Bitcoin feels a bit like the gold standard. Massive mining operations dumping huge volumes of resources and energy to acquire some thing that is only mildly useful. It seems quite wasteful.
Excerpt:
According to our estimates then, the whole Bitcoin network is consuming maybe 10% of a large power plant’s worth of electricity. Although this is not an insignificant amount of power, it's not yet a large amount of electricity compared to all the other things that people are using electricity for on the planet.
Any payment system requires energy and electricity. With traditional currency, lots of energy is consumed guarding and moving gold bullions around, running ATM machines, coin sorting machines, cash registers, and payment processing services, and transporting money in armored cars.
Some people say Bitcoin wastes energy because the energy expended computing SHA-256 hashes doesn’t serve any apparent purpose. But you could make this same argument for traditional currency as well — there’s a lot of energy being wasted and it doesn't serve any purpose besides maintaining the currency system. So, if we value Bitcoin as a useful currency system, then the energy required to support it is not really being wasted.
That said, we can ask if there’s a way to do better ...
I believe that most of money consumed by the financial system actually goes back into the economy. Some bankers buy sushis, then sushi chefs buy gasoline, then oil drillers... and so on.
BitCoin tends to waste energy irrecoverably.
Apples-to-apples comparison is a challenging task, but the modern financial system hardly has that feature of burning more for the sake of burning more.
> I believe that most of money consumed by the financial system actually goes back into the economy. Some bankers buy sushis, then sushi chefs buy gasoline, then oil drillers... and so on. BitCoin tends to waste energy irrecoverably.
Bitcoin is best technical solution we have for an existing societal problem. As soon as better technical solution will be created (e.g. proof-of-stake which can be relied upon), Bitcoin will be modified to use it. And Bitcoin will continue to operate with lower costs - burning less energy.
Money is returned to the economy via energy company profits and wages just as effectively as via bankers' salaries. It's the labour and energy itself that is wasted.
> I believe that most of money consumed by the financial system actually goes back into the economy. Some bankers buy sushis, then sushi chefs buy gasoline, then oil drillers... and so on.
Yes and no. If a banker is being paid $100/hour then presumably (in an efficient-markets sense) their labour is worth that much, and they could be doing something else with their time that would be creating $100 of value instead.
>Any payment system requires energy and electricity. With traditional currency, lots of energy is consumed guarding and moving gold bullions around
Whenever the topic of bitcoin's inherent wastefulness is discussed, someone always brings up this point, but it's a fallacious comparison because most of the power consumed by the traditional financial system is spent in its capacity as a ubiquitous pillar of modern society, wherein bitcoin would be completely subsumed were it to become anything more than a technical novelty.
Even when you subtract the common denominator that represents the vast majority of the world's financial intuitions, bitcoin is still the only currency that burns resources as a function of its circulation.
>most of the power consumed by the traditional financial system is spent in its capacity as a ubiquitous pillar of modern society
Either I missed your point or it would be nice if you brought this back down to Earth. Yes, traditional ledgers help mediate economic exchanges. Bitcoin, as a ledger system, also helps mediate economic exchanges.
> ... wherein bitcoin would be completely subsumed were it to become anything more than a technical novelty.
You put this forward like we should all nod and say of course. Care to tell us about this scenario?
That paper estimates the bitcoin network's total power consumption at around 117MW. This latest increase is estimated at 40MW. So it is a significant increase.
I forget where I read it, but when countries and banks buy and sell large amounts of gold bullion they don't usually move it around because it's expensive and inconvenient.
The ownership changes, but it's usually left where it is.
Stellar solves the same problem in a different way - nodes pick whom to trust in the network. So it doesn't burn vast quantities of energy just to stand still, and it's not vulnerable to someone with vast computing resources.
I'm not an expert but it makes a lot of sense to me. Most real-world decentralized institutions work kind of like this.
And all of the myriad redundant banks, central banks, credit card processors, buildings in every city in the world aren't wasteful? Bitcoin is a monetary system for the whole world and if it succeeds none of the things I previously listed will need to exist.
Proof of work is the most secure way we have by far of running a decentralized currency. I am hopeful that a better, more energy-efficient method will be developed, but until then, I think advancing the state of the art is worth the energy cost.
It's not obscene to me that a truly global currency, that is decentralized and not controlled by any government, would cost a tenth of the energy output of a modest-sized power plant.
That's my main issue with bitcoins (aside from how they're marketed to anyone; it is most definitely NOT anonymous!).
Instead of 'proof of work' it should require actual, /useful/ work. I think it should be a mix of work /types/ to promote general purpose computing, instead of ASICs. Imagine if a comity decided, and the owners of existing coins voted on, what work was worthy of being included. Folding proteins for medical research, SETI, attacking DRM/bootloader encryption keys... things that benefit the world.
Ok, yeah that would be nice. But no one has figured out how to securely do productive work for proof of work. In fact, there are pretty good reasons to believe that it may even be impossible to create a secure yet productive proof of work algorithm.
You can't use SETI@home for proof of work. The work target has to somehow involve a fully random process.
Lots of very smart people have tried this and failed. The best effort so far has been to find prime numbers, and even that turned out to not be a robust proof of work.
It might seem mildly useful until you realize why bitcoin, gold, or fiat currencies all have value - their properties lining up with the properties of ideal money. Gold is not valuable because of jewlery or industrial uses. It is valuable because it was the original decentralized shared ledger. Easy to verify, easy to divide, hard to create, hard to destroy (and some more if you look it up).
