The welfare costs of Bitcoin

[Johnii]

the cryptocurrency is not only extremely expensive in terms of its mining costs, but also inefficient in its long-run design. However, the efficiency of the Bitcoin system can be significantly improved by optimizing the rate of coin creation and minimizing transaction fees. Another potential improvement is to eliminate inefficient mining activities by changing the consensus protocol altogether. So there is the possibility of replacing PoW by a proof-of-stake (PoS) protocol which can strictly dominate
PoW and even support immediate and final settlement. There are many fundamental issues of a PoS protocol still need to be sorted out and remains much to be learned about the economic potential and the efficient, economic design of blockchain technology.

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[odolvlobo]

I doubt that Bitcoin will ever switch to PoS.

[DooMAD]

I'm sure that everyone will love dumping their POS-fork coins for more BTC.  But yeah, this just isn't happening.  The best you could ever hope for is a POS sidechain. 

[Coyster]

the cryptocurrency is not only extremely expensive in terms of its mining costs, but also inefficient in its long-run design.

Mining cost you say, remember when it would cost you nothing to mine bitcoin? Now it costs so much, what does that tell you, that's indeed growth, development, improvement, it shows you it's no longer some valueless shitcoin you simply mine with your ordinary computer.

Bitcoin is more than efficient in the long run, if you trace it's growth from 2009 till now, you may then want to edit that part of your post.

[Johnii]

the cryptocurrency is not only extremely expensive in terms of its mining costs, but also inefficient in its long-run design.

Mining cost you say, remember when it would cost you nothing to mine bitcoin? Now it costs so much, what does that tell you, that's indeed growth, development, improvement, it shows you it's no longer some valueless shitcoin you simply mine with your ordinary computer.

Bitcoin is more than efficient in the long run, if you trace it's growth from 2009 till now, you may then want to edit that part of your post.

I appreciate your opinion, but I think Bitcoin has to wait until we see the outcome of Ethereum 2.0 when it becomes POS in the next few months.

[AjithBtc]

the cryptocurrency is not only extremely expensive in terms of its mining costs, but also inefficient in its long-run design.

Mining cost you say, remember when it would cost you nothing to mine bitcoin? Now it costs so much, what does that tell you, that's indeed growth, development, improvement, it shows you it's no longer some valueless shitcoin you simply mine with your ordinary computer.

Bitcoin is more than efficient in the long run, if you trace it's growth from 2009 till now, you may then want to edit that part of your post.

I appreciate your opinion, but I think Bitcoin has to wait until we see the outcome of Ethereum 2.0 when it becomes POS in the next few months.

That's a wrong calculation, just because ethereum is having its transition to POS we can't say it to be more efficient than bitcoin. Maybe there will be some features lacking with bitcoin, but it has got the better things to stay strong in the market. Even without any changes bitcoin stands high above $8500 what about ethereum?

[malevolent]

I appreciate your opinion, but I think Bitcoin has to wait until we see the outcome of Ethereum 2.0 when it becomes POS in the next few months.

Bitcoin doesn't care what is going on with Ethereum so it doesn't have to wait on anything.

And no one has figured out a way to make PoS work without turning a cryptocurrency into a PoS so until that changes the discussion is pointless.

[CryptoBry]

the cryptocurrency is not only extremely expensive in terms of its mining costs, but also inefficient in its long-run design.

Mining cost you say, remember when it would cost you nothing to mine bitcoin? Now it costs so much, what does that tell you, that's indeed growth, development, improvement, it shows you it's no longer some valueless shitcoin you simply mine with your ordinary computer. Bitcoin is more than efficient in the long run, if you trace it's growth from 2009 till now, you may then want to edit that part of your post.

That statement of OP makes me feel a little bit discouraged with Bitcoin but then again, the cost of mining the coins is one of the very reasons why the price of Bitcoin has been growing for the past 10 years and this can continue for a long time until 2140. I consider Bitcoin to be a living organism that is constantly looking for acceptable and effective ways in dealing with the many issues affecting it. Unlike many centralized platforms, with Bitcoin changes could not happen without the acceptance of the community hence no one has the power to dictate what can be in here and that's good but it could also mean that we have to wait with patience for developments to take place.

[stompix]

and minimizing transaction fees

Three words that show clearly you have no clue what you're talking about.
Transaction fees are determined only by one aspect if the number of transactions made by the users is more than the network capacity in that interval. PoS or PoW with 10 million people wanting to make on-chain transactions we will still see fees over 50$ for a tx.

the cost of mining the coins is one of the very reasons why the price of Bitcoin has been growing for the past 10 years and this can continue for a long time until 2140.

No, it's not.
The cost of mining or the cost of the entire network hashrate follows the block reward.
You won't see growth in the hashrate if there is no room for profit made by mining.

I'm sure that everyone will love dumping their POS-fork coins for more BTC.

Look at the title, welfare, it's obvious what the OP is thinking.
PoS for him is a solution for making money while doing nothing other than keeping coins in a wallet.
Too bad for him that free money turns out to be worthless money in the long run.

[DooMAD]

Look at the title, welfare, it's obvious what the OP is thinking.
PoS for him is a solution for making money while doing nothing other than keeping coins in a wallet.
Too bad for him that free money turns out to be worthless money in the long run.

I thought it seemed like a peculiar choice of wording.  My initial impression was to take them at their word that they were concerned about mining costs, but your take does seem to make more sense, heh.

I appreciate your opinion, but I think Bitcoin has to wait until we see the outcome of Ethereum 2.0 when it becomes POS in the next few months.

Bitcoin doesn't care what is going on with Ethereum so it doesn't have to wait on anything.

All of my "This".  

Bitcoin lives in the moment.  Algorithms in other altcoins come and go, but Bitcoin pays no notice and just churns out another block in ~10 minutes.  Give it all the time in the world if you want, PoS just isn't happening.  Every alt fan thinks their preferred method of securing the chain is better.  But roughly every 10 minutes, they're proven wrong.  

[alyssa85]

the cryptocurrency is not only extremely expensive in terms of its mining costs, but also inefficient in its long-run design. However, the efficiency of the Bitcoin system can be significantly improved by optimizing the rate of coin creation and minimizing transaction fees. Another potential improvement is to eliminate inefficient mining activities by changing the consensus protocol altogether. So there is the possibility of replacing PoW by a proof-of-stake (PoS) protocol which can strictly dominate
PoW and even support immediate and final settlement. There are many fundamental issues of a PoS protocol still need to be sorted out and remains much to be learned about the economic potential and the efficient, economic design of blockchain technology.

Rather than changing bitcoin, what will happen is a change in the source of electricity.

At present a lot of bitcoin mining happens in China where they have surplus hydroelectric power (especially in winter in the mountains where they get a lot of rain). Mining also takes place in Quebec for the same reason (hydro-electric power), If some states adopt cheap solar power, mining will migrate there instead. Coal power is being phased out everywhere.

[dothebeats]

Yeah, no. The system is technically designed to reward those who exert hashing power in order to facilitate the processing of transactions and ensure that the network is safe. If we were to switch over to a "cleaner" and "greener" algorithm which is PoS, those capitalists and whales would benefit from everything while the rest of us would probably eat dust and get dumped into every single time. I must admit that we are nowhere near being an energy-efficient network due to the amount of power--a significant portion of which are still from fossil fuels--that we use as a whole, but the mere fact that greener alternatives are already being introduced and utilized by some of the mining farms is already a good sign towards the right way.

Perhaps a fork of PoS bitcoin might happen, but the main chain will stay on where it is currently and  there's no changing the minds of  the miners nor the majority of the community, that's for sure.

[ETFbitcoin]

I appreciate your opinion, but I think Bitcoin has to wait until we see the outcome of Ethereum 2.0 when it becomes POS in the next few months.

Then welfare cost/problem would be solved if people used ETH rather than BTC.

Besides, welfare cost/problem isn't something that could be solved with algorithm which can't be changed easily.

[Khaos77]

the cryptocurrency is not only extremely expensive in terms of its mining costs, but also inefficient in its long-run design. However, the efficiency of the Bitcoin system can be significantly improved by optimizing the rate of coin creation and minimizing transaction fees. Another potential improvement is to eliminate inefficient mining activities by changing the consensus protocol altogether. So there is the possibility of replacing PoW by a proof-of-stake (PoS) protocol which can strictly dominate
PoW and even support immediate and final settlement. There are many fundamental issues of a PoS protocol still need to be sorted out and remains much to be learned about the economic potential and the efficient, economic design of blockchain technology.

Proof of Stake is Superior to Proof of Work.

You have a lot of bitcoin fanatics in here, that are too blind to see that.

As far as PoS issues,
@NAS, has proven to be a line of horseshit from GMaxwell.

The only real issue was not a PoS issue , but the fact most PoS coins have too high an inflation rate.
Some PoW coins like mooncoin and newyork coin also had too high inflation rates.
Which coins like ZEIT has solved by moving to an ultra low inflation rate of .0005% yearly and a burning of transaction fees.

Bitcoin issues that will never be solved using PoW
Energy Waste will continue to worsen
Transaction fees will increase or the network will collapse
Government approval will be required for the miners to host massive electrical draining warehouses
Bitcoin Mining Control will continue Centralized to the Top Mining Pool Operators

[Johnii]

the cryptocurrency is not only extremely expensive in terms of its mining costs, but also inefficient in its long-run design. However, the efficiency of the Bitcoin system can be significantly improved by optimizing the rate of coin creation and minimizing transaction fees. Another potential improvement is to eliminate inefficient mining activities by changing the consensus protocol altogether. So there is the possibility of replacing PoW by a proof-of-stake (PoS) protocol which can strictly dominate
PoW and even support immediate and final settlement. There are many fundamental issues of a PoS protocol still need to be sorted out and remains much to be learned about the economic potential and the efficient, economic design of blockchain technology.

Proof of Stake is Superior to Proof of Work.

You have a lot of bitcoin fanatics in here, that are too blind to see that.

As far as PoS issues,
@NAS, has proven to be a line of horseshit from GMaxwell.

The only real issue was not a PoS issue , but the fact most PoS coins have too high an inflation rate.
Some PoW coins like mooncoin and newyork coin also had too high inflation rates.
Which coins like ZEIT has solved by moving to an ultra low inflation rate of .0005% yearly and a burning of transaction fees.

Bitcoin issues that will never be solved using PoW
Energy Waste will continue to worsen
Transaction fees will increase or the network will collapse
Government approval will be required for the miners to host massive electrical draining warehouses
Bitcoin Mining Control will continue Centralized to the Top Mining Pool Operators

your approach is highly important about Bitcoin adopting POS for more scaling but the issue here is how to convince what you have described Bitcoin fanatics or maximalists to change their mind and become more flexible towards the development of bitcoin.

[DooMAD]

your approach is highly important about Bitcoin adopting POS for more scaling but the issue here is how to convince what you have described Bitcoin fanatics or maximalists to change their mind and become more flexible towards the development of bitcoin.

I wish you the best of luck in your endeavours, but maximalism has nothing to do with it.  It's more like empiricism.  We see on a daily basis what works and what doesn't.  And what definitely doesn't work is the people who believe they can just turn up here out the blue and announce what would be "better" and assume that everyone will just go along with it.  We're gonna need a little more than that to get over our well-founded skepticism of your "novel idea" that's been proposed and rebuked more times than I care to count.  Why should I be flexible when it comes to inviting terrible ideas that would weaken the protocol?  That's kind of a red line for me.  

[alani123]

There already is bitmessage, an instant messaging protocol and app whose creator was inspired by BTC. However, the competition for privacy-respecting messaging alternatives is fierce believe it or not. But really, solutions provided by any certain party aren't satisfactory. Trust and centralization shouldn't be part of the equation if we're following bitcoin's principles. On that logic, with proper encryption, secure communication can happen through any platform.

[DarkDays]

I don't get what you're trying to say?

Sure, Bitcoin does have a tremendous energy cost because of its mining network, but this isn't an indicator of inefficiency in the slightest.

The Bitcoin network can singlehandedly replace every central bank, payment provider and money transmitter in the world. Do you think these have a lower energy cost than Bitcoin's POW-system when combined?

Think again.

[Artemis3]

the cryptocurrency is not only extremely expensive in terms of its mining costs, but also inefficient in its long-run design. However, the efficiency of the Bitcoin system can be significantly improved by optimizing the rate of coin creation and minimizing transaction fees. Another potential improvement is to eliminate inefficient mining activities by changing the consensus protocol altogether. So there is the possibility of replacing PoW by a proof-of-stake (PoS) protocol which can strictly dominate
PoW and even support immediate and final settlement. There are many fundamental issues of a PoS protocol still need to be sorted out and remains much to be learned about the economic potential and the efficient, economic design of blockchain technology.

This is false, it is efficient and secure enough the way it is. Bitcoin is never switching to PoS as your concerns comes from a false premise. Bitcoin mining will become unprofitable, and there will be less and less miners due to its economic development, which is as intended: to slowdown mining overtime.

Coin creation is set in code, regardless of network hashrate. Bitcoin doesn't really care if you spend too much or too little energy to mine it, or if there are millions or a few hundred, it will work fine just the same.

Bitcoin's PoW is proven to work and is here to stay. Furthermore, it is yet to be challenged by any altcoin, PoS or not.

[Khaos77]

I don't get what you're trying to say?

Sure, Bitcoin does have a tremendous energy cost because of its mining network, but this isn't an indicator of inefficiency in the slightest.

The Bitcoin network can singlehandedly replace every central bank, payment provider and money transmitter in the world. Do you think these have a lower energy cost than Bitcoin's POW-system when combined?

Think again.

YES , Bitcoin energy waste is an indicator of it's failure to improve.

NO, the Bitcoin Network can't even match Visa daily transactions , much less the rest of the world's financial transactions.

Bitcoin is deficient in the following
Energy Efficiency
Transaction Capacity
It is not even able to process micro-transactions anymore which was one of it original utilities.  
Transaction fees will increase exponentially as capacity becomes limited , making bitcoin unsuitable for reliable commerce.  

Proof of Stake coins offer
Energy Efficiency
Increased Transaction Capacity
Easily handling micro-transactions
Fixed Transaction Fees , making it more suitable for reliable economic commerce.