Bitcoin Climate Dilemma: Mining Bitcoin Consumes an Entire Country Worth of Electricity

Guest essay by Eric Worrall

Will latte sipping Silicon Valley Trendies give up their high carbon Cryptocurrencies to save the planet from global warming?

THE HARD MATH BEHIND BITCOIN’S GLOBAL WARMING PROBLEM

ADAM ROGERS

SCIENCE 12.15.17 07:00 AM

LET ME FREAK you out for a second. You know what bitcoinis, right? I mean, no, but quickly, it’s a “cryptocurrency” that’s basically secret computer money. One bitcoin, which doesn’t actually have a real, physical form, is worth at this moment upwards of $16,000. But to get one, you either have to buy them from online exchanges or use specialized computing hardware to “mine” it. That last bit is where the freak-out comes in.

In a report last week, the cryptocurrency website Digiconomics said that worldwide bitcoin mining was using more electricity than Serbia. The country. Writing for Grist, Eric Holthaus calculated that by July 2019, the Bitcoin peer-to-peer network—remember BitTorrent? Like that—would require more electricity than all of the United States. And by November of 2020, it’d use more electricity than the entire world does today.

That’s bad. It means Bitcoin emits the equivalent of 17.7 million tons of carbon dioxide every year, a big middle finger to Earth’s climate and anyone who enjoys things like coastlines, forests, and not dying of mosquito-borne diseases. Refracted through a different metaphor, the Bitcoin P2P network is essentially a distributed superintelligence utterly dedicated to generating bitcoins, so of course it wants to convert all the energy (and therefore matter) in the universe into bitcoin. That is literally its job. And if it has to recruit greedy nerds by paying them phantom value, well, OK. Unleash the hypnocurrency!

The thing that makes Bitcoin bitcoiny is the blockchain, the secure ledger of all payments and trades. The point of the P2P bitcoin network is the generation and maintenance of that ledger, and technically anyone can contribute updates—those recordings of transactions are blocks in the chain. But there’s a catch. (This was the bit of genius in bitcoin inventor Satoshi Nakamoto’s pitch, whoever the almost certainly psuedonymous “Satoshi Nakamoto” is or are.) In order to contribute a block, you also have to solve some really hard math, a “hashing algorithm” called SHA-256.

You can’t trick your way into solving that math. The SHA-256 algorithm is designed, intentionally, to be so hard that it requires brute-force computing. Try as many computational answers as you can, as fast as you can. Which means you have to keep your computer turned on all the time, running the fan to cool off your hot, overclocked processor. “The energy consumption is a security feature. It’s a good thing,” Sirer says. “To take over the system, you’d have to spend at least as much as what the system is spending now. You have to own 51 percent of all the hashing power.”

Read more: https://www.wired.com/story/bitcoin-global-warming/

The expenditure of all this electricity, the proof of work, is the keystone of Bitcoin payment security. People whose computers crack the code breaking problem at the heart of Bitcoin, and in doing so help enforce Bitcoin’s payment transaction integrity, get to reward themselves with a few newly minted bitcoin.

This CO2 belching code breaking effort can’t be made too much easier. While the difficulty can be adjusted by mutual consent, making the code breaking problem too easy would allow people to steal other people’s bitcoins. The whole system would break down into a shambles of fraud and misplaced coins.

To put it another way, given that most of the cost of mining bitcoin is the cost of the electricity you have to burn to solve the proof of work problem, the thousands of dollars you have to pay to buy a single bitcoin is the electricity bill you would have to pay if you mined that bitcoin yourself.

The delicious irony is, the people who created and promoted and popularised this pointless carbon belching monstrosity are mostly also the people driving California’s green agenda.

What can be done to fix this disaster?

Some alternative cryptocurrencies like Ethereum have attempted to replace Bitcoin style proof of work with a low energy alternative, proof of stake. Instead of rewarding people with the most powerful computer, proof of stake seeks to reward investors who got in on the ground floor, giving the lions share of new coins to founders.

Switching Bitcoin to proof of stake, assuming it works as well as proponents claim, would likely be enormously unpopular with those bitcoin entrepreneurs who invested millions building expensive high tech proof of work bitcoin mining rigs.

All this ongoing Bitcoin climate harm could be averted if Californian greens reject Bitcoins and go back to using good old US dollars. Less fashionable, but also way less carbon intensive.

Perhaps concerned greens could start putting signs in their shops “Bitcoins not welcome”.

I’m sure given a choice between giving up Bitcoins and saving the penguins and polar bears, or gross climate hypocrisy, green Californian trendies will make the same choice they always make.

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Wim Röst

No one guarantees the value of a bitcoin. Like no one did guarantee the price of tulips: https://en.wikipedia.org/wiki/Tulip_mania. For that we don’t need to worry more about bitcoins than about tulips. I suppose the confidence in a bitcoin will disappear soon. And so the bitcoin.

Walter Sobchak

The difference between a tulip bulb and a bitcoin, it that even after the price of tulip bulbs collapsed, you could still plant them and grow flowers. If the price of bitcoin collapses, you get nothing, nothing, nothing.

Wim Röst

You are right Walter, but during the top of the tulip mania the most expensive bulb has been sold for the price of an Amsterdam Canal House. When the prices for the bulbs collapsed, you still could grow your bulb, but you had lost your Canal House. Not so good either…..

http://mikestravelguide.com/wp-content/uploads/2012/05/DSCF6901.jpg

Clyde Spencer

It seems to me that we (especially the Chinese) are turning coal into virtual gold. The problem is, the ‘gold’ is intangible and ephemeral. What a convoluted world we have made with computers!

Walter Sobchak

A professor says she couldn’t find any evidence of it — 400 years later. Sorry lady, I am sticking with Mckay. he had never heard of political correctness.

Walter Sobchak

Yes, I am using professor as insult. There is no more corrupt or malicious institution in Western Civilization than the universities.

Further, the absence of evidence is not evidence of absence.

Take out your wallet. Take out a $1 bill. Look closely. Who guarantees the value of it? It only has value because everybody BELIEVES it has value. Like if everybody believed in Tinkerbell, she would live. 100 years ago, a $20 gold piece would buy a nice suit. It will still buy a nice suite, only now that coin is worth $1,318 dollars in paper money. The difference??? People believe more in gold than paper because the government can’t print it.

Walter Sobchak

The United states government guarantees the value of the United States dollar. You can pray for Tinkerbell if you wish, but If you are in the US and you do not pay your taxes, you will go to jail. It is force and violence all the way down. That is the good news. Bitcoin does not have a prison system.

davidgmillsatty

Except that the government doesn’t print our money. The Federal Reserve Does and they issue private banknotes. The Federal Reserve is a private entity, no more Federal than Federal Express. The Federal Reserve Board is a federal agency (like no other because it is totally independent of the government) but it does not issue our money.

If the US actually issued its own money, (it still does in tiny amounts in the form of coins), it would issue them like Lincoln did in the form of bills of credit (which are circulating tax credits) called greenbacks. Coins are circulating tax credits in coin form. Today there are no bills of credit in existence and only a few coins that make up a fraction of one percent of the money supply. During the civil war, bills of credit and coins made up at least a fourth of the money supply. It was Lincoln’s bills of credit that won the civil war. The banks wanted 30 per cent interest and there was no income tax till 1913, the year the Federal Reserve Act passed.

If people had the slightest clue about the history of money and the different kinds, they would be rioting in the streets. When a sovereign government issues money as tax credits, banks can’t pull off their interest swindle. And when a sovereign government mints coins, it does not borrow or tax to do so. And bills of credit are the same.

If we had the will, the US government, by fiat (another name for to order or decree) could issue $20 trillion in bills of credit tomorrow demand that all holders of its debt take bills of credit as payment in full for the debt. Yes, the US could be debt free tomorrow simply by issuing bills of credit. And then after that it could pay all of its obligations with bills of credit.

There is nothing to back up bitcoin, because there is no government behind bitcoin. Ultimately all currency is an agreement or contract between two people. Without a government to enforce the bitcoin contracts, they will ultimately be counterfeited into valuelessness or will be the last man out in the game of musical chairs.

paqyfelyc

“Except that the government doesn’t print our money.”
I disagree. Money is just a standardized, transferable, non-backed by some value, IOU. Obviously the government is currently the biggest such IOU issuer, so he DOES print money.
“If the US actually issued its own money, (it still does in tiny amounts in the form of coins), it would issue them like Lincoln did in the form of bills of credit (which are circulating tax credits) called greenbacks. ”
Why would it do that this way? it doesn’t need dollars by the unit or even the hundreds, but by the billions, so it make more sense to issue bonds and have the banks issue the much lesser value bills to average joe.

I guess you know the one trillion coin story. This is interesting, as it materialize the perfect equivalence of coins, money bills, and federal debt.

“If people had the slightest clue about the history of money and the different kinds, they would be rioting in the streets. ”
I wish they were, but you are not rioting, and neither is anyone knowledgeable about money. As long as money can buy you things, people don’t care.

“When a sovereign government issues money as tax credits, banks can’t pull off their interest swindle.”
Of course they can. They did on gold and silver money.
“And when a sovereign government mints coins, it does not borrow or tax to do so. ”
Of course he does. New coins reduce the value of currently issued coins, so this is a tax.

“And bills of credit are the same.” Indeed.

If we had the will, the US government, by fiat (another name for to order or decree) could issue $20 trillion in bills of credit tomorrow demand that all holders of its debt take bills of credit as payment in full for the debt. Yes, the US could be debt free tomorrow simply by issuing bills of credit. And then after that it could pay all of its obligations with bills of credit.
Seriously? Paying debt by other debt will free you of debts? Of course not.
Besides, the government is not “we”.

“There is nothing to back up bitcoin etc. ,” Just as true of gold, but actually the fact that no government back the value of gold or bitcoin is as much a strength as a drawback. Obviously a government backing is a double-edge sword, as such government would also manipulate the value as it see fit.

Samuel C Cogar

Thank you, …… davidgmillsatty, ……. that was an interesting and informative read.

davidgmillsatty

@pacyfelyc You obviously don’t understand the difference between an IOU and a tax credit. As smart as you seem to be, you seem not to understand debits and credits. Personally I want credits in my account, not debits.

MDS

Non one guarantees the price of a dollar, either. In fact since the Federal Reserve was formed the dollar has lost 95% of its value—and that’s been done largely on a deliberate basis. It might get much worse when the 100+ Trillion in unfunded promises come due. Any currency is nothing more than the equivalent of a standard of measure for value, and by that measure pretty much every currency fails to maintain itself as a standard. Of course bitcoin is being viewed as a get rich quick mechanism by speculators, so I have little doubt its price will collapse at some point and hurt a lot of people.

Dave Fair

Unless one lives in a socialist workers’ paradise, fiat currency devaluation has no real impact over one’s lifetime.

Spend your money and have fun. ‘You can’t take it with you’ is and always has been truth.

I sense just a bit of sarcasm at the end there. I love seeing the Silicon Valley lefties hoisted on their own petard! All the ‘climate change’ nonsense aside, does not the sheer amount of electricity required for bitcoin mining alarm anyone? Sure hope the grid can handle a 100% increase in demand in less than three years.

There is not one “grid.” It’s a localized problem, I.e. where servers they be.

Bryan A

PRNK (North Korea) has been sending out ransom-ware infected data packets which ultimately demand payment in BITCOIN to receive the unlock code. If BITCOIN were to be suddenly devalued, all Kim’s hard work would be valueless.

Neillusion

All that CO2! Bitcoin doing its Bit for the environment, Plants will thrive, food production, oxygen, etc., go up. Those injecting CO2 into greenhouses will save money.

beng135

+100

Old England

Time for a Finding that BITCOIN needs to be closed down to “protect the environment” – come on IPCC, GreenPeace, WWF and all the Paris signatories what are you waiting for ……..

John Silver

You are implying that Ethereum is a Ponzi scheme (Pyramid scheme), well so is Bitcoin, the first investors are paid by the late comers.
The Trump economy will inflate this balloon.

Old England

In the UK the rapid growth of Bitcoin cash machines has led to vast cash deposuits being made into Bitcoins via the machines. Some operators have reported multiple £500 cash deposits being made every day to the same accounts and this is now being viewed by police as drug money-laundering.

I have a suspicion that it is only a matter of time before authorities in one or more countries set out to take down the bitcoin servers and remove all of the criminal money from criminals as well as everyone else.

Gabro

Governments hate bitcoins for the same reasons they hate cash and gold. They can’t track your every move with them.

There are now between 16 and 17 million bitcoins. There will only ever be 21 million. So Bitageddon as imagined in the article won’t happen.

Mining has gotten ever more energy efficient and faster since 2009. I use two ASIC machines to heat my house in winter. Electrical power is cheap in the PNW. It costs about the same to heat with mining machines as electric space heaters. I have gas backup. When it gets colder I add a third machine.

My cousin watches the house for me, as I’m in South America at the moment.

Doug

You really have no idea how Bitcoin works 🙁

Sommer

Take a look at what Quinn Michaels is telling Jason Goodman about bitcoin, block chain and AI Singularity/Sophia in this recent interview:

We all need to understand this. Thanks for the opportunity for this public discussion amongst brilliant minds, Anthony.

The Reveend Badger

Old England

Bitcoin is nowhere near anonymous despite claims that it is. This is quite useful for GCHQ in order to track certain criminal and terrorist activity. In fact it is so useful one might speculate that Satoshi could have been an employee of some TLA.

Now Google “NSA How to Make a Mint”

Enjoy!!!!!!!!!!!!!!!!!!!!!

Patrick MJD

“Old England December 17, 2017 at 4:26 am

Some operators have reported multiple £500 cash deposits being made every day to the same accounts and this is now being viewed by police as drug money-laundering.”

The Commonwealth Bank of Australia (CBA) has been “caught” turning a blind eye to money being deposited in to ATM’s and banked. Claims have been made millions in drug money has simply been washed, in plain sight, by the bank.

Bitcoin Servers?

there are no bitcoin servers.

that is the point.

there are individual miners. there are farms of miners.

and there are thousands of bitcoin nodes.

Most governments who want to put limits on it quickly realize that the only thing they can do is
make it harder for people to turn fiat into BTC.. so they regulate exchanges. Most people are ok
with this because it makes owning bitcoin safer and allows the IRS ( for example) to tax the
gains.. as it does.

When governments shut down exchanges (as in some countries), people respond by trading BTC OTC or like in the old days people work with written script.

Quite simply. If X has 10 BTC and wants to sell it to you, you can give him cash and he can hand you
a paper wallet, which just consists of a public address and private key. it works, but not as safe
as a regulated exchange.

The government can make it more difficult to buy BTC ( as in India) and then people pay 20%
more to own it.. as they did in India. So regulation drives it underground and raises its value.

if you want to move your bitcoin to a friendly country you just need to remember 12 words.

Dave Fair

Mr. Mosher, salesman. Whoda thunk.

Is Anthony allowing marketing on his site?

Schlens

As it is always the case in emerging, promising markets. The sooner you are part of it, the more you have to gain. That doesn’t mean it more or less of a Ponzi scheme than our “regular” currency scheme (what’s the intrinsic value of colored pieces of paper?) or, say, pension schemes.

The Reveend Badger

Sclens.

The only promise here is that sooner or later you are going to hear the words “Sorry For Your Loss” and you will have NO IDEA how all your hard earned fiat disappeared down the rabbit hole of crypto currency.

Don K

“what’s the intrinsic value of colored pieces of paper?”

In the US at least, you can use those pieces of paper to pay taxes and other government payments/purchases (e.g.bonds, government loan repayments) even if no one other than those with taxes to pay wants them. I don’t think the Treasury Department is likely to to accept payment in cryptocurrency any time soon. Or, probably, any time ever.

Jim West

While I am suitably sceptical of the robustness of “value” in regular fiat currency, given central banks propensity to wave ever more of the stuff into existence to fund their debt, it is a very long stretch to compare them to bitcoin.

Government backed currencies have local and international laws against their being conterfeited / debased / stolen, and those laws are ultimately backed by things like guys with badges and guns, with legal permission to apprehend/shoot, and by lengthy prison terms, resourced by a nearly bottomless resources (your taxes and mine). They (governments) also have very strong motivation to maintain some reasonable level of value and reduce volatility. Sure that doesn’t always work (e.g. Venezuela, Zimbabwe), but when such failure happens, your country and governement are immediately relegated to the status of that type of country.

What similar backing does bitcoin have? If, for example, Russian/Chinese/North Korean hackers do manage somehow to steal / debase / otherwise screw your bitcoin holdings, who are you going to call, and what redress do you expect? This goes double when you take into account that virtually every government of a developed country hates bitcoin with a vengence, and will work overtime to destroy / sabotage/ outlaw it, until it is destroyed. Of this you can be assured.

Of course, I have been an utter fool to this point. Had I bought bitcoin when I first really noticed it (all of about two years ago), I’d be in a position to buy that holiday house I’ve always wanted. 20/20 hindsight is really a terrible thing. Yet strangely, I feel even less inclination buy in now even after this huge missed opportunity. I wonder why that is?

Dave Fair

Who is paying real cash for Bitcoins at such inflated values, Jim?

F. Leghorn

Just stop with the’tard trolling.

joelobryan

John,
Your theory on who will (is) inflating this balloon is wrong.
Apparently much of the recent Bitcoin bubble is being fueled by Japanese currency traders.
http://www.businessinsider.com/bitcoin-trading-driven-by-japanese-men-yen-2017-12

John Silver

I didn’t theorize on who is inflating. I would prefer to use the generative term pyramid scheme instead of Ponzi. There are variations on the theme.

Its neither a ponzi scheme ( requires a single owner ) nor a pyramid scheme.

commieBob

The bitcoin problem is similar to the cryptography problem. link

Over the years the power required to process data has decreases. The small battery powered computing device (aka smart phone) in your pocket can do calculations that are beyond the capabilities of the room sized computers of my youth.

As computers become more powerful, the bitcoin problem will have to become more difficult in order to prevent theft. It isn’t a given that it will take more energy as long as the time required to do the calculations increases. Calculation time is what makes the system work. Power consumption is a side effect.

And yes … I can calculate how much power is consumed by a logic gate. For a given gate, the power consumption is mostly driven by input capacitance. Double the speed and you double the power consumption. The point is that the gates get better in newer designs. If your cell phone’s gates had the same characteristics as those of the 1970s, the phone would go up in a puff of smoke the moment it tried to boot up. 🙂

Neillusion

If I’m not mistaken, doubling speed, doubles current, which squares power loss, given the same capacitor.

commieBob

The current is doubled. The voltage causing the current stays the same. The result is that the power only doubles.

P = EI
where:
P is power in watts
E is electromotive force in volts
I is current in amperes

Neillusion

Mmmm, In order to speed up the charge accumulation, so the voltage reaches switching levels more quickly, the resistance must be reduced, track length shorter,etc., given the same capacitor as I stated. So if we double speed we double current and have it twice as long(twice as often), so where does that leave us?
But yes p=iv, i^2r not applicable here exactly.

Neillusion

And just to give an example
Core i7-860 (45 nm) 2.8 GHz 95 W
Core i7-965 (45 nm) 3.2 GHz 130 W
Core i7-3970X (32 nm) 3.5 GHz 150 W

Neillusion

My account not so good, but what I was trying to get at is the fact that as you increase processor speed, power goes up exponentially…

Carl Friis-Hansen

Got a bit confused for a second. The voltage stays the same, then only the capacitive resistance Rc is important when calculating the effect.
Rc = 1 / ( 2 * Pi * f * C )
So a doubling of the frequency means a doubling of the current and thereby the effect.

Dave Fair

P = I^2*R

See - owe to Rich

Rod Everson made one of the more intelligent comments on this thread. Bitcoin is only expensive in electricity if lots of people are competing to do mining, through which they receive bitcoins as a reward. From Wikepedia on bitcoing mining:

“Every 2,016 blocks (approximately 14 days at roughly 10 min per block), the difficulty target is adjusted based on the network’s recent performance, with the aim of keeping the average time between new blocks at ten minutes. In this way the system automatically adapts to the total amount of mining power on the network.”

So bitcoin could happily run on a tenth of the current computer and electricity power used, through its adaptation algorithm. The problem is persuading people not to invest their electricity in this. Just as, with other bubbles, the problem is persuading people not to invest their (or someone else’s) capital reserves in the bubble.

One day the bitcoin bubble may well burst, and then the expenditure of huge amounts of electricity to receive a few bitcoins is going to seem stupid. But I wonder if the creators thought anout the bubble effect?

Rich.

If your cell phone’s gates had the same characteristics as those of the 1970s, the phone would go up in a puff of smoke the moment it tried to boot up. 🙂

It would also be in a computer room with a very large HVAC system, neither of which would fit in your pocket.

hanelyp

Cryptography in the face of growing computer power is one concern I have over the long term viability of bitcoin. Bitcoin wallets are secured by public key cryptography. Unless those keys get longer over time, and the bitcoins are moved to the new and more secure wallets, (or bitcoin suffers devaluation,) computers will reach the point where cracking wallets becomes a profitable exercise. And proving your wallet was cracked may not be possible.

whiten

The public key cryptography at this point in time is a joke, no matter which way you try to consider it as safe.

The AIs these days not only do not need to crack any more the keys used, but do not even need or have need to know the encryption engine involved, for a swift successful decryption or a bridge access or a “brutal force” crack…

Gabro

Theft is a valid concern, but I don’t think it has happened yet, despite the thickest wallets being worth billions already, so surely worth the effort.

whiten

Gabro
December 17, 2017 at 10:07 am

Gabro, I am not claiming that my position in this aspect is indisputable, only saying that to me that position is indisputable to me….
The RSA code cryptography is the most easy to crack these days, by and with the AI support…regardless of the key power or key length…
Sorry but that is my position ….

From my point of understanding these days the AIs can do even more….can crack any thing in the binary digital environment, regardless of engines or keys involved….and that tome for what ever is worth it happends to be true….

Contemplate this please..if Alec Turing story true, then Turing already did achieve far much more with far much less many decades ago……brilliant achievement….and scary also to some.

Thanks Gabro…we just conversing in the end of the day….sharing if I may put it that way. 🙂

whiten

Rob Bradley
December 17, 2017 at 10:25 am

Whiten, AI cannot reduce intractability.
————–

Rob, I have no problem to consider and respect your point made.
And in general your point still stand….I do acknowledge it and accept it, in those terms.

But you have to understand my point made….the AIs do not need to reduce intractability in a digital binary environment…not any more….the AIs can very easily do a full proper info reversal, regardless…….and when considering RSA encryption, the AIs could easily do also a format detection parse decryption, regardless of the key length,,,,, always, but only in the context of binary digital environment…..

I think you need to consider your education, or further education in the binary digital, I think…

cheers

whiten

Rob Bradley
December 17, 2017 at 10:43 am

Rob, please do not get mad with me on this one.

If it makes you happy, I can say that I do consider my self to be completely wrong in this, but my point made means and consist with, then when it comes to RAS encryption, the info reversal consists and stands as method with no any need about the encryption key and its length,,,, the AIs will do regardless, and any “sweet’ there consist only with the amount and the complexity of information involved to be decrypted and accessed……no cracking of the key needed, as the key not need it all at that point, always provided that this all in a binary digital world…

cheers

menicholas

What bitcoin traders I know advise doing is keeping your keys on a specially made thumb drive that is not connected to the internet.
They are now very expensive and should be the first step for anyone just getting on the happy party.
Ledger and Trezor are two that are widely used…but NO NOT buy them from any third party sites…they have been known to have been tampered with. Buy them directly from the manufacturer.
https://www.ledgerwallet.com/products/ledger-nano-s

The other way to store them securely is in a paper wallet…a printout that you store in a safe or wherever you feel comfortable keeping it.
DO NOT let the exchange hold onto your bitcoin. For one thing, when there are “hard forks”, the exchanges have been known not to give you the forked currencies you are entitled to, which are at this point worth a lot of money for people that held the coins before those splits. I have it on good authority that more hard forks are coming, and soon.

whiten

Rob Bradley
December 17, 2017 at 11:11 am

Ah, ok, I am one of them guys, that happen to believe the AIs in this point in time can crack any thing in a binary digital environment ….
A Turing effect, I would say..:)

Thanks for the conversation, appreciated, Rob.

Cheers

Don K

Not that I care, but the fact that no one is publicly disrupting Bitcoin cryptography doesn’t mean that it can’t be/hasn’t been done. The entities with the most capability along those lines would seem to have little incentive to reveal their capabilities — if any.

Gabro

Don,

As per my link above, bitcoin exchanges have been attacked and apparently successfully hacked. Wallets, I don’t know.

Dave Fair

Just insert “beanie babies” for “bitcoins” and you will get a feel for my opinion.

Get in early and get out early. When the bovine excrement hits the air impeller it will be too late.

Late adopters will pay the obscene profits of the early in-and-outers.

Don K

Gabro. I don’t pay all that much attention to Bitcoin which is, I think, a fad. But my impression is that the problems that Bitcoin exchanges have had to date were due either to malfeasance or security problems unrelated to the nature of the entity being traded. That is to say that had Mt Gox been a bank trading Slobovian drachma, or a commodity firm trading Bok Choi futures, they same flaws would have resulted in the same problems.

However one of the risks with cryptocurrencies is that there are flaws in the blockchain or cryptography implementations that are either unknown or are known only to the NSA, CIA and their national equivalents elsewhere. If those flaws exist, we’ll likely not find out about them until they are discovered and exploited by a non-government agent, or some government decides it’s time to do a clean sweep of tax evaders and other folks they don’t much like.

Earthling2

I understand Blockchain more than I do Bitcoin. Blockchain makes sense as a security tool, but creating new value/money/cyrpto currency out of thin air? What does that even mean? Just where, please tell me, does the actual value come from when someone actually successfully ‘mines’ a bitcoin with a computer? It looks to me like this is the ultimate Ponzi scheme and will ultimately fail at some point in this phase 2 of selling bitcoins, leaving everyone who paid cash for a bitcoin holding the bag. If you have any bitcoin, I would cash out, if you even can. The process of payments makes sense, but the value derived by some people doing the mining, leaves me very skeptical. I won’t be buying any bitcoin, because I don’t understand it. Somebody, please explain this to us all please.

John Silver

Apropos of Blockchain, not only will there be voter ID in the US, there will also be a Blockchain based voting system. It’s just a matter of time.

https://duckduckgo.com/html?q=blockchain%20based%20voting%20system

Earthling2

Maybe an efficient and honest voting system would be a good thing. At least everyone would have a vote, and not be dead and still voting or be able to vote twice. And be registered to vote.

As I understand blockchain, a simple analogy would be if here at WUWT, all of us commenters took a screenshot of WUWT at the end of every day, and then if Anthony ever say, changed a detail in a post, or deleted/modified a comment, it would not agree with all the snapshots that we commenters already took.
A way of keeping everything honest as it happened and cannot be changed without being in agreement with everybody else’s exact version. Same with money, or votes. Or history.

Rod Everson

Earthling 2: Yes, your description is accurate in terms of what the blockchain represents. But it leaves out the demand for electricity and the proof of work concept.

Once you had all those users’ pictures, someone would have to be willing to do the work to use them in some way to verify that the historical website hadn’t changed. The images would have to all be digitalized, and then compared with one another to make certain that none had been altered. That would result in a single image that users agreed was the true captured image of the original (after casting out altered ones.) Then that captured image would be compared with what Anthony represented is the original website state at the time. If it agreed, Anthony would not have performed a “1984-like, Orwellian, re-writing of history.”

Again, if you look at the problem, it’s one of computing power but you also have to find a way to get everyone to capture those pictures too.

With bitcoin, the incentive to capture the pictures is the value ascribed to a bitcoin. When there was no significant interest in bitcoin, there weren’t many transactions (pictures captured) and it was trivial to do the work to prove a transaction (prove a picture was real) because there wasn’t all that much data to work with. But as the value of bitcoin increased, interest increased, and there are now hundreds of thousands of transactions to verify (lots of people taking pictures.) Verifying all those transactions takes a lot more computing power, but there’s more to it than even that. Because bitcoin is now trading at such a high price, and rising, people are more anxious to verify transactions because they earn bitcoin if they successfully do so. It’s the competition that is causing the massive increase in computer usage. It would be like if you paid the party who did the computing to verify the website pictures, and then kept increasing the price paid every day.

Of course, verifying that Anthony’s site was unchanged has little value. No one’s going to spend a lot of time doing it. And someday, no one will spend a lot of time mining bitcoin either because bitcoin will have little value, but that time definitely hasn’t arrived yet. It will though, because, as this article indicated, the electricity consumption required is beyond ridiculous. It’s not the CO2 that will stop it; it’s the cost of the power consumed.

The Reverend Badger

There is NO possibility of US voting being via an open blockchain. If it was then any hostile country e.g. China, Russia, North Korea could set up massive computing power, mine the chain and undertake a 51% attack to manipulate the result. No country in its right mind would risk such outcome. The conclusion would be therefore that an open decentralized block chain cannot be used for a voting system. So one would be forced into considering a centralized and closed blockchain BUT THAT IS JUST AN INEFFICIENT AND EXPENSIVE DATA BASE !!!

There is NO practical real world use for an open decentralized blockchain where there is a risk of an enemy country using massive computing power to alter it.

There is NO practical real world use for a closed and centralized blockchain which cannot be carried out more efficiently by established database technology.

Blockchain, as a technological idea , is going nowhere. It’s pointless and impractical. It is however clever and complicated so with the right demographic you can scam some “investment” money out of them.

That, my friends, is it!

andrewd

The badger is confusing bitcoin with the blockchain.

hanelyp

Yes, bitcoin is based on proof of work. But does that work produce anything of real value?

As for blockchain based voting, I still haven’t seen a proper accounting of how it could handle the clash between the secret ballot and insuring that only eligible voters cast a ballot, and only once in an election.

Neillusion

As I understand it, Bitcoin, like paper money, cheques, etc., has value because people have put that value/trust in it, then supply and demand takes over. In the US, when the cheque system was introduced, it failed because people could not understand the concept of writing your own money, so to speak and would not take a cheque.

Doug

For other than a crypto currency please tell me where else a blockchain exists. If you mention anything from IBM I will be forced to ignore you.

Neillusion

There is a good vid on Ted.com about blockchains, some time ago now but should still be there.

The Reveend Badger

Doug

Exactly. No practical implementation of anything blockchain anywhere, and the concept of the blockchain has been around LONGER than Satoshi’s Bitcoin.

Recommended reading : “Attack of the 50 foot Blockchain” by David Gerard (Available on Amazon – treat yourself for Christmas, it’s very good and funny!)

Don K

Not a Ponzi scheme exactly. A Ponzi scheme is a specific way to use folks inability to accurately assess value to enrich oneself oneself by manipulating markets. Bitcoin seems more to be a classic financial bubble — like the Dutch Tulip Mania, the South Seas Company or in modern times, Toronto real estate. The difference is that when/if the bubble bursts, your house in Toronto is likely to be worth about a third of current price (based on prices in Port Colbourne about 90km distant). But it’ll be worth something. When/if the Bitcoin bubble bursts, the price will likely be zero. (But the planet will be saved).

And yes as folks comment elsewhere, blockchain as opposed to cryptocurrency looks to be a useful technology that will quite possibly find many applications

Don K

I didn’t really explain a Ponzi Scheme above. In a Ponzi scheme, a self-proclaimed investment genius takes money from investors and sends out periodic reports of how their accounts are appreciating. The reports are partly or completely false. In actuality, the money they have “invested” is stashed in perfectly conventional “safe” investments — bank accounts or some such. Investors who cash out are paid from the safe investments which, of course, have nowhere near enough money to fully pay all the investors the amounts they are told are in their accounts. The financial genius may be pocketing money from the safe investment pool and/or charging transaction fees on the imaginary transactions reported to investors.

Ponzi schemes are illegal. The best known modern Ponzi scheme was Bernie Madoff’s Madofff Securities LLC which managed to disappear roughly $65B of other people’s money over the course of several decades. Mr Madoff is currently serving a 150 year prison sentence.

While there well may be some amount of dishonesty in the “Bitcoin Universe”, there doesn’t seem to be any person or persons lying to all “investors/miners” about how many coins they own.

The Reveend Badger

Blockchain looks useLESS to me with no practical real world possibilities. It only generates excitement because it is new, complicated and is hyped to the moon, no doubt because a large number of venture capital companies have thrown a few hundred million at it already. This thing will die away and some new thingy will replace it.

Don K ……except for Social Security. That is legal.

Dave Fair

It only becomes a problem when younger people, especially immigrants, get tired of supporting my fat, white ass.

Dave Fair

That’s relatively rich, fat white ass.

MSO

The blockchain (Bitcoin is one implementation) is an accounting system that can be trusted as much as anything can be trusted. Bitcoin itself is a payment system, like money orders, Pay Pal, Western Union, etc., that uses a blockchain to account for all payments made using bitcoin..

The Bitcoin blockchain works by mining blocks each of which can account for a number of payment transactions (currently around a thousand). A single block earns its miner 12.5 bitcoins , and voluntary transaction fees for each transaction recorded within that block. Once 21 million bitcoins have been issued, miners will have to rely solely upon transaction fees for profit.

If bitcoins are not used as a payment system, then bitcoin loses all its value. A bitcoin cannot be spent outside its blockchain and the blockchain needs new blocks mined to record those transactions. If there are no transactions to record, then there is no value in mining new blocks so miners will stop mining. Bitcoin will be stranded like a whale on the beach.

Dave_G

Replace ‘mine’ with ‘print’ and ‘Bitcoins’ with ‘Dollars’ and answer the question yourself.

Walter Sobchak

“Replace ‘mine’ with ‘print’ and ‘Bitcoins’ with ‘Dollars’ and answer the question yourself.”

The difference between bitcoin and the dollar, or any other national currency is simple and quite meaningful. The national government, has a police force and a prison system. It imposes taxes. The taxes, which can be as much as half of GDP, can be paid in the national fiat currency. You don’t have to believe anything other than that the police will trow you in jail if you don’t pay your taxes.

Just tell the police that there is no difference between bitcoin and the legal tender. Their reply should be quite droll.

Earthling

Just where, please tell me, does the actual value come from

As I understand it, bitcoins have no intrinsic value at all. The value is derived from what somebody else is prepared to pay you for one.

In turn, they will estimate the value on what they might sell it for.

It all sounds a bit ephemeral to me!

Gabro

Dollars, Euros, Yen, etc. also have no intrinsic value, now that there is no longer a gold standard.

Earthling2

What this says then, is that the economy is really just an act of faith. If we all believe a dollar is worth a dollar, then the day goes reasonably well. If something happens to that trust, such as the 2008 Great Recession, then we are in for hard fiscal times. It looks like the same is true of just printing fiat currencies as ‘mining’, bitcoins, in that money is printed out of thin air by the Fed, and in reality, our national debt gets paid ultimately by debasing the dollar/currency. Which should cause inflation. In the present case, you would think hyperinflation, since interest rates have been held down artificially as well. I don’t think Bitcoin or the fiat currencies end well in the scheme of things.

The Reverend Badger

Paul Homewood

The illusion is illuminated by the fact that several different exchanges can quote bitcoin prices in $ which differ by over 10% for the exact same second of the day. Furthermore “local bitcoin” price can show transactions which differ by up to 1000% or more from exchange prices.

I know of people who sell bitcoins for cash regularly at prices 20-30% higher than any exchange quotes.

The whole concept is very artificial, most exchanges are totally unregulated and there is no way of knowing if the prices are being manipulated.

menicholas

People have been arbitrage trading in fiat currencies for a long time.
Most large banks and investment houses have an arbitrage trader in their employ.
Keeping things square between exchanges is part of what makes a market.
If the price for the stuff you buy to live, was the same price everywhere, no one would have a store because there would be no profit in it.

hanelyp

If you can buy a currency at one exchange and sell it almost immediately at another for a 10% profit, currency traders would jump on that aggressively. And in the process expend the potential represented by the price difference, bringing the exchanges to very near a common price.

Paul

The value of paper money comes from a government willing to take it as payment for obligations i.e. taxes.

Walter Sobchak

Gabro: “Dollars, Euros, Yen, etc. also have no intrinsic value”

Depends upon how you feel about going to jail for failure to pay your taxes.

Me? I don’t want to go to jail.

Dave Fair

And the shop owners take those currencies.

Dave Fair

As long as the big holders milk the system over time, no problem. Someone gets really greedy and there could be problems.

icisil

“creating new value/money/cyrpto currency out of thin air? What does that even mean?”

Alchemy of the mind

Don K

Earthling — AFAICS, the value of cryptocurrencies relies on the existence of that well known entity The Greater Fool. The GF is the dude who is going to come along to buy the “assets” you have paid too much for at an even higher price.

Perhaps I’m wrong. But just in case I’m not, I passed on the opportunity to acquire Bitcoin at $100 and I intend to continue to miss opportunities now, and in the future.

menicholas

Everything is reliant of the greater fool theory in order for it to have value.
A thing has two sources of “value”.
What it is worth to you, and what it is worth to someone else.
Any other measure of “value” is meaningless and arbitrary.

F. Leghorn

I thought I was Uber Nerd but this slaps me right back to earth. I don’t get it.

For one thing if one bitcoin is worth 16k, how do you buy a cup of coffee?

Gabro

You pay in tiny fractions of bitcoins, as if we had tenths or hundredths of cent coins.

Tom

That would be 0.000313 Ƀ.

joelobryan

Inflation sets in real fast as Bitcoin value goes up rapidly.because Merchants can’t keep up with price adjustments.
In NYC a WSJ reporter shows how a $10 pizza now effectly costs $78 b/c merchants have not been able to keep up with the bubble.

In the bitcoin universe, that is deflation. The quantity of bitcoins required to buy a product or a dollar goes down. Historically, deflation is very hard on a credit-based economy.

Rod Everson

Dave Magill: True, deflation is devastating to an economy, and not just to a credit-based one. If you have a bitcoin to spend, and you think it will buy twice as much a month from now, you hold onto it instead of buying a non-essential item. Or you make what you already own last longer. That behavior frustrates economic growth, although it would conserve resources I suppose. Then again, it might also cause sickness and death as well.

That’s why the most essential characteristic of any currency is that it function as a stable source of value over the near and medium term (today and over the next few months.) Granted, most fiat currencies lose value over time, but unless they go into a hyperinflation stage, they continue to serve the public’s need for a transaction medium.

And, as you indicated, a little inflation is preferred to a lot of deflation.

joelobryan

We still live in the hard currency universe thankfully. Making actual purchases with bitcoin is currently very difficult to impossible. In all of Manhattan, that WSJ reporter was only able to find 1 ice-cream shop which sold him a cheap $4 ice cream sandwich for ~$7 value in bitcoin (at the time he made the video). The pizza place was a Dominos Pizza, but they do not directly take Bitcoin. It went through a middle man exchange that took a transaction fee before sending the hard dollars to the pizza store before the pizza store would make-transfer the pizza. Very inefficient. And in all of Manhattan, only two places to buy something. Bitcoin is worse than tulips. At least you can barter a tulip as it is a tangible thing.

So in the real universe, that’s inflation if I have to put in $78 in greenbacks into a Bitcoin ATM to buy an otherwise $10 if I just paid with dollars.

That’s the beauty of bitcoin, it’s a devaluing currency as there’s only a finite amount and you can always divide down – compare that to our current inflationary system.. remembering money is supposed to be not just a store of wealth but a store of your time – in part a store of your life. When you’re young and strong you set an hour of your labor aside as money – in old age this money should give you back an hour of someone else’s labor. Inflationary currency unfortunately erodes this – an hour of labor stored as dollars in the 1970’s ain’t worth an hour in the 2010’s – ‘inflation’ (actually devaluation of the currency) ate it – all because the banks and governments keep flooding us with fake money. Banks when they lend money simply invent it out of fresh air, they claim this is how debt was always handled but that’s not true – and unlike old debt which was destroyed when the debt was paid off, new debt just keeps injecting more fake money into the world.

We all know what Sir Isac Newton thought of forgers and utterers right? He executed them. His feeling was they were the most destructive element in a society, and that’s why he created the gold standard with it’s inflation running at roughly 0% per decade – it meant wealth could genuinely be stored for later.

Bitcoin may well offer that same assurance if the investors driving speculation on Bitcoin don’t crash it. Better yet, bitcoin losses only serve to increase the value of the bitcoin money you actually do own. As I said it’s infinitely divisible with no cost – so it may have cost 10B per pizza years back when bitcoin seemed to come freely – now it costs 0.000whatever of a bitcoin.. in 20 years maybe it’ll be 1/100,000 of a bitcoin -But that also means people who have sat on it have preserved their wealth.

self devaluing currency is much better than our current devaluing wealth!

Though, they’ll need to be sensible and hang onto it carefully. We keep being conned by banks promises that they’ll look after our money (which they do, while time and time again using it to wreck the economy and abscond with the wealth) Banks ruined the economy in Australia in the 1890’s when house prices in Melbourne rose into the millions of pounds due to them flooding us with fake wealth, they ruined us again in the 1930’s – and both times the Currency Act was tightened to prevent them doing it again. Keating (a Labor gobshite) repealed much of that when in the 1980’s he deregulated the banks and since then they’ve managed to take 320 billion in printed currency and somehow injected 8 trillion in fake wealth into the Australian economy.. and we will fall hard for it when the crunch comes

Disclosure: I bought 1 physical bitcoin for $18 some years back as a curio. I also try to preserve my wealth by converting ‘money’ into silver and gold when I can afford it. I do not trust banks, they’ve ripped us off over and over again and since Sumarian times have always managed to shift the people’s wealth to their own pockets.

pdf link to a bank explaining how their ‘wealth creation’ works – proudly talking about something that would have seen them hang in years past.

menicholas

A physical bitcoin?
If you do not hay the cryptokey to a block chain bitcoin, you do not have a bitcoin.

physical bitcoins are bitcoins in a physical form with a little holographic sticker, behind which sits a pocket with the key inside – they’re a thing, as was paper bitcoin built much the same way. You don’t see many (except the mockups in media reports) as often they’ve been transferred back into the more common state, in a wallet. here: https://en.bitcoin.it/wiki/Physical_bitcoin

menicholas

No one is using their bitcoins at present to buy stuff…value is changing too fast.
Most people intend on holding their coins.
BTW…the price flirted with $20,000 last night and this morning, and is currently in the $19,200 area, as of this moment and on the coinbase.com exchange.
Prices can vary quite a bit from one exchange to another…which leaves open the possibility f some seriously profitable arbitrage trading.
😉

menicholas

When gold was being used for currency, no one wanted to spend gold when the price was changing quickly…they spend whatever they have which is less valuable and keep their gold.

Doug

Not true. I purchased a graphics card from Newegg and honey from a farmer with Bitcoin 🙂

menicholas

Sounds like you paid a lot for some honey and a graphics card.
I was reading the story of the nine million dollar pizza…
But you are correct…I should not have said “no one”.
“Few” would be more like it.

Bruce Ploetz

Bitcoin is in a bubble, soon the bubble will burst and all those bitcoin farms will collapse. Bitcoin is a commodity like any other, its value is determined by supply and demand. There is a great demand for an alternative to the manipulated national currencies, especially in the black market. Gold is over-valued for the same reason. When peace and stability return, demand for alternative currencies fades.
http://firstinfreedomdaily.com/wp-content/uploads/2017/12/bitcoin-bubble-biggest-ever.jpg

Gabro

Gold is grossly undervalued due to central bank manipulation. That’s one reason for the high demand for cryptocurrencies.

PUMPSUMP

Whilst the rising price makes mining viable for the dedicated, surely it is far easier to speculate with futures contracts or derivatives – though definitely not suggesting you do. Don’t know but I suspect the latter outweighs the former because of the tight supply and the current strong demand. When this leveraged speculation dries up, the ingredients for a rapid, violent fall will be in place. Bitcoin will be looked back on merely as another bout of Tulipmania, and about as economically significant, but the underlying mechanism for payment outside sovereign currencies will probably survive.

There is always money sloshing around the financial system, looking for somewhere to go, seeking opportunity. If this money all piled into gold, no amount of central bank manipulation (if it is occurring) could hold it back. When equities finally start falling in earnest, watch for the rise in gold as that money goes in search of opportunity as another dries up.

Walter Sobchak

If you think gold is grossly undervalued, you should by some. If you are wrong, if a Carrington event destroys the world electric grids, not matter what, It will still be gold. Bitcoin? Not so much.

Gabro

Bruce P,

I suppose that currencies are commodities, but there is reason to think that Bitcoin’s bubble, if it be a bubble, isn’t going to burst soon.

For one thing, demand is still increasing, while supply remains constrained. Demand could crash overnight, of course, but IMO it won’t. Most bitcoins are owned by a small number of people, to include its pseudonymous, anonymous founder and early large scale adopters such as the Bros. Winklevoss. These bitcoin billionaires have a vested interest in not cashing in their increasingly valuable assets for fiat currencies or more real property. The Winklevosses haven’t spent or as yet sold any bitcoins.

Should the large holders start selling, it won’t be all at once. Their sales, if any, will be responsible, along the lines of Gates’ divestment in MSFT. They know each other to a great extent. IMO bitcoin will stabilize at some level rather than crash precipitously. But then maybe I’m a delusional fool whistling past the crypto graveyard.

In any case, my average bitcoin cost is negligible.

Rod Everson

Gabro: Your average bitcoin cost might be negligible, but does your bitcoin holding represent a relatively high percentage of your current net worth? Because if is, and it goes poof someday, that will be the number you remember, and will affect your future the most, not the amount you paid to purchase it.

Gabro

Before this year, my bitcoin wallet was a small portion of my paper (or electronic) wealth. Now it’s a substantial but still minor portion. At the moment I still prefer bitcoins to dollars or any other such phony asset. I’m letting my “winnings” run. When and if bitcoin stalls and looks to have topped, I’ll start readjusting my portfolio into other asset classes, such as South American real estate.

I currently have a dozen bitcoins, which might be worth ~240 grand tomorrow. Naturally regret not having bought more, rather than just mining them since 2009. I have however at least steadily upgraded my mining operation.

If bitcoin goes to zero next year, I’ll kick myself for not converting to fantasy Yankee dollars or some other funny money, but I won’t be ruined.

Gabro

Rod,

Sold six coins this AM, ie half of my present stake, but am continuing to mine, while keeping my house warm.

Gabro

Seems as if a lot of people decided to sell on the Friday before Xmas, so glad I did so on the Wednesday.

Down 21% yesterday.

Neillusion

Each Bitcoin has 100,000,000 unique identities. There will be a day when one of those identities is worth a dollar/euro/pound. 100,000,000 satoshi = 1 Bitcoin. Any data in the world can be attached to an identity, not just monetary value, which essentially uses the id itself, the mere fact of having the only private code to that ID, which is a public address/code, essentially makes it yours. Other systems use the id’s for something – there is talk of title deeds being set up in a blockchain system – but anything data wise can be appended/attached to the unique id’s.

menicholas

Some of the companies that comprised the tech bubble turned out to have no value, but that is not the case for all of them.
Many feel that the same will be true of cryptocurrencies.
If you bought AMZN at the IPO and held it, I doubt you are unhappy with the purchase/investment at the present time. There are a bunch of others that are not far in excess of where they traded at the peak of the tech bubble.

menicholas

…are NOW far in excess of…

The Reverend Badger

Bruce Ploetz

If you redo your graph with a Y axis log scale it will be much better.

Bruce Cobb

Faux currency and faux science go nicely together.

Gabro

Yup. The Euro and CACA is a match made in Hell.

Bruce Ploetz

Bruce, maybe they will repurpose some of the climate model supercomputers to produce bitcoins instead. Flood the market and watch it crash.

But really, the popularity of Bitcoin in the tech world is not incompatible with the popularity of pseudo-science. The pseudo-science was invented to make the world seem dangerous, requiring international government to take over.

When the world seems dangerous, alternate currencies seem valuable. Like getting your money out of deutschmarks during the Weimar Republic, before the currency devalues to the point that it requires a wheelbarrow to go grocery shopping.

menicholas

To efficiently search for nonces, the job is now being done by purpose built machines.
No matter how powerful, a machine not purpose built for mining bitcoin is unlikely to make a profit or flood any markets.
You need something like at antminer S9 or good luck wit’ dat.
For one thing, the way the algorithm is set up, the amount of time required for proof of work is automatically recalibrated to about 10 minutes…no way to make them any faster. And there will never be more than 21 million bitcoins, ever. The amount that will be mined every year is very will known, as is the date the last one will be mined.
“When a block is discovered, the discoverer may award themselves a certain number of bitcoins, which is agreed-upon by everyone in the network. Currently this bounty is 25 bitcoins; this value will halve every 210,000 blocks. See Controlled Currency Supply.”

https://www.bitcoinmining.com/

joelobryan

I have made the comment before that GCM modelers should get their paychecks in Bitcoin options. Both are using computing power to turn out virtual nothingness, i.e. junk. One day both efforts will be recognized as worthless endeavors.

Bill Illis

There are many dedicated people in Bitcoin.

Spend some time on Bitcoin reddit which has 551,000 readers.

https://www.reddit.com/r/Bitcoin/

Bitcoins trading every second on the GDAX bitcoin exchange. Approaching $20,000 this morning, up $3,000 overnight. Interesting to watch for a minute or so.

https://www.gdax.com/trade/BTC-USD

John Silver

lol. Reddit.

Bill Illis

The best place to get an education on ANY topic now, are the discussion boards where people have developed an addictive fascination and have spent years learning about the subject (in most cases, visiting it every single day for years on end). After 10 or more years with that, almost a PhD-level of expertise is available on the board.

Reddit is where that is happening now (except for climate change and this is the place).

The Reverend Badger

Bill

r/bitcoin has been subject to massive censorship for years. Look into the background of the moderators and you will understand why. Believe anything you see on there as being representative and you are 75% of the way to becoming a “mark”. I used to be very active on r/bitcoin. They didn’t like what I was saying and have censored me, banned me and even stolen some of my bitcoins which I had in a company controlled by one of the moderators. Luckily they were only worth $2.47 so I didn’t lose much sleep, now of course they are worth over $4,698,750 so I am F********G furious!!

Gabro

You had ~276 bitcoins?

Wow. That was a lot.

menicholas

So, you used to have a bunch, someone stole them because you were incautious, and now you want everyone to think they are evil.
Right, got it.
Hard to believe this story.

Most writer misunderstand Bitcoin’s energy usage. While it’s true that it’s the computational energy that secures the blockchain (makes it immutable, which is why there cannot be “blockchain technology” without a currency) Bitcoin has enough computational power, and then some, to be secure as it is.

Those who verify transactions on the Bitcoin blockchain (“miners”) are in a free market competition for block rewards and transfer fees. That means that a miner that can secure access to cheap energy will try to maximize profits by buying such energy, gaining Bitcoin and then selling them. And since Bitcoin is valued higher than the price of that energy, Bitcoin’s energy usage is increasing.

But here’s the kicker: If no such access to cheap energy is found then Bitcoin’s energy usage will not increase. The energy usage is not a function of Bitcoin’s usage as a currency, number of transactions etc. Bitcoin works perfectly will even if its energy usage would stop tomorrow.

So where do the Bitcoin miners find access to cheap energy today?

Hydro plants surplus energy, that would otherwise not be used. Not really sure how that would be a climate change issue.

/Bitcoin expert

(BTW, Proof of Stake has been mathematically proven to be insecure)

sigh. That’s “even if its energy usage would stop _increasing_ tomorrow”, of course.

Gabro

I have access to cheap hydropower, thanks to the dams which Envirowhackos want to breach.

Gabro

And of which Bonneville Power Administration can’t make most efficient use because of the idiotic windmill farms and their coal backup.

Great point. I’ve read that currently it requires about 200KWh per coin – quite the bargain.
Where can we read about PoS not being secure?

See the paper linked to from here:

“Among other things, it contains a mathematical proof that it is impossible to determine the “true” transaction history in a PoS blockchain without an additional source of trust. ”

https://forum.blockstack.org/t/pos-blockchains-require-subjectivity-to-reach-consensus/762?u=muneeb

John Silver

lol. Surplus energy.
lol. Chinese.

Doug

Troed, you get the idea of Bitcoin. +1

Bitcoin is the ultimate in game theory.

joelobryan

Venezuelans who have access to the computers are settings up DIY mining. Electricity is so heavily subsidized and users pay the government for it with devaluing Bolivars. Electricity in Venezuela I read is effectively about 2cents/KWh. Quite a bargain if you have the computers and the know how to mine Bitcoin.

What is the carbon footprint/$ of printing and minting fiat?

Har-old

But more carbon dioxide is good for our world……

Hocus Locus

IF ONLY that computing power had been put to good use,
1. SETI-AT-HOME would have found intelligent life on Earth by now.
2. We’d have zoomed Mandelbrot deep enough to find ‘Free Energy’ blueprints.
3. We’d have spotted the message in pi: “We apologize for the inconvenience.”
4. Monkeys at typewriters would have won a Pulitzer prize.

<IRONY> Crypto-miners hail from the demographic that deride ‘gas guzzling cars’ </IRONY>

menicholas

Not all of us do.

Zigmaster

My understanding of bitcoins is that it is really a currency in name only. If a currency has movements of 20% + per day it can never be relied upon as a store of value one of the key characteristics of a currency. When you have hyperinflation movements currency movements are so large that commerce breaks down and barter eventually takes over. People don’t value or trust money only goods and services.
The Bitcoin has created an artificial market by limiting supply and creating artificial demand. That demand has been created not for what can be created with Bitcoin like products or services but purely by people wanting to gain from the increased value of an asset, pure speculation. It is the classic ponzi which relies on this belief in increasing values from creating artificial demand. The greater fool theory. The rapid growth of other crypto currencies will ultimately create the excess supply that will deflate this bubble. Once the tide turns the difficulty in selling anything other than minor quantities of Bitcoin will mean paper millionaires will see fortunes evaporate very rapidly without any realistic opportunity to exit.
The timing of this bursting bubble could be anytime in the future but I know as a former stockbroker of over 30 years , when the taxi drivers, cleaners and my own kids want to invest in Bitcoin I would suggest the peak is very close. The creation of futures markets for bitcoins is another warning signal . The use of derivatives is behind most of the modern commodities and stock market collapses that have occurred in the last 30 years including the GFC.

The block chain technology is another matter and companies who have expertise in this area may well have a rosy future unlike the crypto currencies around which that technology evolved.

Gabro

We’ll see, After such a runup as this year, bitcoin should crash in 2018, if it isn’t truly different this time, for the reasons I gave above.

IMO the real sc@m is fiat currency, not cryptos.

A blockchain is not byzantine fault proof without work being done to secure it. Bitcoin solved the riddle by handing out tokens as reward for producing the (energy intensive) work. As soon as those token began to be valued by someone, the blockchain gained enough work to be immutable.

There exists no other known way of securing a blockchain. A blockchain that isn’t immutable doesn’t offer anything a regular database doesn’t.

tl;dr: There exists no blockchain technology that isn’t at the same time a currency. Since the first mover advantage is enormous, there exists no purpose for blockchains other than Bitcoin’s.

(A lot of people misunderstand this, and think that a blockchain in itself solves the Byzantine Generals’ problem. It doesn’t)

Rod Everson

Troed: Very interesting comment. I have been puzzling over how all these champions of the use of the blockchain concept in contracts, etc., were going to replace the miners. Maybe they won’t be able to figure out a way to do so?

I’ve read that Ethereum has broader applicability than bitcoin and can be used to verify contracts. Any comment on that, and is that what you were getting at when you said Proof of State is not secure?

joelobryan

Rod,

Think of the way real property transactions are deed (title) recorded and a date/time stamped on a certified copy and held by a governmental third-party in trust. In the US the deed record is kept by a trusted source, usually a County government function. The registered deed records become the trusted third source. No one is creating any more land these days, just a one day can be no more than 21 million Bitcoins. The Land title companies make money on the deed record searches, title writing, and title insurance underwriting. If Bitcoin is to survive, a similar system will have to evolve.

As Troed quoted. ““Among other things, it contains a mathematical proof that it is impossible to determine the “true” transaction history in a PoS blockchain without an additional source of trust. ”

markl

+1 “The greater fool theory.” When the end comes it will be unbelievably quick and complete. Face it, Bitcoins are only as valuable as the money they can be traded for. Sure you can trade Bitcoins for anything as long as the people accept them but in the end it’s the Dollar/Yen/Deutschmark/etc. that they are given credit for.

Doug

Markl-

Over the past year I have purchased a graphics card from Newegg with Bitcoin and I get honey from a farmer who accepts Bitcoin.

Dave Fair

If I can’t buy something I want with it, it ain’t money.

At the time I was appalled by a philosophy espoused by a friend I made just out of college: Spend and borrow anything you can right now and die in debt.

The older I get, the more that makes sense. I can’t take it with me and I already secured the future of my family. Extra effort to amass “money” is wasted.

Additionally, in an overall sense salting away stuff does not help our economy grow. Ultimately that is the only repository of wealth.

Ed Zuiderwijk

The good old dollar also has the advantage to be, eh, green.

icisil

I wonder how the worldwide online videogame market compares?

I remain sceptical at these estimates of the energy used in ‘mining’ which isn’t mining at all of course.

Has anyone queried the original report that Eric is writing about which has received lot of publicity over the last week here in the UK?

The original report that is, nor Eric’s article 🙂

tonyb

Gabro

I wondered if the numbers were based upon current mining tech, or that of 2009, et seq. There is a huge difference in speed and power usage between a CPU or GPU-based rig, or even a FPGA system, and the ASIC machines of today.

menicholas

+++

Gabro

Me,

Besides which, of course, most of the power consumed in bitcoin mining isn’t from fossil fuels.

And the process is liable to become even less energy consumptive for the last three million coins.

Ed Zuiderwijk

An easier way of making money would be to mention ‘climate change’ in your grant application.

Pillage Idiot

“Scientists” have been mining that rich vein for a long time! Unfortunately, I don’t see any evidence of that vein becoming played-out anytime soon.

flynn

Lets cool down. From this article : https://medium.com/@interdome/how-much-electricity-does-bitcoin-use-c350bd84c64e we can read this :
“At 10 watts per Gh/s, Bitcoin would use the generating capacity of the Loon Lake hydroelectric plant”

Latest ASICs are rated at about 0.1W per GHash/s so 10W is probably a bit pessimist.

100watts per Terahash is a good number.

flynn

Another interesting point is that the chinese miners used to deal directly with hydroelectric plants in China to use the extra electricity they produced during the good season which cannot be carried by the grid. Free power. But the chinese gov. cut that out.

Curious George

Some time ago a cost of a transaction in Bitcoins was around $30, whether you were buying a cup of coffee or a mansion. How much is it today, and how long does it take for a transaction to post in the blockchain?

flynn

about 400 satoshi/byte, that is 0.001 BTC ($19) for a casual transaction which takes 2 block to be confirmed. Note that the lightning Network will take care of this issue.

Curious George

And tabletop fusion will replace fossil fuels.

The Reverend Badger

flynn

No one need to wait for a hypothetical lightening network. bitcoin has already has BitcoinCash fork off it and there is SegWit also so if you want faster transaction or smaller fees just go down that route. The fact that most users don’t says a lot. The VAST majority of people “in” bitcoin are just hoping to use it as a get rich quick scheme. It has been like this since 2013 (at least). I call them the lazy get rick quick dreamers, it is human greed. If YOU own 2 Bitcoins and are hoping to sell them when the price reaches $100,000 please tell me EXACTLY WHERE THE $200K IS COMING FROM ?

whiten

‘You can’t trick your way into solving that math. The SHA-256 algorithm is designed, intentionally, to be so hard that it requires brute-force computing. Try as many computational answers as you can, as fast as you can. Which means you have to keep your computer turned on all the time, running the fan to cool off your hot, overclocked processor. “The energy consumption is a security feature. It’s a good thing,” Sirer says. “To take over the system, you’d have to spend at least as much as what the system is spending now. You have to own 51 percent of all the hashing power.’
—————————————–

With all do respect……the above is just silly……
In the binary digital universe that is just a silly thing to consider….

AIs will break in the shorter moment ever considered any thing that considers itself or is considered to be safe by a “brute” attack…..At this stage even the most sophisticated encryption or algorithm-code protection is a silly joke when relies in a security against “brute force” attack…..Please ask your NSA guys..:)

Even the most hard complex application like in an RSA code encryption at this point in time is simply a joke, in the binary digital world………The AI power can literally MESS up any thing at this stage, in matter of seconds, regardless, for as long as the environment is and consists as a binary digital one, no any possible restriction or protections at this stage against the AI skill and power in the binary digital world…..

Maybe this to much Red Bull for me, but that how it is at this point in time, from my point of view..
There is no real proper safe chambers in the binary digital environment any more, anything is bridgeable and prone to access in matter of seconds or fraction of a second, regardless of the contemplated digital protection or the contemplated digital security….in essential…..

I think Meni will somehow be subject to agreement with me in this one…:)

cheers
The f word is not allowed on this site! Mod.

The Reverend Badger

Can I use the g word yet? It’s nearly Christmas and Newton was quite a clever chap.

[No, not yet. Christmas proves reindeer can really fly. .mod]

The Reverend Badger

Miles Mathis knows how reindeers work.

And aeroplanes.

(Don’t spoil Christmas for him, he should be writing at least 4 new papers during the holiday)

menicholas

Experienced bitcoin traders would disagree with you Whiten.
I am not one, but from what they say, it is not like playing chess, or even Go.

whiten

menicholas
December 17, 2017 at 11:59 am

But, for what it is worth…do you menicholas disagree with my point made?
Just checking.. 🙂

Walter Sobchak

How about I round up some gangsters* and stick guns in the faces of the bitcoin miners.

Or KGB, or the Chinese secret police, or the Illuminati.

gnomish

there are some things that block.chain is great for- like real estate deeds/titles.
and gov should love digital fiat that makes makes follow.the.money as easy as a few clicks.
if it’s done online, it’s data to be mined.
bitcoiners don’t own the internet. the privacy is a myth.
(btw, eu just made b.c. anonymity a crime)

Doug

Gnomish show me a working blockchain for real estate titles and deeds?

That is government’s job and they already have a database for that.

The Reverend Badger.

Blockchains have been around for a long time, Bitcoin itself since 2009. To date there is not one single working blockchain application for anything which previously used a database. I predict there never will be. The whole concept is fundamentally flawed. More information on this can be found in David Gerard’;s excellent book : “Attack of the 50 foot Blockchain” (available on Amazon).

Doug

The Reverend –

The only time I had heard the word “Blockchain” is in Satoshi’s whitepaper. Where else prior to then when was it used?

Bitcoin has been immutable since 2009. A very fine blockchain….decentralized ledgers secured by proof of work with nodes validating the chain.

Math is a beautiful thing 🙂

gnomish

https://www.google.com/search?client=opera&q=blockchain+real+estate&sourceid=opera&ie=UTF-8&oe=UTF-8
digitally accessible distributed ledger is very well suited- ironically, because it makes title search completely transparent and centralized
i guess if you’ve ever bought a property you have paid for a title search by a private company.
that’s more or less required for completion of a transaction. due diligence, like knowing there are no rocks before yu dive.

i don’t agree that this is the job of the state. but that’s another topic entirely.

Ellen

My takeaway from this discussion is simple: if you don’t understand it, don’t invest in it.

Doug

Ellen you are correct. I encourage you to remain skeptical, but research Bitcoin. I think Bitcoin is 2nd only to the internet in how powerful a technology it is and will become. I know this is Hyperbole, but this is truly remarkable.

The Reverend Badger

You cannot “invest” in Bitcoin. It’s not a company, it’s not got shares quoted on the stock market. All you can do is buy some and if you think that is investing then I suggest what you are in fact doing is gambling that someone else will buy it off you at a later date for a higher price in FILTHY FIAT or alternatively you are actually so deluded that you think in some way it’s going to become a useful and practical real world currency which it is no nearer to being after over 7 years in existence!

menicholas

Dang Rev, but seriously…tell us how you really feel!
Ellen, if you want to have some fun and maybe make a bunch of money, decide on an amount you would feel comfy having in your pocket when you walk into a casino or sit down at a poker table.
Consider the money already lost and gone, and then just enjoy what happens next.
1% of net worth is not unreasonable for a person to have in highly speculative investments.
And sure, call it what it is…gambling.
But all bets on the stock market are gambling…ask anyone who had a bunch of money in Kodak or Polaroid, or WorldCom or Lehman Brother’s if they thought they would lose every cent?

LdB

Most people take paper notes which has no value other than a government “stands by the value” whatever you read that to mean. If you were unfortunate enough to have Zimbabwe or Venezuela ones historically you are probably in a very bad place right now. You likely don’t understand how your own currency works and you are hoping someone in your government does, faith which sometimes doesn’t pay off.

Dave Fair

Don’t live in socialist paradises. Problem solved.

Don’t invest in ponzi schemes. Problem solved.

Diversify your investments. Problem solved.

Realize that speculation is not investment. Problem solved.

Realize that frequenting casinos (Bitcoin?) is speculation. Problem solved.

Don’t let anybody tell you how to spend your money. Problem solved.

Have fun with your money. Problem solved.

whiten

Eric, or Anthony..there is a comment of mine which seems to have ended up in to the ‘abyss’ , if you would not mind please let it be if is not much to ask and if that comment not considered as silly one…..Just asking as I have not or could not spare much time at this moment in consideration of any probable replies…

Thanks..

The Reverend Badger.

In order to properly understand Bitcoin (and other crypto-currencies plus the Blockchain) you need to do 3 things:

1. Read this book: “Extraordinary Popular Delusions and The Madness of Crowds” (Charles MacKay).

2. Read this book: “Attack of the 50 foot Blockchain” (David Gerard).

3. Spend at least 1 month on the Reddit site r/buttcoin (Yes, BUTTcoin).

Whatever you do please do NOT put any of your hard earned money into any cryptocurrency scheme as you will very likely lose every single cent/penny of it by one means or another. This stuff is one of the most toxic things seen this century.

mairon62

It’s the “casino” phase of the bitcoin market. Ultimately, we want price stability for our fungible stores of value. And unfortunately for bitcoin, extreme price volatility is not good for what stable money does: separate the two sides of a trade. Knowing that bitcoin is volatile, would you borrow money denominated in bitcoin, knowing that it could be more expensive to pay back a year from now? How do we agree on a price for something denominated in bitcoin, if the bitcoin price is shifting beneath our feet? We don’t. The only reason to buy bitcoin, like all manias, is because the price is going up. FYI, the cost of production for 1 bitcoin is about $1,000 USD.

Gabro

My cost is lower, but I benefit from cheap power and have invested in the fastest currently available gear.

Gabro

And most energy-efficient hardware.

Gabro

The cost of producing 200 US one-hundred-dollar bills is negligible. Indeed, since the Fed invents its funny money out of thin air, it’s practically zero.

Dave Fair

But is now worth $20,000 dollars to me right now. Fiat currency or not, I could have a helluva lot of fun with that.

Gabro

Dave,

As I could with one bitcoin. But my bitcoins are appreciating in value against the dollar, while the US fiat currency continues its decline against real assets, although it is not losing the race to debase, since other imaginary state funny phony money issues are in even worse shape, not being reserve currencies.

J Mac

The state of Montana has entered into the Bitcoin mania, providing funding for a server farm at the site of the old logging sawmill in Bonnet MT.
US State of Montana Invests Directly in a Bitcoin Mining Operation
http://www.trustnodes.com/2017/06/13/us-state-montana-invests-directly-bitcoin-mining-operation

Ironically, the Bonner MT hydroelectric dam and facilities, built in 1908 to power the saw mill, were breached and removed in 2008. Local residents are not happy, as the server farm emits a persistent whine described as similar to a jet engine winding up.

The Reverend Badger

The idiocy of politicians never ceases to amaze.

J Mac

I love the Orwellian use of terms like ‘mining’ and ‘work’, when applied to the crypto currency crappola!

I think you’d fin a fair few IT folk in government departments and businesses are using their employers gear to mine bitcoin on the sly – at a college I worked at we found this was the case (along with one IT bloke who maintained and served a .. how do I put it, pRon site and a P2P video sharing site )

hmm, I wonder whether anyone’s looked at BOM’s supercomputer lately

Chris Jesshope

Earthling

“creating new value/money/cyrpto currency out of thin air? What does that even mean?”. This is exactly what private banks do when they loan money, its just an entry in a ledger (a central ledger, unlike bitcoins distributed ledger, very little energy required and just as much a ponzi scheme, only if the system collapses, it is we, the tax payers who will bail out the banks. To some the bitcoin form on “democratised” currency is fairer.

The energy issue is a problem, as although reducing line widths in the silicon will mean faster and more energy efficient gates, this efficiency can not go on forever, because of the discreteness of matter. Already the number of carriers in a gate is getting so small the statistics that define its operation are getting shaky and the gates correspondingly unreliable. Also the exponential growth in bitcoins value will drive an exponential growth in the resources thrown at mining. The problem is inherently parallel, so that an arbitrary number of processors can be used to test the nonces against the restricted range of hashes (i.e. n leading zeros). Indeed your browser may be mining crypto currencies at this very moment!!

Curious George

Private banks are not supposed to loan money that they do not have.

Chris Jesshope

Curious George: “Private banks are not supposed to loan money that they do not have.”

Banks have been doing this since the goldsmiths realised very few people came in to claim their gold, preferring notes instead. Some 95% of money in circulation is created out of thin air by private banks… at interest. This has the unfortunate effect of requiring perpetual (compounded) growth in the economy to pay down the interest. This of course is unsustainable and leads to cycles of boom and bust. Read “Between Debt and the Devil” by Adair Turner for an analysis of the issue.

Gabro

Serbia is not a very big country.

Gunga Din

Something of imaginary value is contributing to the imaginary cause of an imaginary problem, all of which only exist in the virtual world of Man’s imagination.
People need to out more.
I know what a $20 gold piece feels like. What does a $20 bitcoin feel like?
If the “renewable/sustainable” power goes out, does it still exist?

J Mac

+ 100!!!

Doug

Yep

The Reverend Badger

Never more than 21,000,000 Bitcoins.

Already this is INCORRECT. Bitcoin has already forked with there being now 2 versions, Bitcoin and BitcoinCash. So now there are 42,000,000 crypto coins and a forked blockchain.

Expect even more forks in the future as various factions continue to argue which features they want / don’t want.

menicholas

There have been at least two hard forks in bitcoin.
And a few years ago, Apple did a 7 for 1 stock split.
So what?
If you put $1000 in bitcoin a year ago, and then sold half of it when the price doubled, you now are playing with the casinos money.
You could have done the same thing 2 weeks ago, and would have your dollars back and an equal amount of bitcoin (in dollar terms) sitting in your digital wallet.
Hell, I know people that never shut up for years after March 2009, about the suckers rally in the stock market and how they would lose every cent.
You sound like someone who would like to short sell bitcoin.
I suspect you and anyone else of a like mind will very soon be able to place your bets against bitcoin.

Dave Fair

Menicholas, please visit my hometown of Las Vegas. People like you keep my taxes very low.

The Reverend Badger

Betting is a rather selfish pastime.

I think one can do more good for mankind by talking about why Bitcoin “investment” is a bad idea rather than shorting it. I think efforts in this direction will probably help hundreds , if not thousands, of people avoid rather serious financial consequences. Just think what we could have done if the internet was around when tulips were being traded.

This is an interesting observation.

It made me think of the Australian pre-decimal currency versus contemporary currency – both still technically legal tender and both fall under the Currency Act protection against counterfeiting (I mention this last bit as counterfeit 1950’s crowns are turning up nowdays out of china – if you get ripped off buying one you can refer the matter to the federal police, the penalty is severe) – the old currency may not change hands much these days but with it’s 90% and the later debased 50% silver content, they’ve done a damned fine job preserving wealth – more so that the current contemporary currency. No surprise really that people in the know recognize a debased currency, whether it’s easily traded or not. For the rest there’s whatever is easiest. Perfect for folk who can’t be bothered thinking much. Like those kids that squeal with excitement at the prospect of a future cashless society /facepalm

The Reverend Badger

Talking about 50%/90% silver just shows you are talking about chunks of metal, NOT currency. Purely fortuitous that the particular metal content in the particular coin becomes worth more as “scrap” metal than the previously assigned currency unit. For every coin that’s a metal content “winner” you can find even more that are “losers”.

You can regularly buy lots of old coins in pallet sized boxes from the banks weighing about 4000 kg. They tend to sell to coin dealers who have the time to sort them all out and market them in small lots. In the UK older (non magnetic) 2p and 1p pieces become worth more than face value when copper/nickel prices are high. It’s illegal to melt them down but if, hypothetically, you throw some copper scrap into the mix…..

chunks of metal, like slabs of beer can and are used as currency. I know what you’re saying though, but they’re currency nonetheless – the fact that money as we know it today is deemed a currency is almost an abomination – currency.. money was designed to preserve wealth and facilitate transfer. volatile and fiats can only do this for a while before they fail.

I saw the Canadian mint was selling off scrap pure nickel coins at metal value a time back.. it was an eye opener and one I’ve used as an example to explain how munted the system is – when people willingly hand over $600 in metal (value) and take $200 in (nickel plated steel) coin in exchange.

menicholas

A US copper penny weighs over 3 grams.
There are about 456 grams in a pound, so about $1.47 worth of old copper pennies is one pound.
The price of copper has been far above this amount for many years. We are now over twice that, and rising.
I doubt anyone is selling pallets of old coins for less than half their value in scrap.

icisil

I was gonna say, there’s no way the 21 mil figure can stay static if it costs $19 to process a single bitcoin transaction. Ponzi schemes always need new blood, so to speak, to keep going.

btw, $19 seems outrageously high for a single transaction.

Doug

Bitcoin Cash (bCash) is a dividend from Bitcoin. Bitcoin is the real deal.

BCash is a scam.

The Reverend Badger

Yes Doug. Sliced White Medium Bread is the real deal, that Sliced White Thick Bread is clearly a scam. Use that for your toast and you will regret it!

And don’t go anywhere near that Seedy Wholemeal Etherium, you will choke on it!

Max Hugoson

This was an EVIL article to publish. I haven’t had that much BOVINE EXCREMENT come out of my Computer, since I stopped using my web cams to monitor my cattle barns.

Gunga Din

Then I guess you missed out on a few bitcoins? 😎

The Reverend Badger

Eric never ceases to entertain. I am tempted to assign characters from The Big Bang to the moderators on WUWT but fear it may not be taken as the good natured humour which is my trademark.

Wait for it…………………………………………………………………………………………………………….

joelobryan

Eric wrote:

“I’m sure given a choice between giving up Bitcoins and saving the penguins and polar bears, or gross climate hypocrisy, green Californian trendies will make the same choice they always make.”

Deep down, the smarter ones know(like most regular commenters here at WUWT, probably even Griff) that the IPCC’s Climate Change game is a hustle on stupid people.

JJM Gommers

Once the the use of the bitcoin is widely accepted, its value will level close to the mining costs

Long term that is what The best mining companies plan for.
basically Utility level margins

The Reverend Badger

Bitcoin will NEVER be widely accepted because it does not have the features necessary in a currency for everyday use by the ordinary Joe. Not least of which is the ability to correct for errors caused by the ubiquitous FAT FINGER.

Remember the time you entered one character incorrectly on your keyboard and sent your entire retirement savings pot into a cryptographic address without having the corresponding private key.
comment image

These are objections to a point in time whose conditions to exist won’t exist for your dystopia to emerge. If wide acceptance was being blocked by mistrust then market solutions would emerge like private key custodians like banks. Cryptocurrency insurance. Underwriters would demand further safeguards.

Walter Sobchak

“Hooray for Bitcoin (but Don’t Buy It): The price reached $19,000 last week. It is certain to hit zero.” by
Lawrence Baxter on Dec. 11, 2017
https://www.wsj.com/articles/hooray-for-bitcoin-but-dont-buy-it-1513035892

… But in the long run, the smart bet is against bitcoin, for at least four reasons.

First, bitcoin is too volatile to be a reliable store of value. National currencies rest on the real productivity and fiscal capacity of citizens. With bitcoin there is no there there—only some kind of euphoric trust. …

Second, the bitcoin community is using breathtaking amounts of electricity …. When environmentalists begin to understand this, there will be a firestorm.

Third, the currency is a vehicle for criminal transactions and for avoiding government restrictions on moving capital. …

Fourth and most important, bitcoin is on a collision course with sovereign states. … King Philip IV of France once could not repay his debts to his bankers, the Knights Templar. So in 1307 he had their leaders arrested on trumped-up charges and then burned at the stake. ..

At the first serious (and likely coordinated) move by governments to regulate or bank the digital currency, bitcoin’s price will crash to zero. Panicked owners will rush to exit and the bubble will burst. Bitcoin futures and options may just as well be based on pixies and fairies. Nothing will be able to save them. Speculators will depart for the next lunacy, leaving behind the greater fools to wonder where their supposed wealth went and demand that government do something about it.

Walter Sobchak

I like the warning about the fate of the Knights Templar. And they had some serious military chops. You don’t want to wind up like them.

Really, you don’t.

andrewd

Most bitcoin mining happens in China, done in larger server warehouses co-located next to hydro-electric plants. The warehouses use the cheap, spare hydro capacity to efficiently mine. It’s about the only place where it’s cost effective apart from certain cold-climate locations. There is little to no CO2 emitted. The sleight-of-hand is in the article where it mentions ‘CO2 equivalency’, a common trick regular readers here will have seen used many times before in many contexts.

Gabro

My mining occurs in a cold climate next to abundant hydro. But it’s also a hot climate.

In summer, I move my machines outdoors, just as my grandparents used to do their cooking. I use their summer cookhouse, now turned into a clean room.

Cool gabro!

the ingenuity of the mining community is second to none.

Gabro

As for cryptos being reliant on cyberspace, so are most people’s retirement and investment portfolios. How many people have paper stock certificates. Ditto bank accounts.

Yup

Its almost all Hydro. More importantly its Hydro that is Not being used or sold until miners show up

We pay to amortorize Green tech faster.

This is true outside China as Well.

In the Middle east all of the customers use solar.. sub 1 cent per hour electricity costs.

US customers are all Hydro.

The Reverend Badger

andrewd

“Most bitcoin mining happens in China”

PERFECT. Here’s all my life savings, sign me up, we can trust the Chinese to look after our financial interests. OK, they might have poor human rights and bad pollution but they have never acted dishonestly in financial dealings with another country, ever.

Pretty much all wrong.

“The expenditure of all this electricity, the proof of work, is the keystone of Bitcoin payment security. People whose computers crack the code breaking problem at the heart of Bitcoin, and in doing so help enforce Bitcoin’s payment transaction integrity, get to reward themselves with a few newly minted bitcoin.”

1. “Nobody used their computer. People use the speclalized hardware that we build and design.
Rack and racks of miners. ”

“This CO2 belching code breaking effort can’t be made too much easier. While the difficulty can be adjusted by mutual consent, making the code breaking problem too easy would allow people to steal other people’s bitcoins. The whole system would break down into a shambles of fraud and misplaced coins.”

1. Most of my customers use Renewables. Its the best priced power one the planet.
2. The difficulty cannot be adjusted by “mutual consent” It would require a hard fork
3. Changing difficulty would speed up the issuance of money. Thats it. NOT a shambles
of fraud and “misplaced” coins.

“To put it another way, given that most of the cost of mining bitcoin is the cost of the electricity you have to burn to solve the proof of work problem, the thousands of dollars you have to pay to buy a single bitcoin is the electricity bill you would have to pay if you mined that bitcoin yourself.”

WRONG.
Lets just do a simple calculation with The last machine I sold. The next one will use even less power

1. Landed Cost of the hardware: $897
2. Total Cost of operation after two years $1602 ( daily electricity charge for the machine
is around 97 cents
3. Total revenue $5263 ( after 2 years assuming compounding 5% bi weking increase in difficulty)
4. At the end of two years that single machine will have mined .27 Bitcoin ( priced at 19K)
for a cost of $1602

“The delicious irony is, the people who created and promoted and popularised this pointless carbon belching monstrosity are mostly also the people driving California’s green agenda.”

1. Huh most of us are libertarians and not driving a green agenda.
2. This is not a california silicon valley driven movement. China, Korea, Japan
3. The Mining actually helps to pay for the amortization of terawatts of green infrastructure.
Most of the power is STRANDED.. think Hydro damn in the middle of nowhere china.
4. Coal, gas, Oil is way to expensive for BTC mining unless you find/own a plant that is operating
at low capacity.

What can be done to fix this disaster?

“Some alternative cryptocurrencies like Ethereum have attempted to replace Bitcoin style proof of work with a low energy alternative, proof of stake. Instead of rewarding people with the most powerful computer, proof of stake seeks to reward investors who got in on the ground floor, giving the lions share of new coins to founders.”

1. full on Stupid you dont understand PoS proof of stake.
2. PoS Rewards ANYONE who stakes ( escrows) ether to earn the right to audit transactions

My ASICS have payback in less than 90 days and gross of $700 p/mth per machine and at 0.12 per kWh and daily cost running at $2.3 leaves profit hovering around $620 to $640 per machine per month. Useful life about 18 months then next investment cycle. You can operate profitably with a mix of generating sources. Ours are gas and nuclear primarily. Nuclear plant is close by.

Mosh what are you building sub $900? Multi GPUs? Sourced in China?

Useful life?
the product is designed to last 2 years.
in field failure rate is 1.5%
Chips are designed to dynamically overclock themselves and adjust to the operating conditions
while maintaining hash validity in exces of 98%

Useful economic life depends on your operating expenses of course. I have guys still running old gear
for more than 2 years

Dave Fair

I KNEW IT! Mr. Mosher’s Weed Patch is a Bitcoin scam! OMG: Wandering In The Bitcoin Weeds.

I will never again read a Mr. Mosher Weed Patch Wandering post without laughing out loud.

Dave Fair

PoS: Pile of Sh!t.

Gabro

Cryptocurrencies offer the hope, at least of breaking the government monopoly on money so rightly denounced by Hayek and the other Austrian economists. Governments are indeed liable to fight back, in order to keep their subject populations in financial servitude.

But IMO in the end freedom will win and serfdom lose. It’s in the process of doing so in Venezuela.

Dave Fair

Gabro, fiat currency has little to nothing to do with what is going on in Venezuela; it is socialism, pure and simple.

Gabro

Dave,

Fiat currency is an instrument of socialism, as so well described by Hayek in his seminal “The Road to Serfdom”. Same as state monopolies on education, violence, travel, work, you name it.

David Cage

History has a habit of proving that the only groups to take out evil groups are one step worse or they fail. Yes the banks and governments are often greedy and corrupt but clearly the creators of bitcoin are one step worse already and their power is so far minimal.

The Reverend Badger

Doug

You asked about early blockchain technology, i.e. before Satoshi’s Whitepaper.

http://groups.csail.mit.edu/mac/classes/6.805/articles/money/nsamint/nsamint.htm
https://www.anf.es/pdf/Haber_Stornetta.pdf

David Cage

I wonder if bitcoin becomes a significant terrorist funding liability how long before instead of bothering with the bitcoin source the bitcoin input terminals will be monitored and all the information zero security. There are other ways of intercepting data without cracking codes

Cryptocurrencies aren’t really currencies, IMO. They’re more like commodities like gold and silver. Just like gold, you can’t just make an infinite number of Bitcoins.

The problem is that Bitcoins etc. don’t have any industrial use, unlike gold and silver. And you can always create new cryptocurrencies ad infinitum.

I wonder if blockchains can’t be used for something a bit more imaginative, like, say, those Japanese toys which use barcodes as power points. Products that have barcodes which yield lots of points will sell very well. It’s still a very volatile market – toys can go out of fashion very quickly.

HAS BITCOIN REACHED PEAK STUPIDITY?

by yours truly

http://www.maxphoton.com/bitcoin-reached-peak-stupidity/

Flynn

Bitcoin is backed by mathematically proven trust. You may think this has no value until you realize it’s the thing we lack most in this civilisation. People in this forum should be first in line to realize this IMO.

Chris Jesshope

Max, you make a rather fine distinction between speculation and gambling. When futures markets exceed the physical supply by orders of magnitude, your speculation is equivalent to gambling. Apart from that I agree with a lot of what you say in your blog. Oh and by the way Smart money is not smart it just has access to almost unlimited funds at close to zero % interest.

Paul Cantwell

The Author does not seem to know much about Bitcoin, and as always assumes there is something wrong with CO2 production.

A few years ago live on Earth almost perished because of lack of CO2. We are not in starvation mode. Be a long time before we hit “Jurassic” type CO2 levels.

As far as the amount of electricity used – that is getting under control. The heat being released is being used to produce electricity with big gains being realised.

Nothing like the smell of Bitcoin worth a Million Dollars to bring out the inventiveness in people.

I’m in beijing, run global sales.

We built the very first FPGA and ASIC miners.
2017 we opened sales outside of China and I sold out ..

We just EOL’d the 741.. Sold it for around $700 through sept. raised the price recently and still
sold out within minutes. Crazy volumes and demand.

http://www.canaan.io

Next gen ships in January. I’ll probably announce on the 20th of December. Doing final tests after the first
run through mass pro.

I built this for customers if you want to do some quick and dirty calcs.

https://canaan.shinyapps.io/BTCmining/

test facility

http://www.datacenterdynamics.com/content-tracks/power-cooling/canaan-creative-is-opening-a-10mw-bitcoin-mine-at-the-node-pole/97793.fullarticle

Curious George

sayonara

Gabro

Now concern that bitcoin mining will affect coal prices. I guess not all power for miners is from hydro:

https://finance.yahoo.com/news/bitcoin-apos-wild-volatility-could-152200499.html

Mosh,

At least you can defend yourself from charges of CO2 production by pointing out that your machines are more energy efficient than the primitive CPU and GPU rigs of yore.

Thanks Mosh!

Thanks Mosh!

observa

I don’t believe in CO2 belching Bitcoin at the current price but I would if I got in on the ground floor when it was lots Greener. It’s come as a bit of a shock to discover deep down I’m really a Greeny.

John Mason

The article completely ignores the rate of increase of hash’s per watt which have been going up with each new generation of mining machines. I made one bitcoin the old fashioned way with 2 video cards in a PC a few years ago. It took 3 weeks to make at probably about 100 dollars in electricity cost. All the computers doing the same thing when I made mine had a total worldwide hash rate less than one dedicated ASIC based mining computer you can buy now for about 2700. That sole ASIC computer will take about 8 months to mine one bitcoin now. But the coins are worth more now.

Definitely not a green currency anyway you cut it, but the premise of the article ignores the moores law effect on increasing efficiency of mining.

The delicious irony is, the people who created and promoted and popularised this pointless carbon belching monstrosity are mostly also the people driving California’s green agenda.

It would be good to put some names to this, because this aspect of bitcoin was so really obvious, anyone who persuades governments to erect bird chomping turbines or bird fry-alive solar concentrators, and who also takes any part in the bitcoin mania, deserves to be publicly humiliated.

(Of course, more CO2 is actually good, but that is not their claim, and they have to be judged by their own standard: “As you judge, so shall ye be judged.”)

PUMPSUMP

For those of you interested or have a stake and not checked recently – BTC/USD down more than $4000 points in the last few days. Now that is volatility….