What Uses More Power Than Argentina But Doesn’t Dance The Tango?

There’s been a constant over the last few weeks’ news, thanks to Elon Musk we’re in another Bitcoin hype cycle. The cryptocurrency soared after the billionaire endorsed it, at one point coming close to $60k, before falling back to its current position at time of writing of around $47k. The usual tide of cryptocurrency enthusiasts high on their Kool-Aid hailed the dawn of their new tomorrow, while a fresh cesspool of cryptocurrency scam emails and social media posts lapped around the recesses of the Internet.

This Time It’s Different!

The worst phrase that anyone can normally say about a financial bubble is the dreaded phrase “This time it’s different“, but there is something different about this Bitcoin hype cycle. It’s usual to hear criticism of Bitcoin for its volatility or its sometime association with shady deals, but what’s different this time is that the primary criticism is of its environmental credentials. The Bitcoin network, we are told, uses more electricity than the Netherlands, more than Argentina, and in an age where global warming has started to exert an uncomfortable influence over our lives, we can’t afford such extravagance and the emissions associated with them.

Here at Hackaday we are more concerned with figures than arguments over the future of currency, so the angle we take away from it all lies with those power stats. How much energy does Argentina use, and is the claim about Bitcoin credible?

Eggborough power station, Yorkshire, UK.
The now decommissioned Eggborough power station, Yorkshire, UK. Bitcoin requires eight of these 2GW coal-fired power stations to operate. Deut (Public domain).

We have as good an estimate as possible of the power used by Bitcoin miners, in the form of the Cambridge University Centre for Alternative Finance’s Bitcoin network power tracker. At the time of writing it has an estimate of the network’s annual power consumption at 129.1 TWh. It’s easy enough to find global power consumption data and find that Argentina uses 125 TWh in 2019, so on those metrics the assertion that Bitcoin uses more power than Argentina holds water. A quick back-of-envelope calculation shows the figure to be equivalent to a nearly 15 GW power station running flat-out all year round,and looking up some figures for CO2 emissions per megawatt hour for a further calculations that represents about 130 million tonnes of CO2 from coal-fired power stations.

That’s 10 million tonnes more than the entire UK transport sector emitted in 2019.  Arguments that some cryptocurrency may be mined from renewables do not apply, because while those coal fired power stations still exist they are supplying energy which could be supplied by renewable sources that are instead being taken up by the miners. Lest we forget that the Bitcoin algorithm is designed to become more difficult to compute as the blockchain progresses. Cryptocurrency farmers are not unaware of the electricity bills, perpetually seeking out the most efficient mining equipment. This makes for a hazy future, can hardware improvements keep up with increasingly elusive hashes or will the network’s electricity consumption continue to grow?

It’s inevitable that for the time being while our economies are in the transition away from fossil fuels there will continue to be CO2 emissions generated, so if that is the case then those emissions must provide a useful return. If we burn a tonne of fuel oil to move a shipload of freight containers then at least the emissions have done something for us, so is the same true for a cryptocurrency? Does a tonne of CO2 emitted by the miners do anything for us?

It’s reasonable to turn these same question around on traditional currency trading markets. The aggregate electricity usage of traditional stock markets not easily measured, but we know traders go to great lengths to find advantage like building data centers near trading centers for low-latency microwave link access to information.  It’s worth considering that traditional trading uses a non-zero amount of energy and keep it in mind when flogging the cryptocurrency networks as unworthy of these resources. The problem is that Bitcoin just uses so much, present Bitcoin transaction levels are estimated to be equivalent to one half of the energy used by all data centers globally.

What Makes A Currency a Currency?

A German banknote from the period of hyperinflation
A German banknote from the period of hyperinflation. Stadt Plauen, Public domain.

For a currency to be effective it must serve both as a convenient and usable method of conducting transactions, as well as a safe and reliable storage medium for wealth. I can take a pound down to my local Tesco superstore and buy a loaf of bread, or inflation notwithstanding I can put it in my bank account and go to Tesco with it in a year’s time and buy a loaf of bread then.

Putting it in the bank or handing it over at the checkout are both transactions that don’t cost me any extra money and are completed in an instant. That pound (or dollar, or whatever) isn’t just a shiny disc of metal, it’s a tiny statement of confidence in a country’s economy, and jokes about politicians aside, if that country continues to have trade and factories and consumers, it’s a pretty safe bet. A fiat currency such as the pound can lose that effectiveness when the economy goes into crisis, as happened in Germany in the years following the First World War, or in Zimbabwe following the collapse of the country’s agriculture sector after a disastrous land reform programme. When citizens of Germany began needing a literal wheelbarrow full of Marks to pay for break, and a year in the bank saw a Mark reduced to a tiny fraction of its previous value, the Mark had lost its effectiveness as a currency.

The whole point of a cryptocurrency is that it is not a fiat currency backed by a nation state or a real-world asset such as a pile of gold in Fort Knox. A cryptocurrency that is stable and easy to use would be a very effective currency, in that holding it is not risky and it can be taken to a merchant and exchanged for a loaf of bread without problem. Our next question is therefore whether Bitcoin satisfies those criteria and can be considered a useful currency.

The Cost of Bitcoin Transactions

A Bitcoin transaction carries a fee to the miners, it’s a variable rate that at the time of writing is somewhere around $25. There is also a wait for transactions to complete, until they have been placed in the blockchain by the actions of the miners. Therefore Bitcoin is not a convenient currency for transactions; while both of these drawbacks are nothing when buying a Tesla it makes the currency useless as a means to buy a loaf of bread. The Lightning network is an attempt to mitigate this by abstracting micropayments to a peer-to-peer network of participants who conceal their micropayments within a larger paid-for transaction on the main blockchain, but it is not without problems of its own and does not seem to have gained widespread understanding.

A Neapolitan pizza.
The 10000 Bitcoin pizza is famous in the Bitcoin community, but this isn’t it. Perhaps that neither it or Laszlo Hanyecz get more than a passing mention on the whole of Wikipedia should serve as a reminder that the world doesn’t revolve around Bitcoin. Valerio Capello, CC BY-SA 3.0.

So Bitcoin has at least the potential to remain a useful currency for transactions, but does it stack up as a store for wealth? We hear about Elon Musk and institutional investors buying into the cryptocurrency, but what those stories fail to make clear is that those investments are only a small percentage of their much larger portfolios. What about those of us who aren’t multi-billionaires with huge diversified investment portfolios, and who stand to lose our shirts if our one investment goes south? A pile of pounds or dollars in a bank is a safe place to keep our life savings even if it’s not a particularly clever one in an era of low interest rates, so if Bitcoin is a currency we have to evaluate how its safety matches to that of a traditional currency. It’s tempting at this point to cite Bitcoin’s performance over the last decade as evidence of its safety as a store of wealth, and it’s true that had I put even a small percentage of my savings in the currency back when Laszlo Hanyecz bought his famous 10000 BTC pizza I would now be fabulously wealthy instead of a relatively penniless itinerant scribe (I remember reading that news back in 2010 and thinking “That’s cool but it’ll never catch on”, oh well).

But performance and safety of an investment are not the same metrics, so any appraisal of its wealth storage potential should look at it in the here and now: would you advise your grandmother to put her life savings into it? Even the most ardent Bitcoin enthusiast should admit that it is a volatile asset that is prone to sudden falls as well as the occasional stratospheric rise, so it’s difficult to make a case for it as anything other than a speculative investment vehicle and certainly not a safe place for Granny’s hard-earned.

Have We Backed The Wrong Horse?

The above is almost certainly not what most Bitcoin enthusiasts want to hear, that their currency may have the potential to be usable for everyday transactions but elusively remains a volatile wealth store that’s destroying the planet. But they’re awkward questions that have to be asked, otherwise having so far dodged Government financial regulation, the cryptocurrency may succumb instead to Government environmental regulation.

Cryptocurrencies and the blockchains that underpin them are an extremely cool idea, even though the blockchain is not the universal answer to all computing problems that some of its proponents appeared to present it as during the peak of its hype. It’s inevitable that in some form they will be a part of our futures, but perhaps it’s time to ask: In Bitcoin and cryptocurrencies which follow a similar model, have we backed the wrong horse?

180 thoughts on “What Uses More Power Than Argentina But Doesn’t Dance The Tango?

  1. The energy consumption of bitcoin will always be the sum total power draw of all profitable miners, if a limited run of vastly power efficient miners is released that dilutes the profitability of all other miners then the power draw of bitcoin will fall

    However that is not in the best interest of ASIC manufactures (bitmain, innosillicon, etc) so what you get is a steady stream of just slightly more efficient (profitable) machines and as the price of BTC rises it takes longer and longer for the older machines to lose profitability and be turned off

      1. you could easily argue any new anything that uses power that wasn’t used before is “destroying the planet”. the personal computer is a perfect example, microwaves are another, Playstations and even the data processing of the coming IOT revolution, could all be demonized and argued to be “uneccesary, wasteful, destructive to the planet, blah, blah, blah”.

        1. Maybe, but you do not play games 100% of time. BTC miners use energy all the time :/ AND – playing games does not use 100% power of your equipment. Cryptomining devices are always on 100% power consumption mode ;/

        2. Bitcoin is an extreme outlier in terms of energy waste. The fact that some other tools also waste energy does not detract from that fact. Furthermore we should balance the benefits of a technology against its costs. Personal computers have many benefits. Bitcoin has very few benefits. It is already used for various serious criminal activities, a strong negative. It is also used for massive economic speculation, which is a zero sum casino (some gain what others lose), at best. The world would very likely be better if Bitcoin did not exist. If its current trends continue there will be an ever stronger case for government and international actions to criminalize Bitcoin mining and Bitcoin use altogether. Regulations that in effect make it useless would mean that everything currently invested in it is nullified. That might be a very useful signal that serves to curb similar projects going forward.

    1. Looks like this debate has moved on to action with other crypto. They, like ethereum have moved to a staking proof of work system. This will eliminate mining and it’s large power usage. So perhaps bitcoin will hard fork to a stake system, if not everyone should just use crypto that does.

      1. The biggest problem with the staking is the insane investment any one entity needs to join it…a ‘volunteer’ needs to currently invest 32eth….approx More than 30, 000 USD…this is developed only for those who already ‘old money’

        1. While you’re right about the 32 eth for creating a staking node, there are also options to join a stake “pool” for a lesser upfront amount and a small fee paid to the pool…just as one can join a mining pool.

  2. Unfortunately the cryptocurrency power consumption argument fails to make more practical comparisons. How much is the worldwide electrical consumption of elevators? Of hotplates? Of the VISA network? Of the ACH network?

    1. Elevators are pretty efficient, usually being counterbalanced relatively well and of course able to use going back ‘down’ to reclaim some of the cost of going ‘up’..

      VISA might be the most comparable to bitcoin, and its obvious its millions of times less on power consumptions – its just one small set of encrypted data exchanges that direct the banks to move the money around, not a huge amount of wasted cycles that failed to get it right, so are nothing but a pointless electricity cost…

    2. “Of the VISA network? Of the ACH network?”

      If the “regular” financial system were as energy-intensive and inefficient as Bitcoin, it’d show up in fees you pay, in corporate financial statements, etc. You wouldn’t just hear about interest rate fluctuations, you’d hear about electric rate fluctuations due to the effect on profitability.

      If energy costs were an important factor you’d hear about financial firms clustering operations near hydroelectric plants or other sources of cheap energy. The way Bitcoin miners and aluminum smelters try to locate in such places.

    3. There was a time when crypto was consuming 1% of the worlds electricity. At the same time, far far less than 1% of the financial transactions were carried out in crypto.
      If we switched to crypto for all transactions we’ll need to at least double the whole whole electricity production.

      1. Bitcoin energy consumption is not related to amount of transactions. Also, the blockchain would never be used for regular transactions, but only as a settlement system.

    4. i always asked how much fuel do armored cars use? even carrying hard currency in your wallets makes any transport you use have to burn energy a tiny bit more to move the extra mass around. an apples to apples comparison with other hard or electronic currencies is what you need.

      bitcoin makes more sense in a renewables, fission or fusion powered world, but were not there yet.

      1. Bitcoin makes no sense in any world. Easy to use digital currencies can be useful with well designed regulations. But there is no good reason to tie them up with energy waste a la Bitcoin. It is a terrible mechanism that incentivized energy waste. Imagine that we had 100x the current energy production due to fission or whatever. The competitive dynamics of Bitcoin mining are bound to swallow more and more of that, because there will at the margin always be a way to build a more powerful miner by spending more energy.

        1. You are missing the point. Bitcoin is self regulated not by any government. It’s not a Fiat currency that can be printed at the politicians whim. Also. are you going to stop using aluminum soda cans and aluminum Tesla‘s for that matter? 20% of the worlds electrical energy goes into refining aluminum .

          1. >Bitcoin is self regulated

            It’s not regulated at all – its value goes up as people speculate on it, only to crash randomly as people rush to sell it. It’s a big gamble.

          2. “You are missing the point. Bitcoin is self regulated not by any government.”

            That’s a bug, not a feature. There’s no good reason for thinking that a currency without governmental and/or international regulation is a net benefit for the world.

            Regarding aluminium, well it has many beneficial uses but yeah I’m all for fully internalizing all the negative externalies for any production that uses a lot of resources/energy. Through national and international taxes and regulations. Once that happens some current uses would become so costly that a shift to other materials happened, while other uses prove to be essential and continue. Supply and demand adjustment, once all real costs and benefits are accounted for.

          3. Yes, and when you’re finished you still have a pile of metallic aluminium, which is still useful amd can be reused to make new soda cans, cars etc much more cheaply/efficiently than throwing electricity at refining new aluminium from bauxite.

    5. I wonder how much time humanity has left.
      When the world is ruled by greed, no matter how much effort ‘greenies’ put into fixing the planet, it will all be for nought. There is only so much dead wood you can carry.

    6. Elevators are neccessary in daily life. They make REAL work in REAL world. VISA? Due to centralised system there is little power consumption for making useless and complicated calculations just to ensure safety. Blockchain is a dead-end technology, which needs either abandonment or serious modifications to make it energy-smart. Seriously – even renewables are LIMITED resource. We have much greater needs as a species than just waste tons of energy for useless calculations.

      1. These are some factors that makes Blockchain tech viable (note: energy efficiency is NOT one of them)

        Counterfit proof (caveat: 51% attacks)
        Inflation proof

        These attributes give it value and if all goverments destroy the large farms all that will happen is it will be profitable for people to mine on their GPUs plus the odd asic people have hidden away.

        Their is no way to to change it other than make it unprofitable, and if you raise everyones power to $1/kwh then everyone will start their own solar farm to power their miners. Ill stop ranting
        but tldr

        Power efficiency is not a factor in bitcoins price and you cant make it be

        1. >Decentralized
          Which means no legal backing/proof from any authority and not subject to a social contract, which makes it not worth a damn.

          >Inflation proof
          Deflation prone – not adjustable to the size of the economy, useless.

  3. I think that if we are looking for an apples to apples comparison we should compare it to the total power used by traditional financial transaction networks. It may not seem like much, but there are likely far more POS card machines, ATMs and banking servers than there are Bitcoin ATMs and miners.

    Even gold, as a store of value is not without a carbon footprint as the construction of storage facilities, security and transportation under guard all contribute as well.

    Think also, of the amount of work involved in printing cash, transporting cash, storing cash, counting cash etc.

    Bitcoin is certainly not an everyday crypto currency now, but there are alternatives like Stellar (just an example of a currency that solved some of Bitcoin’s problems) that hold merit and undoubtedly there will be others that prove better yet in theory and in practice.

    1. Those are used for many many more transactions and for moving much much larger sums of money. The energy consumption per dollar transaction rate wouldn’t even be comparable.

    2. If the “regular” financial system were as energy-intensive and inefficient as Bitcoin, it’d show up in fees you pay, in corporate financial statements, etc. You wouldn’t just hear about interest rate fluctuations, you’d hear about electric rate fluctuations due to the effect on profitability.

      If energy costs were an important factor you’d hear about financial firms clustering operations near hydroelectric plants or other sources of cheap energy. The way Bitcoin miners and aluminum smelters try to locate in such places.

      We don’t see this.

      1. That’d work well.

        You on phone: “Heh, I’m trying to pay some money in, but I can’t seem to find your branch, did you move?”
        Bank: “Yes, we’re in Reykjavik now, for the cheap energy.”

        You do see massive expenses on operating statements, BoA, 90B in income 80B in expenses typical, around 10% of that is wages, the rest is hard to split up because the HVAC and lighting might be included in their commercial managed real estate rental, or they might own the building and pay that plus computing etc on the same bill. Guesstimating energy accounts for a quarter, that’s likely to be in the region of 15 Terrawatt hours, and they handle 10% of national over the counter deposits, so 150 Terrawatt hours for retail side of banking in US seems like a good spitball. Number of bank users in US probably equivalent to number of bitcoin users, same ballpark.

    3. Given that miners run 7×24 and need additional cooling, etc. Their carbon foot print is going to be a lot bigger than some guy sitting on a kilo of Gold coins in a safe. Now you realize Gold is quite dense and does not take up very much space. So there is no need for new vaults to be built, or guards to be hired.

      Paper currency is very very low power. You can find it being used in regions where there is no electricity and it works perfectly well. Storing it is easy, you just put it in your wallet or hiding place at home. No A/C needed.

    4. Gold mining is currently a lot worse than bitcoin mining. Not only does it require more energy, it requires dirty energy in the form of diesel fuel for land moving equipment. On top of that, refining the ore requires dirty chemicals such as mercury and acids which are often dumped in poorer areas of the world.

      Bitcoin mining only uses electricity, and the small profit margins means that only cheapest sources can be used, such as excess renewables.

      1. @Artenz – but after you mine and smelt 1 ton of gold – you have it forever in the world. BTC can disappear after global blackout. Gold is necessary in modern technology. About dumping toxic stuff in poor countries… Did u ever wondered what do miners do with used ASICs or GPUs? They dump it in poor countries, as electrojunk which is much greater threat than gold mining.

    5. About gold – it’s necessary resource in modern technology, science and medicine. W/O gold many life-saving devices would not work. Using goldmining as an example in discussion in BTC power consumption is silly. At least gold, if it became worthless metal – it still has huge technological potencial due to its physical and chemical properties.

  4. I have no idea what the answer to this question is, so it is not a smart ass rhetorical question: Are quantum computers suited to cryptocurrency mining. If so will there be massive devaluation as soon as some freelancer gets hold of a quantum computer and starts churning out “money”?

    1. No, because if you were to double the computing power (hard) the bitcoin network would simply double the difficulty (easy) so blocks mined (theirin bitcoin produced) would stay largely the same

      What that might do is allow one person to mine all the block which would centralize and destabilize it but only until enough different people had quantum miners to decentralize the mining again

      1. OP mentioned quantum computing. From my understanding of quantum computing, we’re not talking about doubling the computing power — more like billions and billions times faster, near instantaneous.

        That would kill crypto currency as we know it. Perhaps though brute-force computation of the block chain is a task unsuited to quantum computers.

        1. Quantum knocks quite a few powers of 10 off things, but as far as bitcoin goes it brings the time required to brute force a hash from needing until the heat death of the universe, to needing until the sun turns into a red giant, which are events a huge number of billion years apart, but not relevantly closer on a human scale.

          Or quantum computing when timescales are huge, does not make things happen instantly, for sufficiently large values of huge, like a googol or so.

  5. 1 )Bitcoin is radically transparent. It’s trivial to estimate from the hashrate the power consumption. This is not true for any other large-scale store of value.
    2) To properly compare energy usage you would have to add up all power, resources, and emissions of gold mining worldwide; all energy and emissions of the US naval fleet, average impact of nuclear arms testing over the years, wasteful spending from Cantillon effect; total concrete and buildings materials usage and emissions in unoccupied real estate (used to store wealth in major cities); malinvestment due to the hamster wheel of inflation sending money into the stock market (all the yachts, airline miles and c-suite golden parachutes don’t fund themselves). You didn’t do this, because it’s all obscured and takes massively more effort, but that’s the real comparison.
    3) Bitcoin mining is a more green industry that most. Several studies are available the last time I dug into it, the industry was powered ~75% by renewables. Updated estimates I have seen vary, but may be as low as 45%. This is still higher than most industries. Much of the energy consumed is not co-located with population centers and so would be wasted otherwise – hydro, wind, geothermal are rarely produced in or near large cities.
    4) Bitcoin mining actually creates incentives to develop renewable resources. Renewable energy now has a base price floor, regardless of location. This boosts the value of old projects, and creates additional profitability to spur new installations.
    Mothballed wind infrastructure requiring power line transmission maintenance can now be profitably run for longer, increasing it’s value and that of future projects. Transitioning to green energy is a carrot and stick affair – using only sticks only takes you so far.
    5) Unit of account and transactional medium necessarily come at a later date. Sure, if you’re the Nigerian Feminist Coalition facing jail time for your free speech you necessarily transact in it now, and it works great for that. If you’re a privileged westerner with a stable currency and access to a plethora of banking options, it may not make sense for you. Still, as the need arises, both lightning network (open, decentralized access) and custodial (cheaper/faster to scale) options will be more available.

    There are plenty of criticisms of bitcoin, but the boil-the-oceans argument is perhaps the laziest of all and typically comes from a position of such privilege it’s borderline revolting. If you don’t need it, I’m happy for you, but please don’t moralize on how one should just stick to their local currency because the overall energy consumption of Bitcoin is trivial to estimate.

    1. If the “regular” financial system were as energy-intensive and inefficient as Bitcoin, it’d show up in fees you pay, in corporate financial statements, etc. You wouldn’t just hear about interest rate fluctuations, you’d hear about electric rate fluctuations due to the effect on profitability.

      If energy costs were an important factor you’d hear about financial firms clustering operations near hydroelectric plants or other sources of cheap energy. The way Bitcoin miners and aluminum smelters try to locate in such places.

    2. The starting point should be “Who actually needs bitcoin?”. You say you do but what for – what is it that bitcoin can do for you that traditional banking cannot?

      1. As Bitcoin is a stunningly inefficient method of making financial transactions, there are only two valid uses for Bitcoin. One is gambling (speculation) and the other is laundering money or other nefarious financial transactions. So long as governments allow the latter use, Bitcoin prices can and probably will rise. If governments crack down, Bitcoin will become essentially valueless and so the bubble will burst at some time. I have a patent applied for several years ago for a crypto currency that didn’t use proof of work or proof of stake and so could be transacted efficiently. Unfortunately, although good for transacting it is no good for money laundering etc. so it will probably never be used.

        1. “As Bitcoin is a stunningly inefficient method of making financial transactions”

          Not as efficient as owning one’s own printing press or money tree. But we all know how the government feels about that, so in true sacrifice I chopped down my money tree.

          1. Not true. Printing money consumes far less energy than BTC. AND even after global blackout – this money will exist. AND – trees are currently farmed like other crops. Just you do not have harvest every year but every 50-70 years. It’s renewable resource, which captures and sequesters CO2 during growth.

        2. Bitcoin is very much useful for storing value, just like gold bars in vaults, but much easier to transport and validate.

          Once you have a secure way to store value, you can build other systems on top of that, just like we do with gold bars. These other systems can be made much more efficiently.

          1. No. BTC is a storing value – true. But is nothing compared to gold. GOLD is a real-world material, that does not loose its properties with time. It won’t corrode. It is necessary in high-tech, even in medical equipment. It is REAL stuff, not just some virtual stuff that is cool and precious now.

          2. Gold is real, sure, but the need for physical gold in industry is limited. Every day we mine about 10 times more gold than we consume in electronics. The other 90% goes on the global stockpile, which already has enough gold for centuries worth of industrial consumption.

            The price we pay for gold is mostly determined by people hoarding it, and that purpose could be displaced by bitcoin, since it’s much easier to handle than bars of gold in a vault.

          3. @Artenz – well…’price is determined by ppl hoarding it’ – just like with BTC :) Even if u use gold just for stockpiling or jewellery – it’s not changing it’s physical or chemical properties. And it can be smelted again.
            Smelting industry also develops new technologies. Currently in metal smelting from ores – there are trends to make R&D towards using hydrogen as reducing agent.

          4. >The price we pay for gold is mostly determined by people hoarding it, and that purpose could be displaced by bitcoin

            Why would we want to waste any energy in people doing that? It’s literally of no use to anyone.

          5. People would use bitcoin for the same reason they currently use gold, but without all the hassle of having to store and transports pallets full of heavy bricks.

    3. Sorry but that’s bullsheet. that ‘75% renewables’ does NOT mean that 75% of power is from RES. It means that 75% miners had at least 1% of RES in their mix. AND – RES ARE LIMITED. And they do have negative impact on the environment. So you cannot build the whole area in wind farms or PV due to bird/bats collisions or deforestation. ALSO – often those RES come from big hydro plants, whose construction consumed whole ecosystems and made several species extinct. Like sweet-water dolphin in China. ‘It does make an incentives to develop RES’? Well – as I said – RES are LIMITED. And here and now in Germany – there are clashes between wind-industry and environmentalists. Do you want to exterminate whole ecosystems to make ‘green energy’ for ‘RES-friendly’ BTC? It’s so stupid idea that I do not know how to even comment it in civilized way… Humans are not the only species on the planet and just to make ‘moneyz from BTC’ using RES does NOT justify extermination of many species. BTC mining will be always energy-hungry so no matter how much of RES will be build – it still will be not enough!!! Planet area IS LIMITED!!! And we have to leave a lot of space for other species to secure our and theirs future.

    4. “Bitcoin mining is a more green industry that most. ”

      I think you may have missed something from the piece.

      Bitcoin miners could all power themselves from the greenest of energy and it still wouldn’t matter. Because while coal and other high carbon power stations still exist, the miners as entities whose contribution to the economy is marginal are still taking green energy capacity that might otherwise be reducing the rest of the economy’s reliance of coal etc.

      1. “Because while coal and other high carbon power stations still exist, the miners as entities whose contribution to the economy is marginal are still taking green energy capacity that might otherwise be reducing the rest of the economy’s reliance of coal etc.”

        If there was no cost in transmitting energy we could drop solar panels in the Sahara, Mojave, and Australian outback and be done with it and I could cede this point. However, I think the assumption of fungibility in the energy market oversimplifies the situation to the point of marginal validity at best. The most common power source for bitcoin miners (from what I can gather – there is absolutely no official source of data) is hydro power from the three gorges dam. Taking this example, if you wanted to consume this 22MW in Shanghai, you would need over 1000Km of transmission lines, which are not without upfront cost or upkeep, and you would lose several % of the power during transmission under even the most ideal conditions. Ignoring the reality of local surpluses and deficits in energy markets is unrealistic. So yes, some energy consumed by bitcoin mining could be used elsewhere, but it’s not always a practical reality.

        “Bitcoin miners could all power themselves from the greenest of energy and it still wouldn’t matter.”

        Here’s where I really disagree. We need to switch to clean energy as fast as we possibly can, and bitcoin mining offers potentially the greatest economic incentive to do so thus far. Here in the US, I’ve seen numerous instances of wind and solar farms either being resold after decades of use to be given a new life as a power source for co-located bitcoin mining, or new installations, financed by the anticipated revenue from mining. The nice thing is that these operations could be located in Saskatchewan or in the middle of the Sahara and they could still help drive economies of scale in researching and producing alternative energy sources like wind and solar. The other benefit of the specifically US case is that they are able (in some circumstances) to shut off the miners during periods of peak demand and sell that power to the grid to power homes and businesses, offsetting the need for coal.

        I get that bitcoin isn’t for everyone, and that’s fine. Personally I’m tremendously excited that there is now a monetary option with vastly more transparency and fewer externalities. No wars over oil need be fought to give bitcoin value. No trade wars either. In fact, it really encourages global cooperation in a way I haven’t seen before. I regularly donate to a small primary school in Zimbabwe via lightning in a manner that’s instant, costs fractions of a cent, and has no middle men. I couldn’t have done this years ago, and would have had to limit my charitable giving to a local cause where it wouldn’t do as much good. Yes, bitcoin’s scarcity of supply (and therefore its source of value) is guaranteed by energy consumption, but that incentive is decreasing by half every four years. Meanwhile, bitcoin is open to all, encourages global cooperation in a way never before seen, and gives millions a way to save and invest in their own future for the first time ever.

        If you’re set against bitcoin, it’s actually really easy to stop its growth (theoretically) and its energy requirement theoretically puts it at a disadvantage. The solution is to stop printing money, stop bailing out banks, stop inhibiting trade between people who just want to work together. Stop confiscating peoples life savings in the middle of the night (Greece, Turkey, India). Stop creating trade wars that harm the workers while a select few benefit. If you don’t want to do those, then don’t be surprised when people don’t want to participate in your unfair cartel. Don’t be surprised when they fund renewable energy infrastructure and global instant settlement solutions to bypass corruption of their government or local gangs (El Salvador, Venezuela). Don’t be surprised if they create a more fair and open world that they actually want to live in tomorrow. If some added power demand is the marginal price of that, at this point, I can’t really blame them.

        Finally, I’m sorry if I was harsh in my walls of text. I appreciate your article and it’s not my intent to slam it. As an environmentalist and bitcoin enthusiast, I’m just trying to present the full counter argument and, well, these are subjects I’m passionate about. Cheers.

    5. I recently saw an episode of economics explained about how Iceland is using it’s cheap green geothermal power to entice bitcoin miners to setup in Iceland.

      It’s an interesting thought experiment for green energy. Imagine an island like Hawaii that is cutoff from the world’s grid. All excess green energy will be wasted once batteries are charged, etc. But currently only 50% of power is from Solar. So a solution to the bitcoin waste is to force bitcoin miners to subsidize solar by limiting power use during peak demand and then charging a surcharge during lows.

      What I’m getting at is that bitcoin mining can actually add profitability to green energy project provided the miners are required to work closely with the utilities.

      Finally a thought on deflationary versus inflationary currency. There is a direct correlation between the adoption of fiat currencies and the dramatic rise in CO2 production. This makes sense intuitively as the free money incentivizes people to buy and use resources. It incentivizes people to live above their means with cheap loans. Basically pumping money into the economy always results in the supply side pumping “stuff” into the economy to balance things. Bitcoin is really a very pure form of this. If inflationary fiat currency did not exist there would be no drive to produce bitcoin because the store of value would be inherent in whatever money we had.

      People are essentially living in a massive contradiction when they push for inflationary money so that people are helped by the economy and gov’t services but then point out the CO2 and pollution. The act of boosting the economy produces CO2 and pollution. At least with blockchain you can actually track what is happening. You could even record whether the bitcoins were produced by miners operating off green energy and refuse to allow payments in anything else.

      1. > bitcoin mining can actually add profitability to green energy project

        It can, but it’s not actually profitable in real terms as it merely amounts to wasting the green energy, instead of turning it into something actually valuable such as generating hydrogen and chemicals.

      2. >This makes sense intuitively as the free money incentivizes people to buy and use resources.

        It doesn’t really, since if people didn’t have the money to buy it, the prices would fall until they can buy it. The point of the “services” economy is to have people waste resources in order for a few select people to profit from it. It doesn’t matter what numbers are on the money, the economy runs on a tiny handful of people producing all that everyone needs to survive and then some, and the rest of the society trying to come up with ever more complex dog and pony shows to justify why they should be given the greater share of it.

        1. You are correct regarding the Paretian (pareto-esque?) nature of the economy. Although it might be better to look at it more as a limited number of people produce all the stuff but then that slowly tapers to lower and lower maginal utility, until it is no longer profitable to do so. Then there’s the long tail fat head nature of supply and demand, ie a super rare item will command a high price regardless of it’s utility while a super common one will command a low price to do greater investment into efficiency and competition etc. Water is a great example

          Re the dog and pony show: yes there are dramatic scams being run (especially in america) but again who are we to judge the person who spends $400 to attend a concert that could be viewed online later for free.

          Seriously though bitcoin obviously has 0 utility sitting in a wallet somewhere, but it has near unlimited utility when it is used to buy critical medical supplies in a country hit by hyperinflation.

  6. The main difference is that bitcoin is not money.

    A fiat currency carries the obligation to accept the same currency back in exchange for services, because the debt that created the money must be paid back in time – it’s a legal obligation that creates the legitimacy of the money. The issuer needs to get the money back at some point – they need to buy it back.

    Asset backed currency is of course backed by some real asset. Having the money is a legal claim to that asset in the defined amount.

    Bitcoin is backed by… nothing. The person who creates the bitcoins never needs to accept them back, and they’re not created to represent any reserve of any real asset. With bitcoin, you can do an one-sided trade where you get the goods and they get the money, but they can’t necessarily give you the money in an equal trade of goods from you. This is why it’s like picking up a pine cone or a pebble and using to to pay for a beer – the other person should be stupid to accept.

    1. This is a very important aspect that some people tend to forget.

      “Hype backed currencies” aren’t all that ideal.

      Bitcoin and other block chain currencies are like using paper as money in Minecraft. (who ever has the largest paper farm is the richest.)

      1. The difference is that producing paper in Minecraft is trivial and there’s no limit.

        If you can find a way to reverse SHA hashes as efficiently as farming paper in Minecraft, you’ll be a billionaire.

          1. > doesn’t change the nature of mathematics

            It doesn’t have to. When mining one blockchain becomes too difficult, people simply make up another and start the whole charade from zero. When one bubble bursts, you blow up another.

            When there’s no miners, who’s processing all the transactions? How do people use the Bitcoins in that blockchain when they have to wait for weeks for someone to bother? Oops…

      2. In the case of government issued fiat, the hype is just culturally engrained. A lot of people still believe that if it came down to it, they could take their money to the national bank and demand their real piece of silver or gold for it, and wouldn’t get told to piss off. All money is worthless tokens to save the bother of carrying three cows cross country because you need 2 pigs and some new furniture. What makes it seem to be worth anything is difficulty to fake. Coinage almost costs as much in base metals and stamping as it’s worth. Paper money used to take huge investment in printing capabilities to make it detailed and complex enough. What if it all had a code on that could be checked up instantly? Wait, so if only the code is unique, all you need is the code, bingo.

        1. >What makes it seem to be worth anything is difficulty to fake.

          What makes money worth anything is the legal obligation to treat it as tender. You can authenticate a block of wood – make a whole chain of “very provably authentic wooden blocks” if you want – and it still won’t be money because nobody has to respect it as money.

          While in principle, “money” can be had by people simply pretending that pieces of paper are money and carry value, at any time someone can just wipe their bottom with it and say “I won’t give you the cow for this, this is just a piece of paper.” Having money literally by fiat of simply pretending it’s money is like a coffee shop gift card: an arbitrary non-binding token that is only useful in that particular cafeteria, for as long as they choose to respect it.

          The property of money is that there is a mechanism and/or a legal obligation that makes it so people, institutions and governments, have to accept money as money so you can always pay your taxes and debts with it. Failing to do so triggers the legal obligation and legitimizes punitive action against the party. For example, if the state won’t accept your dollars for taxes and instead starts confiscating your physical property, they have overstepped their legal responsibilities and can be taken down by the people. There are democratic mechanisms in place for that sort of a situation. This is why we can have a level of trust in the money we have created, and why we can call it money in the first place.

          Bitcoin hasn’t got that property. Bitcoin isn’t money.

          1. No, I asserted it. Anything can be “money” between two people, but it is not recognized as such by the society at large, whereas legal tender has to be recognized as money.

            The question isn’t whether you think it is money, but whether everyone thinks it’s money, and whatever isn’t legally defined to be money is objectively not money.

          2. Or to take another point of view: “money” is a phenomenon where some token takes on the quality of money, behaves LIKE money, but in this sense you’re seeing money as a verb, not a noun.

            When you’re talking about whether something IS money, there is no rule that A is money and B is not money unless there is some authority that says so. We can only say that something IS money within the context of such an authority. Some random guy handing out virtual tokens on the internet does not have that authority or the responsibility that is required for anyone to accept them as such.

            So, seeing it properly, Bitcoin can ACT as money, but it is not money, the same as how glass beads can be used to purchase goods from people who don’t yet understand money (or glass beads as it were).

    2. The problem is that the issuers of most fiat currencies are under no obligation to buy back that currency, so they’re backed solely on how much you trust that government

      Cryptocurrency, on the other hand, is backed by an asset, the asset being information that cannot be replicated and is available in limited supply. It has value for the same reason gold coins had value in pre-industrial eras: They’re believed to be a limited supply and therefore have some stability to value.

      For gold to collapse new sources of gold would be needed, which is unlikely but possible. For cryptocurrency to collapse you’d need to find a way to reverse SHA-256 efficiently which is not provably impossible but is almost definitely impossible. For fiat currency to collapse you’d need an unregulated, opaque government agency controlled by non-elected officials to act in bad faith or be dishonest, which is not only plausible but happens all the time. Personally, I’m more inclined to trust the integrity of information theory than the integrity of government agencies.

      I’d also point out that if a way of reversing cryptographic hashes efficiently were found it’d undo the protections of strong encryption which means an almost immediately collapse of every major government in the world, collapse of infrastructure, etc. If cryptocurrency collapses it’ll be the least of our problems.

      I’m also fairly disappointed that neither the author nor any commenters have talked about the current transition away from Proof-of-Work to Proof-of-Stake which goes a very long way to resolve precisely this issue. This article would have been more relevant in 2016.

      Perhaps instead of spreading outdated FUD about technology, HaD should run an article explaining how cryptocurrency works.

      1. >they’re backed solely on how much you trust that government

        Which is maintained by the fact that the people, at least in a democracy, will tar and feather the government if they keep messing with the money too much. Of course you CAN go Zimbabwe with fiat money, but a lot more has to go wrong before that.

        > the asset being information that cannot be replicated and is available in limited supply

        No it isn’t. That information is only useful for the purpose of itself – making more bitcoins. That’s a circular argument.

        1. > No it isn’t.

          It isn’t? You’re saying you found a way to derive hash collisions for SHA-256? Why the heck haven’t you cashed in? You could crash the cryptocurrency market while making a few billion dollars, then sell the technique to the highest bidder so all SSL certificates can be compromised!

          > That information is only useful for the purpose of itself – making more bitcoins.

          The information isn’t used in “making more bitcoins”. It’s a combination of data that is extremely difficult to derive and orders of magnitude more difficult to duplicate. If you don’t understand what a hash is then you probably don’t know enough to debate the technical merits of cryptocurrency.

          So what is paper currency good for? Making more monies?

          1. I’m thinking of a number. It’s extremely difficult for you to guess what that number is. Therefore it is valuable, therefore you should pay me money for it.

            That’s the logic you’re applying.

          2. “The information isn’t used in “making more bitcoins”. It’s a combination of data that is extremely difficult to derive and orders of magnitude more difficult to duplicate”

            So what.

          3. Dude, give it up. You have no idea what you’re talking about. Cryptocurrencies are not based on “numbers that have value”, because with any system where simple numbers have value, you would have a double spend problem.

            Bitcoin is best compared to a distributed bank that keeps all transactions in a secure ledger using clever cryptographic techniques.

        1. Really? When did cryptocurrency collapse? I’m pretty sure it’s still going. The speculation values change a lot, but as long as the blockchains aren’t compromised it hasn’t collapsed and the value is still there.

          You might be mistaking speculation trading for economic infrastructure. I’d definitely recommend picking up a book on macroeconomics and staying FAR away from stock or commodities speculation.

          1. Value is subjective. If 999 people all consider bitcoin to be valuable, and they form a network with each other where they can trade this value, then it would be beneficial for person 1000 to join this network.

            The people already in that network have no motivation to leave, or to abandon their subjective valuation.

            In other words, the mutual network of value and trust is stable, counter-intuitive as it may seem.

            In order for this to work, it is required that the asset has certain properties. Bitcoin has those.

          2. >Value is subjective.

            No it’s not. It depends on your definition of value for the framework where it’s used. There are definitions which make value a subjective thing, but those definitions then fail to give it any reasonable meaning – such as the example you gave.

            If 1000 people think that glass beads are valuable, they will trade their goods and belongings for glass beads, and later find out that they’re just useless trinkets. Then they will figure out that pretending these glass beads are money is a bad system because it has properties that are unsuitable for trade, such as the incentive to hoard the beads to improve their market value.

            They figure the beads were only useful as status symbols in a system that values exclusivity and elitism instead of being handy tokens for mutual trade, so they will eventually conclude that they weren’t valuable after all.

            The same error they made can still be found in the modern economies though, such as in the saying, “It’s worth whatever people will pay for it”, which is confusing price for value or begging the question that value on the market is imaginary and arbitrary in the first place.

      2. >The problem is that the issuers of most fiat currencies are under no obligation to buy back that currency

        Which is why those currencies are like wooden pennies in comparison to dollars and euros, etc. which ARE created by debt obligation, which the governments HAVE to pay back with the money they tax out of the population.

        The essential property of this system is that it can both create and destroy money when the bonds that made the money mature and have to be paid back. This allows the state to control the amount of money on the market by controlling the issue of bonds and how the banks use them to issue new debt, and we’re supposed to control the government so they would do their jobs properly. The fact that this doesn’t really work right is not an argument against fiat money, but an argument against the governments.

        It certainly isn’t an argument for bitcoin, which would be absolutely terrible for the purpose.

    3. To make a story out of it, imagine that you’re selling a hamburger and a guy wants to pay you with X. You ask, “Why should I trust to give you this hamburger for X?”

      Fiat money: “Because the state bank has a legal obligation to buy X from you, which also makes it legal tender for paying taxes. You need this because you can’t pay your taxes with that hamburger.”

      Asset money: “Because there’s a bank with this much of stuff in it, and they’re legally obliged to give it to you for this. If you want that stuff, this is how you can get it.”

      Bitcoin: “LOL, just take it and don’t think too hard. Tomorrow it will be worth TWO hamburgers because of magic!”

      1. Fiat money: “Because the government is always making great decisions and never prints more money to fund things. Trust them.”

        Asset money: “Because there’s a bank with this much of stuff in it, and they’re legally obliged to give it to you for this. If you want that stuff, this is how you can get it as long as that bank doesn’t do anything dishonest. Hurry up and get it before that asset decreases in value because a new gold lode is discovered.”

        Cryptocurrency: “Because the value of this cryptographic hash is bound to the difficulty of reversing cryptographic hashes, which means its value isn’t pegged to trusting in government or bank officials.”

        If you think cryptography is “magic” and state banks buy back currency I’d love to sell you some Zimbabwean fiat currency and a password manager that uses ROT-13.

        1. “Because the value of this cryptographic hash is bound to the difficulty of reversing cryptographic hashes, which means its value isn’t pegged to trusting in government or bank officials.”

          That still doesn’t answer the question, it’s just a red herring. Its value still isn’t pegged to ANYTHING and there is no legal obligation for anyone or anything to respect it as tender.

          1. > Its value still isn’t pegged to ANYTHING

            Its pegged to the difficulty of reversing hashes. It’s not a red herring, it’s literally the point of the technology.

            > there is no legal obligation for anyone or anything to respect it as tender.

            There’s no obligation for anyone to respect gold or oil as tender either.

          2. >Its pegged to the difficulty of reversing hashes.

            Which means nothing by itself.

            >There’s no obligation for anyone to respect gold or oil as tender either.

            Of course. They just happen to be useful and people want them.

        2. Also, the reason why we gave up on gold money is exactly because it’s either limited and leads to hoarding (bitcoin has this same problem), or someone discovers a motherload and crashes the value, which also happens when someone sells too much gold (or bitcoin as it were).

          Bitcoin has all the bad properties of gold money on top of being literally worth nothing.

          1. > Bitcoin has all the bad properties of gold money

            Except that it isn’t made of gold, it is made of unique information.

            > on top of being literally worth nothing.

            FMV of BTC is $50,599.59 USD right now. Since you think it is literally worth nothing I’ll pay you $1 per BTC for any you have, please. I’ll pay the same value for any stock you have too!

          2. >it is made of unique information

            Which has no meaning by itself. Can you eat it? Can you make a tooth filling out of it? A computer chip? No, you’re just making up meaningless numbers and pretend that they’re valuable.

          3. We gave up on gold because we needed an expedient way out of massive state debts accrued during World War I. Prior to that it was the basis for all major currencies for centuries (millennia?). It also has the tendency to become centralized due to the difficulty in custodying, assaying, and transporting it by oneself. For those reasons it has stayed centralized in the hands of states and hasn’t regained much semblance of usage since.
            I disagree with your assertion that bitcoin is literally worth nothing, but would be forced to reconsider my stance in the event you were to desposit one bitcoin to:

          4. > is literally worth nothing

            You claim that bitcoin has value because it can be priced in dollars; that assertion is again confusing price for worth.

            Consider for example, the dollar auction: an auctioneer sells a dollar to the highest bidder with a catch – all those who are bidding lose their money. So the first person bids 5 cents, the second person 10 cents, 15, 20… etc. until the price reaches a dollar. At this point, the person who bid 95 cents stands to lose less by bidding $1.05 because they would only lose 5 cents instead of 95. Therefore the auction continues – quite rationally and inevitably – to sell a dollar for more than a dollar.

            The only person to win the game is the auctioneer. Now, because the winner paid let’s say a dollar fifty for the dollar, does that mean the dollar is now worth more than its face value? Same question for Bitcoins: just because people pay tens of thousands of dollars for one coin, does that make it worth anything?

      2. If I was running a burger stand or selling goods at a flea market and some nerd rolls up and says he wants to buy my goods with Bitcoins I’d chase him out of the store for trying to run a con game on me.

        It’s one thing to show up with a CC to make a purchase or even paying by Postal Money Order. But Bitcoin is backed by nothing except techno-gobbledegook that makes peoples eyes glaze over. Anything that complicated reeks of a scam.

        1. That can be true of anything in some limited sense, but it’s not sufficient to make something money.

          People used to have sticks of wood that they placed next to one another and cut a line across both to mark a debt. Two lines for two chicken, and a notch for one cow… etc. and it would act as a proof for that transaction because neither could alter their stick without getting caught. The seller’s stick could then be used as money because someone else was up two chicken and one cow for it. If that person failed to deliver, there would be a tar and feathers party coming up.

          Bitcoin on the other hand is just having one stick. Although it is difficult to make it, it doesn’t come to existence out of any obligation to pay back: it is simply created. The person then cuts the notch on to declare that this stick is worth one cow, or one dollar, or ten thousand dollars, and asks other people to believe it.

          Well, you don’t have to believe it. In fact, pretty much nobody believes Bitcoin has any value. The trick is that you pay the price and draw another notch on the stick, and sell it to the next person for two cows, and they will pay it because they believe they can sell it to the next person for three cows… and so-on. That’s the ONLY real utility of Bitcoin, and the ONLY thing that keeps up the pretense of it being worth anything.

          I learned that lesson when I was little. Someone taught me to play poker, so me and another kid in my class started playing it during recess, for pennies of course, until I lost all mine. I wanted to continue the game, so I borrowed his winnings back and we continued. We kept the debt in a little notebook and he was a much better player than I was, so it quickly racked up to dollars. I went to my father and asked for ten bucks because I had to pay the guy back – obviously – but when my father asked what it was for, instead of ten dollars, I got a slap around the ears for being an idiot.

    4. But wait! There’s more!

      The idea that there is a limited amount of bitcoin and thus with scarcity can avoid hyperinflation of the “currency” is nonsense. Yes, there is a limited number of bitcoins, but is there a limited number of cryptocurrencies? Not likely. I’m sure there’s a few ramifications to this, but one is likely more energy consumption from mining.

    5. No, you personally creating value of money by work for it (and paying tax) and if you stop accept it, money worth nothing…
      … for you, but if most people stop accept them than it just colored papers or few 0&1 in banks.
      Due to in current economic system “money” backed by nothing, not precious metal and not even % of government property, you waste your working hours on nothing and got nothing.

  7. Understanding the difference between investing and speculation is critical. It’s obviously not an investment as it produces nothing and has no expectation of doing so. “Greater fool” is written all over it.

    Cryptocurrencies and gold are naturally deflationary, which isn’t good. The world’s goods over time are more abundant and of higher quality. The value of everything humans have in this world goes up over time because we take things and make them better, imparting value. This is naturally inflationary. Ideally the currency out in the world would match that value.

    I think the novelty of the blockchain is the real value of all of this work. NBA Top Shot is an interesting example (questionable value notwithstanding). I’m wondering when this will be applied to real assets, like real estate, stock, bonds, etc.

    Regarding energy, the arguments that other things use energy is not convincing. If we’re really concerned about the impact on the environment, then the real problem is that energy isn’t priced correctly to account for environmental impact. Obviously the price isn’t keeping consumption in check correctly. (Though as shown recently in Texas, that has to be done fairly and transparently.)

    1. Investing and speculating are the same thing, those who know they are speculators might actually be more realistic about it. Anyone who bought a restaurant in the first 2 months of 2020 though they were investing in a restaurant, not speculating that in person dining would remain a thing.

      1. The difference is in what you’re betting on: investing primarily bets on the company succeeding and paying you dividends and other returns from the business they make. Speculating bets on the stock market prices going up and down.

      2. Both have risks, if that’s what you’re saying. But they most certainly are not the same. Some things have elements of both, such as a restaurant. I don’t believe anyone was properly insured for a global pandemic. But an investment has an expectation of production. Speculation is profiting from market psychology. The change in value of bitcoin over time, short and long, is 99.9999% attributable to speculation and not the underlying value of the asset.

          1. Turn off the electricity and Bitcoin ceases to exist and your precious server farm becomes scrap metal maybe worth 1% of what you paid for it.. Whereas paper currency works just fine . I can go from the U.S. to Peru and the dollar is accepted as legal tender. Bitcoin would just get you hard stares and maybe a beating,

    2. And why should deflation be bad? As technological innovation creeps into every business, the cost in human labor of virtually everything should go down. Should not the benefits of technological progress be shared by all, or should they only accrue to the wealthy and non-working caste of society? We’re seeing social unrest because of exactly this effect and it will only accelerate. The stock of US dollars went up 345% last year. https://fred.stlouisfed.org/series/M1 This will necessarily result inflation (the price of homes, school, food, healthcare, fuel, etc.). If you save in USD, you are able to spend less, despite virtually every industry becoming more efficient at producing goods. Meanwhile, the number of bitcoins in existence went up 2.1% last year. When you adjust the bitcoin price by the denominator of M1 dollars, it’s actually fairly flat in value for 2020. Currency is just a technology to allow specialization of labor and transfer of effort from person to person, and across time. Saving in one of these technologies preserves your hard work and purchasing power, while the other dilutes it with the remaining value going to: central banks, major financial institutions, blue chip corporations, smaller regional banks, small businesses, and then finally (by the time it buys substantially less), to the workers.
      Sure, a deflationary economy looks drastically different than our current one, and an overnight switch would be disastrous, but it’s not fundamentally bad, and is arguably more fair to broader society.

      1. @Oogally – Deflation means stagnation. Deflation makes investments in new tech… obsolete. Why should anyone invest if their money will be worth more anyway? Small inlfation promotes investments and progress.

        1. I accept neither of your propaganda as sources of truth. Just as there is no perpetual motion machine, economic capital cannot simply be willed into existence by monetary policy. Sure, perhaps in the short term inflation can incentivize outsized investment in tech. However, we are now hitting the caffeine drip of easy money at an ever increasing rate. If we were to stop for even a moment, the economic fallout would be catastrophic. It’s ultimately unsustainable and meanwhile we’ve produced dearth of dubious projects and a plethora of zombie companies (unprofitable without exceedingly low interest rates) will become obvious as soon as the easy money stops.

          By contrast, a fixed monetary policy is just a reversion to steady state. Opportunity for innovation will not somehow disappear, but having a price on spending tomorrow’s money today will limit appetite for risk more so than under QE infinity and capital will necessarily become more selective. Meanwhile, the death of zombie companies will allow space for new, more innovative, more competitive enterprises to emerge and thrive. Growth would not stop, but it would be more sustainable, and because of fixed monetary supply, the benefits of technological advancement would be widely shared by all in the economy.

          Contrast this to the current “K” shaped recovery creating two distinct classes of people, the benefits not accruing equally at all.

          1. Deflation is problematic because it delays spending in general. It means the prices are going down constantly and people are putting off buying new things and services because tomorrow they will cost less than today. Meanwhile, businesses have to pay the expenses and wages the have agreed to today with the money they earn tomorrow, which will be less and less.

            In terms of economic stability, inflation has negative feedback because while your money is worth less and less, you can easily borrow money and your debts will vanish with further inflation. Deflation has positive feedback, because people refuse to spend, which causes the price to go down, which makes sitting on your money even more valuable.

            This is why currencies that are prone to hoarding and deflation – like gold and Bitcoin – are terrible for the market. Their value goes up, and then crashes, and up again, and crash… ad infinitum. You can’t do any real business like that. You might as well put a one-armed bandit at the supermarket and pull the lever to decide what price you get to pay for your bread today.

  8. Burstcoins proof of storage solves the energy inefficiency of bitcoin. Proof of storage also ensures the little player can still participate. No ASICS solving problems, precalculated solutions on hard drives to problems that are so vast they can’t be calculated realistically in real time. So we solve bitcoin energy usage(a lookup every 10 seconds.) tsolve bitcoin time to mine, now just a lookup on a drive making quick transactions viable, and solve bitcoins centralization of mining because storage is storage, unlike algorithms which an be sped up with custom silicon. The only thing burstcoin did wrong was not being first.

    1. Or create some new cryptocurrency that is “mined” by hosting content. As such, a “miner” for it would be something like a Raspberry Pi with a HDD attached. Even if the cryptocurrency itself doesn’t prove very useful, we’ll at least end up with a decentralized version of Youtube…

        1. Putting individuals at the same level as hosting companies will solve a lot of problems. In particular, companies will be encouraged to keep their “community guidelines” as loose as the law will allow since whatever they refuse to host loses them revenue and would not be effective at suppressing (legal) content since individuals get paid hosting it instead.

          1. You’d still want to clearly define “hosting,” “content,” etc… to make sure nobody could game the system, otherwise you’re right back to coin farms by another name. Ideally, the system would use some tracking metric whereby it would only generate currency tokens for every x-thousand unique impressions on any given item of content served, maybe with bonus currency tokens generated based on quality of the content delivery (e.g. did clients interact favorably with the hosted content, such as by clicking or commenting).

          1. Not sure. Their official page lists a couple of no longer available FPGA hits as the recommended setup and says GPU and of course CPU mining aren’t profitable. Dunno if more has been done that isn’t officially noticed yet, no doubt they have forums or discord or the like where the devs hang out but I haven’t delved that deep…

  9. Whatever the case…. We have a bitcoin mining operation here…. When in operation, It used more power than our entire city. What a waste of energy. I mean we ‘like’ it in one sense as we get to use more coal and such to meet the demand (think revenue for the utility and power producers)… But, it was a good thing in this last cold snap, that the operation was shutdown at the time or we would have been having to shed load in our system…. Ironic isn’t it that we are asked to ‘conserve’ and ‘use less’, yet these operations peg the ‘use’ meter for …. nothing but calculating hashes. These are probably the same people that are ‘clean energy’ advocates…

    1. Well are we assuming all the energy of the readers device, hosting device, and every server and other networking gear on route (i.e. the witch hunt model)?

      Or a fair share of the cost? – which for me would be allow say 10w per visit (somewhat of a wild guess, but seems like a reasonable % share of the ‘blame’) for all the myriad network gear and the readers keeping their computer on to enjoy it plus the actual server power draw.

  10. I couldn’t possibly care less about bitcoin and other cryptocurrency. What I care about is the fact that I currently have friends waiting on computer upgrades because of all the morons mining bitcoin have literally exhausted the world’s supply of video cards. Bunch of selfish jerks trying the latest get-rich-quick scheme. Just another stupid gold rush.

    1. Indeed DainBramage, I upgraded to a nice 4K monitor with inbuilt PiP so it can play 2-4 separate monitors at once.. But can’t actually get a video card upgrade to run anything much properly at 4K… Ironically its looking cheaper here to buy a whole bloody laptop, with a processor that probably comes close to matching the workstation (certainly way more power efficient), heaps of ram and the dedicated GPU inbuilt than it is to get a video card.. Even the now several generations old one I want to replace (well downgrade to VM GPU/ GPU2) is on ebay at more than I paid for it new… Its not junk by any stretch, anything in 1080p should be ok performance, but its I think 8 years old now…

      I’d not care (much) if the ‘selfish-jerks’ were actually performing useful computing and getting paid well enough to make this little gold rush for the hardware, but just turning electricity in heat with no betterment of humanity.. I mean think how many generations of machine learning could have been done on all that hardware, hopefully for useful reasons!

  11. Cryptocurrencies are like Linux distros. You can always create another one. So why would anyone accept one? Who sets the exchange rate between cryptocurrencies?

    How do you spend a cryptocurrency if the internet is down?

    The only thing comparable to cryptocurrencies is tulip bulbs. And we know how that ended.

    The early miners who sold bitcoin and bought gold and silver will be the only winners in this Ponzi scheme. Meanwhile the waste of natural resources is spectacular.

  12. So it consumes 1.5% more energy, and has a market value twice that of Argentina’s GDP? Doesn’t that actually mean that Argentina is the one that is energy inneficient?

  13. Learning about cryptocurrency was one of the best decisions I ever made. I LOVE HAD and have been here since almost day one. It makes me so sad to see the ignorance in the comments, we are supposed to be on the bleeding edge of technology guys… Things like ‘latest get rich quick scheme’ and a comparison to tulips just doesn’t fly anymore… Bitcoin is over 10 years old now!

    I never thought I would want to be anything but an EE, because the ability it gives you to build just about anything – but the things you can build once you learn about cryptocurrency, smart contracts, etc are even more amazing.

    Some of the financial/trading side of it can be daunting at first, but again, once you start to understand how the markets work, we’ll, – knowledge is power as they say!

    1. Seconded. It’s hilarious to see comments like ‘hur dur SOMEONE needs to look up value’ from folks who obviously haven’t picked up an econ 101 textbook. Unless you’re a marxist, value in *everything* is subjective. If you *are* a marxist, you actually believe the same thing except you peg it as ‘labor’ and then quickly figure out that not all labor is equivalent even after you account for the labor cost of training. Then you either go talk to someone who doesn’t know anything about economics or stop being a marxist. (Economics, not politics ;)

      The value of fiat currency is actually in the fact that the government accepts fiat as payment for *taxes*. Everyone has to pay taxes, so fiat is valuable to everyone. The government can then use this to pay people for things, and around we go.

      Bitcoin’s value is, yes, subjective, just like the value of water (Amazon jungle vs desert). It has some value as a means of transactions (sending money internationally isn’t free folks, and bank -> BTC -> bank is often faster than bank -> bank). The current market is definitely a product of speculation – but BTC is also incredibly democratic, as well as a fantastic bit of technology. It may one day be superseded, it’s certainly not the most efficient means of transacting on a blockchain these days, but for now it has some value.

      (also, all the GPU gripes are actually about ethereum, BTC mining doesn’t do well on GPUs)

    2. Good ad copy. You should consider it as a profession. Because you really didn’t say anything . And that is the problem with Bitcoin in a nutshell. It’s promoters are incapable of plainly explaining what Bitcoin is to laymen and thus it;s enthusiasts come off as slick talking scam artists who like to insult outsiders.

      Would I trust someone who tries to buy something off me with Bitcoin? Hell no! You either produce paper currency, or a cashier’s check drawn from a well known bank or start walking.

      1. LOL, first let me say that your plan of going to Peru when all the world’s electricity has been turned off is…. Umm.. Unrealistic to say the least!! The world will have much bigger problems if that day ever comes, and your paper money will be worthless too…

        It is my profession, I went full time crypto about 6 months ago now, after 4 years of learning and speculating. Best decision I ever made, as an engineer with a background in low level hardware design and security it was a painless and liberating experience.

        The value proposition is simple, trustless exchange of value backed up my immutable mathematics.

      1. Freedom at the price of destroying the planet? GTFO with such attitude. RES are limited. And they won’t solve the energy problems of BTC, which always will consume more and more…

  14. Fingers crossed for another crypto market crash so that Bitcoin mining profitability fails to recover.
    That energy can be much more usefully applied.
    I like some crypto projects. I hold ADA (Cardano)
    Their proof of stake algorithms are way less energy intensive, cheap and scalable. You can delegate your stake to pools who contribute profits to causes you agree with. It’s built to accommodate global value inflation.
    The more you HODL bitcoin the fewer your chances to wrestle polar bears.
    ps build kite turbines

      1. Right now I don’t even care about anything but that it better bloody crash soon, so I can get a new GPU, or even better that ‘pre-mined’ one for dirt cheap like the last time it busted…

        1. Perhaps we should try to get a return of the smartphone mined coins like Perk? Those were way more energy efficient than GPU or ASIC mined coins and the cheap smartphones ($20 or less) used to mine them aren’t very good as smartphones.

  15. An electronic “Tulip Mania.”

    The Big “Buy & Hype” Bitcoin Casino
    Feb 28, 2021


    Karl Denninger says digital currencies are all a scam


    After his long technical analysis, here’s his concluding sentence:

    “So go ahead and play if you wish folks, but just recognize that you’re riding a ponzi scheme — and that all of them, without exception, eventually collapse.”

  16. “volatile wealth store that’s destroying the planet” are you mad bro for missing out? clearly…
    I gotta laugh on old monolythic sites like this and slashdot hating on bitcoin an other cryptos. Why? Because you are the past, you are insignificant. A single dogecoin reddit thread gets more thumb up than the daily visitor volume of this website.

    1. No. PPL are mad because they will have to live in sheethole planet you jerks are making. We are on the edge of energy crisis worldwide along with climate crisis. And what do you do? Waste tons of energy… W/O BTC a lot of old coal-power plants would be destroyed because the grid would not need them. But u created demand, which makes those old power plants still in use.

      1. Go back to live under your rock trailertrash. The banking system consumes 600x more electricity than BTC but its like talking to a wall to people like you so I stop already. Stay dumb.

        1. How many people use traditional currencies in their transactions versus cryptocurrencies ? Efficiency is not measured in the total amount of energy used, but in the amount PER TRANSACTION.

  17. I love hackaday but I’m sorry this is not good reporting in some respects. There is a lot of misinformation. I think you should edit this post to clean it up. And note that all the changes I’m about to point out are not all “pro” bitcoin.

    > Arguments that some cryptocurrency may be mined from renewables do not apply, because while those coal fired power stations still exist they are supplying energy which could be supplied by renewable sources that are instead being taken up by the miners.

    How can you say that in the context of Texas’s massive power outage? Energy cannot magically teleport from A to B. This is basic grid knowledge and has nothing to do with the notoriously hard to understand Bitcoin, so for shame!

    > Lest we forget that the Bitcoin algorithm is designed to become more difficult to compute as the blockchain progresses.

    Not true. Its designed to produce about 1 block every 10 minutes. If there are fewer miners, difficulty reduces. Also note that given a stable price energy use will halve every 4 years.

    > Cryptocurrency farmers are not unaware of the electricity bills, perpetually seeking out the most efficient mining equipment.
    > This makes for a hazy future, can hardware improvements keep up with increasingly elusive hashes or will the network’s
    > electricity consumption continue to grow?

    This implies the idea that more efficient hardware will reduce Bitcoin’s electricity consumption. But that is not correct. The electricity consumption will stay the same, because people will buy more hardware.

    > There’s been a constant over the last few weeks’ news, thanks to Elon Musk we’re in another Bitcoin hype cycle.

    Bitcoin’s rise started WELL before Musk’s comments. Just look at a graph. Although we cannot know for sure unless someone asks him, the timing implies that his interest is probably an effect of the rise, not a cause. This isn’t as important a correction for Bitcoin’s sake, but for your sake its the FIRST sentence and its not accurate. This is just embarrassing, if you let it stand.

    I wrote a “media package” about Bitcoin and energy use here: https://read.cash/@AndrewStone/blockchain-energy-use-a-media-package-e322977c

    1. BTC is designed to be energy-sink. It’s time to abandon it. Climate crisis, and soon we will have energy crisis. RES can in some % power the BTC mining, but most of RES are unstable sources which are backed by old coal-fired power plants. And coal IS THE CHEAPEST STABLE ENERGY SOURCE. Only in countries in EU, USA etc – coal is taxed additionally for environmental damages. ‘More energy efficient hardware’ – just in theory, cos in reality – miners will buy sheetloads of this hardware and still consume tons of energy. Because why not if it gives them more moneyz?

    2. Yes energy isn’t magically transportable, but if Texas wasn’t so bizarre and actually connected to the wider grid it could receive, with some efficiency losses, from the places that have to it. You can rather trivially move electric from A to B if you put in the infrastructure, rather simple and cheap infrastructure too, which is why in most places in the developed world blackouts are a thing of the past almost all the time…

      Heck Europe is now trading in energy at huge rates between nations, because there is so much renewable out there nations are selling each other their excess, and then buying when they fall short, which also lets the French Nukes just keep ticking along efficiently, rather than have to keep changing to meet the load (which nukes do rather slowly)…

      Also if you are correct and more efficient hardware leads to more hardware bought keeping the electric consumption the same, you are still loosing more energy, as the embodied energy of making all this ‘more hardware’ is significant and wouldn’t be needed if the old hardware was kept running instead. So it is actually still getting worse in that situation..

  18. We definitely have backed the wrong horse. Bitcoin’s goals have been completely subverted by big money.

    When it was new it promised real ownership of ones money, without having a bank. Anonimity (digital cash replacement), and independence of speculative powers like central banks that mess around with our savings by manipulating the interest rates and giving free money to banks.

    However what really happened:
    – Bitcoin has just become another string puppet of big money and speculation
    – Anonymity is gone due to know-your-customer laws and due to its nature it’s now *less* anonymous than anything else
    – The real ownership is not as relevant anymore as most bitcoin owners keep it in central exchanges now
    – Miners have formed blocks especially in China due to cheap/stolen power which makes the bitcoin scarily decentralised and prone to influence
    – And, as the article says the power usage is ridiculously inflated. All for an imaginary currency.

    I was in favour of bitcoins original goals but what it has become bears no resemblance. I still like Monero for anonimity (cash replacement) and Ethereum for its clear vision to reducing power by proof of stake. But bitcoin itself is a travesty now IMO.

  19. Once upon a time, financial markets existed because they were the way for people to raise financing to create or expand their businesses. It was also a test of financial health; if a business wasn’t perceived as successful, people wouldn’t invest in it. It worked pretty good.

    The financial market is of course now a hell of a lot more distanced from this initial function, but BTC represents the move into full absurdity. It’s a synthetic asset that has no real world use (compared to even tulip bulbs…), it sucks up energy resources to simply exist, and it’s a fail as an efficient currency. It’s the Seinfeld of investments – “It’s a nest-egg of… nothing”.

    Of course, if enough people have convinced themselves that something worthless has value, there will be buyers and sellers of it. Or more accurately, if enough people pretend REEELY HARD that it has value, they will hopefuly be able to unload their holding of nothing in the future, at a profit. Who doesn’t want to be that smug jerk who had a stash of BTC from the early days, and has now retired to the tropics in their thirties? I’m sure there’s a new crop of “winners” who have done Ok through the recent surge.

    Of course for every crypto big winner shooting their mouth off, there are 10 who lost a little (or a lot) but are keeping quiet about it. And a whole lot of energy has been wasted to boot.

    At the end of the day… it’s still nothing (v1.0), and when the world decides to jump to nothing v2.0, it will return to being worth nothing. Crypto and blockchain technologies have their applications; synthetic assets do not.

  20. false, 1) each new miner causes 10-15 older miners shutdown due to difficulty increment and lower fees for older miners , 2) countries with more mining capacity are just countries with more hydraulic power generation (China, Venezuela ) exception is Russia (those are 3 bigger miners wordlwide with more than 60% hashpower) 3) if you live in a country with inflation/goverment control for sure you prefer Bitcoin than your local currency (is a real store of value in this countries) 4) in countries with higher bank fees for sure you prefer to move your money throw bitcoin instead of your local currency (in my country if you want to transfer 10$ to EEUU you will pay 60$ (10$+50$ in fees, using BTC even with higher fess probably will be less than 15$) 5) anonymous like cash

  21. So many seem to try so hard to be authorities claiming everything is black and white, when its living color.
    So when my machines running on solar and wind out compete with miners paying for fossil fueled electric, they won’t be changing?

  22. I think the big issue environmentally, is the scaling of it all. The more profitable mining is, the more electricity you can waste, and still be profitable.
    Any time there’s any profit to be had, people/groups/states with enough money can throw more hardware at it. If you’re making $10 a day in _profit_ from a single machine, 20000 identical machines will make you $200000 a day. It’ll essentially scale out until it’s not profitable anymore.

    It’ll also be most profitable to those with the cheapest electricity, and you can guess how most of that is generated.

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