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Author Topic: 2013-04-12 krugman.blogs.nytimes.com - Adam Smith Hates Bitcoin  (Read 3252 times)
marcus_of_augustus
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April 15, 2013, 10:39:08 PM
 #21

I see this pendulum swing ... bitcoin rallies and gains momentum then a concerted effort at talking it down from the academics and others occurs and bitcoin idles for a while, but then it gains traction again and that becomes undeniable where it starts to rally again and the cycle repeats.  But each time bitcoin ends with higher highs and higher lows.    

The exposure these people bring to bitcoin is invaluable.

Nice analogy.  The beauty of this is that we can't even be blamed for that.

Yes, we are blameless ... it is just the people doing it, they yearn for freedom  Grin

Edit: Adam Smith Hates Paul Krugman?

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April 16, 2013, 12:15:24 AM
 #22

A couple of great rebuttals to Krugman's nonsense:

http://bitcoinmagazine.com/bitcoin-is-not-antisocial-a-rebuttal-to-paul-krugman/
http://juanramonrallo.com/2013/04/krugman-no-entiende-ni-a-adam-smith-ni-al-oro-ni-a-bitcoin/
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April 16, 2013, 12:50:38 AM
 #23

lots of Krugmanites on reddit right now:

http://www.reddit.com/r/Bitcoin/comments/1ce04u/charlieshrem_calls_out_krugman_for_a_debate/

https://localbitcoins.com/?ch=80k | BTC: 1LJvmd1iLi199eY7EVKtNQRW3LqZi8ZmmB
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April 16, 2013, 04:51:24 PM
 #24

http://tvtropes.org/pmwiki/pmwiki.php/Main/AdamSmithHatesYourGuts
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April 16, 2013, 05:02:46 PM
 #25

I did not understand anything.  Maybe I'm tired or something.
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April 16, 2013, 06:27:11 PM
 #26

Quote
I wish someone could make a study on how much energy and/or money is spent with the bitcoin network as opposed to the current monetary system.

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.



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TraderTimm
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April 16, 2013, 07:19:53 PM
 #27

The cost of making one dollar or one us-minted coin is not equivalent to a miner running until they find a block.

Your core assumptions and math are deeply flawed, especially in light of ASICs, which pull ~600 Watts and churn out more blocks than their predecessors, GPUs.

Bitcoin is the currency of the future, not the currency of a fantasy-novel.

fortitudinem multis - catenum regit omnia
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April 16, 2013, 07:22:36 PM
 #28

Quote
I wish someone could make a study on how much energy and/or money is spent with the bitcoin network as opposed to the current monetary system.

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.



I hope this was meant to be troll analysis.
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April 16, 2013, 07:27:20 PM
 #29

Quote
I wish someone could make a study on how much energy and/or money is spent with the bitcoin network as opposed to the current monetary system.

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.

The current daily mint rate is not 0.03%, but 0.017% (25 * 6 * 24 /  21e6).  And it halves every four years.

It seems that you're more or less right, though:  if bitcoin was to replace the US dollar now or in the next few years, it would give an incentive for people to put a huge amount of energy into computing power.

It would be as if the government was paying people to consume electricity.  The more they would consume, the more they would get paid.  No wonder the consequences would be disastrous.

So I have to admit that you made a point.

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April 16, 2013, 09:11:27 PM
 #30

cost efficiency will drive mining devices to be built into heaters, hot water systems etc...

then it wouldn't look as bad anymore I'd guess.

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April 16, 2013, 09:27:08 PM
 #31

2012 Revenue     (from the various wikipedia pages)

BofA US$ 83.33 billion
Wells Fargo $86.08 billion
JP Morgan Chase $97.03 billion
Citigroup $ 70.17 billion

Visa $10.421 billion
Mastercard $ 7.391 billion

other Huh

Sum> $354.422 Billion


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April 16, 2013, 10:12:23 PM
 #32

The current daily mint rate is not 0.03%, but 0.017% (25 * 6 * 24 /  21e6).  And it halves every four years.

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.

Quote
Your core assumptions and math are deeply flawed, especially in light of ASICs, which pull ~600 Watts and churn out more blocks than their predecessors, GPUs.

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.

Quote
cost efficiency will drive mining devices to be built into heaters, hot water systems etc...

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.


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April 16, 2013, 11:14:00 PM
 #33

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

Quote
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).

Your point about bitcoin leading potentially to a massive consumption of energy is right, but the way you seem to conclude that it would lead to some kind of feudal system where early adopters subject all others is not clear.  Bitcoin is a voluntary currency:  I can't force anyone to accept it if they don't want to.  So bitcoin does not give any special power over anyone.

The point about energy consumption is definitely interesting, though.  I admit I hadn't thought about it enough.  So far I was just thinking that in a free world people have the right to use as many energy as they want, but when this energy consumption is a race to obtain some valuable resource (monetary symbols, for instance), the amount of energy involved can be humongous, indeed.   It's not clear to me which proportion of the total power consumption that would represent, though.  

Quote
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.
The idea was not to recycle generated heat into electricity, but to use this heat for what it is.  Heating is one of the major usage of electricity.
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April 17, 2013, 06:56:00 AM
 #34

 So far I was just thinking that in a free world people have the right to use as many energy as they want, but when this energy consumption is a race to obtain some valuable resource (monetary symbols, for instance), the amount of energy involved can be humongous, indeed.
Technology advancements are hard to predict: in 10 years maybe new form of power could be developed that could bring cost of electricity (both economical and environmental) close to zero.

Maybe someone finds a viable way to harness anomalous heats produced by LENRs, or new nanotechnologies could convert efficiently solar light, or genetically enginereed bacterias could create energy converting wastes.

Who knows?

Articoli bitcoin: Il portico dipinto
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April 17, 2013, 08:29:40 AM
 #35

@BubbleBoy,

With the US consuming around 20% of the world's electricity production, then in the wildly successful hypothetical scenario you described, bitcoin mining consumes 1-3% of the world's electricity (using your numbers).  With the natural incentive to make optimal use of the waste heat, a likely large majority of this energy would've been consumed for heat anyway, so bitcoin mining would really only be contributing an additional few tenths of a percent to world electricity consumption, and halving every four years.  Depending on how mining is distributed amongst nations, these numbers are likely irrelevant to most in terms of their national energy policies.  And of course this does not factor in the cost savings from the monetary systems Bitcoin has supplanted.
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April 17, 2013, 09:10:29 AM
 #36

Quote
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.
The idea was not to recycle generated heat into electricity, but to use this heat for what it is.  Heating is one of the major usage of electricity.

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.


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d'aniel
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April 17, 2013, 09:35:24 AM
 #37

@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.
Ah, whoops, I see what you were doing now.  Well then let's tack on an extra 15 years for Bitcoin to take over the world and call it even Smiley
grondilu
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April 17, 2013, 09:58:13 AM
 #38

It's a weird reasoning though.

The initial assumption is that bitcoin becomes the world currency in a not too distant future.   Then it is concluded that bitcoin mining would be a prominent part of world's energy consumption.  This would obviously raise energy costs, and thus would make lots of people unhappy.    But since bitcoin is a voluntary currency, this means that those unhappy people would stop using bitcoin.  Which contradicts the initial hypothesis.

Is it to be concluded that bitcoin can not be successful in a near future?   No, it means that the initial hypothesis is wrong:  bitcoin can not become the world currency any time soon.    Not so surprising.   People do not agree on what money should be anyway.   When I was a goldbug, there were quite a few people around me who told me that saving gold was ridiculous, that gold was a Ponzi scheme, a barbarous relic and so on.  So if even gold could not gather a consensus about money, surely bitcoin will not either.  This does not mean it can not be successful.   To me, bitcoin is already pretty much successful.  It does not have to be used by every single human on the planet, after all.  As long as enough people use it to provide a satisfying liquidity on the exchange market, it will be successful as a currency, imho.

What could happen, for instance, is that as bitcoin gains value, more and more bitcoin users feel concerned about the enormous energy consumption.  Those people would either decide to use an altcoin, or fork bitcoin into an alternate chain with no more mining rewards or a much reduced subsidy.

Anyway, imho what will happen depends much more on social and psychological aspects of human behavior than on technical factors.  It's very difficult to foresee.
grondilu
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April 17, 2013, 10:31:35 AM
 #39

So far I was just thinking that in a free world people have the right to use as many energy as they want, but when this energy consumption is a race to obtain some valuable resource (monetary symbols, for instance), the amount of energy involved can be humongous, indeed.
Technology advancements are hard to predict: in 10 years maybe new form of power could be developed that could bring cost of electricity (both economical and environmental) close to zero.

Maybe someone finds a viable way to harness anomalous heats produced by LENRs, or new nanotechnologies could convert efficiently solar light, or genetically enginereed bacterias could create energy converting wastes.

The energy production capability does not matter because bitcoin mining is a race.  Bubbleboy's point was that the cost of mining would rise up to the market price of bitcoin, whatever the energy production technologies are.
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April 17, 2013, 11:22:28 AM
 #40

The initial assumption is that bitcoin becomes the world currency in a not too distant future.   Then it is concluded that bitcoin mining would be a prominent part of world's energy consumption.  This would obviously raise energy costs, and thus would make lots of people unhappy.    But since bitcoin is a voluntary currency, this means that those unhappy people would stop using bitcoin.  Which contradicts the initial hypothesis.

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 !).


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