Bitcoin's fundamental value is negative given its environmental impact(markets.businessinsider.com)
markets.businessinsider.com
Bitcoin's fundamental value is negative given its environmental impact
https://markets.businessinsider.com/currencies/news/bitcoin-value-negative-environmental-impact-nouriel-roubini-cryptocurrencies-2021-2-1030067687
169 comments
My problem with these takes is that they're missing the forest through the trees. I don't believe you'll ever be able to solve climate change by shaming people based on their usage of electricity. The problem is not HOW people use electricity, it's how the electricity itself is generated. The electricity might be used to draw triangles on my screen, hash some value, keep me warm in my apartment, or make my car move; each of those things might be objectionable to someone.
Ever since humans learned to harness electricity our usage has increased, and with it our quality of life has also increased. That's not going to change. The only way to prevent electricity usage from causing climate change is to regulate emissions themselves (either through carbon taxes or outright bans: that's for regulators to decide) and invest in alternative forms for electricity generation (that includes nuclear).
Ever since humans learned to harness electricity our usage has increased, and with it our quality of life has also increased. That's not going to change. The only way to prevent electricity usage from causing climate change is to regulate emissions themselves (either through carbon taxes or outright bans: that's for regulators to decide) and invest in alternative forms for electricity generation (that includes nuclear).
This would be a reasonable stance if Bitcoin were just another activity, but it’s unique in its energy profile. What other technology is designed so that energy efficiency improvements are absorbed and nullified (through the difficulty adjustment mechanism)?
Bitcoin is far from unique in this. When gas prices fall people have been shown to drive more. And buy less efficient cars and drive them less efficiently (faster, more aggressively).
When water prices are lower people water their lawns more and take more baths.
When shipping ePackets from China is cheap, people buy more stuff from there.
I just don’t see how Bitcoin responding to supply and demand is different from any other consumable.
It feels like the argument makes the unstated presumption that Bitcoin has no utility, which is a separate debate. Bitcoin advocates would say that more and more miners arguably provide greater security assurances making the currency itself more valuable.
When water prices are lower people water their lawns more and take more baths.
When shipping ePackets from China is cheap, people buy more stuff from there.
I just don’t see how Bitcoin responding to supply and demand is different from any other consumable.
It feels like the argument makes the unstated presumption that Bitcoin has no utility, which is a separate debate. Bitcoin advocates would say that more and more miners arguably provide greater security assurances making the currency itself more valuable.
>> This would be a reasonable stance if Bitcoin were just another activity, but it’s unique in its energy profile. What other technology is designed so that energy efficiency improvements are absorbed and nullified (through the difficulty adjustment mechanism)?
> Bitcoin is far from unique in this. When gas prices fall people have been shown to drive more. And buy less efficient cars and drive them less efficiently (faster, more aggressively).
I don't think that's true, or it's only true if you look at it from a consumption perspective that ignores important parts of the picture.
When gas prices fall, more energy is used, but travel miles increase. More work gets done per dollar.
When bitcoin mining gets more efficient or energy cheaper, the amount of bicoin "work" done stays constant, because the difficulty changes to compensate. It's like if roads got longer the cheaper gas gets.
> Bitcoin is far from unique in this. When gas prices fall people have been shown to drive more. And buy less efficient cars and drive them less efficiently (faster, more aggressively).
I don't think that's true, or it's only true if you look at it from a consumption perspective that ignores important parts of the picture.
When gas prices fall, more energy is used, but travel miles increase. More work gets done per dollar.
When bitcoin mining gets more efficient or energy cheaper, the amount of bicoin "work" done stays constant, because the difficulty changes to compensate. It's like if roads got longer the cheaper gas gets.
> When bitcoin gets more efficient or energy cheaper, the amount of bicoin "work" done stays constant...
Not quite. The extra work it does allows the network to secure itself better. We don't have to agree with this energy use, but it does do something.
Not quite. The extra work it does allows the network to secure itself better. We don't have to agree with this energy use, but it does do something.
Do you believe the Bitcoin network would be insufficiently secure if miners were incentivized only by the transaction fees and not the block rewards?
Bitcoin has to withstand an attack from central banks of the world in the future. Just look at some comments from Christine Legarde to see what is coming. It's the war of media companies vs internet coming back, just with something much more important. I hope Bitcoin wins, but I think that nobody knows the future for certain.
> Bitcoin has to withstand an attack from central banks of the world in the future
Q: How do we imagine central banks would 'attack' a cryptocurrency, and how is a cryptocurrency (or its users/owners/proponents) going to defend against whatever form such attacks might take?
Q: How do we imagine central banks would 'attack' a cryptocurrency, and how is a cryptocurrency (or its users/owners/proponents) going to defend against whatever form such attacks might take?
Buy / bribe miners to have a constant 50% attack even if they lose billions / tens of billions of dollars.
Bitcoin mining should soon be seen as national security threat for countries that have the most bitcoins, that's why having so much hashing power in China is dangerous.
Bitcoin mining should soon be seen as national security threat for countries that have the most bitcoins, that's why having so much hashing power in China is dangerous.
> Buy / bribe miners to have a constant 50% attack even if they lose billions / tens of billions of dollars
(This is a genuine question, I'm not nearly as well-read on this as I should be) What would this achieve, and whom would benefit?
My naïve assumption would be that coordinated, deliberate (over-)regulating of cryptocurrencies and/or attempting to manipulate prices lower might be a) much cheaper, and b) much more effective.
If you bring enough political pressure to bear on any particular international financial flow, it takes quite a lot of (political!) effort to stand up to that.
Look at what happened between the US and Iran re: the reintroduction of sanctions; then look at the response from France, the United Kingdom, and Germany.[0][1]
Can Bitcoin and its backers (yet?) muster sufficient political muscle to respond if there's a coordinated political attack?
[0] https://www.europarl.europa.eu/thinktank/en/document.html?re... [1] https://ecfr.eu/article/commentary_trading_with_iran_special...
(This is a genuine question, I'm not nearly as well-read on this as I should be) What would this achieve, and whom would benefit?
My naïve assumption would be that coordinated, deliberate (over-)regulating of cryptocurrencies and/or attempting to manipulate prices lower might be a) much cheaper, and b) much more effective.
If you bring enough political pressure to bear on any particular international financial flow, it takes quite a lot of (political!) effort to stand up to that.
Look at what happened between the US and Iran re: the reintroduction of sanctions; then look at the response from France, the United Kingdom, and Germany.[0][1]
Can Bitcoin and its backers (yet?) muster sufficient political muscle to respond if there's a coordinated political attack?
[0] https://www.europarl.europa.eu/thinktank/en/document.html?re... [1] https://ecfr.eu/article/commentary_trading_with_iran_special...
It's easy to censor Iran if you control the international clearing system.
What you suggest is more similar to banning gold, which happened 100 years ago in US. Where do you think gold price went after that?
What you suggest is more similar to banning gold, which happened 100 years ago in US. Where do you think gold price went after that?
> What you suggest is more similar to banning gold, which happened 100 years ago in US. Where do you think gold price went after that?
Where the gold price when after 1933 isn't that relevant to all those who were forced to sell their gold to the Federal Reserve at that time.[0]
Thought experiment: were your national government to pass a law forcing you to sell your Bitcoin to them at a price they pick, you would appear to have precisely two options: 1) sell, or 2) be prosecuted
There's plenty of precedent for 2) [1], so I'm guessing most people would end up opting to sell. That would appear to be the end of that... (?)
For clarity: no, I don't think this is right. It might happen anyway.
[0] https://en.wikipedia.org/wiki/Executive_Order_6102 [1] https://en.wikipedia.org/wiki/Executive_Order_6102#Prosecuti...
Where the gold price when after 1933 isn't that relevant to all those who were forced to sell their gold to the Federal Reserve at that time.[0]
Thought experiment: were your national government to pass a law forcing you to sell your Bitcoin to them at a price they pick, you would appear to have precisely two options: 1) sell, or 2) be prosecuted
There's plenty of precedent for 2) [1], so I'm guessing most people would end up opting to sell. That would appear to be the end of that... (?)
For clarity: no, I don't think this is right. It might happen anyway.
[0] https://en.wikipedia.org/wiki/Executive_Order_6102 [1] https://en.wikipedia.org/wiki/Executive_Order_6102#Prosecuti...
Any decent sized nation state could afford a 51% attack if they didn’t care about profiting on it and only wanted to wreck Bitcoin.
In theory sure, but how do you suggest to do it in practice?
Turn off electricity to half of residents because you have this crazy idea that doesn't help them? Buy miners just to get nothing out of it at the end?
Also what do you think other billionaires with Bitcoin holdings do? Sell it all, or counteract by buying even more miner equipments?
It would be a political disaster unless all natiom states work together to take over all miners...which is a possibility.
Turn off electricity to half of residents because you have this crazy idea that doesn't help them? Buy miners just to get nothing out of it at the end?
Also what do you think other billionaires with Bitcoin holdings do? Sell it all, or counteract by buying even more miner equipments?
It would be a political disaster unless all natiom states work together to take over all miners...which is a possibility.
> Bitcoin is far from unique in this. When gas prices fall people have been shown to drive more.
This is human behavior responding to incentives. Yes, more energy is burned, but more people get places.
What I’m talking about is like if a car responded to the price of gas decreasing by 50% by revving in neutral until the total cost per mile was the same.
This is human behavior responding to incentives. Yes, more energy is burned, but more people get places.
What I’m talking about is like if a car responded to the price of gas decreasing by 50% by revving in neutral until the total cost per mile was the same.
I think this is not what the parent poster was saying. The problem of bitcoin is not one of induced demand, where cheaper goods means that people become willing to use it less efficiently. Difficulty adjustment is as if every car monitored its MPG and then dynamically adjusted the engine until it became as efficient as a 2003 hummer.
When the mining efficiency is increased, that isn't translated into more bitcoins being mined or more people benefiting from bitcoin. The matching mining difficulty increase ensures that all that extra efficiency will be turned into waste heat.
When the mining efficiency is increased, that isn't translated into more bitcoins being mined or more people benefiting from bitcoin. The matching mining difficulty increase ensures that all that extra efficiency will be turned into waste heat.
Yes this is known as Jevon's paradox and is not unique to these situations
https://en.wikipedia.org/wiki/Jevons_paradox
We can't simply just rely on improvements in efficiency to solve these problems.
https://en.wikipedia.org/wiki/Jevons_paradox
We can't simply just rely on improvements in efficiency to solve these problems.
A fall in the price of a product (say, as a consequence of efficiency gains in the production process that shift the supply curve) increases the quantity demanded for that product. The end result of the efficiency gain is an increased consumption at a lower cost.
But when gas prices fall people either move those savings to cheaper, less efficient cars or get more satisfaction out of their driving?
Whereas there is very little change in the bitcoin mining, unless you have fetish for long zeros in hash values.
Whereas there is very little change in the bitcoin mining, unless you have fetish for long zeros in hash values.
The zeros translate to "more secure network"
Precisely.
Without Bitcoin, we could be retiring coal plants with the additional solar and wind that have been coming online. Instead, every additional Watt-hour we generate is used to mine Bitcoin on top of existing demand.
Without Bitcoin, we could be retiring coal plants with the additional solar and wind that have been coming online. Instead, every additional Watt-hour we generate is used to mine Bitcoin on top of existing demand.
That's an absurd argument. And as long as we're using solar and wind, we'll need backup from coal, gas and nuclear for when the sun isn't shining and the wind isn't blowing. If you think increasing battery capacity will solve that, read up on the supply chain of lithium.
Coal is a baseload generator. It cannot ramp up or down very easily.
Nuclear is mostly baseload... not so much because its impossible to ramp-down nuclear, but because nuclear's initial-investment (site planning / engineering / regulations) are the bulk of its costs. Ongoing costs (ie: fuel) are miniscule.
There's "no point" ramping down Nuclear, given its miniscule fuel costs. Might as well keep pumping electricity as long as the price of electricity is non-negative.
So only gas ramps up-and-down.
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As such, Solar / Wind + Gas Peaker combinations are very good for ramping down Coal production. Because the bulk of electricity is needed in the daytime (due to the hot sun making AC work harder), Solar/Wind + Gas Peakers will use less fossil fuels than a Coal baseload generator over the same period.
Nuclear is mostly baseload... not so much because its impossible to ramp-down nuclear, but because nuclear's initial-investment (site planning / engineering / regulations) are the bulk of its costs. Ongoing costs (ie: fuel) are miniscule.
There's "no point" ramping down Nuclear, given its miniscule fuel costs. Might as well keep pumping electricity as long as the price of electricity is non-negative.
So only gas ramps up-and-down.
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As such, Solar / Wind + Gas Peaker combinations are very good for ramping down Coal production. Because the bulk of electricity is needed in the daytime (due to the hot sun making AC work harder), Solar/Wind + Gas Peakers will use less fossil fuels than a Coal baseload generator over the same period.
Coal plants can't dynamically ramp up or down to partial capacity but coal plants can be activated and deactivated according to demand - there is, essentially, a priority list of plants in the US dictating the order in which to turn them on in times when demand is exceeded - there are also some bi-modal plants out there (some hydro plants on lakes which can pump water into the lake during low demand times and run their turbines when demand is high).
Coal plants tend to be quite low on this list due to their poor scaling and obvious environmental impact - in fact for a while (I'm not certain if this is still accurate - it's about a decade out of date) one of the last entries on that list was a rarely activated coal power plant in downtown boston that had an extremely inefficient conversion ratio and was deemed exceptionally dangerous due to being located in a population center - still, in times of extreme demand it was standing ready to be activated.
Coal plants tend to be quite low on this list due to their poor scaling and obvious environmental impact - in fact for a while (I'm not certain if this is still accurate - it's about a decade out of date) one of the last entries on that list was a rarely activated coal power plant in downtown boston that had an extremely inefficient conversion ratio and was deemed exceptionally dangerous due to being located in a population center - still, in times of extreme demand it was standing ready to be activated.
What about hydroelectric? Is it not possible to ramp up and down there?
Hydroelectric is great, but only when the geography + local water usage agrees with the construction project.
For places like California which is facing a shortage of Water, Hydroelectric is a weaker option. Ex: if you run a dam in reverse for Pumped Storage, that implies sucking up the precious water from the lower-reservoir back up to the upper side.
Realistically speaking, the near term future is Solar + Gas peakers. We should build out as much Hydro-electric as possible, but most good river sites are already built out. (IE: Rivers which have a large change in elevation to make a Dam project actually worthwhile).
For places like California which is facing a shortage of Water, Hydroelectric is a weaker option. Ex: if you run a dam in reverse for Pumped Storage, that implies sucking up the precious water from the lower-reservoir back up to the upper side.
Realistically speaking, the near term future is Solar + Gas peakers. We should build out as much Hydro-electric as possible, but most good river sites are already built out. (IE: Rivers which have a large change in elevation to make a Dam project actually worthwhile).
I read somewhere recently that if existing dams in West Virginia were retrofitted with hydroelectric capabilities, they could yield something close to the power requirements of New York City.
Maybe hydroelectric isn't an option for California, but in the east, there might be much more of an opportunity.
Maybe hydroelectric isn't an option for California, but in the east, there might be much more of an opportunity.
Ish. The east already has the Bath County Pumped Hydro station (aka: "the largest battery in the world")
Its not like the East needs more hydro / energy storage. They've already got GW-hrs of energy storage. That's the "problem" about geography-based solutions: the places where Hydro already makes sense are already built up 50 years ago.
Not that that makes Hydro a "bad idea" or anything. If anything, it proves how Hydro has been tested for decades and is effective. It does mean that the East can build up more Solar Panels, since there's plenty of energy storage available.
Its not like the East needs more hydro / energy storage. They've already got GW-hrs of energy storage. That's the "problem" about geography-based solutions: the places where Hydro already makes sense are already built up 50 years ago.
Not that that makes Hydro a "bad idea" or anything. If anything, it proves how Hydro has been tested for decades and is effective. It does mean that the East can build up more Solar Panels, since there's plenty of energy storage available.
lithium is now barely used in the latest battery tech. See Tesla
This is both a good and a fair critique of bitcoin. But I don't understand the endgame. Should the use of bitcoin be banned or just shamed?
Let's assume for a moment that I live "off the grid" and run my full BTC node using my own solar power. Is that something that should be banned? Should it be shamed?
I don't know where to draw the line.
Let's assume for a moment that I live "off the grid" and run my full BTC node using my own solar power. Is that something that should be banned? Should it be shamed?
I don't know where to draw the line.
This is a great question and I don’t have all the answers, but I’d at least like to see CEOs who put it on their balance sheet put to task for it. E.g. putting it on your books should be penalized by ESG funds. Elon Musk shouldn’t get away with greenwashing it through Tesla’s (possibly overrated anyway) environmental halo. Nor should California taxpayers be subsidizing electric vehicles if the carbon benefits are negated by the manufacturer’s Bitcoin holdings.
>This is a great question and I don’t have all the answers, but I’d at least like to see CEOs who put it on their balance sheet put to task for it
Should CEOs who put gold on their balance sheets be put to task for the environmental damage that causes? Should companies that buy conflict minerals be put to task for that as well? If so, you're just describing a pollution tax.
Should CEOs who put gold on their balance sheets be put to task for the environmental damage that causes? Should companies that buy conflict minerals be put to task for that as well? If so, you're just describing a pollution tax.
Teslas holdings do not cause emissions. Every time I see one of these bitcoin climate articles on HN the quality of dialog and general knowledgeability of the subject at hand, takes a nose dive.
Sure, technically it’s not holding that increases emissions, it’s buying, but you can’t hold without buying.
Buying increases the market price, which increases the market value of the block reward, which increases the amount of energy miners are willing to use to earn the block reward.
Buying increases the market price, which increases the market value of the block reward, which increases the amount of energy miners are willing to use to earn the block reward.
And also increases the demand for more efficient mining rigs and pushes miners to move equipment. When we sold the miners we used to heat our building back in the winter of 2017, We made sure they went to an ethical place (a hydro dam in OR). In some cases, it's a neat way to store energy that would otherwise be waisted.
banning bitcoin would be fine with me, because i think the tradeoff is a bad one.
The endgame should be a global carbon tax.
In my original comment I said I favor carbon taxes (in addition to other measures to stop carbon emissions).
But the comment I'm replying to seems to imply that it doesn't matter where the electricity comes from, that bitcoin is bad regardless of how the electricity is generated.
But the comment I'm replying to seems to imply that it doesn't matter where the electricity comes from, that bitcoin is bad regardless of how the electricity is generated.
If the externalities were properly accounted for, I wouldn’t have a problem with Bitcoin. It wouldn’t be my cup of tea, but neither are lots of things. It’s purely the externalities I care about.
A global carbon tax would be great if it were enforceable but it’s not. Just look at how we treat our oceans. It’s especially a problem with Bitcoin since production will naturally shift to the cheapest location, and since it’s fungible and non-physical this can’t be accounted for with trade law/sanctions the same way it could with manufacturing.
A global carbon tax would be great if it were enforceable but it’s not. Just look at how we treat our oceans. It’s especially a problem with Bitcoin since production will naturally shift to the cheapest location, and since it’s fungible and non-physical this can’t be accounted for with trade law/sanctions the same way it could with manufacturing.
Compared to other methods of money transfer I think Bitcoin does pretty well in terms of its energy usage. How much energy is used printing money and shipping it to various banks in Brinks trucks? How much is used building and operating millions of bank branches/ATMs worldwide?
Cash is terrible. But that's not all "other methods of money transfer". Compared to an ATM debit, credit card payment, or even most modern crypto coins, the energy cost of Bitcoin is ridiculous.
The marginal cost to use an ATM is low but what about the fixed costs of installing them and the ongoing maintenance? How much methane is released into the atmosphere feeding bankers porterhouse steaks?
No design needed. If the price of gold doubles, twice as much resources can be invested to dig up a ton of gold.
Gold has an intrinsic additional cost to acquiring that is unrelated to humans. There exist deposits that are harder to get to in the world and it isn't currently economically viable to extract them. This isn't mankind's doing it is just a truth of the world.
Bitcoin adds artificial scarcity that isn't intrinsic. And unfortunately society as a whole pays for that additional scarcity by increasing the resources spent mining blocks.
I am not saying this is an unacceptable trade-off all things considered. I just think the gold analogy is flawed.
Bitcoin adds artificial scarcity that isn't intrinsic. And unfortunately society as a whole pays for that additional scarcity by increasing the resources spent mining blocks.
I am not saying this is an unacceptable trade-off all things considered. I just think the gold analogy is flawed.
>Gold has an intrinsic additional cost to acquiring that is unrelated to humans. There exist deposits that are harder to get to in the world and it isn't currently economically viable to extract them. This isn't mankind's doing it is just a truth of the world.
I disagree. Gold was specifically chosen to be rare and hard to counterfeit. That's why we don't use sea shells as a store of value. In that respect I don't see how awarding value to holders of a shinny yellow metal is any different than awarding value to holders of a hard to find hash.
I disagree. Gold was specifically chosen to be rare and hard to counterfeit. That's why we don't use sea shells as a store of value. In that respect I don't see how awarding value to holders of a shinny yellow metal is any different than awarding value to holders of a hard to find hash.
The most obvious difference is that the "mining" of BTC is necessary for its security/transaction layer. The security of the worldwide gold supply is not contingent on constantly directing more resources towards mining, and it is possible to continue to transact with gold if mining were banned altogether. Most holders of gold don't have any interest at all in mining; indeed curtailing gold mining would actually work in their favour.
(But yeah, gold hoarding is pretty wasteful in multiple ways too)
(But yeah, gold hoarding is pretty wasteful in multiple ways too)
> gold hoarding is pretty wasteful in multiple ways too
Isn't most hoarding wasteful?
Isn't most hoarding wasteful?
That applies to bitcoin too, but gold doesn't also become twice as hard to dig up just because mining equipment became twice as efficient.
>gold doesn't also become twice as hard to dig up just because mining equipment became twice as efficient.
it does, kind of. as we use up the easy to find deposits, the remaining deposits are harder to mine/refine, so essentially it does get harder.
it does, kind of. as we use up the easy to find deposits, the remaining deposits are harder to mine/refine, so essentially it does get harder.
This is also literally how oil/fracking projects work and are decided
The problem is more fundamental than that. We cannot solve climate change by subtraction (eliminating things, usage, consumption, fuels, factories, etc.). We know this with absolute certainty through at least 800,000 years of highly accurate ice core atmospheric data.
I'm a Bitcoin skeptic, but mentioning "fundamental value" when talking about currency seems incongruous. The "fundamental value" of bitcoin is whatever people think it's worth. Just like USD.
The "fundamental value" of anything is whatever people think it's worth.
I have a very hard time understanding why people can't wrap their heads around this very basic concept.
It's just a restatement of the law of supply and demand.
I have a very hard time understanding why people can't wrap their heads around this very basic concept.
It's just a restatement of the law of supply and demand.
Currency is a special case of this because most other things have some sort of inherent-use value independent of what someone will pay you for it. In other words, for most things, even if the most someone will pay you for it is $0, it may still be useful to you for some reason and therefore not worth giving it away for free.
I think there is some nuance. The fundamental value of wheat is linked to its ability to feed people. In other words, it has concrete qualitative value to human existence, with natural scarcity.
BTC's scarcity is set by algorithm and BTC provides no value other than being a store for value.
USD's scarcity is set by the printers and databases at the Federal Reserve, and its value is derived from the faith that the US economy and government will honor its value.
BTC's scarcity is set by algorithm and BTC provides no value other than being a store for value.
USD's scarcity is set by the printers and databases at the Federal Reserve, and its value is derived from the faith that the US economy and government will honor its value.
Air is something that is utterly "valuable" (using your definition).
Yet it is free. How's that for value?
Again: you need to get back to the one thing that models all of these things properly: supply (currently akin to infinite for air) and demand (huge, for air, but finite, hence air is free).
This whole notion that "I can eat it therefore it has value" is simply a corollary of the law of supply and demand.
If you use the more general, more powerful paradigm, you reasoning will become crisper.
Yet it is free. How's that for value?
Again: you need to get back to the one thing that models all of these things properly: supply (currently akin to infinite for air) and demand (huge, for air, but finite, hence air is free).
This whole notion that "I can eat it therefore it has value" is simply a corollary of the law of supply and demand.
If you use the more general, more powerful paradigm, you reasoning will become crisper.
More precisely, "I can eat it therefore it has value" is a component of the demand.
"I genuinely believe that a hedge fund will be forced to pay me lot to take it off my hands" was a component of the demand for GME recently. Unfortunately this belief was not well founded, and so many buyers of GME did not realise the value expected from their purchase of GME. Of course, there is also demand for GME because it is a company with substantial assets which can plausibly return profits and pay dividends in future years, it just happens to be a lot less. The only people for whom peak price GME was worth what they thought it was worth were the people who got >$250 out of entertainment value from watching it fall.
All market prices are whatever people think its worth, but individual buyers can derive much more value than that price, or make mistakes and derive much less value.
I don't think that people talking about "fundamental value" have missed the fact that supply also affects price. I think they've avoided missing the fact that people valuing an asset based on predicting others will want it even more in future can be wrong. And that investors who are good at predicting assets other people might want more in future tend to look at intrinsic properties.
"I genuinely believe that a hedge fund will be forced to pay me lot to take it off my hands" was a component of the demand for GME recently. Unfortunately this belief was not well founded, and so many buyers of GME did not realise the value expected from their purchase of GME. Of course, there is also demand for GME because it is a company with substantial assets which can plausibly return profits and pay dividends in future years, it just happens to be a lot less. The only people for whom peak price GME was worth what they thought it was worth were the people who got >$250 out of entertainment value from watching it fall.
All market prices are whatever people think its worth, but individual buyers can derive much more value than that price, or make mistakes and derive much less value.
I don't think that people talking about "fundamental value" have missed the fact that supply also affects price. I think they've avoided missing the fact that people valuing an asset based on predicting others will want it even more in future can be wrong. And that investors who are good at predicting assets other people might want more in future tend to look at intrinsic properties.
The USD actually has two other major sources of value:
1. It's required to pay debts to the US government, like taxes.
2. OPEC oil is priced in dollars by an old agreement with Nixon.
> BTC provides no value other than being a store for value.
And exchange medium.
And exchange medium.
Isn't this a tautology, though? Isn't the definition of value, "whatever people think something is worth?"
It's good to be reminded that value emerges from individual decisions made by individual traders that collectively form a market. Still, there is also benefit in understanding whether there is some external objective reality that is influencing those decisions.
Sometimes, value decisions are arbitrary or irrational—but over time, value decisions tend to be rational and based on underlying fundamentals of the thing in question, do they not?
People who buy and sell things have the same mental capacity, after all, as the observers who are on the outside asking about the "fundamental" utility of the thing to which value is being assigned.
Wouldn't the people who have something at stake in a transaction have more incentive to develop a theory of underlying value than would disinterested observers? If they do develop a theory of underlying value, wouldn't that theory guide their pricing decisions when buying and selling?
And if so, how is the "fundamental value" of a thing distinct from the aggregated theories of value that buyers and sellers of that thing hold over its lifetime? Accurately assessing this "fundamental value" might not help you as a short-term trader, but it surely can improve the decision making of a long-term investor, no?
It's good to be reminded that value emerges from individual decisions made by individual traders that collectively form a market. Still, there is also benefit in understanding whether there is some external objective reality that is influencing those decisions.
Sometimes, value decisions are arbitrary or irrational—but over time, value decisions tend to be rational and based on underlying fundamentals of the thing in question, do they not?
People who buy and sell things have the same mental capacity, after all, as the observers who are on the outside asking about the "fundamental" utility of the thing to which value is being assigned.
Wouldn't the people who have something at stake in a transaction have more incentive to develop a theory of underlying value than would disinterested observers? If they do develop a theory of underlying value, wouldn't that theory guide their pricing decisions when buying and selling?
And if so, how is the "fundamental value" of a thing distinct from the aggregated theories of value that buyers and sellers of that thing hold over its lifetime? Accurately assessing this "fundamental value" might not help you as a short-term trader, but it surely can improve the decision making of a long-term investor, no?
I agree with your example.
I think the problem, though, is with the concept of value itself.
To my knowledge, the value of something is necessarily a personal assessment that individuals 1) make for themselves and 2) by a process that they do not and can not fully comprehend.
I think the problem, though, is with the concept of value itself.
To my knowledge, the value of something is necessarily a personal assessment that individuals 1) make for themselves and 2) by a process that they do not and can not fully comprehend.
Price is what you pay but value is what you get.
As Warren Buffett (I think) once said.
As Warren Buffett (I think) once said.
I could understand if the cost of electricity people have spent on mining and transactions were higher than the sum total of current value of all bitcoins mined, et the current exchange rate to, say, USD.
I think it's emphatically not the case.
I think it's emphatically not the case.
FIAT is backed by the military. The countless wars to maintain hegemony are surely very environmentally destructive. Has anyone done a comparison study between the US dollar and Bitcoin from this environmental perspective?
Edit: I looked it up on Wikipedia and found this:
>In FY 2006, the DoD used almost 30,000 gigawatt hours (GWH) of electricity, at a cost of almost $2.2 billion. The DoD's electricity use would supply enough electricity to power more than 2.3 million average American homes. In electricity consumption, if it were a country, the DoD would rank 58th in the world, using slightly less than Denmark and slightly more than Syria (CIA World Factbook, 2006).[1] The Department of Defense uses 4,600,000,000 US gallons (1.7×1010 L) of fuel annually, an average of 12,600,000 US gallons (48,000,000 L) of fuel per day. A large Army division may use about 6,000 US gallons (23,000 L) per day. According to the 2005 CIA World Factbook, if it were a country, the DoD would rank 34th in the world in average daily oil use, coming in just behind Iraq and just ahead of Sweden.
https://en.m.wikipedia.org/wiki/Energy_usage_of_the_United_S...
Edit: I looked it up on Wikipedia and found this:
>In FY 2006, the DoD used almost 30,000 gigawatt hours (GWH) of electricity, at a cost of almost $2.2 billion. The DoD's electricity use would supply enough electricity to power more than 2.3 million average American homes. In electricity consumption, if it were a country, the DoD would rank 58th in the world, using slightly less than Denmark and slightly more than Syria (CIA World Factbook, 2006).[1] The Department of Defense uses 4,600,000,000 US gallons (1.7×1010 L) of fuel annually, an average of 12,600,000 US gallons (48,000,000 L) of fuel per day. A large Army division may use about 6,000 US gallons (23,000 L) per day. According to the 2005 CIA World Factbook, if it were a country, the DoD would rank 34th in the world in average daily oil use, coming in just behind Iraq and just ahead of Sweden.
https://en.m.wikipedia.org/wiki/Energy_usage_of_the_United_S...
I’m biased but I wonder whether these outlets write more about Bitcoin hurting the environment than oil companies and other energy producers pushing back so hard on alternative energy.
The elephant in the room is Adtech. It wastes obscene amounts of energy, mostly coal mines, and it's only going to waste more with the growth of the economy and the increasing competition between advertisers.
Yes, articles tend to go in groups. Everyone focuses on one topic and then changes.
At the moment the topic seems to be Bitcoin, since it's currently skyrocketing due to Tesla.
But don't worry, they will return to gas/oil soon.
At the moment the topic seems to be Bitcoin, since it's currently skyrocketing due to Tesla.
But don't worry, they will return to gas/oil soon.
Internet advertising's fundamental value is negative given its environmental (not to mention psychological and sociological) impact. So can we get rid of ads?
Someone needs to pay businessinsider to make an article against ads. And such an article could be sponsored by... nobody.
For this critique to be meaningful, it should compare vs. alternative approaches of storing and transferring value - including cash, which can’t possibly be environmentally friendly. Not just in production, but storage, transfer (I wonder what the MPG is on those Brinks trucks), and so forth.
I suspect Bitcoin still comes out behind, but at least it would be a meaningful comparison.
I suspect Bitcoin still comes out behind, but at least it would be a meaningful comparison.
A Brink's truck at maximum capacity can move 600 million dollars. That’s unusual, but filling up several ATM’s can quickly get into the low millions. Most cash transactions are low value by comparison, as the energy cost of cash in your wallet is infinitesimal. It’s the daily or weekly drop of merchants taking cash to their bank which is the main environmental cost of cash but again that’s often thousands of individual transactions. Further those banks tend to be close to the stores and use much of it to fill local ATM’s etc.
For large transactions like paying a mortgage it’s all electronic and very energy efficient.
For large transactions like paying a mortgage it’s all electronic and very energy efficient.
"Cash" is usually just 1s and 0s these days, at least in the US, isn't it? It doesn't require mining, unlike bitcoin.
No, we use physical money all the time.
What do you use physical money for?
In my area of Europe:
Buying things at stores and shops that don't take card payments for one.
Buying weed for another.
Buying/selling small things in person, think garage sales, or even buying second hand cars.
Buying things at stores and shops that don't take card payments for one.
Buying weed for another.
Buying/selling small things in person, think garage sales, or even buying second hand cars.
Can't buy a car in many European countries with cash these days.
The iron grip of the governments there is getting a lot tighter.
The iron grip of the governments there is getting a lot tighter.
In which ones?
Italy, France for example where there is a cap on how large a cash transaction can be.
Here's a list: https://www.europe-consommateurs.eu/en/shopping-internet/cas...
[EDIT]: I should have been more precise: you can't buy a new car in those countries.
You can still probably buy a used car with 10k euro if the transaction is conducted between private persons.
But then: the seller will be left holding 10K euros in cash, which he is likely going to want to deposit into a bank and run into complications.
Here's a list: https://www.europe-consommateurs.eu/en/shopping-internet/cas...
[EDIT]: I should have been more precise: you can't buy a new car in those countries.
You can still probably buy a used car with 10k euro if the transaction is conducted between private persons.
But then: the seller will be left holding 10K euros in cash, which he is likely going to want to deposit into a bank and run into complications.
Fair enough, thanks.
Making purchases and settling debts.
Someone's really serious about pushing the "bitcoin is bad" narrative. Too many articles like that recently. Nevertheless, upvoting because HN should see this.
I mean is it not a good narrative to push? Someone in another comment pointed out each transaction uses so much energy it would be more effecient to just drive 600 miles in a tesla to hand deliver them money. That is awful, and basically for no reason, a digital currency could be designed without that entirely. There is no way to fix it, as proof of work demands that much energy be used no matter how effecient computers become.
An important nuance: such a bitcoin transaction is worth about a billion dollars. It's not a grocery store kind of transaction.
That's also a separate issue, it _also_ requires trusted 3rd parties to broker small, everyday transactions, which has it's own costs (energy and otherwise) and fundamentally requires some centralization and/or escrow, which kind of defeats the purpose.
Maybe it's, you know, people caring about a livable planet. The "Big survival of humanity" lobby.
It's the same people who allow coca cola to poison the planet with plastic so it could make money by poisoning people with sugar. It's the same people who let adtech eat energy budgets of large countries. Same people that encourage the planned goods depreciation economy so we have city sized dump sites. They speak about bitcoin only to remove the spotlight from the real polluters who make some respectable people very rich.
You're right to focus on the really important issues, it is clearly Bitcoin that's going to ruin it for us all and it should be an absolute priority on every self-righteous internet user's agenda.
Oh, btw, did you heat your house today?
Or did you happen to drive a car?
Or did you fly in a plane prior to COVID?
How much fossil fuel was burned to move your 80-ish kg from point A to point B in the air?
Energy consumption is on an exponential growth curve. Has been, will be for the foreseeable future.
The problem is how the energy is produced, not the fact that we use energy.
Oh, btw, did you heat your house today?
Or did you happen to drive a car?
Or did you fly in a plane prior to COVID?
How much fossil fuel was burned to move your 80-ish kg from point A to point B in the air?
Energy consumption is on an exponential growth curve. Has been, will be for the foreseeable future.
The problem is how the energy is produced, not the fact that we use energy.
Does you personally heating your house, or driving a car, or flying planes, for a year match the energy consumption of an entire country?
> At current rates, bitcoin mining uses the same amount of energy every year as the Netherlands did in 2019
Part of the problem is certainly in how the energy is produced. But another part of the equation is that this store of value, by itself, adds very significant amounts of consumption to that growth curve you mentioned.
Wish as we may that we could just snap our fingers and switch to clean energy, realistically that will not happen in the near future. Meanwhile, bitcoin mining will continue to consume as much energy annually as entire countries, and much of that energy will come from non-clean energy.
I'm not saying "let's burn bitcoin", or saying that I have a way out of this situation. But it's either a bit disingenuous or a bit naive to compare personal use of electricity to that of bitcoin's, in order to imply that only "self-righteous internet users" need to concern themselves with it.
> At current rates, bitcoin mining uses the same amount of energy every year as the Netherlands did in 2019
Part of the problem is certainly in how the energy is produced. But another part of the equation is that this store of value, by itself, adds very significant amounts of consumption to that growth curve you mentioned.
Wish as we may that we could just snap our fingers and switch to clean energy, realistically that will not happen in the near future. Meanwhile, bitcoin mining will continue to consume as much energy annually as entire countries, and much of that energy will come from non-clean energy.
I'm not saying "let's burn bitcoin", or saying that I have a way out of this situation. But it's either a bit disingenuous or a bit naive to compare personal use of electricity to that of bitcoin's, in order to imply that only "self-righteous internet users" need to concern themselves with it.
You can care about more than one issue or aspect of the issue at the same time. There's never one change that will fix everything.
Energy is a big part of that. We need as much electricity as possible to combat the effects of climate change.
Interestingly it's the same people who drop millions of tonnes of munitions to protect the dollar without any environmental impact stories hitting the media.
Probably the same group of journalists always trying to associate Tesla with fires.
Bitcoin or anything really should be allowed to use however much energy it is economically feasible. The real question is, why is there no better use for that electricity than to compute numbers? How our economies became so stagnant the best return for capital investment is bitcoin?
Bitcoin was designed in part as a challenge to the monetary system, but it has ended up shining a light onto a much bigger problem: the economy itself is broken, it is sick, energy usage is just one of the symptoms. Resources in most industries are being wasted so much investors see no value in generating 'real' productivity. Hence the demand for cryptocurrencies.
Bitcoin was designed in part as a challenge to the monetary system, but it has ended up shining a light onto a much bigger problem: the economy itself is broken, it is sick, energy usage is just one of the symptoms. Resources in most industries are being wasted so much investors see no value in generating 'real' productivity. Hence the demand for cryptocurrencies.
I think its wild that when the absurd energy consumption curve of bitcoin used to be brought up the defense was "you're blowing it out of proportion", whereas now it's "so what.. don't you have a fridge?"
(Same pattern I recall about climate change, ice caps melting, etc. Deny until it's impossible and then dismiss instead)
(Same pattern I recall about climate change, ice caps melting, etc. Deny until it's impossible and then dismiss instead)
Most bitcoin mining is done with hydro or solar electricity, because it's either very cheap or free.
Both are renewable.
And even if it wasn't, who are we too tell people how to spend their energy? What we really need is a proper carbon tax.
Both are renewable.
And even if it wasn't, who are we too tell people how to spend their energy? What we really need is a proper carbon tax.
Even if we accept this argument at face value, every Watt-hour of hydro or solar that goes to mining Bitcoin could have been used to reduce demand for power generated from fossil fuels.
Power generation isn't perfectly fungible, but it's enough so that this argument falls completely on its face. I wish people would stop making it. Bitcoin is an environmental disaster.
Power generation isn't perfectly fungible, but it's enough so that this argument falls completely on its face. I wish people would stop making it. Bitcoin is an environmental disaster.
> Watt-hour of hydro or solar that goes to mining Bitcoin could have been used to reduce demand for power generated from fossil fuels.
No, that power would have gone to reducing the price of power and people would have found new uses for it.
https://en.wikipedia.org/wiki/Jevons_paradox
No, that power would have gone to reducing the price of power and people would have found new uses for it.
https://en.wikipedia.org/wiki/Jevons_paradox
I love the Jevons paradox but it has limits. Per capita energy consumption in the US peaked in 1979 and has dropped 14% in the last 20 years. https://www.eia.gov/totalenergy/data/browser/index.php?tbl=T...
In the context of Jevons, wouldn’t that explain why we have bitcoin?
But those new uses (presumably improvements to quality of lives) are now gone because the electricity is used in mining bitcoins.
Yes, people used it for the best available purpose. If that purpose was not available to them they would have chosen something inferior.
You are wrong. A lot of solar is being built because of bitcoin, they are not taking energy away from other enterprises but adding renewables to the pool. The good thing is all are benefiting, now solar is becoming economically feasible as an alternative to oil for example, that wouldn't have happened so soon without the demand from bitcoin.
> A lot of solar is being built because of bitcoin
A lot of solar would be built with or without Bitcoin. If the cost to build and operate solar is cheaper than the cost to operate fossil fuel plants, it will get built regardless of Bitcoin's existence.
> they are not taking energy away from other enterprises but adding renewables to the pool
Only if you assume that a virtually all of that solar wouldn't have been built without the existence of Bitcoin.
> now solar is becoming economically feasible as an alternative to oil for example, that wouldn't have happened so soon without the demand from bitcoin.
[citation needed]
A lot of solar would be built with or without Bitcoin. If the cost to build and operate solar is cheaper than the cost to operate fossil fuel plants, it will get built regardless of Bitcoin's existence.
> they are not taking energy away from other enterprises but adding renewables to the pool
Only if you assume that a virtually all of that solar wouldn't have been built without the existence of Bitcoin.
> now solar is becoming economically feasible as an alternative to oil for example, that wouldn't have happened so soon without the demand from bitcoin.
[citation needed]
The Chinese miners sticking rudimentary hydro-turbines in rivers to mine bitcoin in the middle of nowhere are not using energy that could otherwise be distributed. It just wouldn't be generated at all.
Source?
Video gaming has more environmental impact than bitcoin. So do porn sites. Bitcoin just seems like an easy target because people are more directly profiting off of it.
Gaming and computer hardware is ruthlessly optimized to be as energy-efficient as possible while Bitcoin mining is specifically designed to waste energy even though more efficient ways (PoS) exist.
Cable boxes used to waste massive amounts of energy (because GI/SA don't pay your power bill) and eventually the government stepped in to force efficiency. So no, Bitcoin isn't being unfairly singled out for criticism.
Cable boxes used to waste massive amounts of energy (because GI/SA don't pay your power bill) and eventually the government stepped in to force efficiency. So no, Bitcoin isn't being unfairly singled out for criticism.
Bitcoin mining does not waste energy in the same way cable boxes did. The more energy is "wasted" the more secure the network is.
This isn't an argument that it's worth the energy expenditure, or that there aren't alternate ways to get the same level of security, but it's an apples and oranges comparison.
This isn't an argument that it's worth the energy expenditure, or that there aren't alternate ways to get the same level of security, but it's an apples and oranges comparison.
The more energy is "wasted" the more secure the network is
That's a bit like saying the more resources you spend on something, the better it is. Are there crypto currencies that have comparable levels of security with less resources spent on it? Is it theoretically possible to have a crypto currency where the resource requirements don't scale as dramatically as they do with bitcoin?
Even if we grant that more energy == greater security, there's still the question of whether or not the resources per unit of security (however you want to measure "security") might be more efficient using some other methodology.
That's a bit like saying the more resources you spend on something, the better it is. Are there crypto currencies that have comparable levels of security with less resources spent on it? Is it theoretically possible to have a crypto currency where the resource requirements don't scale as dramatically as they do with bitcoin?
Even if we grant that more energy == greater security, there's still the question of whether or not the resources per unit of security (however you want to measure "security") might be more efficient using some other methodology.
>Gaming and computer hardware is ruthlessly optimized to be as energy-efficient as possible
And yet gaming still wastes more energy than crypto. Poor argument.
And yet gaming still wastes more energy than crypto. Poor argument.
Mining through aka PoW at least does redistribution. PoS means that current owners just get more and more *coin.
Not really. In PoW you convert money into electricity, then use that electricity to claim mining rewards. In PoS you lock down your money, then use it to claim minting rewards. The two are not fundamentally different, PoS just skips the "convert into electricity" part.
Are you sure about that? Do you not think the mining is extremely concentrated by a handful of big players and is going to become increasing more so as the hardware needed is becoming more difficult to obtain?
This is a bit of a myth. The actual mining is very fragmented and so are the Chinese mining pools.
There is an appearance of fragmentation. If you look at the order from the supply chain it would lead you to believe this is not the case. It's not going to be even be easy for anyone in retail to get an ASIC miner for the foreseeable future.
Hardware manufacturing for ASICs is indeed mainly from Bitmain and a few others - how does that matter here?
(Too late to edit, but to get the point home): Would you argue that non-blockchain computing is centralized just from the fact that Intel and TSMC arguable control the CPU manufacturing?
Bitmain gives preferential treatment to certain vendors. This is problematic with a massive supply shortage. It makes it worst when the hardware that already exists starts to become worthless.
> Video gaming has more environmental impact than bitcoin.
This seems dubious.
This seems dubious.
>Bitcoin just seems like an easy target because people are more directly profiting off of it
There's a name for that particular ailment: it's called acute nocoiner syndrom.
There's a name for that particular ailment: it's called acute nocoiner syndrom.
The question really isn't whether other endeavors waste more resources, it's whether the goals of Bitcoin could be achieved with fewer resources.
Also how are you measuring the environmental impact of video gaming & or porn? Are their white papers out there with a comparative analysis?
Also how are you measuring the environmental impact of video gaming & or porn? Are their white papers out there with a comparative analysis?
Source? All these whatabout takes I've seen compare the sum total of some hugely popular activity to the relatively small userbase of Bitcoin. I'm highly skeptical Bitcoin would compare favorably on a per-user basis.
The other reason is that the average person does not obviously derive value from its existence.
Video games and porn sites serve some purpose. Bitcoin is virtual Monopoly money for libertarians.
Bitcoin's purpose is to provide a global append-only (ie, non-censorable) database. It doesn't actually serve that purpose, but that's true of, eg, 'free'-to-play mobile games as well.
> Bitcoin is [...]
That's a purpose.
That's a purpose.
This is the 3rd story I've seen on the front page today about the environmental impact of mining BTC. Interesting.
I’m thinking a decent amount of people missed the boat on it, are currently seeing the reality of the new economy unfolding and realizing they aren’t going to be one of the winners in it. And that their power games don’t work here.
I think what scares some well connected people that could use politics to influence things is that the people who got behind this revolution don’t need them now. We chose not to play that game anymore and made a new game that doesn’t care about the rules they (the well connected in journalism, universities, think tanks, lobbies, corporations, activists, etc) corrupted.
You have to understand what a threat this is as millions of individuals will be able to more or less remove themselves from the system and just not participate in their political power game. Financial independence is a threat.
I think what scares some well connected people that could use politics to influence things is that the people who got behind this revolution don’t need them now. We chose not to play that game anymore and made a new game that doesn’t care about the rules they (the well connected in journalism, universities, think tanks, lobbies, corporations, activists, etc) corrupted.
You have to understand what a threat this is as millions of individuals will be able to more or less remove themselves from the system and just not participate in their political power game. Financial independence is a threat.
The USD and all the banks must really have some serious negative value if this farce is to be believed. What about automobiles? I won't go on, so tired of this phony narrative. Things cost electricity and money to create. Has anyone tried to add up the power consumption of all the banks collective offices total power consumption? Just to manage money hmmm?
This is a blatant smear campaign as Bitcoin gains popularity.
I'm genuinely curious to know how much power is being used for things like machine learning (tons) and AWS hosting and various other large power consumers and what "value" they have vs, anything else.
Edit: I know I said I won't go on, but I started thinking about total power consumption from Netflix and all streaming servers, the load, the bandwidth etc because I'm quite familiar with how much a datacenter full of video streaming/conversion servers can pull. All just so people can sit at home totally unproductive sapping up bandwidth and power through multiple points.
Edit: I know I said I won't go on, but I started thinking about total power consumption from Netflix and all streaming servers, the load, the bandwidth etc because I'm quite familiar with how much a datacenter full of video streaming/conversion servers can pull. All just so people can sit at home totally unproductive sapping up bandwidth and power through multiple points.
This is a rehash of a previous post of mine regarding electricity consumption. Just wanted to repost this to get more eyeballs and critiques:
Back in the days where all our electricity came from fossil fuels, I completely agree that marginal electricity usage was bad for the environment. However I think that thought has persisted with us even though it is no longer true 100% of the time. With renewables sometimes the marginal cost of electricity to our environment is near 0 or even negative (eg, during periods of higher winds and lower demand.)
I predict that in the future as bitcoin mining becomes more and more of an efficiency game that you will see bitcoin mining be kind of a load balancer the grid, effectively turning off during peak demand (or low supply) times and contributing to the base load during regular times.
For example, it may even help the economics of building new wind plants. Eg, currently it may not be profitable to build a new wind plant because base load is too low that the excess power generated would need to be sold off at 0 or even negative prices. However if bitcoin mining could be turned on during these times and off during periods of high demand, there will need to be fewer peaker plants in operation and it would positively affect the economics of opening a new wind plant.
Bitcoin mining only cares about the cost of electricity at a given time, it is not like most other electricity demands that are very time based. With the large variance of electricity generation by renewables, I think bitcoin can in the future help smooth demand according to the real supply/demand curve.
It's kind of like a different implementation of the Tesla utility grid batteries. Instead of deploying power, you force the grid to build more renewable capacity (that the miners are paying for) that you use except in peak periods, where you turn off and effectively provide the grid with more power.
Here are 2 articles of a bitcoin mining company doing just this: https://www.bloomberg.com/news/articles/2020-09-01/bitcoin-m... https://www.forbes.com/sites/christopherhelman/2020/05/21/ho...
Back in the days where all our electricity came from fossil fuels, I completely agree that marginal electricity usage was bad for the environment. However I think that thought has persisted with us even though it is no longer true 100% of the time. With renewables sometimes the marginal cost of electricity to our environment is near 0 or even negative (eg, during periods of higher winds and lower demand.)
I predict that in the future as bitcoin mining becomes more and more of an efficiency game that you will see bitcoin mining be kind of a load balancer the grid, effectively turning off during peak demand (or low supply) times and contributing to the base load during regular times.
For example, it may even help the economics of building new wind plants. Eg, currently it may not be profitable to build a new wind plant because base load is too low that the excess power generated would need to be sold off at 0 or even negative prices. However if bitcoin mining could be turned on during these times and off during periods of high demand, there will need to be fewer peaker plants in operation and it would positively affect the economics of opening a new wind plant.
Bitcoin mining only cares about the cost of electricity at a given time, it is not like most other electricity demands that are very time based. With the large variance of electricity generation by renewables, I think bitcoin can in the future help smooth demand according to the real supply/demand curve.
It's kind of like a different implementation of the Tesla utility grid batteries. Instead of deploying power, you force the grid to build more renewable capacity (that the miners are paying for) that you use except in peak periods, where you turn off and effectively provide the grid with more power.
Here are 2 articles of a bitcoin mining company doing just this: https://www.bloomberg.com/news/articles/2020-09-01/bitcoin-m... https://www.forbes.com/sites/christopherhelman/2020/05/21/ho...
I am a strong believer of voting with your wallet.
Don't like something? Build something better. Opinions in news media are worthless.
Don't like something? Build something better. Opinions in news media are worthless.
Bitcoin can be carbon neutral but it has a long way to go.
Energy usage itself is not a bad thing, it’s the energy source that can be environmentally problematic.
Currently 39% of mining power is driven by renewables [1]. It’s not much but a good start.
The simplest solution to speed this up would be to create a law requiring that all mining must use renewable sources (or at least tax those that don’t). It would drive innovation, jobs, and make locations with renewable sources competitive places to live.
[1] https://www.jbs.cam.ac.uk/faculty-research/centres/alternati...
Energy usage itself is not a bad thing, it’s the energy source that can be environmentally problematic.
Currently 39% of mining power is driven by renewables [1]. It’s not much but a good start.
The simplest solution to speed this up would be to create a law requiring that all mining must use renewable sources (or at least tax those that don’t). It would drive innovation, jobs, and make locations with renewable sources competitive places to live.
[1] https://www.jbs.cam.ac.uk/faculty-research/centres/alternati...
As a miner, I'm running a machine that takes electricity as input and outputs bitcoin.
Since I have to pay for the electricity in dollars, and since I sell the bitcoin for dollars, I'm actually operating a machine that takes dollars as input and outputs dollars.
As long as I get more than a dollar out for every dollar I put in, I basically want to put as much money through the machine as it can handle, and I want to build as many more machines as I can afford. That will only change if the $ input:output ratio drops below 1.
If the cost of electricity goes up, my ratio suffers. I have to pay more to get the same amount of bitcoin out.
If the price of bitcoin goes down, my ratio suffers. I get less dollars out for the same input.
If you want me to burn less electricity, you need at least one of those two things to happen: Increase my electricity cost or decrease the price of bitcoin.
You may be rolling your eyes at the obviousness of this. That's because all industrial capitalism operates this way. You put money in to pay for power (to extract resources and fabricate), and you get money out the other end when you sell your product. The "use value" of the product never comes into it for the capitalist. All that matters is what it costs to produce vs what someone will pay at the end.
You may say "but industrial capitalism produces actually useful things like food and clothes" but when it does, that's just coincidental! The situation with bitcoin isn't unique, it just illustrates the phenomenon especially elegantly: the economy does not care whether it's producing useful things or destroying humanity. It only cares if the math works.
Since I have to pay for the electricity in dollars, and since I sell the bitcoin for dollars, I'm actually operating a machine that takes dollars as input and outputs dollars.
As long as I get more than a dollar out for every dollar I put in, I basically want to put as much money through the machine as it can handle, and I want to build as many more machines as I can afford. That will only change if the $ input:output ratio drops below 1.
If the cost of electricity goes up, my ratio suffers. I have to pay more to get the same amount of bitcoin out.
If the price of bitcoin goes down, my ratio suffers. I get less dollars out for the same input.
If you want me to burn less electricity, you need at least one of those two things to happen: Increase my electricity cost or decrease the price of bitcoin.
You may be rolling your eyes at the obviousness of this. That's because all industrial capitalism operates this way. You put money in to pay for power (to extract resources and fabricate), and you get money out the other end when you sell your product. The "use value" of the product never comes into it for the capitalist. All that matters is what it costs to produce vs what someone will pay at the end.
You may say "but industrial capitalism produces actually useful things like food and clothes" but when it does, that's just coincidental! The situation with bitcoin isn't unique, it just illustrates the phenomenon especially elegantly: the economy does not care whether it's producing useful things or destroying humanity. It only cares if the math works.
I wonder if Bitcoin could ever migrate to Ethereum technology/proof of stake? It seems like a good idea but the Bitcoin community seems very resistant to change (see block size debate).
Ethereum hasn't even migrated to "Ethereum technology". They have been claiming for years that they are planning to move from Proof of Work to Proof of Stake. Maybe someday they will.
My take on this: I remain unconvinced that any form of Proof of Stake can give the same security properties we easily get from Proof of Work. I won't say never, but getting Bitcoin to move would take a very convincing argument about the viability of PoS, and so far that's not happening. (Especially given that the poster child for PoS does not actually _use_ PoS yet, they just keep promising it "soon".)
My take on this: I remain unconvinced that any form of Proof of Stake can give the same security properties we easily get from Proof of Work. I won't say never, but getting Bitcoin to move would take a very convincing argument about the viability of PoS, and so far that's not happening. (Especially given that the poster child for PoS does not actually _use_ PoS yet, they just keep promising it "soon".)
Eth2 with PoS is already running with Phase 0 on mainnnet though.
https://beaconcha.in/
The merge from Eth1 to Eth2 is expected to happen this year or after. There shouldn’t be any significant delays now because Phase 0 was the biggest hurdle with research and technical dependencies that didn’t exist yet, like BLS signatures.
There’s no way Bitcoin will move to PoS without another contentious fork.
https://beaconcha.in/
The merge from Eth1 to Eth2 is expected to happen this year or after. There shouldn’t be any significant delays now because Phase 0 was the biggest hurdle with research and technical dependencies that didn’t exist yet, like BLS signatures.
There’s no way Bitcoin will move to PoS without another contentious fork.
Bitcoin will never change. In the future we'll probably see large amounts of BTC wrapped on Ethereum/Avalanche for DeFi trading.
Bitcoin has undergone pretty massive updates in the last few years. Proof of stake doesn't seem that far fetched honestly.
AFAIK, none of the Bitcoin updates in the last few years is a "hard fork", that is, old nodes can still process valid blocks made by new nodes (though they might accept blocks which new nodes would reject). Changing from proof of work to proof of stake would require a hard fork.
Yup, proof of stake is the simple solution to this. BTC community won't be able to justify it eventually. Unless we get free energy in the mean time lol
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Bitcoin could be using clean energy in future (at least there is the opportunity for it) - maybe Tesla does something in this place. Regular finance, banks and money printing are also using a lot of resources. Why does the article not attempt to compare these? Seems more of an opportunistic write up, than an in depth analysis of the problem space.
I guess news outlets also have to ride the hype whenever it happens.
I guess news outlets also have to ride the hype whenever it happens.
Is bitcoin able to alter its approach from POW to POS or something else? If so how might that work?
I think BTC mining provides a needed incentive to invest renewable power. You have a customer that needs infinite electricity and they’re okay if supply is not 100% available as long as the price is low.
In the future I hope we use this supply for something else but in the short term it solves the issue of no one wanting to invest in and improve renewables.
In the future I hope we use this supply for something else but in the short term it solves the issue of no one wanting to invest in and improve renewables.
More likely to be coincidence than malice, but after crypto got some positive attention through tweets and dogecoin, I wonder if these negative stories are a push against it in order to suppress their value.
Why is mining the only factor here? All currency has a quantifiable velocity of economic value, and that economy has environmental impact.
Yes, and my understanding is that neither metric favors bitcoin.
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If the price of energy is calculated with corresponding carbon tax included, shouldn't Bitcoin be neutral?
> If the price of energy is calculated with corresponding carbon tax included, shouldn't Bitcoin be neutral?
Yes, but there are vastly more energy efficient substitute DLTs with near-zero switching costs. Litecoin and scrypt (instead of AES256), for example.
Apply a USD/kWhr threshold across all industries.
Is this change (and focus on the external costs of energy production) more the result of penalties or incentives?
Pre-mined coins are vastly more energy efficient (with tx costs <1¢ and similarly minimal kWhr/tx costs), but the market doesn't trust undefined escrow terms that are fair game in commodities and retail markets.
We have trouble otherwise storing energy from noon to commute and dinner time; whereas a commodity like grain may keep for quite awhile.
Bitcoin serves as a demand subsidy when heavily-subsidized energy prices crash due to oversupply (that we should recognize as temporary because we are moving to electric vehicles and we need to reach production volumes so that, in comparison to alternatives, renewables are now more cost effective)
In the US, we have neither carbon taxes nor intraday prices. The EU has carbon taxes and electrical energy markets.
Yes, but there are vastly more energy efficient substitute DLTs with near-zero switching costs. Litecoin and scrypt (instead of AES256), for example.
Apply a USD/kWhr threshold across all industries.
Is this change (and focus on the external costs of energy production) more the result of penalties or incentives?
Pre-mined coins are vastly more energy efficient (with tx costs <1¢ and similarly minimal kWhr/tx costs), but the market doesn't trust undefined escrow terms that are fair game in commodities and retail markets.
We have trouble otherwise storing energy from noon to commute and dinner time; whereas a commodity like grain may keep for quite awhile.
Bitcoin serves as a demand subsidy when heavily-subsidized energy prices crash due to oversupply (that we should recognize as temporary because we are moving to electric vehicles and we need to reach production volumes so that, in comparison to alternatives, renewables are now more cost effective)
In the US, we have neither carbon taxes nor intraday prices. The EU has carbon taxes and electrical energy markets.
>In the US, we have neither carbon taxes nor intraday prices.
Like, no intraday electricity market?
Like, no intraday electricity market?
That would be true after a carbon tax exists.
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I love the angle these attacks on BTC has been taking lately, it really seems somebody is getting desparate for it not to succeed.
This however seems a particularly bad attack on BTC, because we are not (spoilers) going to be able to to solve global warming, or even to mitigate it much. That ship has sailed, if it ever existed at all.
This however seems a particularly bad attack on BTC, because we are not (spoilers) going to be able to to solve global warming, or even to mitigate it much. That ship has sailed, if it ever existed at all.
I don't know if it makes sense to merge these threads, because the point about environmental impact is mostly just a side comment in the original article.