> 1) Proof-of-work systems are pure, unadulterated energy waste (and an ecological disaster as long as we depend on fossil fuels). They cannot, ever, be allowed to become significant in the economy, lest our future will be building a Dyson sphere around the Sun just to power everyone's ability to pay for a hot dog on their way to work.
Proof of Work gets a bad reputation because people have a hard time wrapping their heads around why it is useful. People don't complain about all of the energy that goes into making concrete, or transporting people around, or making houses cooler, because the impact of these things is more direct and less abstract.
But proof of work has a massive benefit that - as the market shows - well outweighs the cost. Thanks to proof of work, a group of counter-parties that are all fully mutually distrusting can interact with eachother without electing a mutually trusted subset or finding a trustworthy third party to facilitate the transaction.
Within the rest of society, trust is extremely expensive. Large financial institutions are only able to operate within the context of a massive court system with a massive law enforcement arm and necessarily privacy violating technologies like KYC. Proof of Work allows us to throw all of that away and use something much simpler and more privacy preserving! You trade one expense for another, and in many cases, Proof of Work transactions are able to succeed in areas where banks could never reasonably get established. That is _massive_ value added to society. And yes, the cost is this giant proof of work engine that burns a lot of electricity. But it's not _waste_, it's serving a key purpose that nothing else is able to serve.
In areas where trust is cheaper than Proof of Work, you should use trust instead of PoW. But the world is full of places and opportunities where PoW is by far the cheapest way to get something done.
I haven't done the exact math (I'm sure somebody did, though), but I based on some rough estimates I do believe that for widespread use as currency, trust-based systems beat trustless systems significantly in terms of energy efficiency. Partly because scaling factors - trust scales sublinearly with the number of participants (like average path between two arbitrary vertices in an acyclic graph). PoW energy use scales superlinearly. On top of that, energy use in trust-based systems is upkeep - it's a waste that participants have to pay out of their pocket, so everyone has strong incentives to minimize it. Whereas in PoW systems, energy waste is network security, so the incentive is to maximize it.
"Massive court system with a massive law enforcement arm" doesn't exist just for the large financial institution. It's the baseline, arguably the core piece of social infrastructure. Beyond finances, it serves to protect just about any kind of dealing that involves more than two people. It allows society to coordinate. So if you want to count that in, be sure to limit the scope to just the impact on securing financial deals - otherwise, you'll have to include on the crypto side of the ledger the costs these institutions incur so that crypto developers can spend their days developing financial systems, instead of hunting animals for food with rocks while hiding from the local warlord.
Citation needed? I don't believe this is true. And techniques like payment channels allow you to stretch a significant amount of mileage out of a single transaction. The Sia network for example has payment channels that have over a million payments made per on-chain transaction.
That's also the role of prices - they are signals for people to take action, provided the actors are free. Prices as an information signal simply fail to work when entities like the government use coercive force to interfere. Prices also fail if the markets are based on coercion or violence towards others.
That's true - but arguably orthogonal to the topic of fiat vs. crypto. Yes, the government uses coercive force to interfere, but that's very often to counteract various failure cases of the free market. Another thing that makes prices fail is information asymmetry - which, in reality, is a constant of trade.
Crypto or fiat, there will never be a totally unregulated market that works.
In a way, it's like Star Trek TOS epispode "A Taste of Armageddon" - you can't replace war with a simulation (and then voluntary euthanasia). You won't resolve international conflicts through a friendly match of Q3 Arena. It's an unstable situation, because anyone who disagrees with the result can just pick up a club, or a gun, and force their own result - at which point you're back to square one. And so it is with unregulated markets: someone feels cheated, picks up a gun, and you're back to some form of governance.
Proof of Work gets a bad reputation because people have a hard time wrapping their heads around why it is useful. People don't complain about all of the energy that goes into making concrete, or transporting people around, or making houses cooler, because the impact of these things is more direct and less abstract.
But proof of work has a massive benefit that - as the market shows - well outweighs the cost. Thanks to proof of work, a group of counter-parties that are all fully mutually distrusting can interact with eachother without electing a mutually trusted subset or finding a trustworthy third party to facilitate the transaction.
Within the rest of society, trust is extremely expensive. Large financial institutions are only able to operate within the context of a massive court system with a massive law enforcement arm and necessarily privacy violating technologies like KYC. Proof of Work allows us to throw all of that away and use something much simpler and more privacy preserving! You trade one expense for another, and in many cases, Proof of Work transactions are able to succeed in areas where banks could never reasonably get established. That is _massive_ value added to society. And yes, the cost is this giant proof of work engine that burns a lot of electricity. But it's not _waste_, it's serving a key purpose that nothing else is able to serve.
In areas where trust is cheaper than Proof of Work, you should use trust instead of PoW. But the world is full of places and opportunities where PoW is by far the cheapest way to get something done.