nature of the system.

Re: Resources are being utterly and completely wasted on mining bitcoins

#123

Post by vladd » Tue, May 31, 2011, 6:53 PM UTC

danenania wrote: post #120

masklinn wrote: post #111

Earlier quoted context omitted.

> This is just a ruse used by governments as a pretext for inflation. It isn't necessary for money supply to 'keep up' with growth. As demand increases, the value of money goes up, and people simply use smaller units for exchange. The result is exactly the same, you're just making the whole process more painful by rebadging money.

There is no need to 'rebadge' money. That is the function of prices.

In economic terms what you're describing is called deflation.

During deflation prices keep falling, which causes consumers to post-pone their purchases (tomorrow they'll be able to get that TV at a lower price so there's no point in buying it today) and investors sit on the money since they'll be more valuable tomorrow.

This is the exact opposite of inflation, which causes people to convert 'today' money into goods since tomorrow they'll buy less with it; it also causes investors to put money to good use or in interest-bearing accounts since otherwise they lose the value).

Therefore some economists argue that deflation might be even more dangerous than inflation because it discourages consumption and tends to have down-spiralling effects. (see http://krugman.blogs.nytimes.com/2010/08/02/why-is-deflation... ).

Re: Resources are being utterly and completely wasted on mining bitcoins

#124

Post by doyoulikeworms » Tue, May 31, 2011, 7:06 PM UTC

masklinn wrote: post #70

pbreit wrote: post #56

Earlier quoted context omitted.

The idea that gold has no real value is bizarre.

"real value" is not very clear a concept. Gold does not have much intrinsic value (not actually correct anymore, in our modern world gold is used quite a bit in industrial contexts): apart from being shiny, before the 19th century there wasn't much it could be used for. The vast majority of its value was extrinsic and pretty much arbitrary, in its use as part of monetary exchange systems. The same can be said of diam…

Before the 19th century, gold was used for a very important purpose: money. Money is a commodity just like any other, and some things make better monies than others.

What are some characteristics of a good money?

It's divisible. 1 oz. of gold is equal to two 1/2 oz. of gold. Two halves of a diamond are not equal to the intact whole.

It's fungible. Gold coins of the same weight are, for all intents and purposes, the same. The same cannot be said of diamonds or oil.

It resists deterioration/decomposition. (Self-explanatory).

Its rarity/weight/volume characteristics are manageable. You can buy an iPad with a reasonably sized gold coin. The same could not be said of bushels of wheat, lead, stone, oil, etc.

It is relatively easy to identify. This provides anti-counterfeit measures out of the box.

I'm not a gold bug (I own zero gold... not even jewelry), but I do appreciate that it makes complete and total sense that it was used for money for thousands of years. Should 1 oz. of gold be worth $1500? I don't know; I don't follow the market. I do know that gold is extremely valuable due to how well it serves as a medium of exchange, and due to that fact alone.

tl;dr Gold has intrinsic value: it makes a good medium of exchange.

Re: Resources are being utterly and completely wasted on mining bitcoins

#125

Post by daviddoran » Tue, May 31, 2011, 7:06 PM UTC

api wrote: post #49

vladd wrote: post #6

Any system of checks and balances will have its price. Look at what we do with gold: we dig it from a hole in Africa, we transport it in other countries, we dug holes or build vaults and throw it there. Like Warren Buffett said, it has no utility, if Martians were to look at the process they would scratch their heads. Except for the guarantee of uniqueness. Which is one of the most powerful invariants against corrupt…

Bitcoin is not quantum-hard. When quantum computing reaches a certain threshold, bitcoin will lose its uniqueness and collapse. There are post-quantum algorithms that are computable on ordinary computers, but they're still under research and they'd make Bitcoin's data set considerably larger.

Correct, however the Bitcoin website has an answer for that: upgrade. The cryptographic methods are not fixed for all time, we can switch to other methods (which are quantum-resistant) when it becomes necessary.

Re: Resources are being utterly and completely wasted on mining bitcoins

#126

Post by DennisP » Tue, May 31, 2011, 7:08 PM UTC

joezydeco wrote: post #121

DennisP wrote: post #93

Earlier quoted context omitted.

I'm guessing that's the cost of printing a single dollar bill. There are also hundred-dollar bills, which presumably cost the same. It'd be pretty interesting to get the total cost of printing, transport, and storage, and compare to the cost of maintaining a similar amount in bitcoins (which I calculated here: http://news.ycombinator.com/item?id=2602667 ).

Yes, that's a single dollar bill note, quickly grabbed from here: http://www.enchantedlearning.com/math/money/bills/one/ I didn't count the $100 because I don't believe they're printed/circulated/destroyed/reprinted as heavily as the $1. Who knows about the 5, 10, 20 and 50. I also don't think this $0.042 covers the labor cost of distributing, collecting, securely shredding and tracking the movement of all these bill…

I was thinking more along the lines of what the total cost might be. There's about a trillion dollars worth of cash circulating, but since it's not all ones we can't just multiply a trillion by $0.042.

In any case, it sounds like the bitcoin cost might be in a similar neighborhood to paper costs.

Re: Resources are being utterly and completely wasted on mining bitcoins

#127

Post by joelthelion » Tue, May 31, 2011, 7:10 PM UTC

duskwuff wrote: post #91

joelthelion wrote: post #68

Earlier quoted context omitted.

Gold's market value is far above what it would be if it wasn't used as a value store.

Which ends up being harmful to industries which could make good use of gold... if it just weren't so bloody expensive.

In the same way the car industry harms the industries that could use all that oil we burn in our cars...

Using gold as a store of value is useful, otherwise we wouldn't do it.

Re: Resources are being utterly and completely wasted on mining bitcoins

#128

Post by reedlaw » Tue, May 31, 2011, 7:18 PM UTC

vladd wrote: post #123

danenania wrote: post #120

Earlier quoted context omitted.

There is no need to 'rebadge' money. That is the function of prices.

In economic terms what you're describing is called deflation. During deflation prices keep falling, which causes consumers to post-pone their purchases (tomorrow they'll be able to get that TV at a lower price so there's no point in buying it today) and investors sit on the money since they'll be more valuable tomorrow. This is the exact opposite of inflation, which causes people to convert 'today' money into goods s…

If deflation is so dangerous I wonder why anyone buys consumer electronics which, despite currency inflation, continue to decline in price due to advances in technology. If we experienced the full effect of deflation, today's iPad would cost a much tinier percentage of yesterday's Apple II. Would that have stopped people from buying either? I doubt it.

Re: Resources are being utterly and completely wasted on mining bitcoins

#129

Post by danenania » Tue, May 31, 2011, 7:47 PM UTC

reedlaw wrote: post #128

vladd wrote: post #123

Earlier quoted context omitted.

In economic terms what you're describing is called deflation. During deflation prices keep falling, which causes consumers to post-pone their purchases (tomorrow they'll be able to get that TV at a lower price so there's no point in buying it today) and investors sit on the money since they'll be more valuable tomorrow. This is the exact opposite of inflation, which causes people to convert 'today' money into goods s…

If deflation is so dangerous I wonder why anyone buys consumer electronics which, despite currency inflation, continue to decline in price due to advances in technology. If we experienced the full effect of deflation, today's iPad would cost a much tinier percentage of yesterday's Apple II. Would that have stopped people from buying either? I doubt it.

Exactly. The consumer electronics industry is enough to dismiss this idea on its own.

Re: Resources are being utterly and completely wasted on mining bitcoins

#130

Post by prodigal_erik » Tue, May 31, 2011, 8:00 PM UTC

danenania wrote: post #129

reedlaw wrote: post #128

Earlier quoted context omitted.

If deflation is so dangerous I wonder why anyone buys consumer electronics which, despite currency inflation, continue to decline in price due to advances in technology. If we experienced the full effect of deflation, today's iPad would cost a much tinier percentage of yesterday's Apple II. Would that have stopped people from buying either? I doubt it.

Exactly. The consumer electronics industry is enough to dismiss this idea on its own.

Consumer electronics are unique right now in becoming orders of magnitude more capable before the old versions even begin failing. New products sell because nothing comparable was even available before and it's inconceivable that next year's version could be better somehow (even though it will). No other category has this going for it.