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Bitcoin Energy Consumption Index

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Re: Bitcoin Energy Consumption Index

#201

Post by SilasX »

Taek wrote: post #146
akvadrako wrote: post #126

Earlier quoted context omitted.

That's incorrect. All that matters is you can't game the system by taking shortcuts or deciding what the problem will be beforehand; the work cannot be even partially computable without knowing the previous block.

No, you are incorrect. The important aspect of proof of work is that it is very expensive to create an alternate history (maybe one where you didn't send $15,000,000 to the exchange, for example). If you are doing useful work, someone can pay for it, and you can use that payment to make an alternate history for free, defeating the security assumption of blockchains. Blockchains only work by probably wasting in order…

But "socially useful" does not imply saleable (to the bane of venture capitalists everywhere).

It's possible for something to provide a social benefit but not make sense for anyone to pay for as a for-profit business because others would get the same benefit and free ride off them. (Hence the problem of public goods in economics.)

So if the proof of work is only solving some general research problem, then it might not be feasible to double dip like you've described. That's why primecoin was able to avoid the problem.

Re: Bitcoin Energy Consumption Index

#202

Post by Taek »

mcv wrote: post #197
hwillis wrote: post #60

Earlier quoted context omitted.

>The correct comparison would be to compare the cost of Bitcoin to U.S. dollars or gold. Gold requires hundreds of dollars per ounce and untold energy to extract. U.S. dollars require the existence of a powerful economy and trillion dollar military to keep the currency secure and desirable. No it isn't- the energy cost of bitcoin is ongoing and depends on the volume of transactions. Each time money changes hands, it…

If a single bitcoin transaction uses enough energy to power 5 households for a day, that certainly makes me not want to do any bitcoin transactions anymore. I knew it was wasteful, but this article is really putting it into perspective. And because of the proof-of-work system, the wastefulness is intentional; you have to prove you've wasted enough time and energy to be allowed to mine a bitcoin.

To say that one transaction costs that much power is a misunderstanding of what the power is useful for. The amount of electricity spent mining a block is a function of the block reward, which is a function of the value of the total system. A block doesn't just protect the transactions inside of it, it also protects every single transaction in the whole history of bitcoin.

And, the high value transactions tend to dictate the value of the whole system. Not every transaction is equal in that regard. If all the high value transactions were to move to another system, the coin price would plummet, and so would the amount of energy required to mine blocks, and thus the 'per transaction' cost for low value transactions would plummet.

The right way to think about it is that we spend around a billion dollars per year protecting $70 billion in assets. Put that way, it doesn't seem so bad.

If you look at the percent of the US GDP spent on military defense, you'll see that bitcoin is quite attractive by comparison.

Re: Bitcoin Energy Consumption Index

#203

Post by Taek »

SilasX wrote: post #201
Taek wrote: post #146

Earlier quoted context omitted.

No, you are incorrect. The important aspect of proof of work is that it is very expensive to create an alternate history (maybe one where you didn't send $15,000,000 to the exchange, for example). If you are doing useful work, someone can pay for it, and you can use that payment to make an alternate history for free, defeating the security assumption of blockchains. Blockchains only work by probably wasting in order…

But "socially useful" does not imply saleable (to the bane of venture capitalists everywhere). It's possible for something to provide a social benefit but not make sense for anyone to pay for as a for-profit business because others would get the same benefit and free ride off them. (Hence the problem of public goods in economics.) So if the proof of work is only solving some general research problem, then it might no…

Primecoin also ultimately had limited utility. It found the world's largest prime number thousands of times, continually beating it's own record. At some point we had more prime numbers than had mathematical utility.

My unprovable guess is that any other non-sellable problem will ultimately have the same outcome. It's interesting and useful for a bit, but when you have a billion dollars of hardware grinding nonstop for years in a row, you eventually exhaust everything interesting about the original problem and then it's back to the same waste you started with.

Re: Bitcoin Energy Consumption Index

#204

Post by rtpg »

alister wrote: post #44

You can't compare Bitcoin to Visa. Visa is merely a payment sytem -- a means of transfer of money that already exists. Visa is not money. Bitcoin however is money. As well as being a payment system. The correct comparison would be to compare the cost of Bitcoin to U.S. dollars or gold. Gold requires hundreds of dollars per ounce and untold energy to extract. U.S. dollars require the existence of a powerful economy an…

If it wanted to, Visa could "become a crpytocurrency" tomorrow. It could make Visabux and continue working without real changes to infrastructure.

Bitcoin is a payment network with its own currency. Visa is the same thing, but the currency is linked to dollars. It is the most apt comparison.

Re: Bitcoin Energy Consumption Index

#205

Post by davidmanescu »

Taek wrote: post #140
leroman wrote: post #121

Earlier quoted context omitted.

The fairer comparison would be Bitcoin vs Visa the corporation, which includes buildings, people, air-con, employee traveling for work, to begin with. Still, let's hope Bitcoin moves away from wasting energy soon.

Also the courts that enforce the contracts visa makes, the FBI that chases people who commit fraud, the police and jails who enforce the decisions of the court, etc etc. Blockchains can operate without all of those.

Payment systems like visa are relatively cheap to operate when being used honestly. There may be overhead when people commit fraud, but to me that seems more prudent than giving honest actors an intentionally inefficient system just to make abuse more difficult.

Since I personally don't worry about centralisation and "trust", I like the idea that a system like the blockchain could be used to revolutionise payments without the need for tin foil hats and proof-of-work.

Re: Bitcoin Energy Consumption Index

#206

Post by SamBam »

Taek wrote: post #202
mcv wrote: post #197

Earlier quoted context omitted.

If a single bitcoin transaction uses enough energy to power 5 households for a day, that certainly makes me not want to do any bitcoin transactions anymore. I knew it was wasteful, but this article is really putting it into perspective. And because of the proof-of-work system, the wastefulness is intentional; you have to prove you've wasted enough time and energy to be allowed to mine a bitcoin.

To say that one transaction costs that much power is a misunderstanding of what the power is useful for. The amount of electricity spent mining a block is a function of the block reward, which is a function of the value of the total system. A block doesn't just protect the transactions inside of it, it also protects every single transaction in the whole history of bitcoin. And, the high value transactions tend to dic…

It's hardly justifiable to imply that the entire military defense of the United States is simply to protect "$70 billion in assets."

If the entire monetary system of the US were replaced by BitCoin, do you think there would be no need for an army? Would the block ledger be "protecting" all the actual physical assets, land, and people?

You can argue over whether the US should have a military, or its size, but to imply that it's just to protect the dollars isn't going to sway anyone in an argument.

Re: Bitcoin Energy Consumption Index

#207

Post by shrimpx »

Taek wrote: post #160
jaekwon wrote: post #142

Earlier quoted context omitted.

Incorrect. Bitcoin isn't "backed by electricity". You can't turn Bitcoin back into energy. The energy is used to secure a distributed ledger to prevent double spend attacks on ongoing transactions, in a really inefficient way, but don't call it "backing". PoS will succeed. It already has, we've set all the pieces. The thing is, you don't want to live in a world where Bitcoin and PoW dominate our financial transaction…

It takes a cryptographically provable amount of energy to reverse a Bitcoin transaction, and that amount is equal to the money spent on electricity mining blocks that confirm a transaction. Proof of Stake systems have no equivalent. They operate by trusting the staking parties are not colluding to create an alternate history. But if they do decide to collude, there is little thermodynamic cost to rewriting history. I…

51% coalitions can also create alternate histories in PoW by agreeing to run a modified version of the client. There is negligible thermodynamic cost to rewriting history when you control a majority of the nodes.

Pow is really an incentive system to keep selfish miners flocking to one chain, by making betting on one chain more profitable than betting on lots of chains at the same time.

The PoS challenge is to do the same without the egregious amounts of wasted energy, by making miners bet their money directly, instead of indirectly through their computers and electricity.

Re: Bitcoin Energy Consumption Index

#208

Post by Zamicol »

PoW needs to die.

PoS can be superior to PoW in every way except the problem of initial wealth distribution. PoW solves this problem elegantly. PoS currently has no meaningful alternative to this distribution method.

What Ethereum is doing with using PoW to bootstrap wealth and then transition to PoS looks like a winning combination.

Re: Bitcoin Energy Consumption Index

#209

Post by shrimpx »

Taek wrote: post #172
jcfrei wrote: post #169

Earlier quoted context omitted.

PoS as well as PoW depend on the assumption that a majority (either in terms of value invested in hashing power or invested in tokens) of the network is following the rules. If you try to double spend in a PoW system you are betting your current electricity usage on a new block becoming the longest chain and in a PoS system you are betting the tokens themselves - from an economic point of view those two systems are i…

No, in a proof of stake system collusion to rewrite history is essentially free. In a proof of work system, even if you collude you still have to spend a non-trivial sum of electricity to create that alternate history. Electricity that would be making you money via the block reward if you were using it honestly. It is provably more expensive to reconstruct history in a PoW setting, even when everyone is happily collu…

How is it more difficult to rewrite history in pow? Maybe only if you want to stick to the same exact algorithm going forward. But a modified node can do whatever it wants, including rewriting the blockchain from the beginning to use a different hashing scheme, making custom exceptions for individual block numbers, etc. It all depends on how the modifications align with the incentives of the coalition and user base.

Re: Bitcoin Energy Consumption Index

#210

Post by Taek »

SamBam wrote: post #206
Taek wrote: post #202

Earlier quoted context omitted.

To say that one transaction costs that much power is a misunderstanding of what the power is useful for. The amount of electricity spent mining a block is a function of the block reward, which is a function of the value of the total system. A block doesn't just protect the transactions inside of it, it also protects every single transaction in the whole history of bitcoin. And, the high value transactions tend to dic…

It's hardly justifiable to imply that the entire military defense of the United States is simply to protect "$70 billion in assets." If the entire monetary system of the US were replaced by BitCoin, do you think there would be no need for an army? Would the block ledger be "protecting" all the actual physical assets, land, and people? You can argue over whether the US should have a military, or its size, but to imply…

I meant only to imply that the US military alone is about 3.5% of our economy, and that the protection to value ratio there is about 1:30

I did not mean to imply that bitcoin could replace the entire military, only that the ratio of spending vs. assets defended is better.

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