> "The plant used to only open at peak times in the summer and winter months; the new mining initiative means it now operates all year round."
This is actually pretty sad. This isn't power that would otherwise be wasted: they are emitting more pollution and greenhouse gasses in order to mine Bitcoins.
Bitcoin has created a perverse incentive to pollute here.
Bitcoin hardly created the perverse incentive; pollution has always been an externalized cost in most parts of the world. We really need a carbon tax (or similar) so that pollution costs aren't externalized.
Unless buyers of the coins were charged based on the carbon footprint of the coins they bought, this would just cause mining to move to places where there was no carbon tax.
Unless copyrighted works couldn't cross borders, copyright infringement would just happen in countries which don't enforce copyright...
The US having worldwide enforcement of IP rules a primary foreign policy goal for the past 50 years has mostly closed that loophole, despite most other countries not having a direct financial incentive to enforce copyrights. The same could be done with worldwide environmental costs.
It would also reduce supply of locations, increasing the amount people would have to pay. Do this enough, and it would no longer be economically feasible.
> This isn't power that would otherwise be wasted: they are emitting more pollution and greenhouse gasses
This isn't obvious to me. Natural gas is often a byproduct of extracting other resources like oil, coal etc. If it isn't used for electricity, heat, chemical feedstocks etc. it either gets flared (resulting in zero revenue) or else ends up in the atmosphere as such, with a vastly higher GHG potential compared to the CO2 equivalent.
But it doesn't have to be flared or emitted immediately. There's nothing keeping them from generating less electricity now and burning the natural gas later.
You and the GP are in agreement with each other and in disagreement with the OP's claim that Bitcoin created this perverse incentive--the incentive to externalize pollution costs has its origins in the Bronze Age or sooner. Bitcoin is further exploiting this incentive.
According to[1], "technology" demand (eg. not for jewelry, investment, or central bank reserves) is only 7.5% of total demand. Your response only excuses a small fraction of the pollution being generated from gold extraction.
I should say there's also 48% used for jewelry, but that doesn't really make a good excuse either. The pollution is necessary because ... people need to display their wealth?
I think everyone involved in this project should be ashamed. Energy shouldn't be wasted into bruteforcing sha1 checksums of lists of transactions, a hash of a previous block to have a neat Merkle tree, and random data to find checksums starting with enough zeros. This is so unnecessary when we have global warming and much better things to do with our energy budget.
And yet, this "waste" of energy enables a sizeable amount of decentralized positive-sum transactions by actors who don't necessarily trust each other, and cannot always use existing (centralized) systems for this purpose. This is a socially-positive development overall.
Thankfully Bitcoin isn't the only solution to answer this problem. By the way, the world economy isn't centralized and thankfully doesn't rely on a single database with a shitty and super slow consensus algorithm that destroy the environment, by design.
By design, bitcoin favors the miners with the most efficient equipment and naturally adjusts to advances in these technologies.
I think the other concepts are quite interesting as well. But it’s not fair to say bitcoin is design to destroy the environment as it can also drive people to design ever more efficient ways to produce energy.
What if I told you that you can use this "useless" BTC to purchase carbon offsets, invest in renewable energy (which otherwise would have no funding), etc?
Sure, money has no value when you're stuck on an island, but a bow and arrow does. Similarly, a bow and arrow has little value in Tokyo city and money does. Money is the engine that drives motivation - it can be used to compel others to do good things.
Also, people don't understand what Bitcoin mining in wholistic sense is.
Model A: Energy -> Factory (Assets) + Labor -> Revenue
Model B: Energy -> Mining hardware (Assets) -> Revenue
It is surprisingly the same (we can even argue that labor is involved in building mining assets, GPUs don't grow naturally). You can argue that any economic endeavor is a waste.
Not only is nobody using bitcoin for that, bitcoin is also a negative-sum game, and no actual new wealth is created. If you were going to buy those credits, you would get more if you cut bitcoin out of the equation entirely.
That's assuming it never creates any utility, which might be a fair assessment now but the same argument could have been made about many early stage innovations
Maybe never, but just dismissing the technology as worse than useless seems a bit irrational. If your position is that the entire crypto space is just delusion, it's probably good to take a step back and consider that you are the one that's missing something.
I am not actually doing any of those things, even though they would all be fair to say.
I am saying that the economic system built around bitcoin is, by definition, negative-sum. And there is nothing about the technology that can change that.
Can you give an example of why an economy using bitcoin would be negative sum? If I'm producing widgets and transacting in crypto, value (widgets) are created, the transaction medium seems irrelevant to me.
I don't actually think switching exclusively to a deflationary currency is a good idea, but I don't buy that it creates a situation where value can only be destroyed..
The only input of wealth is people buying tokens on the market. The only output is people selling tokens on the market. There is a constant drain of this wealth from both market fees and from miners minting new coins and cashing them out.
There is no wealth creation anywhere else in this system. There are only these factors, and they are negative-sum, except for market operators and miners.
If you are producing widgets on the side, that is entirely unrelated to the token market. You can do that with any currency, and it is entirely orthogonal to the tokens. You are not creating wealth within that market, you are creating it outside that market, and possibly transferring it into as a separate step, to be siphoned off by market operators and miners.
Maybe I misunderstood what you meant by "the economic system built around bitcoin", I thought you meant "the economy if bitcoin were adopted would be negative sum".
Now that I understand your point: how is this different from any currency? Currencies are a medium of exchange, by definition they don't have intrinsic value. The value is defined by what you can buy. They are simply a convenient accounting system for value, not the source of value.
How does your argument not apply to every other currency?
Currencies do not exist in a vacuum, like bitcoin, it is an instrument of an entire country's economy. There is wealth created inside that economy, unlike bitcoin.
Right that's exactly my point, you're critiquing bitcoin as an alternative to the "economy" part, but that's not something it has ever claimed to be. It's an alternative for the "currency" part.
What does that mean? That the dollar implements the entirety of the economy? No currency "creates value"
I understand what you mean by saying bitcoin is zero sum, but I'm asking for an explanation of how that's any different (for example how is the dollar NOT zero sum)? I don't think you've explained what, in your opinion, is the differentiating characteristic here.
The dollar does not exist on its own. It is an integral part of the US economy. The two can not be separated. The dollar represents, in some sense, a unit of the US economy.
Bitcoin could theoretically become an integral part of some economy (or a smaller part of every economy). Then by your standards it would no longer have a problem?
It seems like a catch 22 you're presenting. It's a bad currency because nobody uses it, and nobody uses it because it's a bad currency. To me that's kind of a circular argument, and the same argument could be made about any early-stage network (the internet, facebook, etc.)
No, this can not be changed. It doesn't matter how many people use it or not. It very deliberately, by design and implementation, does not represent anything at all. This would not change even if an entire country used it (putting aside that it is not technically capable of doing so).
> This would not change even if an entire country used it (putting aside that it is not technically capable of doing so).
This is the point you need to expand on. When I asked what the difference between bitcoin and the dollar is, you said the defining difference is that the dollar is used by a country. So if that's not the difference what is?
If bitcoin was adopted, would it not also represent a unit of the economy?
Does your argument boil down to "it's not officially backed by country therefor it cannot serve as a medium of exchange"? If so I ask you WHY that prevents it from being a medium of exchange?
I really don't follow the "negative sum" argument. It seems like that applies to every currency, so it's kind of an irrelevant point
It is not that it is USED by a country. It is that it is an INTEGRAL PART of the country's economic policy. The country can, as part of managing its economy, also manage the currency.
Bitcoin is not managed this way. It has rules set in stone it follows entirely on its own, without external input. This means it exists in isolation, unaffected by whatever economic activity takes place around it. This is entirely unlike a national currency.
> The country can, as part of managing its economy, also manage the currency.
You think a requirement for currency is that the country using it can manage it? What about all the non-US countries that use the dollar? They absolutely cannot manage their currency. What about in the past when the US and others were on the gold standard? There are a million counterexamples.
And again, let me reiterate (because it seems we're drifting away from the point here) that we were originally discussing whether bitcoin was "negative sum". I'm telling you that if it has utility (like any other currency) there is value being created.
> This means it exists in isolation, unaffected by whatever economic activity takes place around it.
I don't really know what that means, everything is subject to outside economic forces.
They moved away from the gold standard for some pretty good reasons. And countries don't use other currencies unless they are in a very bad position and have no other choice. Bitcoin is gleefully copying all the bad features of these kinds of systems, and not really any of the benefits.
And I have explained why it is negative sum. It is an exceedingly simple system and easy to analyse. There is no value creation involved at any point. Any value creation happens outside of the bitcoin economy.
There are only three factors:
1. People putting real money into markets.
2. People taking real money out of markets.
3. Exchanges taking a cut of that real money.
Nothing else involves actual value.
The combination of 3 and the fact that miners are allowed to do 2 without transferring any value in means that for the reason of the users, the sum is negative.
> What if I told you that you can use this "useless" BTC to purchase carbon offsets, invest in renewable energy (which otherwise would have no funding), etc?
Unless they actually are using it to purchase carbon offsets, I don't see what's the point of this hypothetical?
> Also, people don't understand what Bitcoin mining in wholistic sense is.
Sure, some Bitcoin critics don't understand it well, but don't paint us all with that brush. Some of us have a very good understanding of what Bitcoin mining is and still find it tremendously wasteful.
I think it is just to make a point - that BTC generated from this "wasteful" activity can be used for any purpose. It could pay off executives or the government can use it to propel society forward or offset carbon credits or build warheads. The right or wrong is not in the action of mining BTC, it is the same as any other economic acivity.
I've added some more clarity.
> Sure, some Bitcoin critics don't understand it well, but don't paint us all with that brush. Some of us have a very good understanding of what Bitcoin mining is and still find it tremendously wasteful.
By all means, expand on this and enlighten me, I am curious to hear both sides.
> By all means, expand on this and enlighten me, I am curious to hear both sides.
Sure. My concern with Bitcoin mining is that (#1) it absorbs efficiency improvements by design, and that (#2) it is structurally an environmental race to the bottom.
By #1, I mean that even if you could magically halve the energy use of mining overnight, you wouldn't meaningfully reduce Bitcoin's footprint: mining would use less energy, so it would be (temporarily) more profitable, so miners would scale up until it was back at equilibrium. It's back in equilibrium when the cost of mining is the market value of a coin, and since energy costs dominate the cost of mining, this is (roughly) when energy use is on par with what it was before the efficiency improvement.
By #2, I mean that mining naturally gravitates to places where the externalities are not priced in. If Country A has a carbon tax and Country B does not, mining will just move (pushed by the invisible hand) to Country B, rendering the carbon tax ineffectual with regards to coin mining. Of course this is just part of a bigger problem of enforcing global externalities locally, but the tools that would usually help here (trade policy, etc.) do not really apply to crypto mining.
It is wasteful because it is expending fossil fuels, manufacturing and raw materials to build the compute resources to perform calculations that don’t produce any intrinsic value, but rather just another way to represent and redistribute the value that already exists. It is as worthless as options/RSUs until you convert it to currency, and no currency is created in that transaction.
It’s like writing an unnecessary API wrapper or similar abstraction layer. YAGNI
That's not the same at all. You left out an important step in the first model:
Energy -> Factory + Labor -> Goods and Services -> Revenue
Goods and services improve the life of people, and we have deliberately organized our society in such a way that providing goods and services is incentivized with revenue.
That you can also leech revenue for yourself by shuffling liquid assets around while providing no net benefit to the world is a side effect nobody intended. If you happen to reinvest that revenue into something more positive than what the other suckers would have, then no harm no foul, I suppose, but then "Revenue" shouldn't be the endpoint of your model. Something like "Well-being" should.
This is a really good counterpoint, thanks. What, if any, government interventions could be put in place to somehow add value to BTC mining?
What are your thoughts of governments using a resource such as hydroelectric dam or wind power to mine BTC and using it to build infrastructure (Goods), healthcare (Service), etc.? It kind of sounds like trickle down economics though, I am afraid.
> What, if any, government interventions could be put in place to somehow add value to BTC mining?
Well, the typical answer to "what can government do about this thing that is bad for society, but not bad enough to ban outright" is "tax it", though as another poster pointed out offshoring limits the efficacy of this strategy.
I'm going to interpret your second question as "What are your thoughts of governments using a resource such as hydroelectric dam or wind power to mine BTC and using it to increase their budget?" since in general, money spent on Expense X doesn't remember whether it was generated from Assets Y or Z; money in the budget is money in the budget. That said, I suppose I'm not strictly opposed to the idea, though I'd be interested in an analysis of the returns you can get on those CPUs when you're optimizing for a community rather than an individual - for example, how much benefit does society get from putting all that CPU to work for something like folding@home?
Except in Model A the products have some utilitarian/recreational value to humanity (coats, iPhones, ect.)
In Model B the product is a transaction network that is horribly inefficient in terms of $$$ transferred per unit of energy input. It probably makes sense to buy Cocaine (even then other cryptos are likely more efficient energy wise/secure) with Bitcoin, it doesn't make any sense to buy a car with it when there's already a banking system
Definitely, I am missing the intrinsic societal value of Goods and Services produced from Model A and that's lacking in Model B. I am curious if Model B can use the generated revenue with a guaranteed (by law) expenditure to benefit the society?
Right now, say governments use unused hydroelectric power to mine BTC and use it to buy masks or ventilators?
> say governments use unused hydroelectric power to mine BTC
This would be predicated on there being unused hydroelectric power, which there generally is not (unless you factor in over production via other means of generating power that are less environmentally friendly). Unlike wind and solar, hydroelectric power is generally very predictable and controllable how much is produced and when.
You raise a good point, but sidestep a good conclusion I feel like. I can agree that it is surprisingly similar. However the root of the issue is that we need to speak in terms of environmental impact to get to Revenue.
I think the (implied) argument that the GP is making is such that Bitcoin is having too large of a cost to the value add to society.
I have no idea if this is true or not. I don't even know how we can quantify environmental damage relative to revenue.
People have found bitcoin valuable to them. There are a million other things people spend money (energy) on that are just as wasteful if not more. Why not eliminate movie theaters, air conditioning, travel, sports? People should be free to do as they please and this is all enabled by energy.
That's not true. There are people who are making a living of trading Bitcoin whose lives will deteriorate. Since Bitcoin only functions when it's hard, cutting the energy consumption means cutting the thing. And attempting to control things like this is a whack-a-mole expedition.
If you'd like to account for the carbon externalities, then do so. Tax carbon emissions. Proxy by purchases of fossil fuels if you have to. The reason we don't do that is that most people are rampant polluters. They know it, because when you put the numbers up, we know something interesting: most of those attempting to shame others here are rampant polluters, emitting large multiples of the median human's carbon. The truth is you can't maintain the standard of life you're talking about at the emissions necessary.
Shame doesn't work here. Only policy. Tax the carbon if that's what you don't like. Tax the sound if that's what you don't like. Tax the land on its value if you think this is an uneconomical use of the land.
But shaming is ineffective. You will walk away with the dopamine rush of outrage, having achieved nothing of note.
Wouldn't the same be true of eliminating anything in society? If we all went to electric cars, those in the petro industry would suffer. After all, I don't hear anyone in the Bitcoin community decrying the bank jobs when they wax poetic about putting the banks out of business.
Oh no, we absolutely should allow for people to change. Few things in the world are Pareto-optimal and we should not restrict change to Pareto-optimal things alone.
But the comment I responded to said this:
> We could cut the energy consumption of bitcoin to zero and the quality of life of everyone would not change at all.
Now I'm not one to normally be pedantic, but if we actually treat this non-literally we're faced with an optimization problem: how much is it worth reducing the quality of life of these people to ensure that energy isn't "wasted"?
So either you take the statement as a rhetorical flourish, in which case it is an inadequate response that merely relies on emotive appeals. Or you take the statement as literal, in which case it is obviously true. I guessed at a path but perhaps I should have articulated both sides. As it turns out I guessed wrong and you can see from his response that it was just an optimization problem inadequately specified.
The people living from Bitcoin are so few that they don't really matter. I'm sure many of them would find another well paid occupation shortly after and I wouldn't be sorry for the ones that would have to reduce the costs of their lifestyle.
I do think social shaming is very powerful, but it must be used correctly. Shaming Bitcoin professionals is fine in my opinion.
I don't think it will be effective. Are you interested in laying a bet with some time-frame? You don't have to be, but I find that it clarifies my priors appropriately.
Are we converting increase in thermodynamic entropy with decrease in information entropy (with some loss)?
What if we use bitcoins mined by renewable resources (for e.g. Hydroelectric generator) to purchase carbon credits? What would the energy balance and economics look like?
Already this is happening in a roundabout way. Much of the bitcoin mining is unused hydroelectric in China, they are using the excess power that is basically free.
Not just in the Finger Lakes. Various firms have set up shop in northern NY near the St. Lawrence River to access cheap power. Two years ago, authorities became concerned because of the impact on residential rates:
“[These] companies are using extraordinary amounts of electricity — typically thousands of times more electricity than an average residential customer would use. While such a significant amount of electricity usage might go unnoticed in large metropolitan areas, the sheer amount of electricity being used is leading to higher costs for customers in small communities because of a limited supply of low-cost hydropower,” according to the New York State Public Service Commission.
After NY state authorities set higher rates for crypto mining, one of the local communities withdrew from the local power agency so it could set its own rates, which has prompted at least one company (Coinmint) to announce plans to relocate there. https://northcountrynow.com/business/cryptocurrency-mining-c...
The server farm currently consumes 14 megawatts of the 106 megawatts of Greenidge's capacity. That's enough electricity to power well over 11,000 average U.S. homes.
The opposite situation would be where we'd redirect excess nuclear energy (or other energy that can't be throttled easily) to mining BTC. That would be pretty OK in my opinion. Though I hope that future of crypto is more energy-efficient consesus mechanisms. As far as redirecting excess energy goes, there are surely better uses too.
Imagine how much pollution Bitcoin would create a day if it became 10x more valuable. Roughly 10x. This is because the cost to mine a resource trends towards the value of a resource. Disclaimer. I invented a cryptocurrency that pays stakers inflation instead of miners.
HN is very Bitcoin and cryptocurrency in general-hostile so I'm not going to debate about how bad it is or isn't for the environment or set up a strawman with gold mining. However, I'll say this: in a world where Bitcoin did not exist, I don't really think that power plant would have remained idle.
oh huh it’s really happening. I’ve been trying to work out the effects of this for a while - bitcoin will always be more profitable than curtailment, but supply and demand should push the cost of bitcoin down below most other uses of electricity... except in places where the generators are distant from other kinds of capital. But some of those bitcoins will probably go towards buying other kinds of equipment by the power company? (direct air capture to high value molecules, eventually, I hope.) If the cost of utility power gets inflated, more people will buy solar panels.... lowering demand? It’s complicated!
Why can't the less "wasteful" currencies compete with bitcoin? (serious question; I've never owned it and though the crypto seems straightforward enough I don't feel I understand the market in general)
Several reasons. There have been to many scam projects so it’s hard for most people to separate wheat from shaft. Bitcoin is oldest and therefore the most accessible one, with more ways to buy it and trade it. Finally, there’s vested interests that help keep the status quo as it is. For example, miners who have invested capital in mining equipment and who wish to keep making a profit.
The first several reasons seem plausible; the last one does not. It isn't clear why the cryptocurrency community would care about others' investments in mining equipment. If I had made such investments, I would use bitcoin, but that wouldn't force anyone else to use it.
True, but you could use your money and influence to try and prevent the market from moving to other, more efficient cryptocurrencies. Remember that BTC started in 2009, significant efforts have been made to build infrastructure around it. Many people got rich thanks to the increase in price. There’s a lot of money and emotions invested, for material and philosophical reasons.
In short I would say it's network effect. Those networks are less secure because they have fewer participants, and have fewer participants because they are less secure.
All is a strong word. This implies that since 2009, no protocol has emerged which is able to overcome some of Bitcoin’s pitfalls, or has different trade-offs that place it ahead for some specific usecases, i.a. day-to-day use cryptocurrency.
This is actually pretty sad. This isn't power that would otherwise be wasted: they are emitting more pollution and greenhouse gasses in order to mine Bitcoins.
Bitcoin has created a perverse incentive to pollute here.