It’s a system with feedback loops, it’ll eventually level out at some equilibrium. You didn’t provide an actual argument for why it should definitely collapse.
The existence of feedback loops very much doesn't imply a stable equilibrium. Actually, any system that is not overdamped will necessarily not reach an equilibrium.
Or maybe the equilibrium is that no country bans it, and PoW currencies don't die on their own due to lack of financial rewards, and PoW artificially inflates the demand and therefore price of energy, leading first to widespread economic issues, then widespread ecological issues, until there is no one left buy pizza from with your BTC. Very compelling equilibrium.
point is that it's not a closed system that just blows up at some point. as long as there are people interested in keeping bitcoin running - it will keep running. for now economic incentives are enough, and it'll probably be enough forever, worst case - ideological incentives will do it.
Is there any forecast of where the equilibrium happen? Say, if you're in a 1000-people closed society where cryptocurrency is the only thing used to buy stuff, what's the economic calculation for the long-term energy consumption? Seems like there should be papers about that...
Good question. Some function of how much PoW each person can deploy in order to attack the chain and how much value is secured by the chain. It’s like a relation between price of a bike and price of a lock to secure the bike.
I think you're right. I phrased my argument like all PoW must necessarily collapse once they get too popular, and that may not be true exactly.
E.g. if Bitcoin had no block rewards, then the income from transaction fees alone might provide a more reasonable ceiling for miner activity. Users will only pay fees that make sense vs the utility they get.
However, for Bitcoin that's not the case right now. The combination of high price and block rewards provide an enormous subsidy for miner activity. (Some back of the envelope numbers elsewhere in this thread[1].)
And if Bitcoin gets banned, all PoW will likely get banned, so it doesn't matter if other PoW systems can behave better.
Interestingly enough, as the ledgers are all public by nature, there would be nothing stopping states from forking blockchains into centralized solutions, outcompeting miners by reducing transaction costs to zero. Crypto-anarchists would lose their minds, but most consumers would probably pick whatever's cheapest and which "just works".
Don't get me wrong, I love the politics of decentralization. But it's worth remembering that decentralization tends to be a cost-center, not a profit-center, from the standpoint of efficiency and performance; and decentralized tech is no guarantee of decentralized results (see Amazon/Facebook/Google, who have quasi-monopolies in their niches, despite being delivered over open and federated web protocols).
