Bitcoin mining pointless?

[FreeMoney]

 
I think all of these have solutions, but they require work, where bitcoin as it is now is pretty solid (until someone breaks sha256 (which will surely happen before the last million coins is generated)).

Just so no one freaks out. Encryption systems don't break all at once and we can move to a different one when needed.

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[commlinx]

Just so no one freaks out. Encryption systems don't break all at once and we can move to a different one when needed.

I'd gathered that would be the case. It's a little off-topic but only having a basic understanding of hashing and cryptography it's something I've wondered a while, given the low cost of modern storage and Internet bandwidth why are the increases in bit length over time somewhat incremental and not something huge like 8192 bits / 1K?

I can understand for high-traffic things like SSL and things that need hardware acceleration, but for applications like signing a single document, encrypting small but important documents and generating things like bitcoins where the difficulty is being manipulated to make it harder as time goes on I never really understood why it wouldn't be done?

[kripke]

I don't know precisely what proof of work entails but if it needs to be beefed up or elongated to slow down the rate at which btc is generated then surely the 'filler' could be some computation that is of greater general use? Like folding proteins or working out further digits of some transcendental number or something! Perhaps I can't see the wood for the trees but it seems extraordinary that wastage should be intentionally built into a system. I'm not picking on bitcoin in particular, just in general the idea that it is self-imposed perplexes me.

Basically, a very simplified way of looking at it is that you have to find a particular value of n such that f ( n ) returns a desired value (you nit-pickers in the back row keep quiet! I said this is simplified). The function f is designed in such a way that changing the value of n even the tiniest bit gives a completely unpredictable result; f( 1 ) might give 33929494, and f( 2 ) might give 4. So the only way to find the value of n that solves the problem is by brute force: try each possible value of n until you find one that works. The value of n that solves the problem is called the proof of work.

The function f and the value n have an important use in Bitcoin, so the solution is not just some pretty value that gets put on the fridge for a few days then quietly gets buried in the recycling bin.

Your idea of using 'useful' calculations to maintain the rate is interesting, but I'm not that it can be worked in. The problem has to fulfill two criteria. First, it has to be something that can be dynamically adjusted to compensate for more and more computers coming online to solve it. Second, the problem must be difficult to solve but easy to verify the solution, because every client will verify the solution at least once, if not several times. And, let's face it - we're dealing with money. A lot of people will be very motivated to claim they found a solution, so we must be able to check their claim quickly and easily.

'Useful' calculations could probably meet the first criterion by varying the number of folds, or the number of digits to solve, and so on.

With the current setup, finding the solution is very hard, but checking whether the solution is correct is, comparatively speaking, trivial. If someone says "Hey, the answer is 542214675," you don't have to try all the values from 1 through 542214674 - all you have to do is plug 542214675 into f and verify that the result meets the requirements. I'm not sure the same thing can be said about folding proteins, extending a transcendental number, and so on - I suspect you would have to duplicate the entire work effort to verify its legitimacy.

Surely after a while security of the network stops becoming an influencing factor. There reaches a threshold where you can clearly say 'the system is secure'. From what I can gather this is at some point where 50% or more of the computational power of the network is not within the control of a single user? I don't know where this point is, I'm sure this figure is completely wrong, but equally I'm sure the point was passed ages ago when bitcoin was in its infancy, when security was still a legitimate concern.

By this I mean, the security of the system increases as more and more user mine bitcoin but the advantage to security of having 100 million unique miners is, in truth, of no real difference to having just 1 million.

There is a point where improving security is pointless. After this point the energy expended by the surplus bit miners can be considered to be wasted if the function of mining is to check and secure the bitcoin network.

If more a more people became interested in bitcoin mining then the wasted energy will increase exponentially, especially if as I understand it, the difficulty of mining those bitcoins increases as the number of bitcoins tends to 21 million.

I'm not sure that protein folding can be dynamically varied in difficulty but I believe that it is possible to estimate how long it will take to complete the task to some degree of accuracy. Folding@home works by distributing work units to clients who then return the units to the server along with a digital signature. I'm guessing this doesn't work for something decentralised like bitcoin.

I don't claim to have a solution of how this surplus processing power could be better utilised, but at the moment it seems a tiny bit crazy that all those processor cycles are doing nothing more than solving puzzles of no consequence. The only purpose these processors serve is to actuate the bitcoin system. Something that could be done using far less energy as security, after a point, is not a concern.

That is what I mean about inefficiency as being a self-imposed feature of the way bitcoin is designed.

[Kiv]

Energy used for mining is not necessarily wasted - I live in a cold country and my mining computer produces heat for my home using energy that would otherwise be spent on electric heating.

You could say that electric heating is actually the wasteful thing since that electricity could be being used to secure the Bitcoin network

[marcus_of_augustus]

The total energy consumed by the miners on the bitcoin network is probably less than two large semi-trucks (~350 kWatt) ... is it really such a huge burden on the environment considering the millions of trucks on the roads carting useless crap around for wasteful govt. projects?

Go pick on someone who's really fucking things up.

EDIT: Let's just say that I'm not losing any sleep over the bitcoin network wasting energy ...

[rezin777]

In my opinion bitcoin has more potential to improve society than the rest of the distributed computing programs combined.

Miners profit from Satoshi's creation. I'm sure this was intended. There are enough people that place value on bitcoins to make mining profitable. Let's not fool ourselves, how powerful would the network be if everyone was working at a loss?

If someone designs a way to make more profit with the energy these miners are using, I'm certain that most would switch. Mining is extremely competitive, and my guess is that it will continue to become more competitive as bitcoin grows. Miners are not philanthropists, they are businessmen. Profit motivates.

I am simply amazed at Satoshi's work. It seems odd that someone combines the talents required to create bitcoin. Knowledge of many different fields are involved. And so far, it's working.

So again, find a more profitable use of the energy, and people will come on their own. As with bitcoin, they won't even need to understand it completely, because they will understand their bottom line.

[kripke]

The total energy consumed by the miners on the bitcoin network is probably less than two large semi-trucks (~350 kWatt) ... is it really such a huge burden on the environment considering the millions of trucks on the roads carting useless crap around for wasteful govt. projects?

Go pick on someone who's really fucking things up.

It's not just energy that's being wasted in theory, though; it's also computing power unnecessary to the core task of Bitcoin except that it has a predictable difficulty.

It would be nice if the mining process could incidentally cause some external benefit. If we were deciding between two scarce physical stores of value (say, gold and something else), and gold requires the mining process it does today whereas the alternative requires equivalent expense and involves equivalent scarcity but happens to reduce global warming or contribute to medical research, there would be little reason to choose the former.  (The only reasons would involve the purity of the object as a store of value without any incidental worth, but there's little reason in an efficient economy to believe that that matters in the long run.)

Thanks, this is exactly what I mean!

[goatpig]

There is no limit to the useful level of security in the network. As people join the network, the wealth it represents increases, so it is more prone to attacks. There is about 9 millions dollars worth of Bitcoins in circulation, about 5~10k BTC sent per hours, and 700~800 gh/s to maintain it, which means you can expect the network to be safe under these conditions considering how much money has to be spent to achieve half of that power to double spend a few grands. Now assume the network doesn't increase in size but the representative wealth is now $100,000,000 and you have a problem.

You also need to take in account that the network hashrate is directly related to the price of the BTC, as the higher the price goes, the more profit there is to make out of mining. The distribution of BTC is also a critical point. You can't just magically bestow 21 millions Bitcoins to one guy and expect people to be willing to buy them off of him. It has to be distributed under a controlled inflation system. The publicized rate of inflation ensures adopters can safely invest in the currency. And what better way to distribute the BTC but to reward the people that are spending resources to ensure the security and validity of the network?

[BitLex]

...what counts as "proof of work" for Bitcoin could theoretically be something more productive...

yes, you're right,
theoretically it could be something more productive

Do you have an improved, better way, to accomplish the same tasks ?  ;-)

I'm sure if you have a better design, people would flock to it! I await your offering.

[goatpig]

This point is consistent with mine, though, and with the argument generally being made in this thread.  You can theoretically have the same incentives for mining (and its benefits to the integrity of the Bitcoin network) even if there is a positive externality to mining.  If anything, you would get more of such incentives because people would have reasons to mine in addition to its profitability; nothing depends on that, and it wouldn't be a reliable market force, but it would nonetheless be a benefit to the Bitcoin network.

Ima simplify this thing so you understand the point once for all:

Is mining required? Yes (see proof of work/proof of time). After all this is a virtual currency, you need some sort of validation process, hence cryptography, which leads to hashing to verify it.

Is the difficulty increase required? Yes. Simple increase in network hashrate doesn't mean better security. If a cpu can validate a block in a few seconds at 800 gh/s, then it can inject a falsified a block that easily as well, resulting in double spending and forks from all over the network. If anything, this would be a waste of computational resources.

Is the security required? Do I even need to answer this one?

Is the fixed amount of blocks per hour needed? Yes. It makes more sense to secure the system by verifying one big block every 10 minutes than a small block every seconds. As a matter of fact, that's also a measure to save resources. It is beyond me that you could think bandwidth and computational efficiency were not considered in the building of a p2p network... Hell, under your logic, why would people have bothered researching gpu mining, if they're making a point of "wasting energy" to mine, as you portray it.

Can there be positive externalities coming from hashing? rofl... Have you ever coded, have you ever looked at a cryptographic problem? Actually you don't need to, a little common sense will suffice. What other kind of use would you put the data resulting from the process of validating a unique cryptographic problem? Gimme a break... The energy used for hashing is a requirement, period. The difficulty is not optional, the security it engenders either.

Now if you so wish, you can research fpga/asic hashing, smaller die process, supra conductors, better mining software, or hell, a way to recover the heat dissipated by the video cards. But your insistence in reusing the data processed for the hashes for some other benefit just indicates that you don't know what you are talking about.

This isn't really a response to the argument in this thread, just to the words in its topic.  But as an aside, since I see a related point a lot in the forum, it's important to understand that there is a good degree of both arbitrariness and potential sophistication in the particular mechanism in which Bitcoins were "bestowed" by the protocol and initial network.  Likely the mechanism was a careful strategic choice as to what would successfully grow the network and give the original developers and promoters of the technology a reasonable return in order to encourage that growth, but there are any number of other models that would be equally consistent with most of Bitcoin's core principles, both ideological and technical.  For example, you could have a system very similar to Bitcoin except that it bestowed less of a reward for early mining.  Such a system would probably have better distributional properties than Bitcoin's present system, but it's an open question whether a system like that would ever have taken off.

This response is directly related to the argument ("is mining pointless"), and you even explain why yourself. Proofing the network is a necessity, that it takes resources is a fact. That the Bitcoins need to be distributed in some sensible fashion is beyond the any need for explanation, hence mining is necessary. It allows the network to exist, it secures it and provides a proper way of disseminating the Bitcoins in the network. Try to take one of these elements away and you hurt that balance, in which case I'll simply quote you:

but it's an open question whether a system like that would ever have taken off.

[marcus_of_augustus]

Is the fixed amount of blocks per hour needed? Yes. It makes more sense to secure the system by verifying one big block every 10 minutes than a small block every seconds. As a matter of fact, that's also a measure to save resources. It is beyond me that you could think bandwidth and computational efficiency were not considered in the building of a p2p network... Hell, under your logic, why would people have bothered researching gpu mining, if they're making a point of "wasting energy" to mine, as you portray it.

You seem to be ignoring or misunderstanding my point; I haven't questioned why anyone would mine, nor have I questioned the need for mining in a network like Bitcoin.  The question is whether the particular choice Bitcoin made among the many possible mining infrastructures that satisfy the demands of such networks is the optimal one in view of the potential externalities (positive or negative) of the mining activities.  The particular choice -- as the developer of the network, not a client of it! -- is arbitrary, or at least arbitrary within some constrained range.  As a very simple example, imagine that one candidate hash algorithm favors hardware produced by a violent, morally repugnant regime and another favors hardware produced by a regime you want to support; why would you -- again, as the developer of the system, not a user of it! -- choose the former over the latter?

You're perhaps hung on the title of the thread (and the word "pointless"), but that's a red herring, as I've already made clear.  Nobody is suggesting that Bitcoin, in any form similar to its current one, could exist without the need for mining.  The question is just "What kind of mining?"  And again, since you seem to be misunderstanding, it's not "What kind of technology should a user of the Bitcoin network use to mine?"  The question is one about how to design the network.

Can there be positive externalities coming from hashing? rofl... Have you ever coded, have you ever looked at a cryptographic problem? Actually you don't need to, a little common sense will suffice. What other kind of use would you put the data resulting from the process of validating a unique cryptographic problem? Gimme a break... The energy used for hashing is a requirement, period. The difficulty is not optional, the security it engenders either.

Your disrespect is coming from ignorance of the economic point I'm making, even though I illustrated it with a straightforward example, so it's hard to continue the discussion in good faith.  If you're interested, please reconsider the point I made earlier about the broad possible positive externalities from GPU mining.  Who is to say that the present algorithm, which allows for GPUs to be deployed usefully for this purpose, presents the broadest, most positive externalities?

For what it is worth, I am an expert in both cryptography and economics, and I have developed a widely used cryptosystem and written many academic papers on related topics.

Now if you so wish, you can research fpga/asic hashing, smaller die process, supra conductors, better mining software, or hell, a way to recover the heat dissipated by the video cards. But your insistence in reusing the data processed for the hashes for some other benefit just indicates that you don't know what you are talking about.

I have not, anywhere, insisted on "reusing the data processed for the hashes," but your disrespectful tone makes it hard to continue the conversation.  You might consider listening to what people are saying and possibly learning from it, rather than rejecting it jingoistically.

Sounds like you think you've got a better way of doing this ... let's put some of those "supra-optimal, supervenient, potential positive externalities" into practice.

Write your better software, put it up on git-hub and get some skin in the game, stop pontificating about it, just do it.

We'll take it from there and let the free market decide who knows what they are talking about.

My money's on satoshi for now.

[goatpig]

For what it is worth, I am an expert in both cryptography and economics, and I have developed a widely used cryptosystem and written many academic papers on related topics.

For what it is worth, this declaration is worth nothing in a discussion where credentials cannot be verified, and as such, any contributor that is genuinly concerned about the questions discussed in a thread would never resort to that kind of sterile attempt. Then again, reading you all over this thread showed but one thing:

You reveal no understanding of cryptographics or coding in general. Else, you could at least provide one strong example of what a positive externality resulting from hashing cryptographic problem is?

I have not, anywhere, insisted on "reusing the data processed for the hashes," but your disrespectful tone makes it hard to continue the conversation.  You might consider listening to what people are saying and possibly learning from it, rather than rejecting it jingoistically.

What are positive externalities but a beneficial byproduct? What possible beneficial byproduct could result from the use of a piece of software but to reuse part of the data it has processed? Go ahead and name a single piece of software which resulting data can be used for a different, beneficial process than the one it is intended for. None comes to my mind. If your concept of "positive externalities" encompasses the recuperation and reuse of the power dissipated by the hardware, then your question isn't limited to the "design of the network", is it? If you are taking in account the power the consumption, then the problem extends to power efficiency, in which case you need to be more rigorous. Or wait, next you're gonna tell me this isn't about mining anymore, right?

The question is one about how to design the network.

If I had not understood this question, why would I have bothered explaining every step that results in the existence of mining is necessary for this system to be sound? My point, that you obviously missed, is that the design so far works, and that there are no superficial elements in this design. And on this regard, you provide me with another proof that you have no idea what you are talking about:

The particular choice -- as the developer of the network, not a client of it! -- is arbitrary, or at least arbitrary within some constrained range.  As a very simple example, imagine that one candidate hash algorithm favors hardware produced by a violent, morally repugnant regime and another favors hardware produced by a regime you want to support; why would you -- again, as the developer of the system, not a user of it! -- choose the former over the latter?

No choices in this process is arbitrary. Your pretense that developer choices are somehow arbitrary shows that you think Bitcoin is just a crapshoot. Your pretended expertize level in economics would indicate that you know the conditions needed for a commodity to be a sound currency. Your expertize in cryptography implies you know the list of steps necessary to secure a decentralized, p2p network that is continuously producing fresh data from within while blocking outside injections.

If you had those pretended skills you would know that there a predefined set of NECESSARY steps in order for such network to function, and the only remotely arbitrary development decision made would be in regards of the seeding constants and hashing algorithm. And even those are established with efficiency in mind. In what world can a voluntary, open source, p2p project afford to randomly choose its mechanics and expect to be adopted?

Once again, your point about the hardware favoring speaks volume about your understanding of Bitcoins. These kind of externalities are absurd. There is a unique nature to the calculation that has to be processed, that's the whole point of cryptography. You can't just go around changing it without hurting its ability to secure your data, nor can you choose something weaker. But hell, you're an expert in cryptography, you should know that shouldn't you?

Your pretense that externalities resulting from the very fabric of the Bitcoin system should be weighted in the design of said system shows that you think the problematic and conditions the Bitcoin project is trying to address are indeed loose and replaceable at a whim. Again, if you were truly an expert cryptographer and economist, you would know better, or you would present us with the better alternative.

Nobody is suggesting that Bitcoin, in any form similar to its current one, could exist without the need for mining.

If you are discussing design, you are discussing form. Why can't you wrap your mind around the fact that the different parts of Bitcoin form a whole and that changing one would require to compensate with another part or add a whole new concept to it unless one of the foundation of the system is to be compromised, which isn't an option.

If you're interested, please reconsider the point I made earlier about the broad possible positive externalities from GPU mining.

You made no such valid points. A bunch of 'ifs' thrown in by someone uneducated to the matter do not consist in a valid point. I could just as well walk to a car manufacturer and ask him why he isn't building antigrav vehicules in order to save friction wastes and tires. He'd have the same reaction as I am having with you. Do you really think that if such encryption algorithm that emphasis general computing unit architecture (cpu) against parallel, raw power processing power processors (gpu), that the developers of Bitcoin would have made a point of choosing the GPU one for the single purpose of limiting access to a P2P open source project?

Your disrespect is coming from ignorance of the economic point I'm making

Your economic point is the result of your ignorance. What do you expect me to do, praise you for it?

You might consider listening to what people are saying and possibly learning from it, rather than rejecting it jingoistically.

Says the troll... Also a jingoist provides no rationale to his rejection. I gave you a proper counter argument. l2troll.

[Jim Hyslop]

The particular choice -- as the developer of the network, not a client of it! -- is arbitrary, or at least arbitrary within some constrained range.  As a very simple example, imagine that one candidate hash algorithm favors hardware produced by a violent, morally repugnant regime and another favors hardware produced by a regime you want to support; why would you -- again, as the developer of the system, not a user of it! -- choose the former over the latter?

I will not succumb to your reductio ad absurdium argument, but rather I will point out that, when you are designing a system, you tend to focus on just the system and the immediate problem. Yes, the design choices are arbitrary, but the job of the designer is, by definition, to make arbitrary choices. Satoshi was designing a digital currency system - why on earth would he include something totally unrelated to digital currency?

I'm not certain what the argument against trying to find a more productive side-effect for the mining process would be.  The difficulty of the task need not be narrowly predictable for a protocol similar to Bitcoin to work; it just needs to be predictable enough.

Well, I'm going to go out on a limb here and potentially alienate myself from a lot of the people who've been around longer than I have, but there seems to be almost a reverence for "the way Satoshi set it up." It seems that Satoshi and an anointed few have the master plan for details of the road map, and any deviation from that is frowned upon.

Now, putting aside my cynicism, I've already outlined a potential argument against different proofs of work, namely that you need a problem that can be easily verified and cannot be cheated. I don't know if those problems can be easily verified. The amount of work required to modify the system to allow different types of proofs of work is probably far more than the benefits Bitcoiners would derive, especially for something that's considered a "nice to have."

Some more potential arguments:
What if someone doesn't agree with the project that's chosen as the beneficiary of the work? Can we find a project that everyone can agree on? What if we don't? Do we deny someone access to Bitcoin because they don't agree with the beneficiary? That doesn't seem right to me. Your same reductio ad absurdium argument can be inserted here with little modification.

Bitcoin is open source, and anyone can review the software. At the moment, it requires a basic understanding of cryptography to verify that the code does what it claims to do. If you add in protein folding, then in order to understand and verify that the proof of work cannot be cheated, then you now need to become familiar with protein folding. If it gets changed to finding more values of pi, then you have to become familiar with how to calculate pi. The more problem domains you add, the more complex the system becomes, and the easier it will be for someone to exploit a weakness and cheat.

I think that's the most compelling argument: it adds unnecessary complexity. As an expert on cryptography, and by inference an expert on security (the two are not the same), you know that complexity is the antithesis of security. The existing system is simple, it works, and is secure. Yes, it would be nice if it did something that also had a useful side benefit, but I will take simple and secure over complex and unknown any day.

[Jim Hyslop]

Surely after a while security of the network stops becoming an influencing factor. There reaches a threshold where you can clearly say 'the system is secure'. From what I can gather this is at some point where 50% or more of the computational power of the network is not within the control of a single user? I don't know where this point is, I'm sure this figure is completely wrong, but equally I'm sure the point was passed ages ago when bitcoin was in its infancy, when security was still a legitimate concern.

The 50% figure is correct for certain types of attack, particularly ones involving modifying the block chain.

There are other attacks which do not rely on controlling a large portion of the network. The Finney Attack can be carried out by a single user. The basic attack is:
- have some Bitcoins on hand.
- Create a transaction to send those Bitcoins to yourself, but don't publish the transaction
- Start mining, with the above transaction in the block.
- When you find the solution, then immediately create a NEW transaction, sending the same Bitcoins to some unsuspecting victim, who acknowledges payment and sends you whatever it was you paid for
- Publish your block

If your timing is right, you have just successfully double-spent your coins. The only known defense against that attack is to keep the difficulty of creating a block containing arbitrary data as high as possible, requiring the attacker to expend a lot of effort and time. In order to make the attack worthwhile, the attacker will select high-value payments, which (presumably) the recipients will check more carefully before acknowledging.

By this I mean, the security of the system increases as more and more user mine bitcoin but the advantage to security of having 100 million unique miners is, in truth, of no real difference to having just 1 million.

I doubt we'll even get to 1 million miners. As the system matures the goal is to have the majority of users running a "light" client, which does not mine. In fact, right now the option to turn on mining is being removed from the default client - there's no point to mining unless you have a GPU setup. The gold rush has peaked - at this point, only established miners and really determined newcomers will likely set up shop and continue mining.

I'm guessing this [protein folding's centralization] doesn't work for something decentralised like bitcoin.

Ah, yes - that's another consideration. You're probably right.

I don't claim to have a solution of how this surplus processing power could be better utilised, but at the moment it seems a tiny bit crazy that all those processor cycles are doing nothing more than solving puzzles of no consequence.

Then you still have not grasped the fundamentals of Bitcoin. The puzzle has actual dollar value. Solving a puzzle will earn you 50 Bitcoins, which according to Mt. Gox you can redeem right now for about $80. That hardly seems "no consequence" to me!

[mintymark]

I did a thought experiment that I found illuminating.

Bitcoin mining is a little like gold mining as has been said many times before, except that the work involved in gold mining is not useful, even though it does keep the value of gold high.  The value of gold as a currency is just because it is hard to forge because of this work. But men do die doing it.

Bitcoins, on the other hand, are pulled from the mathematical ether with raw computational power, and if that is a waste, it seems a necessary one.

Why not have a bit coin client that can also do useful problem solving? I thought. Well, actually, why not have such a client that is quite separate from bitcoin, but happens to accept bitcoin as a means of payment of the person running the GPU's?

The answer seems to be that technically we are not quite there yet. And that many people offer free computer power via the folding at home network. But I think this could happen by the time bitcoin becomes mature, and could be an alternative way for miners to spend their GPU electricity.

Would it be better to have an electronic currency based on real useful work, maybe, but in fact it does not have to be built into the currency and in fact probably should not be.

[goatpig]

I did already.  You seem more interested in beating your chest and insulting me than in thinking about the problem.  The example I gave is as follows:  the choice of SHA256 and its particular use in Bitcoin will, if Bitcoin grows, create incentives for the development of better GPUs and create economies of scale for those organized on principles like AMD's.  That can have positive effects for those who use the cards both for Bitcoin (which is internalized) and for other purposes (which is an externality, from Bitcoin's perspective).

Excuse my Wikipedia: "In economics, an externality (or transaction spillover) is a cost or benefit, not transmitted through prices,[1] incurred by a party who did not agree to the action causing the cost or benefit."

What you are describing is the direct consequence of AMD's business strategy, which graphics branch produces parallel computing processors and have decided before Bitcoin existed to widen their driver support to other tasks requiring parallel computing. Confusing externalities with a business plan, that only confuses the discussion. Once more, be rigorous. Unless you are going to pretend to me that miners nor gamers want faster, more power efficient hardware.

Then again this a discussion on semantics. If your point all along was "Bitcoin should be designed to have good impact on the world oustide of being a crypto currency", my answer doesn't change too much: it has no room for such a thing, nor does it users care. The existence of Bitcoin alone is cause enough.

Really?  The examples are endless.  A particular file format for storing graphics could be more or less amenable to steganography than its competitors.  A music file format could encourage or discourage the sale of particular kinds of speakers, based on the frequencies that the format faithfully replicates; that in turn could influence how music is written and enjoyed.

None of these are ACTUAL examples. Just chimeras in your head. My tendency of thinking you're a troll is that you have failed so far to provide anything but speculation when asked otherwise. My insistence in asking for an actual, real life example of your claims is so that you understand the detachment your perception of this project has with the reality of its development. What incentive would one have to spend efforts in researching positive externalities for Bitcoin when building and updating the project unless these externalities have a direct consequences on the project, in which case they are not externalities anymore, are they?

You do understand that to incorporate externalities implies limiting your choice in developmental possibilities by rules that are not directly related to the goal of the project. Which begs the question:

Of course many features of it are.  Chances, and judgments, were taken in the original design and in the modifications throughout its ongoing adoption.  Magic numbers are always in some sense arbitrary, but they're a necessary feature of the design of many protocols.  But the choices and judgments don't stop there.

How can externalities be voluntarily implemented if the design choices are arbitrary? Surely if the functionalities the project has to deliver are precise and legion, this will restrict the design choices, which hurts your idea that any precise piece of software is designed on lsd at 4am. This isn't a governmental project afaik.

Is Facebook a crap shoot? Yes. The problematic is far too unclear for a precise developmental line to be isolated. Is h.264 a crap shoot? Certainly not. But somehow you are thinking that there is a lot of leeway in Bitcoin's developement. So again, I'll tell you, the conditions needed to establish a decentralized, currency worthy, virtual commodity are pretty restrictive.

The adoption by any P2P community of any software is in some sense arbitrary and based on marketing, goodwill, and the vagaries of self-interest and public-interest.

There is no marketing in Bitcoin's, since there is no one selling you access to it. As for self and/or public interest, what is arbitrary about that? This isn't a dc++ vs torrent turf war, it is the establishment of a currency. Again, precise guidelines, known problematics.

I didn't mean to threaten you in any way, but I appear to have triggered a needlessly emotional response.  I don't know why.  You don't have to continue in the conversation if it upsets you or if you think I'm producing noise without purpose.  That I'm being as respectful to you as I am, with huge restraint, should be an indication that I'm not trolling for angry responses.

None of this. I am being perfectly respectful with you by explaining why you are ignorant on the matters you are discussing, by pointing how detached you are of certain realities of this project. Was I to praise you for them, then I'd be a hypocrite, wouldn't I? To summarize this discussion, you go something like "Hey, cars polute and waste energy by using oil, why haven't you guys built an engine that turns oil waste into pizzas?", then I come in, tell you that's not gonna happen for several reasons that I outline, and you call me a combustion engine jingoist. My stance is the same as someone witnessing a newcomer question a research group on energy about why they're not researching perpetual movement.

But I agree with you more generally; you're hitting on something important.  Ignoring spillover effects is the methodology either of the impractical academic or the philosophical conceptualist; it would be like saying "don't think about global warming; we're designing CARS here."  The typical way to address a highlighted spillover effect satisfactorily is to show either than it's not important or that it's impossible to address . . . .

Scuse me what? If that company can make a business of selling polluting cars, so be it. The responsibility lies on the consumer, not the manufacturer. No one is forcing you to buy that car, and by buying it and using you are ruining the atmosphere, not the manufacturer. If you only buy clean cars, manufacturers will have to adapt and integrate that to their business strategy. This about as bad as saying guns kill innocents so manufacturers should only sell rubber bullets.

[marcus_of_augustus]

I did a thought experiment that I found illuminating.

Bitcoin mining is a little like gold mining as has been said many times before, except that the work involved in gold mining is not useful, even though it does keep the value of gold high.  The value of gold as a currency is just because it is hard to forge because of this work. But men do die doing it.

Bitcoins, on the other hand, are pulled from the mathematical ether with raw computational power, and if that is a waste, it seems a necessary one.

Why not have a bit coin client that can also do useful problem solving? I thought. Well, actually, why not have such a client that is quite separate from bitcoin, but happens to accept bitcoin as a means of payment of the person running the GPU's?

The answer seems to be that technically we are not quite there yet. And that many people offer free computer power via the folding at home network. But I think this could happen by the time bitcoin becomes mature, and could be an alternative way for miners to spend their GPU electricity.

Would it be better to have an electronic currency based on real useful work, maybe, but in fact it does not have to be built into the currency and in fact probably should not be.

This is a very perceptive and useful observation.

The bitcoin miner network is providing a service that it gets paid for (that of maintaining a currency value that can be used in the economy as money). It should not be need to be said here that sound money in itself is an amazing invention that is efficient at distributing labour, good and services in a free market. The economic benefits from having a properly managed money are enormous and should not be underestimated. In free market of currencies the one that delivers the most benefits will win out, currently we have no such thing. We have an elaborate system full of historical kruft and arcane regulations that is dysfunctional as a financial system of resource and capital allocation. It is administered by a facistic elite hell-bent on self-enrichment, at the expense of the proper functioning of the entire global economy. If bitcoin or crypto-currencies in general can right this listing ship they will be cheap compared to how many hundreds of billions that are being thrown into the current banking systems toxic pile of debts to save it, yet inevitably ends up in bankers bonus pay-packet.

Bitcoin offers a model for using a distributed network of computers, each with an individual economic incentive to perform work, and is a step up in evolution over the volunteer grid computing of folding@home, SETI, etc. It can even be said to be the beginning of a time when GPGPU power connected to the network has become a marketable commodity.

[allinvain]

I think the fundamental reason for the wasteful computations is the 10 minute bound. It has turned out that the difficulty of the sha256 problem can be varied easily. What other computations that do not involve a third party (like Folding@Home) exist in which the time to solve the problem is predictably related to some integer?

Even if you would use Folding@Home or world community grid. What would happen if Folding@Home stopped existing? If you want to change the problem, you would need to have a way to vote in a distributed way over another computation to be performed with some piece of code for the verification of the work performed. This is in principle possible, but how are you going to get an agreement on which particular piece of code? I think all of these have solutions, but they require work, where bitcoin as it is now is pretty solid (until someone breaks sha256 (which will surely happen before the last million coins is generated)).

Hmm, I wonder if or how easy it would be to upgrade the bitcoin network to use SHA3 in the future. Is SHA256 (aka SHA2) that vulnerable to "cracking"?

[allinvain]

Hmm, I wonder if or how easy it would be to upgrade the bitcoin network to use SHA3 in the future. Is SHA256 (aka SHA2) that vulnerable to "cracking"?

People say it could be done, but I think more importantly SHA256 will probably last unless there's a fundamentally new sort of compromise.  It likely won't fail because of improved hardware over the next 20 years, unless we get a kind of improvement that we'd have no reason to expect.

The only thing that I can think of at this moment that would qualify as an "unexpected improvement" (well sort of unexpected) would be a quantum computer capable of making use of a surprisingly large number of qubits.

Now on to the subject of the thread. I personally don't think bitcoin mining is pointless. I like to think of bitcoin mining as sort of what a stock exchange's transaction processing systems do. They process the necessary transactions of the exchange and in return earn a fee for their work. Miners do very much the same thing. Thus the energy expended as a result of this process is not "wasted" or "pointless" because it is used to accomplished a desirable and absolutely necessary task.

If one argues that bitcoin mining is pointless, that is sort of like saying the energy used by cars is wasted or pointless because it doesn't cure world hunger. Kind of silly way of thinking.

To phrase it differently; No use of energy that results in a personally or socially desirable outcome should be considered wasteful.

Perhaps someone can refine my phrase a bit better. But anyways, I was quite surprised when I first saw this thread because I never quite expected that someone would question the usefulness of one of the KEY and ABSOLUTELY necessary components of the bitcoin system.

[BitLex]

the problem with your Aztec gold analogy is,
that in the bitcoin-network we need a quick and easy way to verify that you indeed mined real *gold* and not just some shiny rocks.
it doesnt matter for us, if you find valuable sources of water or other useful stuff, important for us is, that the *gold* is valid.

how are you gonna achieve that with useful work?
if you can't come up with a new design (and so far noone could), the community doesn't have a choice.