The idea that you can be paid to waste this power just creates economic incentives against the improvements we actually need to be making.

In other words: your scenario is identical to GP's except that someone is paying you to run your AC while you aren't at home, rather than just doing it because you can. The logical question is then to ask why they're paying you to run your AC, and that is the uncompelling part: it's not clear that we should be paying people to burn energy to crack hashes.

Im not saying this is good, but its the way it works...

if you want a transition away from carbon, you have to solve that question.

https://en.wikipedia.org/wiki/Carbon_fee_and_dividend

This would remove the incentive to mine crypto on any grid that is coincidentally emitting carbon.

As most (if not all) uses of electricity, Bitcoin mining is sensitive to the electricity price. Introducing a a carbon tax / carbon dividend, doesn't magically make any particular use of electricity economically unviable all of the time. It just pushes the cost equilibria to different values.

Money is just another technology. As a technology it has existed in various forms over thousands of years.

Technologies see continual innovation and change, with various actors and various motives influencing their use, function, reach.

Governments of various forms are our current best method- govern-ance- for managing human-scale assets, resources, and technologies with collective purpose and implication.

Moneys- currencies- as a technology are one of those human assets owned and managed by governments, like land, and other resources. There are over 200 distinct currencies in the world.

The mechanism for this management is based on the notion of a ledger- the record of balances, of debts, of interest, and the creation- inflation- of money supply in the context of that management.

Most governments are poor at this management when measured by how well their implementation of this technology that is money serves the needs of most of their populations.

Governments themselves- both "democratic" and non- in their current form are fragile and vulnerable, with the powers of governments utilized against portions of theirs and other populations.

BTC is a technology, a cryptographically-secured system of record- a ledger- that can be used as a money. It is not under the control of an existing government.

By collective agreement of its participants, a complex balance of users playing different roles with different incentives and risks, the rate of creation of assets recorded there is managed to a low level of inflation. As such, as a technology utilized for money, it is a stable "store of value" in contrast to the moneys supplied by literally every government.

The ledger, the system of record can be preserved- secured- if and only if it is too expensive for attackers to change it. The turning of energy into hash minting is the security for that system of record.

That's it.

Adopting a mindset where the above argument takes hold involves a kind of leap of faith. It is a belief. Sure, a religion. The game theory/mechanism design behind BTC is a true innovation, the first demonstrated solution to the Byzantine Generals problem.

There is an argument- won't people stop believing in it?

Maybe? I would suggest evaluating that argument against the lifespans of other innovative beliefs.

Is it something that comes and goes, or is it like the eye, an invention of evolution that solves a specific problem and appears distinctly and repeatedly in different organisms once they hit certain levels of complexity.

Cheers.

It was first, and first mover advantage is significant, which has turned into network effects and inertia, and now with the ETF recognition has gained "official" validation;

Anti-inflation is one of its core design principles, is the basis for store of value, and commitment to it has remained solid;

After ETH PoS changes it remains the only proof of work chain. PoS has belief failure modes that can lead to collapse of value. PoW-based value by definition is secured by the cost of the work. It is a financial equation- a ledger can be maintained at the underlying cost of recoverable energy- not a political/fashionable one.

Mindshare can be fickle, and if purely based on fashion, if there is no inertia and there are adjacent equivalents, value can be lost quickly. With BTC there is inertia, because at a deeper level there are no adjacent equivalents. BTC continues to occupy a unique niche in the design space of these artifacts/assets.

I can see the inertia argument. Why switch when it works. I still don't see the store of value argument when Bitcoin requires such exorbitant amounts of energy to keep up. That's a tax on the value. "Look how much energy it's using, it must be worth a lot!"

People can wrap their heads around there being "value" in an "asset" because it has "revenue streams" associated with it- that's what property and being a landlord is about. You can charge rent, so your property has value. That is very familiar because everyone either owns property or rents property. And then they look at BTC and are like- there are no revenue streams, any "value" is just made up.

Gold, a scarce/low supply inflation asset, and former money, is a good mental model for BTC, but it is completely unfamiliar to most folks, and not even the notion of metal coin being intrinsically valuable applies in any economy any more. In fact if anyone thinks about gold, they probably think people who put value into it are deluded.

People also can understand different currencies having different relative values, some being stronger, some being weaker. Why that is is generally a complete mystery. People think of strong currencies coming from "strong" countries with "strong" economies and weak currencies coming from "weak" countries with "weak" economies, where strong and weak roughly correspond to military capability and economic industrial capacity and diversity.

There is some truth in that mental model, but since BTC is not really "used' as a currency, it doesn't get to be slotted in to the currency mental map.

The actual function that BTC is starting to serve and that is critical to the functioning of all modern economic entities, whether governments or private enterprises, the notion of a "financial settlement layer", is completely unfamiliar. So yeah. It is hard to get traction when the machine is mysterious, to abuse a metaphor a bit.

The unnecessary energy waste argument though is an interesting one, eg where BTC is wasteful like just running your A/C unnecessarily or whatever. The most relevant comparison is looking at something called "home idle load" which in the US is basically the background appliance energy use. BTC total electricity use is in fact a tiny fraction of home idle load, which people don't really get exercised about and many when buying new appliances pay little or no attention to.

If one doesn't see the purpose for the use of BTC energy- which again is an unfamiliar concept of the need for "security" for a system of record- people do see the purpose for the wasted home load energy. They need home appliances, they just wish they were more efficient. That BTC mining becoming more efficient would not result in the network using less energy, in fact, the opposite would occur- this is also strange.

Anyway- I agree with you, it is a set of completely novel concepts that interoperate in ways that are very different from existing related and familiar mental models.

That is why to my mind the only way "in" to arriving at an understanding is to look at money- all moneys- as technology, as technical machines that are different implementations of accounting rules.

BTC is a "store of value" "secured" by burning energy because it is an asset system of record, a ledger, that uniquely for the first time in human history cannot be changed either directly or indirectly (e.g. by inflation) by a political actor who "governs" it. The "value" of a BTC is mathematically related to the cost of energy, and to the demand for use of that sort of ledger. What we have seen is that there is significant and growing demand for this sort of ledger, a ledger that is independent of the political processes that exist in every government, and were some problem with BTC itself to emerge, there are now different implementations of the idea that this demand would shift onto. But most of the brains that have the capacity to study and find such problems in BTC's implementation have done so and have not yet found them, so its value is really as the best known solution to a problem that we didn't know we had, and now we do.

Not sure if that makes sense. Thanks for the engagement.

If we're talking about the value of a currency, we're talking about what we can get in exchange for it. And when we talk about the store of value, it's what we can get in the future. With Bitcoin, we know it must burn energy, so we can get something only less that energy. The currency may get more "believable" due to the burning, when you look at sacrifice as commitment. But what are they committing to? Burning more in the future, because they now have coins they want to keep their value?

The funny thing is that most people trade in virtual Bitcoin they don't control. Because it's more comfortable and the ledger doesn't support the volume. So they need a government to assert their claim on their coins. I guess one can't even get Bitcoin from their ETF and needs to round-trip to some other currency.

The market is settling out of chain, because it's cheaper.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4727999

Will try it this way. The store of value is a derivative result of the actual innovation, which is- BTC for the first time is a computationally secure mechanism that provides a system of record, the contents of which are somewhat resistant to political attack and manipulation.

A system of record is the basis on which rule of law exists, the basis for accounting and financial transactions, the basis for property, etc. Proof of Work vs Proof of Stake vs others as the "costs" for maintaining those systems of record, are experiments, empirical discovery processes to see which one(s) over what timeframe hold water.

Specifically to the points:

> BTC vs Gold

Yes. BTC is a technology that has wider use cases than gold. Store of value is just one use case.

> Who is paying for those watts and why?

Right now, people who want to make money, it is economically viable to turn stranded energy into "mining". Who is benefiting from the use of the ledger for store of value and medium of exchange? Often, not always, elements considered criminal by most governments as well as people whose legitimate needs are not being met by their governments.

> store of value...we can get something only less that energy

This is where I think the disconnect between the mechanism that BTC is, and these "rhetorical" questions, is greatest. BTC is a system of record platform. We have lots of other ones. All systems of record require upkeep. They are out there, they are expensive, we don't think about them. They are just people's jobs. Every county has a system for property and title maintenance. Every single financial institution has a ledger- many ledgers. etc.

Many of these ledgers are private. Oracle, the database company, originally became a big business on being the underlying mechanism for millions of private systems of record around the world. In every one of those ledgers, there is a DBA who can do UPDATE X SET VALUE = Y WHERE KEY = Z and often does- certainly "legitimately" governed by the various policies and protections and business rules and so forth that apply to the ledger. But sometimes those UPDATE SQL statements are "illegitimate" and those often occur when the political and governance mechanisms in the business or in the country are breaking down.

There isn't any of that SQL manipulation in BTC. Storing asset holdings is again, just one use case. Attestations, like on off-chain ownership, are another.

And to be sure:

> The market is settling out of chain, because it's cheaper

Absolutely- or rather, there is a lot of implicit cost hiding and inertial convenience in existing systems, as one would expect. And they work "well enough" in a "worse is better" sense. BTC may be too good, too "perfect", too expensive, as a system of record, long term. We'll see.

Hope that makes sense. Cheers.

At the same time I have a hard time accepting that people could see use in the inherent waste of energy. And it irks me when it's framed as use of "stranded energy". Because that's far from reality.

I've heard two voices so which is it to you? Is Bitcoin useful now and worth the lost energy? Or is it an experiment of an interesting tech gone too far?

Relative to other blockchains, like PoS ETH, etc- the question of whether BTC is "worth the lost energy" does have meaning. I think when one looks at the full spectrum of use and failure cases, the "lost" energy is an important part of the value proposition that BTC as technology offers. I don't see ETH or other PoS replacing it. Instead they are kind of complementary.

As a technology, like all technologies, BTC certainly has costs and externalities. Money as a technology is as important, say, as transportation technologies. So look at cars. Cars powered by internal gas-fueled combustion engines could definitely fit into the classification of "experiment of an interesting tech gone too far" given the incredible waste, ecological and sociological damage, and climate impact car-based travel and -based societies incur that, for instance, are lessened in mass transit-based societies. But we are stuck with cars, their global use continues to grow, and we're adapting, introducing and scaling electric, more efficient materials for roads and the vehicles themselves, safer automated driving, etc.

There is no going backwards. BTC and its ilk are part of the future, for both good and ill, IMO.

Specifically as a store of value, I do think BTC has a bright future. I have a small portion of my net worth in BTC, small because there are still non-nil risk and failure cases that could impact it specifically, and diversity across risks is important. It is also important to understand what one is getting oneself into in terms of one's investments. It is an "active" investment, not "passive." People who are looking for passive-like benefits should not look for them from anything in the "crypto" space.

One thing I'm wondering: did you acquire actual Bitcoin, or title to it?

In the crypto space there is data to quantify the cost of divergence. People who want to just get off the train- fine- there are others willing to play/drive.

Re: actual BTC vs title- the BTC I count is that which I only have title to, e.g. held by a custodian. Yes, not your keys, not your coins- but as both a technologist who has had to manage- and has lost data- and as someone also with a background in the financial space- custodianship is one of those essential cultural/behavioral features- it only works if people follow certain rules, and those who do not are punished. My custodians have been around for a while and are I believe properly incentivized. As such they will be better suited to asset management than I am, as a single point of failure. Once more mature multisig/social auth workflows are worked out I will probably move to those. I am lucky to have partners who can play parts in those.

I'm arguing that the unique energy demand characteristics of bitcoin mining allow it to support building renewable energy projects and balance electricity costs and thus it has effective positive contribution to the environment.

Whether it's used to mine bitcoins or cool a house is irrelevant, except that the demand for cooling a house is location and time sensitive, whereas bitcoin mining is cost sensitive. This flexible consumption gives it unique properties that support deployment of renewables.

Please explain what you mean by "false economy". Is the economy for skins in a game you don't care about "false" because you don't like that game?

Not if someone paid me to do it. That's the point. If there was money in hauling ACs around the US and running them on the cheapest electricity the local market could provide, we'd have exactly the same false economy.

(Besides: the GP points out that Bitcoin appears to be sufficiently profitable on NYC electricity prices, which are not cheap. They also appear to be sufficiently profitable on "retiring coal plant" prices[1], which undermines any kind of unique incentivization of renewals argument.)

[1]: https://www.indystar.com/story/news/environment/2023/12/05/c...

How is such a purely hypothetical scenario useful as an argument?

It's like saying: "If nobody ever did physical harm to anybody, we could get rid of some part of law enforcement." Not useful because it's simply not the case and very likely never will be.

> They also appear to be sufficiently profitable on "retiring coal plant" prices[1], which undermines any kind of unique incentivization of renewals argument.

Bitcoin mining incentivizes any kind of generation that cannot be consumed by a more profitable process or use case. If the price of electricity on a mostly fossil powered grid is low enough, then Bitcoin mining will be profitable. Same goes for a mostly renewables powered grid.

There are two ways, politics can handle this:

A) Impose a high enough carbon tax on fossil generation. This will lead to higher electricity prices for the fossil grid, possibly making Bitcoin mining unprofitable. But it will also make other uses of electricity unviable.

B) Regulate that Bitcoin mining is prohibited under certain conditions (location, grid generation mix, ...)

B doesn't appear wise to me. Since it's highly subjective what kind of energy/electricity use one deems useful/legitimate. I personally find the use of a > 100 horsepower private car or a private jet totally illegitimate and would welcome regulation that drastically hinders these absurd uses of energy.

Gold worked as a currency as it was independently verifiable from either side of a transaction. Modern currencies work so long as they’re backed by credible assurances of their value. Ie passing off fakes is dangerous and they may be used as “legal tender.” (That term could itself be further defined via google.) crypto currencies seem to lack this functionality. (Not wanting to abide by any law outside core network mechanics is functionally close to establishing a new form of sovereignty. Only sovereignty doesn’t work like that.) Also note how hyperinflation is dangerous to the assurance of value of a currency. Similarly, any form of instability could shake those assurances.

Modern currency is also almost trivially, embarrassingly parallel.

And even if that weren't the case, your argument still makes no sense. Every watt that Bitcoin mining incentivizes is then consumed on Bitcoin mining, it's a zero sum game.

It's like building heaters in the desert: if you're willing to spend money for 1GW of electricity to run your heater, someone will build a 1GW plant for you. Now there is nominally one more 1GW plant in the world, but there is 0 extra available power, you're using up all of it to heat the desert.

Bitcoin mining, far from the wasteful ‘heating the desert’ analogy you propose, incentivizes the development of excess energy infrastructure that can be redirected or scaled based on demand fluctuations, acting as a catalyst for innovation in energy production and management.

Moreover, your argument smacks of a dangerous ‘divide the cake’ mentality, suggesting we should cap our aspirations and limit access to energy and technological advancement to maintain a status quo. Should we tell emerging economies that they must forego the benefits of modern technology because we’ve decided there’s simply no more room for energy growth? That’s not only patronizing but inherently regressive.

The beauty of Bitcoin and its underlying energy consumption is that it encourages the search for more efficient, cost-effective, and often greener energy solutions. This is not about wasting resources; it’s about driving forward a future where energy is more abundant, accessible, and sustainable for all. To stifle this under the guise of protecting resources is to deny the very essence of human progress and innovation.

> Bitcoin mining, far from the wasteful ‘heating the desert’ analogy you propose, incentivizes the development of excess energy infrastructure that can be redirected or scaled based on demand fluctuations, acting as a catalyst for innovation in energy production and management.

You do realize that the article here is directly pointing to evidence that the bulk of large bitcoin mining operations are being driven from existing fossil fuel plants that seemed to be on their way to decommissioning?

This is what I don't like about your argument: it's a standard Bitcoin talking point, but people struggle to point to actual examples of Bitcoin mining spurring investment in renewable energy, while it's easy to point to actual examples of Bitcoin mining spurring investment in decommissioned/decommissioning fossil fuel power plants. The facts on the ground just do not support your argument, period.

One can justify all sorts or environmental destruction with this your argument. Pouring oil on the beach is pushing local regulators to act, spurring the creation of less harmful lubricants.

The numbers show bitcoin mining is doing harm.

It's not clear to me that Bitcoin delivers sufficient economic value to justify the vast power demand. What utility do all these hashes provide, except to other people who bought into crypto trading? If there were some positive externality that'd be great, but there's no inherent value to crypto beyond the artificial scarcity.

The worth of a decentralized and uncensored monetary framework is beyond imagination; it promises to unleash the inherent vigor and potential of an organic market-driven capitalism, unfettered and boundless. Such a system stands poised to precipitate the downfall of the fiat regime—a mechanism that has empowered governments of every stripe to engage in warfare and to subjugate their citizenry, not excluding even the most free and illustrious nation such as the United States.

This assertion is far from nonsensical; it is a veritable truth, one conspicuously absent from educational curricula, likely because states find the acknowledgment of their historical predilection for violence too ignominious to bear. Taxation stands as the state’s principal means of amassing resources. Yet, for those states compelled to engage in warfare, mere taxation proves insufficient. Here, the utility of modern fiat currency becomes apparent, facilitating the acquisition of resources beyond what a transparent tax rate would permit. Through fiat, the dilatory effects of inflation serve the dual purpose of either being dismissed as unrelated in the event of victory—perhaps offset by the spoils thereof—or, in the case of defeat, rationalized as a war’s consequence. Regardless, the result is the same: a surreptitious expropriation of the populace’s wealth.

State-initiated actions, notably famine and war, rank as the foremost causes of human mortality, surpassing even health crises and natural calamities.

The inception of the modern fiat system, marked by the establishment of the Bank of England, was explicitly intended for waging war. Indeed, the very creation of the contemporary British Pound was predicated on this bellicose objective.

P.S.: Please excuse the grandiloquence of my discourse; consider it a charming anachronism. I hail from the future, having spent several delightful decades marooned in the 1800s. Only recently have I elected to grace the early 2020s with my presence, and it appears my linguistic preferences have yet to acclimatize to the present era’s vernacular.

It's actually rather more like "we'll rapaciously use energy to bring the grid to its utmost limits, but don't worry, if you pay us lots of money [in some cases, more than we get from our regular business!], we'll happily not use quite enough to actually cause it to buckle and fail." Sounds like an extortion racket, doesn't it?

This is a major flawed assumption. Even in a 100% renewable world, every extra watt consumed carries an environmental cost. It is of course less than when burning fossil fuels, but it's still there, and not necessarily even that small.

> The ability of Bitcoin mining to consume excess renewable energy when it's available (and potentially at low or negative prices) could improve the financial viability of renewable energy projects by increasing the floor price these new projects can sell electricity at.

The world has not run out of useful things to do with energy yet, so this is already a bizarre claim. But even ignoring the uselessness of Bitcoin for a moment, this clearly incentivizes the wrong kind of renewable development. If you need to turn your power to Bitcoin to be profitable, that means you can't afford to store this power even as the technology to do that improves. And if you can't store the power, then you can't be part of a fully renewable grid, so you're essentially building the wrong thing and it's better to leave the resources alone to be used in other projects that can actually be self sustaining.

Lots of things have the potential for lots of things. But we need to operate on the reality as it exists, and that reality is that Bitcoin uses a phenomenal amount of power, to the point that people are paying Bitcoin miners to not use electricity when the grid is at capacity (as mentioned in the article).