Is the periodic reset due to rebooting the machine ? Each week or so or on a given day ?

It's not my intention to question the freedom of people to use bitcoins or watch Nascar. There's one critical difference: in the case of bitcoin the resources employed to mint it are part of the economic design, it's not the desired end result. Free people want a monetary and transaction system and the incentive structure built into bitcoin encourage them to expend resources towards that goal. So if a better system can be designed that offers the same freedom and features with less resource expenditure, everybody is better off and you can objectively call bitcoin "wasteful" by comparison. Whereas the whole point of Nascar is having people's run around with their ass on fire, there's no waste because that's the end goal.



We should discern the minting part of bitcoin (disbursing new coins in existence) from the consensus algorithm (keeping transaction with existing coins safe from double spend). Bitcoin cleverly conflates them during initial bootstrap  so that sufficient security exists despite not much transactions going on, but they are really two different problems.

For the purpose of this discussion let's ignore Ripple and it's ilk and posit that proof of work is the only way to achieve reasonable security in a distributed system. Well, then we should design the system so that it can prevent a given double spend size (say, 1 million dollars), compute how much proof of work we need for that goal, and limit the block reward at that level. We could have a 1 trillion dollar economy on top of this network, it's just that those accepting large payments should spread them out in multiple blocks no larger than 1 million dollars. Hardly a major issue and it caps the energy waste to a negligible level.

This leaves us with the initial distribution problem. It is here where the "proof of work" vs gold parallel exists. There's no fundamental reason that we should waste resources to bring money into existence. We could design quite a number of "fair" schemes that don't involve "mining": gift every person in the country with 10 coins, allot them by lottery to a list of charities etc. OpenCoin decided to gift itself with the whole 100 bln XRP, hardly a fair scheme but again, no resource waste.

@marcus: So I see you have detected the skillful errors I've planted in my calculations. Illuminate us all, if you please.

As with all environmental arguments, this boils down to externalities. You might be very satisfied by the great energy based currency you have, but other people living in Micronesia who are on the receiving end of the higher sea levels would beg to differ. There are many indisputable externalities: increasing electricity price, higher proportion of dirty sources like coal since renewables are limited etc. These other people who have nothing to do with bitcoin have no economic leverage to control it's adoption, so bitcoin can be (moderately) successful despite being an environmental catastrophe.

It also puts some perspective into the whole "but the financial system is wasteful too". At least the money the banksters steal goes into nice yachts, mansions and impressive office buildings. I would rather they didn't steal, but at least it creates some employment and trickledown, and when we get rid of the thieves we can repurpose the buildings to some constructive goal. So I say let's fuck the banksters without trashing the world in the process. Money is just information and there's no real need to go back to the gold age (stone age). Krugman is largely right here despite his alternative solutions being wrong (print and spend more MONEY !).

The point is that transforming high value electric energy to low value waste heat still has major environmental impacts, even if the energy is conserved. You could much rather heat homes directly using gas than transform the gas into electricity before burning it in the mining rig. Because heat -> electricity has 30-50% efficiency and needs major infrastructure: turbines, cooling towers etc.

If there would be a market for heating homes with waste datacenter heat, Google and Amazon would be all over it, building their datacenters near high density apartment complexes. Instead, they put their centers near cheap energy sources and spend even more money on industrial cooling. Because the chip temperature can't get too high, the only way to reuse the heat is to literally build your mining rig into the walls. In the summer they would lay idle, doubling the capital costs.

I just don't see it happening, except for highly unusual circumstances like northern homes who have access to cheap electricity, heat year-round using electricity and not wood/coal/gas and for some reason or another chose to install these new "bitcoin heating panels".

@d'aniel: apples to apples please. If bitcoin, instead of overtaking just the US dollar ,would become the World's currency, then it's valuation would rise even further, to cover all goods and services on the planet, and the waste would rise proportionally. Since US is a major industrialized nation with high energy consumption per capita, when you scale the same scenario at planetary proportions it looks even worse.

That's IReport, where the I stands for any douchebag having something to say.

Clearly. It's not my intention to suggest that bitcoin mining could ever suck all the electricity produced. That would send the energy price skyrocketing. But since bitcoin is money in itself, and not just another energy-derived commodity that the market can find substitutes for, there's no way for society to agree on such a low fraction as you suggest. The way bitcoins are produced demands resource destruction, and the resource destruction is proportional to the real-life value of a bitcoin. So the resources available for consumption will drop (significantly) and the their price would rise to reflect an equilibrium, making non owners of bitcoins poorer in real terms.

The main point here is that, given it's current size, the bitcoin economy is horribly inefficient and this a reductio ad absurdum proof.


Sure, if mining covers only security then less resources are burnt and the comparison with gold becomes less valid. But as you've seen, even 15 years from today the waste problem is still major, so we would have to wait decades to finally gain a decent system. But why not create an alternate system today where say each citizen receives one coin, or some group of charities own them all and spend them into existence ?

It's also not clear if mining is really necessary for achieving security. There are various proof of stake proposals floated in the forums and the Ripple network is using a hash-free darknet consensus algorithm. We'll see where these schemes go. With mining not necessary for either coin disbursement or network security, I really can't see how Bitcoin will survive on the long run.

Sure, but we need to compare apples with apples to understand the true ecologic impact; people keep comparing the puny total consumption of the puny bitcoin network to the whole financial sector.

Roger is a crypto, tech and privacy guy. He's not a PR person, not a finance guy to fix exchanges, and not an economist - obviously form the macro design. So he can't help you with those problems.

He put up a rough draft of a privacy-oriented payment protocol, see it through beta launch, and moved on to other important projects like Tor. He chose to stay anonymous precisely because he knew what kind of freaks his design would initially attract, and being associated with this early cryptocurrency that anarchist and junkies love would affect other things, like getting grants from the US government to develop Tor.

Allow me to quote myself from another thread on the same topic:

---

If the United States dispensed of dollars entirely and replaced all it's ~ 3 trillion $ M1 stock with bitcoins, the current bitcoin daily mint rate of 0.03% would cost today's equivalent of one billion dollars per day in wasted resources. At 5c/KWh that comes down to 20 billion KWh or 20 TWh / day. That's more than the entire electricity production of the United States which hoovers around 15TWh/day.

Even if we allow 75% of the mining cost to go towards capital expenses (asics, rigs, datacenters etc.) we are still talking about a full third of the national electricity production dedicated to bitcoin mining. And producing 750 million dolars worth of mining infrastructure per day is bound to have some ecological impact. You could literally gift a computer to every child in the developing world for a few months  of running the Bitcoin economy.

Bitcoin is the currency of Mordor.



Ok, let's drop the immediate obsolescence of the dollar as implausible, and say it would take Bitcoin 15 years to replace the US dollar. The block reward would halve 3 times to 3.125 BTC and the total mined by then would be around 20 million, bringing daily expansion to 0.0023%. Even in this scenario mining of bitcoins would suck a full 5 to 15% percent of the national electricity production, depending on the capital ratio.

I don't want to split hairs, but if the sheer order of magnitude of these numbers don't concern you, then you might suffer from the modern day version of the gold fever. There's just about no chance in hell a democratic society will allow such a behemoth to live (only to be subjected to the feudal whims of the early adopters that happened to be in the right forum 20 years ago, I might add).

The concept of cryptocurrency and it's privacy and liberty implications are revolutionary. The specific way bitcoins are produced in this chain is bad and can't possibly survive in the long run. Bitcoins will be replaced by better designed cryptocurrencies, there's no doubt about that.

Why are you dividing to 21 million, the eventual numbers of coins ? There are 11 million now, so if bitcoins replace us dollars now, the daily expansion is around 0.03%

Ok, let's drop the immediate obsolescence of the dollar as implausible, and say it would take Bitcoin 15 years to replace the US dollar. The block reward would halve 3 times to 3.125 BTC and the total mined by then would be around 20 million, bringing daily expansion to 0.0023%. Even in this scenario mining of bitcoins would suck a full 5 to 15% percent of the national electricity production, depending on the capital ratio.

I don't want to split hairs, but if the sheer order of magnitude of these numbers don't concern you, then you might suffer from the modern day version of the gold fever. There's just about no chance in hell a democratic society will allow such a behemoth to live (only to be subjected to the feudal whims of the early adopters that happened to be in the right forum 20 years ago, I might add).

The concept of cryptocurrency and it's privacy and liberty implications are revolutionary. The specific way bitcoins are produced in this chain is bad and can't possibly survive in the long run. Bitcoins will be replaced by better designed cryptocurrencies, there's no doubt about that.


Inconsequential. The difficulty will adjust to cover any absolute advantage of ASICS and as long as the mining market is worth 1 billion dollars, the money will go to either electricity, mining equipment or profits. Since the market is competitive the profit margins are thin and most resources are simply wasted.


A nuclear reactor dumps two thirds of thermal energy as waste heat, hot water. Because of thermodynamics you can't make electricity with high efficiency from heat alone, you need very high temperatures differentials. If there is a town near by that can use the waste heat, fine (cogeneration) if not all of it is dumped in the atmosphere or a river. Since ASICS can't exceed 60-70 degrees Celsius, there's little that can be done with that heat. Electricity is expensive to make while low temperature heat is almost useless, we have plenty of that.

There's little connection between the transaction rate and the monetary velocity. I can move money between wallets or I can pay using a PayPal like service, thereby introducing false or hiding real transactions from the chain. This is not simply statistical noise because high worth speculators will abuse your mechanism on purpose to move the exchange rate. Nevermind that there's very little connection between the exchange rate and the monetary velocity.

To control the exchange rate you need to watch it directly, because it's influenced by external factors: fundamental supply and demand, economic cycles, trade deficits relative to the fiat world, speculators, etc.


There's no need to do that, just let the money inflate. It will reach an equilibrium value reflecting the new scarcity level. People will lose money but so would fees make them lose money, or other random confiscation schemes.

If the United States dispensed of dollars entirely and replaced all it's ~ 3 trillion $ M1 stock with bitcoins, the current bitcoin daily mint rate of 0.03% would cost today's equivalent of one billion dollars per day in wasted resources. At 5c/KWh that comes down to 20 billion KWh or 20 TWh / day. That's more than the entire electricity production of the United States which hoovers around 15TWh/day.

Even if we allow 75% of the mining cost to go towards capital expenses (asics, rigs, datacenters etc.) we are still talking about a full third of the national electricity production dedicated to bitcoin mining. And producing 750 million dolars worth of mining infrastructure per day is bound to have some ecological impact. You could literally gift a computer to every child in the developing world for a few months  of running the Bitcoin economy.

Bitcoin is the currency of Mordor.

@Ashley, let's agree to disagree on the "neo-keyensian myth" part, you are obvious not a macroeconomist so pardon my inclination to listen to people who actually have a clue. Like Milton Friedman, a strong free market advocate and by no means a keynesian who would be the first to point out the foolishness of the Bitcoin macro design.

As for the "how are people supposed to save using inflationary money" open challenge, the answer is easy. Acquire and hold cash for the short term, a few months at most, then invest them in any way you like: a bank deposit, stock, a retirement fund, land, your teeth, canned beans, ponzi schemes etc. The inflation tax you are subjected to during the hold period, less than 1%, is negligible compared to other taxes - assuming you pay taxes.

There is simply no such thing as 100% safe and stable way to store wealth, and money should not be hijacked for this purpose. What if by the time you retire the fertility drops to such an extend that there aren't enough young people to service all the old people for their hard earned cash ? Well, old people should get their ass back to work then, and realize a careless retirement is not a right. And price inflation is the best mechanism for that. Something you done in the past has a lower value for me today and I refuse to inherit the society's debt towards you.

ROTFLMAO ! You can always count on the coin community for good humor. This takes me back to the cosbycoin hack... ah... memories.

You need to take on risks to make money, especially in a zero-sum market like this. So buying "too early" does not make you a fool, nobody has psychic powers, catching falling knives, hindsight is 20/20 etc.

However you can't stick your head in the sand and claim you view the world in bitcoin-only colors. There is no price stickiness in bitcoins, no matter how many you have when it's time to spend them you will see people give you twice more stuff for twice more bitcoins (unless you plan on taking them in the grave). So any strategy that leads you to twice more bitcoins in the long run is preferable, and failure to seize the opportunity is a loss, pure and simple. Accept the loss as part of a calculated risk and improve your strategy.

Moving large amounts on small exchanges is not the best strategy, especially if you are not panicky. Gox is decent when there's no panic and you can sink millions without bending it. Perhaps you have personal reasons for avoiding them.

Not really. I don't think demurrage can be sold to regular people. Inflation is simple, everyone can understand that: put your money to work or they will lose value. But having 100 Fc in the account, preparing to buy a car, then see you just missed that price and you have 99.5Fc ? Say whaaat ? "Unit of account" and all that.

Also, they burn the money they collect as miner fees. That just isn't right, it's a very expensive way for society to mint it's money. It's digital gold with demurrage. I think it's better to just gift those money to people who need it - and the Ripple experiment will show if proof of work is really necessary for security.

Otherwise, I 100% concur with the philosophical goals of Freicoin. We should not strive to give rich people an inflation hedge. They should invest, risk and create value. I'm not against wealth, I'm against self-perpetuating wealth, also know as feudalism.

Think of this example: a calamity hits society and everything is harder to produce, be it goods, services, food, etc. Since there are less stuff than before for the same amount of money, increasing prices across the board (aka inflation) are the natural way to restore balance and both wealthy and poor get a share of the goods proportional to their assets, like before. If you strive to maintain the same purchasing power for the holders of wealth, there's no logical outcome other than poor people getting less - because poor people spend most of their wealth while rich people hold it. A more complex argument can be made that even in normal times a 0% guaranteed real return is too high, since no human activity has zero risk.  Zero risk inflation hedges for rich people are always at the expense of poor people.

@rpietila, you just disclosed that you lost 15-20.000$ nominal value in a single day, but rationalized that the loss is not real since you can't get back in easily at large volumes. I objected that the loss is very much real, and it's easy to get 500 coins in this market without much slippage.

A loss is a loss, it doesn't matter what you and I think the future will be. Sure, if it goes back up you recover and then some, but you still have a lost opportunity, you could have made the same money with a lower investment or double profit with the same investment.

@OP, change title to $15 and you can be perma-right again. No wories, your secret is safe with us.

I can easily buy 500@50 in this market. But why would I want that ? The rocket is landing:
http://www.google.com/trends/explore?hl=en-GB#q=bitcoin%2C%20buy%20bitcoins&date=today%207-d&cmpt=q

Good luck with that great strategy.

The past is done, don't think about your total loses. You need to make money now and selling at a relatively higher price is still a profit that can go towards your loss.