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> mathematically guaranteed to be a crypto dead-end Your argument is not mathematical at all. It assumes first that bitcoin needs to appreciate 10-100 times cu

> mathematically guaranteed to be a crypto dead-end Your argument is not mathematical at all. It assumes first that bitcoin needs to appreciate 10-100 times current value. And second, that political willpower exists to then shut it down purely because of energy usage. Neither of those conditions are mathematically guaranteed, nor are they even in the realm of mathematics. I won't even address the underlying assumption that energy usage is unilaterally bad. One possible outcome, for example, is that bitcoin just hovers around its current price for a long time. If feels like every discussion on bitcoin is made of people who either think that it must either take over the world or must go to zero.

hn_throwaway_99 4y ago
OK, of all the comments I've seen trying to refute what I've written, yours is the only one I've seen that at least makes sense. Yes, I totally agree, the crux of my argument is really just "in a proof-of-work system, it is undeniable that electricity spend is proportional to total network market cap", so if the market cap doesn't change, then things can certainly putter along. That said, if the idea is that more and more of the world's economy will be represented by BTC transactions, which these days is pretty much what every person who owns BTC believes, then the market cap can't stay static. I also have a very difficult time believing that if the market cap did stay static for 10 years or so that people wouldn't start to realize "the jig is up". But yes, I totally concede, if the market cap doesn't rise, current electricity spend doesn't need to rise either.
- austinjp 4y ago
  What jig would be up? Mining as profiteering? For sure, and the end of mining is an inevitability. Bitcoin as currency could continue though, no?
  - ironSkillet 4y ago
    The end of mining is the end of bitcoin. If there are no miners contributing to create the network consensus, then anyone can come in with a 51% attack and destroy the integrity of the block chain.
  - hn_throwaway_99 4y ago
    By "the jig is up" I mean that the vast majority of reason people invest in Bitcoin is as a speculative investment. If it stays flat for 10 years, it loses its appeal as a speculative investment, and then would collapse. The other reason some "true believers" (or, as I refer to them, insane cultists) invest in Bitcoin is because they believe it will be "the world's currency", i.e. that it will replace major currencies like the dollar. But, were that to occur, it's market cap would skyrocket, at which point it would require a planet-and-a-half's worth of energy to stay secure, which is also not happening.
    - dmichulke 4y ago
      > at which point it would require a planet-and-a-half's worth of energy to stay secure Ehm, either that or the price of energy increases or the percentage of reward per block mined to mcap decreases.
      - buzzin_ 4y ago
        No, total dollar amount of electricity expenses spent on mining does not depend on the price of electricity. Today, miners are getting paid about $1.5 billion per month. If they like money, they will keep adding new miners and run them until they all in total spend less than, but close to that amount. So, $1.5 billion per month of fresh money needed to offset this pressure on Bitcoin price. There goes the argument that Bitcoin is a good "store of value."
        dmichulke 4y ago
        > total dollar amount of electricity expenses spent on mining does not depend on the price of electricity I agree. As far as I understood the issue was not with the money spent on energy but with the energy spent, no? > So, $1.5 billion per month of fresh money needed to offset this pressure on Bitcoin price. If I understand correctly, you're saying that BTC inflation is a problem and I believe this is true, both in the economic and ecological sense. But there was no way in 2009 to foresee the optimal inflation rate (halving every 4 years isn't too bad actually) and modifying it now defeats the founding principles of BTC, so it'd be a big no no. So it was kind of a trade off and will continue to be, every 4 years a bit less though unless we hit hyperbitcoinization. From an economic point of view the investment into bitcoin is only ever relative to other assets and most of them inflate far more (relative to their mcap).
VHRanger 4y ago
It would be very strange for the current situation to be a long term stable equilibrium for Bitcoin. Bitcoin is a zero sum ecosystem, minus mining fees. So it's a net negative sum by some $20-30m per day in electricity and hardware costs. Why would it stabilize around this particular value?
- datadata 4y ago
  The inflation due to bitcoin mining is already smaller than other systems that are widely considered stable. Note that I don't think bitcoin will actually be stable, but I think inflationary pressures are almost insignificant as a factor that would drive it to collapsing. For bitcoin, 90% of all bitcoin has already been mined. So the remaining dilution for all time is in total just about 11%, and the current annual rate is 1.8% inflation. Compare this to gold, which has 2% inflation and no max supply. There are also technological innovations that could inflate gold much faster, e.g. asteroid mining. Compared to USD as measured by CPI is 8%, and the Fed's own target for CPI inflation is 2% annually, so this is much higher than bitcoin and also unbounded total dilution.
  - FabHK 4y ago
    Don't confuse money supply growth and inflation. (Unless you're a monetarist, of course, but their doctrine has been quite convincingly refuted over the last decade and a half.) Inflation is change in the price of real goods. BTC experiences 1.7% money supply growth p.a. until the next halving, and it had deflation on the way up to $60k. BTC had 100% inflation since then, obviously, way worse than fiat. Fiat had massive money supply growth since the GFC, but virtually no inflation until now (which can be explained by supply chain problems due to COVID, war, and too loose fiscal policy (Biden's stimulus arguably too large, after Obama's was too small)).
paulmd 4y ago
> Your argument is not mathematical at all. It assumes first that bitcoin needs to appreciate 10-100 times current value Satoshi consensus doesn't care about the numeric value of Bitcoin at all. It cares about the value of the transactions conveyed by bitcoin. Satoshi consensus is the observation that if the energy required to fork the network and roll back a transaction costs $X, then it's financially non-viable for someone to roll back a set of transactions that is worth less than $X. That's all. If the value transacted on bitcoin increases above $X, then it is potentially financially worth it to attack the network, unless the amount of energy expended increases accordingly. So the value of the transactions is directly tied to the (value of the) energy expenditure. As a side note, there is no automatic mechanism built into bitcoin that ties these two values together. The assumption is that the value increases and the rewards decrease and it all sort of works out (especially if the network transitions to transaction fees instead of inflation-based block rewards). But there is no mechanism that it must, and if the value dropped really hard all of a sudden, for example, it might suddenly be more viable to attack the network. Attacker energy cost will significantly decrease as rational actor miners realize they're taking a loss and turn off their mining hardware, miner energy expenditure will decrease, which decreases the energy (and cost) required for attackers to fork and roll back transactions. It's an interesting variation of the "frisbee on the roof" attack, like a "fire all the janitors and then shit on the floor" attack. Nobody ever wants to go back into that business because there's shit all over the floor, but without any customers there's no money to hire janitors either. The network now enters a terminally unrecoverable state, without manual intervention from outside actors.
- datadata 4y ago
  > if the value dropped really hard all of a sudden, for example, it might suddenly be more viable to attack the network In practice, users of bitcoin would simply wait a longer time for more block confirmations, namely if you estimated the cost of a double spend attack was $X you would just wait for block confirmations with a total of more than $X of fees + block rewards such that the transaction you are confirming is deep enough in the blockchain to not be economical to include in the double spend attack. Note that the slowness of difficulty adjustments is also a defense here against the further problem of $X decreasing very quickly such that a transaction you had already confirmed becomes viable to attack. Because difficulty changes only every 2016 blocks, if all mining stopped and $X theoretically became 0, in practice you won't get to the next difficulty as no new blocks would be found, so $X in practice wouldn't move.

hn_throwaway_99 4y ago

OK, of all the comments I've seen trying to refute what I've written, yours is the only one I've seen that at least makes sense. Yes, I totally agree, the crux of my argument is really just "in a proof-of-work system, it is undeniable that electricity spend is proportional to total network market cap", so if the market cap doesn't change, then things can certainly putter along. That said, if the idea is that more and more of the world's economy will be represented by BTC transactions, which these days is pretty much what every person who owns BTC believes, then the market cap can't stay static. I also have a very difficult time believing that if the market cap did stay static for 10 years or so that people wouldn't start to realize "the jig is up". But yes, I totally concede, if the market cap doesn't rise, current electricity spend doesn't need to rise either.

austinjp 4y ago
What jig would be up? Mining as profiteering? For sure, and the end of mining is an inevitability. Bitcoin as currency could continue though, no?
- ironSkillet 4y ago
  The end of mining is the end of bitcoin. If there are no miners contributing to create the network consensus, then anyone can come in with a 51% attack and destroy the integrity of the block chain.
- hn_throwaway_99 4y ago
  By "the jig is up" I mean that the vast majority of reason people invest in Bitcoin is as a speculative investment. If it stays flat for 10 years, it loses its appeal as a speculative investment, and then would collapse. The other reason some "true believers" (or, as I refer to them, insane cultists) invest in Bitcoin is because they believe it will be "the world's currency", i.e. that it will replace major currencies like the dollar. But, were that to occur, it's market cap would skyrocket, at which point it would require a planet-and-a-half's worth of energy to stay secure, which is also not happening.
  - dmichulke 4y ago
    > at which point it would require a planet-and-a-half's worth of energy to stay secure Ehm, either that or the price of energy increases or the percentage of reward per block mined to mcap decreases.
    - buzzin_ 4y ago
      No, total dollar amount of electricity expenses spent on mining does not depend on the price of electricity. Today, miners are getting paid about $1.5 billion per month. If they like money, they will keep adding new miners and run them until they all in total spend less than, but close to that amount. So, $1.5 billion per month of fresh money needed to offset this pressure on Bitcoin price. There goes the argument that Bitcoin is a good "store of value."
      - dmichulke 4y ago
        > total dollar amount of electricity expenses spent on mining does not depend on the price of electricity I agree. As far as I understood the issue was not with the money spent on energy but with the energy spent, no? > So, $1.5 billion per month of fresh money needed to offset this pressure on Bitcoin price. If I understand correctly, you're saying that BTC inflation is a problem and I believe this is true, both in the economic and ecological sense. But there was no way in 2009 to foresee the optimal inflation rate (halving every 4 years isn't too bad actually) and modifying it now defeats the founding principles of BTC, so it'd be a big no no. So it was kind of a trade off and will continue to be, every 4 years a bit less though unless we hit hyperbitcoinization. From an economic point of view the investment into bitcoin is only ever relative to other assets and most of them inflate far more (relative to their mcap).

VHRanger 4y ago

It would be very strange for the current situation to be a long term stable equilibrium for Bitcoin. Bitcoin is a zero sum ecosystem, minus mining fees. So it's a net negative sum by some $20-30m per day in electricity and hardware costs. Why would it stabilize around this particular value?

datadata 4y ago
The inflation due to bitcoin mining is already smaller than other systems that are widely considered stable. Note that I don't think bitcoin will actually be stable, but I think inflationary pressures are almost insignificant as a factor that would drive it to collapsing. For bitcoin, 90% of all bitcoin has already been mined. So the remaining dilution for all time is in total just about 11%, and the current annual rate is 1.8% inflation. Compare this to gold, which has 2% inflation and no max supply. There are also technological innovations that could inflate gold much faster, e.g. asteroid mining. Compared to USD as measured by CPI is 8%, and the Fed's own target for CPI inflation is 2% annually, so this is much higher than bitcoin and also unbounded total dilution.
- FabHK 4y ago
  Don't confuse money supply growth and inflation. (Unless you're a monetarist, of course, but their doctrine has been quite convincingly refuted over the last decade and a half.) Inflation is change in the price of real goods. BTC experiences 1.7% money supply growth p.a. until the next halving, and it had deflation on the way up to $60k. BTC had 100% inflation since then, obviously, way worse than fiat. Fiat had massive money supply growth since the GFC, but virtually no inflation until now (which can be explained by supply chain problems due to COVID, war, and too loose fiscal policy (Biden's stimulus arguably too large, after Obama's was too small)).

paulmd 4y ago

> Your argument is not mathematical at all. It assumes first that bitcoin needs to appreciate 10-100 times current value Satoshi consensus doesn't care about the numeric value of Bitcoin at all. It cares about the value of the transactions conveyed by bitcoin. Satoshi consensus is the observation that if the energy required to fork the network and roll back a transaction costs $X, then it's financially non-viable for someone to roll back a set of transactions that is worth less than $X. That's all. If the value transacted on bitcoin increases above $X, then it is potentially financially worth it to attack the network, unless the amount of energy expended increases accordingly. So the value of the transactions is directly tied to the (value of the) energy expenditure. As a side note, there is no automatic mechanism built into bitcoin that ties these two values together. The assumption is that the value increases and the rewards decrease and it all sort of works out (especially if the network transitions to transaction fees instead of inflation-based block rewards). But there is no mechanism that it must, and if the value dropped really hard all of a sudden, for example, it might suddenly be more viable to attack the network. Attacker energy cost will significantly decrease as rational actor miners realize they're taking a loss and turn off their mining hardware, miner energy expenditure will decrease, which decreases the energy (and cost) required for attackers to fork and roll back transactions. It's an interesting variation of the "frisbee on the roof" attack, like a "fire all the janitors and then shit on the floor" attack. Nobody ever wants to go back into that business because there's shit all over the floor, but without any customers there's no money to hire janitors either. The network now enters a terminally unrecoverable state, without manual intervention from outside actors.

datadata 4y ago
> if the value dropped really hard all of a sudden, for example, it might suddenly be more viable to attack the network In practice, users of bitcoin would simply wait a longer time for more block confirmations, namely if you estimated the cost of a double spend attack was $X you would just wait for block confirmations with a total of more than $X of fees + block rewards such that the transaction you are confirming is deep enough in the blockchain to not be economical to include in the double spend attack. Note that the slowness of difficulty adjustments is also a defense here against the further problem of $X decreasing very quickly such that a transaction you had already confirmed becomes viable to attack. Because difficulty changes only every 2016 blocks, if all mining stopped and $X theoretically became 0, in practice you won't get to the next difficulty as no new blocks would be found, so $X in practice wouldn't move.