Bitcoins are a waste of energy - literally
Posted
Vast amounts of electricity go into feeding the Bitcoin delusion. Fortunately, it's unlikely that the digital currency will survive long enough to generate the environmental disaster that would arise if it became a major part of the financial system, writes John Quiggin.
The digital currency Bitcoin has been seen by many as a source of threats, as potentially facilitating terrorism, money laundering, and drug dealing; undermining taxation systems; and rendering monetary policy unworkable.
While these threats have raised concerns, it appears that all can be managed with appropriate regulatory and law enforcement strategies.
By contrast, only a handful of insiders (most notably Guy Lane of BitCarbon) have noticed a threat inherent in the very design of the Bitcoin system: that of ever-increasing environmental damage from the electricity used in the 'mining' of Bitcoins.
Even more striking, this same design feature ensures that Bitcoin cannot, in the end, provide a stable store of value.
In essence, the creation of a new Bitcoin requires the performance of a complex calculation that has no value except to show that it has been done. The crucial feature, as is common in cryptography, is that the calculation in question is very difficult to perform, but, once done, is easy to verify.
In the early days of Bitcoin, the computations in question could be performed on ordinary personal computers. Nowadays, however, 'miners' use special purpose machines optimised for the particular algorithms used by Bitcoin. With these machines, the primary cost of the system is the electricity used to run it. That means, of course, that the only way to be profitable as a miner is to have access to the cheapest possible sources of electricity.
Most of the time that means electricity generated by burning cheap coal in old plants, where the capital costs have long been written off. Even in a large grid, with multiple sources of electricity, Bitcoin mining effectively adds to the demand for coal-fired power. Bitcoin computers run continuously, so they constitute a 'baseload' demand, which matches the supply characteristics of coal (and nuclear). More generally, in the process of decarbonising the energy supply system, any increase in electricity demand at the margin may be regarded as slowing the pace at which fossil fuels can be phased out.
The cost of coal-fired electricity can be as low as 5c/kWh for industrial users; mining with electricity costs above 10c/kWh is usually unprofitable. With the coin price currently a little above $US200, optimized systems can break even with electricity requirements of around $150 for each coin. At 5c/kWh, that's three megawatt-hours (MWh) per coin. That corresponds, in turn, to about three tons of carbon dioxide for coal-fired electricity. Even at 10c/kWh, each Bitcoin mined using coal-fired power is associated with 1.5 tons of CO2 emissions.
The average US household uses 10 to 12 000 kWh in electricity each year, about the same as would be required to generate four Bitcoins worth a little under $1,000. But the same average household has about $6,000 in cash on hand and savings accounts, and around $15,000 in credit card balances. Switching even a small part of a typical household's financial transactions to Bitcoins must therefore entail a massive increase in electricity use.
Fortunately, it's unlikely that Bitcoin will survive long enough to generate the environmental disaster that would arise if it became a major part of the financial system. The same design feature that requires the use of so much electricity is the fatal flaw in Bitcoin as a currency.
The creation of a Bitcoin requires costly calculations. But these calculations are of no use to anyone. If they were valuable, then they would be performed for their own sake, with Bitcoins as a free by-product. That would undermine the whole system.
By contrast, all viable currencies are underpinned by the fact that the currency has a use outside its role as a medium of exchange. This is obvious in the case of metallic currencies such as gold and silver coins, and of paper currencies that are convertible into gold. But it is also true of 'fiat' currencies, not convertible into precious metals (the case with the US dollar since 1971).
The external value of fiat money is more subtle than that of a metal coin. It is inherent in the fact that the government issuing the currency is willing to accept it in payment of taxes and other obligations. If the US government ceased to exist, people might choose to go on using US dollars as a medium of exchange for a while. Ultimately, however, all currencies without an external source of value must share the fate of the Confederate dollar and similar former currencies, becoming, at best, collectors' items.
In the end, Bitcoins will attain their true economic value of zero. But as long as Bitcoin, and similar 'crypto-currencies' persist, the mining process will continue to damage the environment by wasting energy to no purpose.
The sooner this collective delusion comes to an end, the better.
Professor John Quiggin is an ARC Laureate Fellow in economics at the University of Queensland.
Topics: currency, internet-technology, internet-culture
Comments (44)
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Mark:
06 Oct 2015 7:42:42am
Because digging precious metals out of the ground for refinement & minting, or housing the current financial systems databases and payment networks doesn't consume energy.
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mark:
06 Oct 2015 10:10:22am
That's obviously not what he was saying.
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Gary:
06 Oct 2015 10:18:48am
Good point Mark. How many resources are consumed around the world to mine gold - an essentially useless metal.
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denisc:
06 Oct 2015 8:00:42am
What a ridiculous article.
There are only 21 million bitcoins available, yet you write as if there will always be mining carried on.
Where did you factor in the bank charges every time your fiat currency is traded, particular with overseas recipients. Bit coin = NO bank charges.
The research(if any) that went into this article was a complete waste of taxpayer funding and you should be ashamed to put your name on it.
Totally doesn't fit in with any of your other articles that I've read.
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NomDePlume:
06 Oct 2015 9:02:02am
In addition governments deliberately inflate currencies through quantitative easing to reduce the real value of their debts. That's why people look for safe havens such as bitcoin and gold. This nothing new. Governments wrack up debts to pay for their election bribes, then inflate the currency to pay for it, cheered on by economists like this author. Even those stupid enough to vote for the bribes to get free stuff pay for it in he end, just as the Greeks have done.
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Dosomeresearch:
06 Oct 2015 9:54:20am
Mining WILL always be carried on. How do you think transactions will be processed once all the coins are mined. Miners by that point are supposed to be supported by the transaction fees. Do you know anything about this technology?
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Nathan:
06 Oct 2015 10:28:27am
"Mining WILL always be carried on. How do you think transactions will be processed once all the coins are mined. Miners by that point are supposed to be supported by the transaction fees. Do you know anything about this technology?"
As this stage the computational load will be significantly less, and equivalent to any other electronic transfer.
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John:
06 Oct 2015 8:11:05am
Surely Quiggan understands that the marginal cost of production is only relevant for mining new coins. Once mined they can be reused thousands and thousands of times (unlike physical currency).
And as an economist, surely he knows that all "economic value" is subjective. There is no such thing as an "external source of value" (or an "intrinsic value") there's only subjective value in the eyes of the people willing to trade one person's goods or services for the other person's bitcoin/dollar coin/electronic digits/gold etc. Why they wish to have "money" or a "medium of exchange" instead of the goods in their possession is fundamentally about trust that the medium of exchange will operate as such when they wish to obtain goods or services from others (or fulfill a debt obligation). Without trust no medium of exchange is a medium of exchange (by definition). Without trust, a gold coin simply becomes gold, while a $10 note just becomes wallpaper, a bitcoin becomes a mathematical curiosity and my Westpac savings account becomes an anecdote to tell my kids. So Quiggan hasn't really said anything here that doesn't apply to every medium of exchange (or good and service offered in the market). Pointless.
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phil:
06 Oct 2015 8:19:37am
I thought the reason for the gfc was financial institutions creating
wealth out of thin air, and you can bet its still going on .So whats the difference ?
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Jeremy:
06 Oct 2015 10:36:17am
That's incorrect. The problem was too much money lent to people (to buy houses) who couldn't pay it back and couldn't provide anything of the value of the loan. Ignore youtube videos. It was just the loss of loans that triggered the collapse.
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eric:
06 Oct 2015 8:20:34am
This article has so much one-sidedness I dont even have time to address all the inaccuracies you have thrown up all over this article.
Further you probably wouldn't even post it if I did, so why even waste my time.
Eric
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worrierqueen:
06 Oct 2015 10:03:32am
So why did you waste our time by telling the ABC to stop wasting yours?
My first reaction on reading the article is this can't be true, that the mining of bitcoins can't really use up large amounts of energy but indeed it does and is using a lot more now than 5 years ago as bitcoin is deliberately designed to be harder the more coins are mined (much like a seam of gold). This feature is to ensure that bitcoins don't reduce in value due to endless bitcoin creation.
So if indeed there are inaccuracies in Quiggans article, then perhaps you might take the time to explore one, rather than wasting your own time telling us nothing.
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Nick Santamaria:
06 Oct 2015 10:24:22am
"This feature is to ensure that bitcoins don't reduce in value due to endless bitcoin creation."
No, that feature is to ensure a steady rate of bitcoin production. There is a hard-coded limit of 21 million which can not be overridden.
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Richard:
06 Oct 2015 10:33:06am
Just like physical resource mining, there will eventually be a cost-benefit assessment made on the mining of bitcoins. When the cost of mining new coins exceeds the market value of the coins, mining will slow or cease, and trade will only be conducted in previously mined coins.
And there is no such thing as "endless bitcoin creation". There are a finite number of bitcoins.
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Sam:
06 Oct 2015 8:36:27am
Professor,
Whilst your lack of tangible and comprehensive research is clear, your point is not. Cryptocurrency's proof-of-work removes the ability for governments and other financial institutions to print money. As a professor in this field, how can the benefits of that advantage alone have escaped your grasp?
If, as you say, your concerns are environmental, perhaps you should have considered crytocurrency in relation to its nearest rival, our current economic system. What effect does mining fossil fuels have on the environment? conveniently, you must have forgot that part at the time of writing.
Cryptocurrency's represent a tangible shift of power away from financial institutions that have led us to the greatest economic disparity the world has seen. As such, fear mongering of change, based on unresearched environmental claims is not needed, waranted, or productive in the consideration of alternative currencies.
Kindly,
Sam
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worrierqueen:
06 Oct 2015 10:06:09am
So Sam are you saying that if we replaced the Mint, federal reserve, US treasury etc with bitcoin we would no longer need to mine in the real world? Even its greatest enthusiasts must find that a bit of a stretch.
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James:
06 Oct 2015 8:44:43am
"all viable currencies are underpinned by the fact that the currency has a use outside its role as a medium of exchange". The Sumerians had clay tokens. Their use other than a medium of exchange was... what exactly? I'm afraid this statement falls in a heap with the oldest known currency in history, which unravels the rest of your argument.
Bitcoin is a delusion? The same statement can be said about all currency. It's a delusion. What's the value of my AUD in my bank account? Well, if the servers go down and don't come back up, the value is nothing. Money is a purely imaginary concept invented by humans, with no basis in objective reality. Even precious metals like gold and silver - yes they're shiny and they have other uses. But you can't use a gold COIN for those things. Their value as a currency, is a human delusion.
The value of bitcoins is what people are prepared to pay for them. Currently that's only slightly above their production cost as you might expect. Once the space has been exhausted, you might expect their value to increase, as with the most basic economic law of supply and demand. In the mean time, while the difficulty of generating new coins keeps going up, so does the available compute power per watt applicable to it, so the price may fluctuate.
The mechanism for a collapse of the value of bitcoins is not suggested in this article, let alone well established.
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Jakob:
06 Oct 2015 8:49:57am
This sounds like an article written by a banker who has a vested interest in getting rid of BitCoin, which is effectively a competing bank.
Australian banks have started closing all bank accounts that have anything to do with a BitCoin business. But overseas BitCoin is treated variously.
Since all money is a virtual concept, it's not impossible that a world currency originates from the concept, or reality, of BitCoin.
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Nathan:
06 Oct 2015 8:50:04am
Bitcoin generation has the same goal as other currency - to make it difficult to make your own (counterfeit) money. Where it differs is the practical cap on generation (although such a cap also applies to many other forms of money, such as scarcity of precious metals).
"Even more striking, this same design feature ensures that Bitcoin cannot, in the end, provide a stable store of value."
This is the design intent. Supply of bitcoins are limited to 21 million - value can fluctuate freely.
"In essence, the creation of a new Bitcoin requires the performance of a complex calculation that has no value except to show that it has been done. The crucial feature, as is common in cryptography, is that the calculation in question is very difficult to perform, but, once done, is easy to verify."
As you suggest, this applies to all cryptography. You could extend your argument against all forms of encryption as in many cases your argument of 'no value' is equally justifiable.
"In the early days of Bitcoin, the computations in question could be performed on ordinary personal computers. Nowadays, however, 'miners' use special purpose machines optimised for the particular algorithms used by Bitcoin."
And what is glossed over here is that the special purpose machines are much more power efficient.
"By contrast, all viable currencies are underpinned by the fact that the currency has a use outside its role as a medium of exchange. This is obvious in the case of metallic currencies such as gold and silver coins, and of paper currencies that are convertible into gold."
I fail to see any obvious use for physical currencies. Perhaps you can use coins as a paper wieght? You suggest that exchanging for gold is useful however:
A: Isn't that just 'its role as a medium of exchange'?
B: Why is gold useful? It's value is largely based around it's use as a medium of exchange.
"Ultimately, however, all currencies without an external source of value must share the fate of the Confederate dollar and similar former currencies, becoming, at best, collectors' items."
And this is exactly what bitcoin hopes to avoid. The US dollar (as you suggest) is tied to the US government. Bitcoin is not. There is a strong case that bitcoin could outlive any traditional fiat currency.
You have ommitted that bitcoin generation is limited, and rewards regularly drop. This practise is self limiting and as more coins are mined the value in mining more will be removed and the mining will stop (or stop at the hard limit of 21 million coins.
I'm dissapointed because the main point that bitcoin has cause (and continues to cause) environment damage is correct, but the arguement presented here comes accross as misrepresenting what bitcoin is.
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Peter S.:
06 Oct 2015 10:21:52am
Thanks. Good analysis.
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owen:
06 Oct 2015 9:04:56am
are the ABC editors INSANE? how can this be considered for publication? it's an advertisement for the banks and current (not working) system ... full of arguments that are full of holes.
"Vast amounts of electricity go into feeding the Bitcoin delusion. Fortunately, it's unlikely that the digital currency will survive long enough to generate the environmental disaster that would arise if it became a major part of the financial system
The digital currency Bitcoin has been seen by many as a source of threats, as potentially facilitating terrorism, money laundering, and drug dealing; undermining taxation systems; and rendering monetary policy unworkable."
come on, my 11 year old daughter can mount a more convincing and rational argument than that ... environmental disaster due to Bitcoin .... you are wasted talent John - you should be doing stand-up comedy.
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Gordon:
06 Oct 2015 9:51:57am
How are banks "not working" exactly? Other than charging too much interest and paying too little they seem to be functioning fine. I'm not entirely sure how i would approach Bitcoin for a loan of working capital to run my business.
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Tropicalcat:
06 Oct 2015 10:13:13am
I'm with Gordon. Bitcoin is a solution looking for a problem that doesn't exist. But hey then again I don't want to buy guns or drugs on the black market either though....
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Chris:
06 Oct 2015 9:10:56am
A very interesting article. I'm not sure what the reasons for some earlier criticisms, these likely have no basis in monetary economics. While I'd heard of 'mining' Bitcoins I wasn't that familiar with how they worked. So I found this article very illuminating. I engage in volunteer distributed computing projects like BOINC and Folding@Home which use a decent amount of energy, but at least produce a useful outcome in terms of extending existing knowledge. Bitcoin, on the other hand, seems redundant, not to mention, disastrous for the environment.
Further, Bitcoin is sowing the seeds of its own destruction with people creating money, reducing their purchasing power. Ultimately, the usefulness of a currency as a medium of exchange relies on other people's willingness to accept it. Hopefully though, for the sake of the environment, this collective delusion ends soon.
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Nathan:
06 Oct 2015 9:37:26am
"So I found this article very illuminating."
Unfortunately I have to suggest you do some research elsewhere.
"Bitcoin, on the other hand, seems redundant, not to mention, disastrous for the environment."
It is equally as redundant as encrypting your internet banking and purchases.
"Further, Bitcoin is sowing the seeds of its own destruction with people creating money, reducing their purchasing power. "
This is incorrect, the article fails to adequately describe this aspect of bitcoins (specifically the supply limit).
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deluded_jim:
06 Oct 2015 10:35:07am
"Further, Bitcoin is sowing the seeds of its own destruction with people creating money, reducing their purchasing power. "
This comment from the article is fundamentally flawed in economics. Your purchasing power is only diminished if the supply of new coins outstrips demand. As Nathan says, there is also a supply limit which is inherent in the bitcoin equation, so, that being the case, given there is a finite number of bitcoins, isn't there more of a risk of the price sky rocketing, than them becoming redundant?
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Gordon:
06 Oct 2015 9:31:15am
Trusting financial transactions to some unfathomable process run by unknown people because "corporations" (i.e. unknown persons with unfathomable processes) are running the regular system. Please.
It makes perfect sense as a money laundering system, which is why ransomware and online drug dealers use it. Marvellous.
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Nathan:
06 Oct 2015 9:57:30am
"Trusting financial transactions to some unfathomable process run by unknown people because "corporations" (i.e. unknown persons with unfathomable processes) are running the regular system. Please. "
This comment shows a complete lack of understanding. The entire design of bitcoin is to remove control from any person or group of people. It is a completely fathomable process that is publically defined. It is a really interesting idea, I suggest you look into it before spreading your uninformed views.
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Boonie:
06 Oct 2015 9:45:54am
If the problem is too many carbon emissions from coal-fired power plants, then isn't the solution to shut down the coal plants and replace them with a carbon neutral alternative like solar, wind or nuclear?
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Mena Reno:
06 Oct 2015 9:48:14am
Professor John appears not to know what he's writing about. Fiat currency also has no value in an age when nations have no compunction in printing more money to shore up sluggish economies. Rule number one in economics is the law of supply and demand - the more currency there is in circulation, the less each unit is worth (inflation), which means all currency under central bank control is ultimately worthless. 'Value for money' only really makes sense in the present tense. As long as the central banks control the money supply, currency is just a goverment's promise to pay. And we all know what government promises are worth.
The cost of energy required to produce anything is now highly political, which means it is also being centrally manipulated. This pretty much makes the point of this OP moot. Rejecting a non-fiat currency like Bitcoin on the basis that it is environmentally unsustainabile is clearly a red herring. The writer would of course know this. The question is, why is the good professor trying to obfuscate?
It's easier to understand why the establishment fears Bitcoin and others like it (don't forget the others, when one looks at the basis of their expertise and reputations. The foundations of established economics expertise are built on the concept of 'national' wealth - e.g. Adam Smith's 'Wealth of Nations'. These foundations more or less crumble if a trading currency is independent of national collateral. If these free market, non-fiat currencies succeed, much of the exonomics of nationhood will become irrelevant, and the concept of 'nationhood' and its accompanying taxation rights will have to change. Political and geographical borders will have no economic basis any more. No wonder it frightens the establishment. In a perishing world, nationhood is the principal defence against global tyranny.
The smart money is on Bitcoin and the others over the long term. The danger is not in the energy cost of production but in the social and political cost of decoupling taxation from trade. It's enough to spook even the most committed puppet-statist.
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Bruc3:
06 Oct 2015 9:48:27am
"By contrast, all viable currencies are underpinned by the fact that the currency has a use outside its role as a medium of exchange. This is obvious in the case of metallic currencies such as gold and silver coins, and of paper currencies that are convertible into gold."
This is not so obvious. Gold and silver only have value because they have limited supply and are popularly perceived as valuable. Are not Bitcoin just the new gold and silver?
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Lachan:
06 Oct 2015 9:49:06am
This article is a joke, 0 research was done. In the introduction of 'Bitcoin: A Peer-to-Peer Electronic Cash System' by Satoshi Nakamoto (guy who created bitcoin), the rationale for bitcoin is stated as 'an electronic payment system based on cryptographic proof instead of trust,
allowing any two willing parties to transact directly with each other without the need for a trusted
third party.' > the idea is to reduce transaction costs by removing the need for a third party - a bank/ financial institution. The author does not address the fact that banks/ financial institutions use so many resources, - bitcoin cuts this third party out.
He does not see the benefits to bitcoin - a programmable currency that has unlimited potential, if you have listened to Andreas Antonopoulos, or anyone with a working knowledge talk about the possibilities eg. programming contracts, escrow related services, you would not view bitcoin like this author you would view it as a new technology.
In summation this article reads like it was created by a high school student who has heard a few things about bitcoin, it is ridiculous that the title of professor is next to the authors name because there is nothing scholarly about this article.
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Con:
06 Oct 2015 10:10:46am
Your lack of knowledge about Bitcoin is as terrible as your lack of foresight. Please refrain from writing opinion pieces about topics you have not taken the time to qualify yourself to provide an opinion about.
You'd hope a professor would possess more intellectual rigour.
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Tropicalcat:
06 Oct 2015 10:11:07am
I kept reading expecting to see a punchline that never came. This article has to be a new low for the ABC. Surely someone with some standards should have seen it before publication and cringed and hit the delete key.
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Craig of North Brisbane:
06 Oct 2015 10:16:21am
Heh, really enjoying the bitcoin nuts harping on about fiat currency here. Quiggin is correct; the production of new Bitcoins is an environmental disaster, but as the currency has no long term future it's not likely to be a lasting problem.
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Spinebill:
06 Oct 2015 10:18:40am
Mr Quiggin is way off the mark.
The Blockchain and it's token the bitcoin is coming, it's unstoppable. What Mr Quiggin's piece is about is that the financial institutions have recognized its importance as a technology, a killer app, and the banks etc, are desperate to maintain their social and financial relevance and therefore their profitability.
The Blockchain is a Community project, to provide the Market with services that the Market currently doesn't supply. It's relatively 'distributed' and to continue to make a motza of profit the financial sector need to centralize the technology. They may succeed, but it's more likely they won't, as their centralized principle will have a very expensive time to match the hashing power of the distributed bitcoin network. Give your hashing power to the bitcoin Blockchain, screw the banks.
To learn bitcoin and the Blockchain is a useful personal literacy project. It's a kindergarten for learning about encryption and privacy, both skills everyone will need to navigate with over the next decade and onwards.
The Blockchain and it's emerging 'ecology' of technologies will replace more than just the "credit " card.
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Deep:
06 Oct 2015 10:19:01am
Perhaps the coin's limited supply will be its strength and so worth the initial cost of electricity.
Preventing its manipulation and resulting inflationary tendencies may well be a value with the knowledge that it can't be manipulated and rob people of value via the money printing fractional banking system.
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Jimmy:
06 Oct 2015 10:19:09am
I absolutely agree with every single point brought up in this article. When I first heard of the existence of Bitcoin in 2012, I remember trying to think of one single way that such a "currency" could be of any value to humanity in any way. I'm still yet to come up with or be convinced of a single way.
It's a shame that there are so many jokers out there who would prefer to increase their own material wealth by burning precious energy, wasting huge quantities of semi-conducting devices that cold be used for serious computing (i.e servers for websites) and occupying warehouses that could be used for actual storage of goods.
I frankly don't care how much Bitcoin "protects freedom of speech", if you don't feel comfortable with having an online transaction being able to be tracked back to you by the police, perhaps you should reconsider said purchase.
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notathome:
06 Oct 2015 10:24:14am
Yes it can be expensive to mine, so you don't, but regardless it's a tiny fraction of the energy used to manage even our currency let alone every currency in the world. How much energy is used by say Armagaurd to physically transport cash every day? By bank tellers just going to and from work? By all the ATM's and bank servers? Actually printing our currency?
I don't like that it uses so much energy but that's simply the nature of the beast and is essential to it being secure.
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Robert:
06 Oct 2015 10:26:45am
This article is a waist of time - literally!
To state my biases - I think bitcoin is a complete waste of time and would never be bothered with it.
I did whoever do some research before coming to this conclusion and have a sound knowledge of what a bitcoin is and the system that it works within.
This article is so full of biases, untruths and misconceptions that it would be easier to write a complete factual article from scratch than it would be to correct the error in this one.
If you want to know the truth about bitcoins then do a google (nothing is hidden and there are no secrets), don't waste your time with this cr*p.
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Living Room of Satoshi:
06 Oct 2015 10:29:22am
I commend you on your effort so far to understand the bitcoin payment network, it seems you have done some research into it.
I think what you are missing though, is that the energy used by the bitcoin network is not 'wasted' or 'useless'. The energy consumed is the very thing that gives bitcoin security as a currency.
Think about Australian paper currency. The government could save a lot of energy by writing '$100' in biro on a few packs of reflex from officeworks. But the resulting currency would have no security... it could easily be forged.
No, they spend a vast amount of energy and money producing (and replacing) paper currency, the machines that produce them, the buildings that house them the staff that run them etc.
The energy that the bitcoin network consumes enables the creation of something truly worthwhile: a global payment network far more accessible than any individual nation's currency or payment system. It is one that is not restricted to a few banking institutions, but allows anybody on earth with an internet connection to access it.
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deluded_jim:
06 Oct 2015 10:30:55am
A really interesting piece John. I can't help but wonder though as at least one person pointed out, what about the coins that have already been mined? I mean, I can see that the supply of new coins would be relative to the cost of mining them and also their demand, but wouldn't it be true that so long as the cost of mining the coins < what people are willing to trade for them, they would still be produced? Also, once the cost of mining them is more than what they are worth, I understand no new ones will be produced, but wouldn't the older coins still hold some value as a unit of trade, to be dictated by the market pricing?
I'm confused as to why coins already mined would get a zero pricing. That would imply they are worthless - I'd suggest they wouldn't be worthless while people are willing to trade them.
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mick white:
06 Oct 2015 10:35:15am
Thanks John for an interesting article.
I think the fact that costly calculations of no use to anyone, are used in creating bitcoins, may be a bit of a red herring.
Is bitcoin any stranger than people accepting the current economic system?
I have often thought that accountants would get better results handing out monopoly money (i.e. tokens) for people to spend, instead of having multimillion dollar computer systems (costly, and perhaps of little use) to track how money is being spent.
Richard Mullins
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You what now:
06 Oct 2015 10:36:30am
How long until this news 'article' is pulled? This is just mud slinging at its best/worst: fears around money laundering, drugs, weapons are largely unfounded. If only cash were as traceable as Bitcoin, there would be a lot less illegal activity. Every Bitcoin can be traced; transaction by transaction, back to its discovery, it's called a blockchain. This is what makes it secure and does away with a single 3rd party approver. There will always be people who want to use tools for illegal activities, they may try to hide / randomise their identity in the blockchain.
The other major flaw with this article is it implies that the mining of Bitcoin will go on forever, and ignores all the environmental costs we currently accept in our stride. How much electricity does the current system consume? Once a Bitcoin is mined, that Bitcoin will only ever consume energy if it's traded. I'd put a Bitcoin or two on the current system being far worse energy consumption wise. I'd also challenge the author to declare they have no conflict of interest in this article... All I've heard recently is banks closing ranks around the Bitcoin issue, and now this.
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