The most prominent negative effect is the huge energy waste, which doesn't help when we are trying to cut on our carbon footprint
The second one is that it makes illegal activities easier, and at a larger scale. It's quite common right now for companies to be coerced pay millions of dollars to anonymous criminals, all enabled with cryptocurrencies.
Unless equally sized positive effects would emerge, it creates a growing pressure on governments to regulate and potentially criminalize the usage of cryptocurrencies. If that happens, the monetary value will naturally fall down.
For the vast majority of businesses/individuals, it is governments and banking cartels the ones stealing your money (via inflation and fractional reserve respectively) without recourse. Switching to a world in which, instead of all of us, but only a few, are stolen money, is a bit better.
> The most prominent negative effect is the huge energy waste, which doesn't help when we are trying to cut on our carbon footprint
Debunked. Sources:
* https://newmoneyreview.com/index.php/2020/09/03/big-oil-goes...
* https://www.bloomberg.com/opinion/articles/2017-12-07/bitcoi...
* https://blog.bitcoin.org.hk/bitcoin-mining-and-energy-consum...
* https://www.youtube.com/watch?v=2T0OUIW89II
* https://cointelegraph.com/news/study-over-74-of-bitcoin-mini...
Re: Energy use - A single Bitcoin transaction is around $8 today. If you assume an efficient market, where the cost to compute Bitcoin is roughly equivalent to the energy cost, that's a crazy 80kWh in US energy cost for a single transaction (and probably more, since Bitcoin mining is done where energy cost is lower). The claim that a fraction of that comes from renewable is silly, this renewable energy could go to other means.
Don't put words in my mouth that I didn't say (or rather, typed). I never said it's better. Government&banks-robbing-all is a worthy cause to fight anytime, even if it doesn't directly help the criminals-robbing-a-few problem, because actually, the latter already happens today, and will always happen (sadly). So we must fix one thing at a time.
One of the biggest misconceptions around Bitcoin is somehow that it was supposed to sort all this out before it bootstrapped to a large enough network, but we all know that´s impossible.
Depends on how quickly you need that transaction to hit the blockchain.
Anything over 30 minutes is currently 1 sat/vByte and 1 sat = $0.00019230 dollars. The average bitcoin transaction is about 250 bytes. That's $0.048075 or almost 5 cents.
If, on the other hand, you accept contemporary definitions of inflation and consider normal modern monetary systems as being the least bad - then it’s a pretty different picture.
These articles invariably attract the gold heads.
Are you sure? Gold is a massive problem: https://theconversation.com/gold-mining-leaves-deforested-am... (bitcoin fixes this)
If that was your idea, wouldn't we be better served by lobbying our politicians to move the needle on the drug war (seems to be happening) instead of creating volatile whale controlled crypto "currencies" which use huge amounts of electricity as our planet faces a climate change crises and which also enables all of the other really terrible illegal things listed?
What would really be better is to push politicians to stop using the banking system as a mass surveillance apparatus and allow there to be above-board systems for the anonymous digital transfer of modest amounts of cash. Then you destroy the demand for cryptocurrency by out-competing it, and eliminate the energy waste problem.
The US, for example, will happily assert its ability to intercede when Iran and China trade. It isn't at all obvious why that should be the case, and it is profoundly unclear why China and Iran should cooperate. It is plausible that countries should be trading using a decentralised system like a bitcoin-style cryptocurrency. US law really should stop at the US border.
Kids would benefit if their parents' savings in USD wasnt debased at an accelerating rate aka 50% loss of purchasing power every 8-10 years (soon to be 5-10 years).
Bitcoin is better money, because it allows for more pure self-organization, as a result of its money supply being predetermined by hard-coded algorithm, rather than by fiat decree.
This single benefit far outweighs the mentioned negatives. It has the potential to completely eliminate the boom/bust cycle, eliminate currency manipulation that facilitates international trade imbalances, and free hyperinflated jurisdictions from that aspect of their poverty.
Many think these expectations are unreal, and that's fine. I'll see you when we get there.
Because bitcoin requires substantial inputs (hardware, energy), if it actually has legs, it will end up being controlled by whoever controls the most capital.
That's not self-organization, that's just replicating the same broken economic system we have right now, but (ironically) with much lower efficiency.
> It has the potential to completely eliminate the boom/bust cycle
Citation needed. =)
> eliminate currency manipulation
"A single anonymous market manipulator caused bitcoin to top $20,000 two years ago, study shows"
https://www.cnbc.com/2019/11/04/study-single-anonymous-marke...
> free hyperinflated jurisdictions from that aspect of their poverty.
I'm sure that'll work great for folks who can afford to buy (or would be payed in increments of) approximately 0.0005 BTC at a time. What are transaction fees these days, anyway? =)
Huh? Whoever has the most capital has the most capital? I don't get it.
> Citation needed
The boom/bust cycle is caused by what we declare to be the solution: active management and printing of the money supply as desired to achieve short-term economic or political goals.
> an anonymous market manipulator caused bitcoin to top $20k
I was speaking about the money supply, not the price. Dunno if you meant to misinterpret or not. But regardless, even that criticism isn't really doable at the scale Bitcoin will achieve.
> I'm sure that'll work...
I don't consider this to be a real criticism. I don't consider any scaling criticism to be valid, because they all come from the perspective of "Bitcoin hasn't scaled already, therefore it will never scale." 80% of software engineering is scaling. It's what we do, it's what's being done. It's a lazy argument. For it to be interesting, you have to tell me why Bitcoin can't scale, ever, in principle.
It's an efficient store of value. Here is a dilemma - you have 10 million dollars. You need somewhere to park your money. Do you follow the Chinese businessman pattern and buy real estate in Toronto? That seems complicated - picking a property, being subject to the real estate market, etc. Often these houses sit empty, since you are on the topic of wasted resources.
Do you buy gold? Gold is as useless as Bitcoin, in terms of intrinsic value, your special snowflake "industrial applications" of coating McLaren F1 engines as a heatshield and superconductivity aside.
Buy stocks? How do you pick them? A financial advisor certainly won't do it properly for you. And the fed is pumping out USD.
Of course USD is going to deflate.
So, Bitcoin suddenly doesn't seem so useless.
"is the huge energy waste"
Gold takes a lot to store, secure, and transport. BTC replaces that with mining.
"The second one is that it makes illegal activities easier, and at a larger scale. It's quite common right now for companies to be coerced pay millions of dollars to anonymous criminals, all enabled with cryptocurrencies."
Every single transaction is on the chain. At this point they are worried that Monero is insecure. There are even conspiracy theorists saying that "the man" wants blockchain currencies as the norm due to the "nowhere to hide" policy.
And yes, you can create a wallet on some hotspot, and it is "anon". But let's be honest.
"Unless equally sized positive effects would emerge"
It's a secure place to park cash that doesn't deflate by nature.
edit: If you downvote, try to explain what you disagree with.
Are people using bitcoin to replace USD in general? No, not really. It's not a very good medium of exchange not because of the illegal stuff but because no one knows how it works and it's messy, that's why no one buys stuff with it. They also don't know how much it's worth on average and therefore struggle to use it, bringing me to my next point...
Are people using it as a standard of value? No, if I tell you a car costs 15k USD you know what that means. If I tell you it costs 1 BTC, you have no tangible idea of how to relate that to the real world because BTC's value changes sporadically. I am sure this will stabilise as crypto matures, but i dont think people should invest this much effort into something that is just going to be used as a value measurement.
So back to the 'store of value' thing, why do I want people not to invest their money? Is wealth hoarding not a problem now, or do you believe that just by virtue of it existing as BTC, it's doing something good?
No, the "huge energy waste" is so vast as to be nearly inconceivable. It cannot reasonably be compared to anything else. Even shipping literal gold around by helicopter might be more efficient.
"Bitcoin uses as much energy as the whole of Switzerland, a new online tool from the University of Cambridge shows." https://www.bbc.com/news/technology-48853230
Anyway, the BTC-enthusiast argument to that is "Well, if BTC replace banks, imagine how much money that would save."
That argument holds some ground - think of all the armored cars, shipping containers, and facilities that serve to move and store cash and gold, as well as all the labor involved in maintaining the system.
Of course, BTC is not going to replace cash/gold fully in the near future, if ever, and the cost is absurd. Nor is there a solution to this, as transaction demand will just continue driving up price.
The environmental argument is one that I concede.
It's not a dilemma. At all. If you have 10 million dollars just lying around, chances are, uo already know what to do with your money.
So your entire premise is based on a combination of assumptions that make it entirely laughable:
- that if you have 10 million dollars, you have a problem with storing them
- that in order to defend bitcoin you have to come up with an example involving no less than 10 million dollars
> Do you buy gold? Gold is useless. Buy stocks? How do you pick them? Of course USD is going to deflate.
Ah, I feel so sad for people who have 10 million dollars which they have to just "park". How did they ever manage to do that in the past?
Oh, right. Stocks, property, securities, bonds, investments, diversified portfolios.
It also is not secure as China is controlling a majority of the mining now and the majority can control the currency. Further, Google has a computer that can hack the encryption and you will see a lot more organizations have them soon.
It consumes more power than Switzerland. It's bad for the environment.
It's just a bubble and can be popped anytime.
Not to mention that it is just unusable for actual legal transactions on a regular basis.
The state has the guns to outlaw a lot things. Yet many of those products, I can still purchase on the local street corner. Simply having a monopoly on force isn't enough to totally stop trade in some good. Especially when that good is easy to hide, and easy to move. Crypto is pretty much the easiest good to hide and move in the history of mankind.
Citation needed
Bitcoin does not involve encryption, and it's a common mistake by journalists to toss that buzzword in there.
It looks like you need a lot more qubits than the most powerful quantum computer we have now. Also, it's fairly trivial for Bitcoin to adopt a quantum resistant algorithm with consensus.
I think the far larger problem would be every non-quantum resistant encryption on the planet being broken at once.
https://en.m.wikipedia.org/wiki/Elliptic-curve_cryptography#...
Which government exactly would do the outlawing? We're actually seeing the opposite.[1]
[1]https://blog.chainalysis.com/reports/japan-cryptocurrency-re...
That's been said for years since Bitcoin emerged, this is starting to get a little old as Bitcoin survives longer and longer.
Compared to what? You think fiat money has a zero environment footprint?
And unlike other currencies this one doesn't require the energy expenditures of a full standing army or the diplomatic trades to enter into protection with someone who has one. Seen through that lens bitcoin is absolutely green.
- a stamp uses a small amount of resources no matter how many stamps you want (more stamps may even be cheaper from economies of scale).
- Bitcoin inherently relies on expensive computation to provide safety
- each Bitcoin is more expensive than the last due to increasingly difficult nonces.
- (dumb edge case) you can’t make old stamps so it’s hard to image using a lot of resources to find/make them. Obv not true for other products
further crypto would be a much more flexible domain at working towards reducing carbon emission than deeply embedded and slow changing fiat systems
My simplistic view is that government money such as the dollar serves a small handful of purposes: It's a medium of exchange, short term store of value, and tool of government economic policy. The government has loosely defined "short term" by the target inflation rate. I suppose that regularizing the taxation process is another purpose.
Does it work? Apparently some national currencies work better than others. People in some countries will, if possible, use some other country's money in preference over their own, for all but minor daily transactions. Thus, objecting to one kind of money, and swapping it for another, predates bitcoins.
What I think makes bitcoin different is that no government can influence its purpose, leaving its purpose up to each user to define on their own terms.
Perhaps another way of thinking about it, is that its own behavior defines its purpose, because if your use is in opposition to its behavior, then it doesn't work for you. This could be said to be true of dollars as well.
Bitcoin is interesting because of its decentralization, but it definitely pays a high cost to support that feature. If decentralization is not a feature you care about, than a central authority printing cash is a much better system.
Than energy wasting cash computed by chinese miners and (in the early days) a select group of early adopters? Yes, it makes more sense.
“Disrupt incumbents! Topple the establishment! We have the power to do great things! Let’s found a startup!”
When it comes to bitcoin:
“Well actually individuals shouldn’t be trusted, decentralization bad, I LOVE my ancient bank with its shitty website, how dare you question authority?”
>I’m still trying to piece together what exactly how much control governments really lose under Bitcoin, whether I can see that as a positive or a negative, and whether I agree with Dalio that governments would (or could) take action to prevent it.
I don't think they could control it at all, as I will get into in the next post
>The enforcement of debt and the ability to track money seem, to me, like some of its most important properties
I don't think you could track money at all, because I think in a world where bitcoin is dominant, you can bet that you would have many other cryptocurrencies as well. And you can today exchange btc for monero, ethereum or whatever and back again and it's virtually untrackable who owns it or where it came from.
Because of this, governments could no longer do any automated taxation, they could no longer have any verification of who owns what, and so they would have to manually tax everyone based on manual observation of physical assets, as they probably couldn't look into most peoples actual financial records either, unless it was voluntary. This is untenable of course
>I’m also interested in what a world with a fixed amount of currency really looks like.
It wouldn't be fixed in reality, and nobody would really know how much money exists and each currency and inflation would have to be determined individually and you would have booms and crashes based on just how individual markets supply/demand progresses (i think?)
Yes, it would be fixed. Each bitcoin is currently divisible to 100 million satoshis and it could be further subdivided if necessary.
Regarding not knowing how much exists, at least with Bitcoin, that's not true. Anyone running a full node has a complete copy of every transaction going back to 2009. And the generation of each and every block that contains newly created bitcoin.
We would know exactly how much money exists if we were on a Bitcoin standard.
This doesn't sound any different from cash. Which is why existing systems of taxation don't rely exclusively on the banking system. When you buy a television, you don't self-report the purchase and pay sales tax at the end of the year, the vendor charges it up front. When you're paid a salary, the employer withholds income tax. The businesses, in turn, have their own income tax, and want to report the employee's wages to be able to deduct them from their own taxes. They want to report sales in order to be able to legally deliver those profits to shareholders. So what's different about cryptocurrency here?
They could tax you by a percentage of each asset. At the end of the year, you might owe 31 bitcoins, 0.0125 acre of land, and a chicken.
Ironically, this is why money was invented in the first place -- an asset that represents value rather than having inherent value (such as, the inherent value of a chicken is one chicken).
I don't get why people buy into this idea that BTC is super-hacker-cash that can't be traced.
BTC can be traced. That's the point of an open ledger. If you want 'untraceable' BTC, you have an big burden to do so (buy it for cash in a parking lot with no cameras and using an alias).
The problem is the second you start buying things with the BTC and sending them to your house, your anonymity is shot.
There are coins (like Monero) whose purpose is to make transactions more untraceable but BTC is intended to be traced.
How about a decentralized peer-to-peer exchange that runs over Tor? There's an app for that: https://bisq.network
For a better understanding of money and why Bitcoin is a better money, I would recommend this article:
https://vijayboyapati.medium.com/the-bullish-case-for-bitcoi...
I'll also toot my own horn a bit which also delves into this confusion:
https://www.amazon.com/Little-Bitcoin-Book-Matters-Finances/...
> Beyond the financial case for Bitcoin, its rise as a non-sovereign store of value will have profound geopolitical consequences. A global, non-inflationary reserve currency will force nation-states to alter their primary funding mechanism from inflation to direct taxation, which is far less politically palatable.
Isn't this all backwards? In the past, when it was politically inconvenient not to be able to inflate money, governments abandoned gold-backed money and went to fiat. Wouldn't one assume then that the possibility of such profound geopolitical consequences is precisely the reason why governments will not let it become so important?
In case anyone would like a YT video so they can listen/watch at 2x instead of read... check out: The Complete Case for Bitcoin.
https://www.youtube.com/watch?v=xjeXIGWY2DI&ab_channel=Block...
As for states, they're rolling out their own cryptos. The Chinese have CryptoYuan, the EU central bank is releasing a currency likely by late 2021, and the Federal Reserve is also planning to create a new currency. That's how they beat Bitcoin.
Fiat currency is likely going to be slowly phased out as cryptos take hold, like an old iPhone.
States will absolutely gain power if they adopt cryptos, because they can implement currencies that can always be tracked and disseminated much faster and easier than fiat.
Any new currency or "coin" that a country develops completely misses the mark, and is literally no better vs Bitcoin than their standard currency.
Where can you follow design of these initiatives?
Could a state actor DDoS another state's crypto, or will these just be centralized systems with just the crypto moniker?
Will Libra make it?
I assume they're keeping their designs under wraps for now, but I haven't really taken a deep look. There is some info available though:
* The Chinese Central Bank has filed over 80 patents relating to CryptoYuan, which can be checked out - https://digitalchamber.org/pboc-patent-repository/
* The European Central Bank released a report in October - https://www.ecb.europa.eu/pub/pdf/other/Report_on_a_digital_...
* The Federal Reserve is apparently still just researching - https://www.federalreserve.gov/econres/notes/feds-notes/cent...
DDoSing another state's crypto would probably be considered an overt act of war, so I don't know how often that could happen.
I have no idea what Libra is to be honest.
What's the technical feasibility of migrating BTC's pow scheme to quantum-resistant hashing?
What is the technical feasibility of migrating wallet/private keys to quantum-resistant crypto?
Would any such migration of wallet/private keys be dependent on public/non-public interactions with the blockchain by wallet holders, and would those interactions introduce deanonymization or other risks?
Bitcoin is designed so that different asymmetric crypto governing controlling coins can be compatibility introduced-- as has been done a couple times in the past (to introduce revisions to the script system). PQ crypto could be introduced in that way.
Unfortunately existing PQ signature schemes don't have a great mix of maturity and performance that make them especially attractive absent a clear and present need.
For years I maintained a private patch set to introduce hash based signatures on short notice if needed. I haven't for a number of years now in part because there are now enough contributors I'm confident that if it were needed it could be done quickly without any special preparatory effort.
Users can change the rules governing their coins just by moving them.
We know how to construct kinds of forward compatibility that could allow being spent with a new scheme but the specific scheme would have to be set in advance so they users could generate the future keys at the same time the generate the current ones. And, as mentioned, the existing choices aren't that great (for this application).
"Ten years in, nobody has come up with a use for blockchain": https://hackernoon.com/ten-years-in-nobody-has-come-up-with-...
Follow up, "Blockchain is not only crappy technology but a bad vision for the future": https://medium.com/@kaistinchcombe/decentralized-and-trustle...
For every other country literally anything else is more useful and convenient.
BTC has been hated on HN since it's creation. Even over 10 years later, the crypto luddites keep coming at it.
Learn by yourself instead of listening to the doomsayers: some people thought independently, like this person in 2011 who was ridiculed here: https://news.ycombinator.com/item?id=2596475
Check the discussion from 2017: https://news.ycombinator.com/item?id=15976946
Then the new one from 2020, 3 months before the current rally: https://news.ycombinator.com/item?id=24259700
Then make your own judgement, as most of the people here won't learn. They refuse to - they are too emotionally invested in their past lapse of judgement, so they need to rationalize it and double down, in the hope that maybe it will crash and everybody will know they were right all along!
It's been going on for over 10 years, so follow their advice at your own risk.
Someone else said, if god had wanted to help the geeks, it couldn't have been done better - anyone could mine, at the cost of $0 on a CPU back then.
I was bitten by the HN naysayers and didn't. Fortunately, I quickly realized my mistake and just worked in the field.
It's sad so many people want to double down and triple down on their past errors. As long as they can live with the consequences of their actions, I guess it's their problem, not mine. That doesn't make it any less sad.
Anyways, currency is not value. Currency represents value. It is symbol. I feel like confusing the symbol with what it represents is the source of much of the misunderstandings of how money works.
No one makes you buy bitcoin! If you don’t like it, just ignore it. I could list many more arguments here as to why different sorts of people value it, from libertarians to drug dealers to hedge funds to people in countries that have terrible fiat currencies and corrupt central banks, but ultimately it’s a variation of the government not having control.
One final thought is that the term “currency” confuses a lot of people. Whether it can actually be used like a dollar is moot - it’s an asset that can be used sometimes like a currency, but being a true currency is not required for utility and value. It’s a misnomer.
It certainly can, at least if you intend to exchange it for tangible goods or services, or if you convert it to a government currency. Why do you think these sorts of transactions cannot be regulated?
https://www.amazon.com/Bitcoin-Standard-Decentralized-Altern...
The author didn't really do serious research. I can imagine having doubts or questions after reading this book, but without basic knowledge about money there's no point in arguing (I agree with Jimmy Song's comment, but I find Saifedean's book much better researched)
> I’m still trying to piece together what exactly how much control governments really lose under Bitcoin
Can't you just compare it to the gold standard? Seems like we have a lot of history we could look at where gov could not print money how it pleased.
> The enforcement of debt and the ability to track money seem, to me, like some of its most important properties. If I can’t tell how much Bitcoin someone has, how can they be made financially responsible in court?
Seems fairly easy to me - you ask them how much money they have, they tell you. If they lie, you throw them in jail. Its really no different than how we handle people who keep there money in the form of gold bars under the bed, or in offshore bank accounts. Sure you can sometimes get away with shinanigans, but its not a new problem.
> I’m also interested in what a world with a fixed amount of currency really looks like. I would imagine “inflating away” debtors obligations through fiat would not really be on the table.
It would look like the gold standard. inflating away debt with fiat in a major way is pretty uncommon anyway and usually ends badly (Germany tried that and we ended up with WWII!)
> 65% hashrate by china, 51%attack, etc
It should be noted that a 51% attack is generally something noticeable. Its not a secret attack. So that reduces risk somewhat. Also i thought 51% attacks were actually closer to only needing 33%.
> Energy, environment
Yeah, i agree with author on these points. Ethereum is doing some interesting stuff here.
The energy consumption argument alone should completely destroy bitcoin's prospects. I'm not sure how you can even apply classical economics principles to something as uniquely different as bitcoin. Maybe the cost means people should only trade in extremely high amounts of bitcoin so there are less transactions? I don't know.
I've got a lot here to read for the next newsletter. Thanks folks that gave insightful comments.
Feel free to read more about the process I'm taking with this newsletter or sign up:
https://thinkoutloudnews.substack.com/p/why-you-should-read-...
Isn't that literally what investing is?
As pointed out elsewhere here, fiat currency is as equally arbitrary as bitcoin is.
Bitcoin's age and seeming resistance to network manipulation and cracking over a long period of time is really the source of its enduring value.
In my personal opinion/perception, the true devaluation of other cryptocurrencies occurred in the "aaaand its gone" twitter moment. Even if it was a joke/stunt, it really highlighted the superfluous nature of almost all cryptocurrencies besides BTC.
Bitcoin (crypto) will be used for second hand sales of digital items from gaming characters to digital weapons or other unique items across different games from completely different gaming developers.
In fact I became a bit of a Bitcoin evangelist in my circles, especially as it aligned with my then-libertarian worldview. (However, the questionable leadership of the core Bitcoin fork has mostly eroded that enthusiasm over time.)
Now, as a regular taxpayer, Bitcoin makes no sense to me either. And I say that as a fortunate person with a significant stake, and a retirement fund increasingly grateful to all the dumb money being poured into it.
Its popularity and exchange rate is not a function of its utility, but rather an indication of a disillusioned and frustrated middle class looking anywhere for financial relief. Cryptocurrency is lottery tickets for people who consider themselves too clever to buy lottery tickets. (Especially all of the new, more volatile cryptocurrencies popping up each day.) Governments would be well-advised not to deprive their taxpayers of this distracting fantasy.
You'll know when you need it. Until then, if you want to take a gamble at timing your exit better than the next guy, thanks very much.
