[kenneth]

As an engineer, it saddens me to see the huge inefficiencies inherent to cryptocurrency mining these days. Surely, when we're spending in the billions on wasteful hashing, we could dedicate a small fraction of that to engineering better consensus algorithms.

Unfortunately, we have an ecosystem where everyone is incentivized to ignore the problem because they're too invested in maintaining the price of Bitcoin and other PoW cryptocurrencies. They often don't pay for the externalities — environmental costs. The specialization of mining also severely hurts the distributed and decentralized nature of these crypto-currencies.

I'm a huge fan of crypto-networks, and have made a career in the space. But, I want Bitcoin to die off and leave room for newer generation technology.

[vernon99]

This is a one-sided comment. There’s a lot of research going into different variations of proof-of-stake. 4 out of 10 largest crypto (by market cap) are PoS. There’s a lot of work Ethereum community (Casper), Cardano folks, Tendermint etc are doing to create better consensus models.

[nosuchthing]

Proof-of-Stake statistically equates to "Give the rich more money".

Consider Ethereum's stats (and other similar PoS minting methods):

  Presale ICO / Premine ( max cost $0.50 USD per ETH  )
  = 72,009,990 ETH
  
  Total Supply today (Feb 23rd 2018)
   = 97,800,000 ETH

  Source:
  https://etherscan.io/stat/supply

Now imagine a financial system where all the wealthy have to do simply own money (spawned from software or premine) to get more money. Or where voting is done by merely by controlling a large sum of money/tokens.

[adadad3442]

>Now imagine a financial system where all the wealthy have to do simply own money... to get more money.

You mean the current system?

[nosuchthing]

PoS is literally get paid for doing nothing but owning lottery tickets.

Normal capital flow with bonds, stocks, etc allow a legally binding agreement for mutually beneficial transfer of capital between parties.

[Anderkent]

Well, they get paid for putting that capital at risk and for keeping it locked into the system to provide consensus. It's a kind of a service.

[nosuchthing]

Except only the top few largest "stakers" are paid, others are either disqualified entirely for being too poor to stake, or will not recieve block rewards for being statistically irrelevant.

PoS is a lottery with reusable tickets. Winners get more tickets.

[jacobr]

With PoW you use your money to buy mining equipment and you will get more money, and voting power. With PoS you buy more of the currency with that money instead.

[s73v3r_]

Right, but the rest of us also have to suffer due to the economic repercussions (or being unable to get an affordable graphics card without waiting forever)

[aianus]

Just pay more for the card and you can have one whenever you want. Isn't that what HN thinks employers should "just" do with tech talent because "there is no real shortage"?

[econ_th0]

the economist would say...

"affordable" is a opinion.

the market price is the market price, if you want one you have to pay more.

you are not entitled to a good at the price you think is "fair"

[wyldfire]

Nano uses dPOS and does not mint any new coins with PoS nor does not charge any tx fees. Instead of "Give the rich more money" it's more like "preserve the value of my money by fulfilling the promise of this coin".

[nosuchthing]

Nano (aka Raiblocks) is basically a scam.

How was the supply produced and distrubited? https://raiblocks.net/page/frontiers.php?limit=100

Nano/Raiblocks were created from software, a reproducable distributed database protocol. Except in the case of Nano, the vast majority of the tokens are in control of the owners with a few being given away to the public for clicking captchas.

https://www.youtube.com/results?search_query=raiblock+captch...

Consider, anytime you buy a cryptocurrency it means someone else is trying to cash out...

[wyldfire]

I don't agree, but I do think it's very wise to be suspicious of coins and their distribution mechanism.

[seanwilson]

> Except in the case of Nano, the vast majority of the tokens are in control of the owners

Do you have evidence of this?

[doots]

What evidence is there 90% of Nano distribution isn't owned by a single person?

This is a major aspect of transparency in decenteralized p2p protocols, and the issue with Nano is there's no paper trail or proof that the devs didn't take all the supply.

We do know 13% of all Nano in circulation was stolen in the Bitgrail hack.

[GhostVII]

Proof of work is the same, except instead of rich people buying more Etherium to get rich faster, they buy more mining hardware.

[nosuchthing]

Not entirely, PoS disqualifies poor accounts from receiving newly minted block rewards.

[trophycase]

This is basically how it is now. There is a non-zero risk to staking as well as the stock market/bonds

[CodeCube]

I'm having a hard time understanding the risk to staking ... is it just an opportunity cost risk ?

[bcohn91]

Yes, combined with the risk that the currency could go down in terms of the currency you care about.

[CodeCube]

Can you retract those funds at any time?

[zodiac]

What's your proposal for a more egalitarian reward model for block producers (in any consensus model)?

[curyous]

Proof of work, it requires continual investment if you want to get the rewards, not just sitting there watching the cash roll in.

[aoeusnth1]

How is that more egalitarian? It's still a conversion between capital and income.

It's like saying stocks that give dividends are more "egalitarian" because you have to reinvest them in order to gain the same return on investment.

Absurd.

[nosuchthing]

Equal payment for the same work/processing power.

[zodiac]

What does that concretely mean?

[bitL]

PoS is not going to be very popular as it removes the literal "money out of thin air" that was happening with GPUs in the past few years (coming to end in medium term). PoS strongly favors already well capitalized owners, instead of allowing new ones.

[twiceaday]

Doesn't PoS generate money out of thin air? It's just a matter of putting your dollars into stake vs hardware and electricity.

[nosuchthing]

Only for the largest account holders, whom statistically will receive most of the newly generated money (and even more as they continue to accumulate newly printed PoS tokens).

[twiceaday]

PoW distributes block rewards proportionally to hash power and these proceeds can be used to buy more hash power to achieve a compounding effect. From what I understand all of the viable PoS systems offer a fixed rate of return on the stake. This is like PoW forcing everybody to use the exact same hardware; a benefit to the little guy at the expense of the large account holders.

[aoeusnth1]

I'm confused - what's your objection? Should capital put into PoS not provide a constant reward?

Or are you under the impression that larger pools of capital provide disproportionate rewards?

[JustAnotherPat]

5% a year. You're better off keeping it on an exchange in case of a pump.

[coralreef]

What's this 5% figure from?

[ktta]

Casper atleast says it is going to be a linear return model, without the asymmetrical return you get with large scale efficiencies.

[tlrobinson]

Transitioning from PoW to PoS seems like a possible solution. Or shortcut the PoW phase by seeding your coin with snapshots of one or more existing coins that had a “fair” distribution phase.

[mrb]

The ugly truth is that proof-of-stake systems, at least current ones, give up decentralization properties. Users with the most funds (stakes) can effectively validate and rewrite the blockchain. Or in the case of a network split, the 2 chains can no longer be merged (because they implement "safety" mechanism such as preventing nodes from rewriting more than X blocks.)

[undersuit]

I'm more concerned that it takes something "wasteful" like mining to make people wake up. What about DRM techniques like HDCP? Even with hardware acceleration we've been wasting power for at least a decade to encrypt every single video stream so that we can stop piracy. Piracy still exists. Mining most definitely uses more power than video encryption but only one of them has really produced anything of value.

[nradov]

Can you quantify the energy wasted on HDCP? My understanding is that it's typically handled by efficient custom circuits.

[undersuit]

Efficient? Maybe, you can still have inefficient hardware. The hardware dedicated to HDCP encryption is single purpose, just like a Bitcoin miner. I'd expect the Bitcoin hardware is far more tuned for efficiency than most hardware HDCP circuits since power usage is the major cost of owning a miner in the longterm.

I'm not aware of any actual metrics and like I originally said I'm pretty sure bitcoin mining still uses more energy.

[umanwizard]

What of value has bitcoin mining (or for that matter, anything relating to bitcoin) produced?

DRM makes it harder to pirate, which is something of value in my opinion.

[wz1000]

If bitcoin has zero value, DRM has negative value.

DRM doesn't make it harder to pirate. DRM makes it infinitely more attractive to pirate.

[aianus]

Bitcoin (well, its descendants now) makes my international money transfers dirt cheap while DRM prevents me from using media that I paid for on my favorite devices.

[undersuit]

I think it's highly disingenuous to feign that bitcoin has no value.

[goldenkey]

The encryption doubles as compression. Its not wasting power..

[undersuit]

No, the HDMI and HDCP specs support encryption and compression on video streams. Encryption is not compression.

[goldenkey]

Actually, most encryption includes compression. Google it.

[Nursie]

No, it doesn't. If anything, with the use of padding schemes, IVs and MACs, most encryption schemes make the data grow a little.

[undersuit]

I don't mean to be snippy, but could you instead just give me proof of your claims?

[snitko]

Have a sense of proportion. Think about how much electricity, paper, waste and money is spent to keep up the banking industry, anti-fraud departments, AML/KYC compliance teams, clerks and all that show. Bitcoin is actually an improvement.

[wmf]

It's funny you mention anti-fraud departments and AML/KYC compliance teams since Bitcoin does not provide those and thus their cost exists in addition to the cost of mining.

[umanwizard]

But Bitcoin doesn’t provide the services that the banking industry does. Bitcoin is more comparable to physical gold than to a modern bank account. Banking was built on top of gold (and later fiat) because it provides valuable services. If bitcoin becomes a widely-used currency then the same banking system will be built on top of Bitcoin.

[drngdds]

I feel like preventing fraud and money laundering (incidentally, two things you can't prevent when using cryptocurrency) is actually not wasteful

[Nursie]

Nope, Bitcoin is much worse than that.

[wyager]

> we could dedicate a small fraction of that to engineering better consensus algorithms.

I wish people would dedicate a few minutes to reading about theoretical limits on consensus mechanisms.

[umanwizard]

Got any links?

[bogomipz]

>" we could dedicate a small fraction of that to engineering better consensus algorithms."

Can you elaborate on what the shortcomings of the current consensus algorithms are?

[nosuchthing]

Immense waste, and lack of egalitarianism.

Proof-of-Work consensus algorithms (so far) work by wasting more and more energy.

  Max efficiency peaks in the network with a very basic CPU 
  PoW algorithm merely sets a lottery number granting write access for a single computer
  Every additional increase in processing power reduces efficiency by increasing the size of the number to be guessed 

All PoW does is increase the capital cost for any user who joins after x-amount of time has passed.

[DaiPlusPlus]

I like that analogy: “setting a lottery number” - that feels more accurate than the typical way the lay media explains mining, usually a variation of “solving lots of puzzles”.

“Puzzle” implies some cognition is required to come to a solution - not that effort is being wasted by brute-forcing something.

[bogomipz]

Thanks for elaborating, these are interesting points and observations.

I am curious are there any proposals floating about for achieving greater efficiency or more egalitarianism?

It seems like a great area of research.

Might you or someone else have any resources you could share if this is an active area of research? Cheers.

[nosuchthing]

It's a problem in the realm of distributed computing.

PoW attempts to create a mechanism to verify accuracy of transactions in the database among a group of users who would want to cheat, suppress, or manipulate the records.

So PoW uses the lottery to create a competition among all users for high computational power (capital sacrifice), but unfortunately the computational "work" is nothing more than a random number generator.

Ideally, the computational work used in PoW would not be worthless random numbers but could instead be computations that provide value to scientific research. Distributing computing projects like Berkeley Open Infrastructure for Network Computing (BOINC), Folding@Home, and Seti@Home, are all very similar distributed computing projects that predate Bitcoin.

The main problem is PoW for transactional verification needs to be a problem that's hard to known in advance, yet very easy to verify once known, and there must be a consistency to the solving of transactions. This can be done with a centralized validator, but presumably the ideal solution would need to be distributed/decentralized as was the point of Satoshi's p2p cash system.

The problem is it's very hard to have consistency of successful problems solved when you have complex useful computational problems being solved, whereas PoW simply asks "guess a number, now guess a higher number if the network hashrate is faster".

If anyone solved a method to process useful valuable computational work, instead of random numbers, and applied it algorithmically into a PoW transactional protocol - this would be a holy grail solution as it wouldn't be considered a race to the bottom of inefficient computational waste.

Golem seems to be attempting a distributed computational work for digital tokens model, but I have doubts their design will be genuine, effective, or sustainable.

See also: https://medium.com/@hallam/proof-of-work-is-the-worst-way-to...

[bogomipz]

Thanks for the comprehensive response. It does seem like there should be a way to accomplish something more meaningful for society as part of PoW. That link was an interesting read, I was unfamiliar with "Notary digest chains." I have now some new reading. Cheers.

[VMG]

It's only wasted if there was a cheaper alternative. There isn't.

[trixie_]

If all the power eventually comes from renewables. Is it still wasteful?

[curyous]

Bitcoin mining seems inefficient now, but when the network is carrying 100x more or 10,000x more transactions, won't it be extremely efficient? (On a per-transaction basis)

[proofofmoon]

O(n) total world energy expenditure on Bitcoin scales to O(1) transactions, so it currently only gets worse as more energy is poured into the system for the same transaction output.

There's a few solutions proposed:

- off-chain transactions (Lightning Network) - unknown complexity

- increased block size (Bitcoin Cash) - O(n) -> some larger O(1)

- a different consensus system (proof of stake blockchain, distributed proof of stake blockchain, Tangle, etc.) - varies

It's possible that the Bitcoin ecosystem will adopt one of these solutions in the future, but there doesn't appear to be a silver bullet right now.

[curuinor]

There have now been about a half-dozen various suggestions to get the network to carry more transactions, all of which are mostly failures, except for Lightning Network, which is now in the process of becoming a failure.

[atomical]

Lightning is DOA. Who has ever heard of opening a payment channel to buy a cup of coffee?

[Taniwha]

happens every time I wave my credit card in front of a payment terminal

[atomical]

How much money did you put in escrow last time?

[sradu]

Which projects would you consider as a potential replacement for Bitcoin?

[zallarak]

http://za1.co/2018/02/10/proof-of-work.html

[kerng]

I have been wondering if an algorithm of Proof of Spending could somehow be in the mix. People should be rewarded for spending their money to enable a healthy economy. Of course something like this couldn't be the main part of an algorithm, but maybe somehow be considered. Not sure if there has been any research in that area.

[umanwizard]

What's to stop you from just sending the same money back and forth between addresses you control?

[doots]

NEM implements an algo like Googles anti SEO / anti sybil

it's closed source though

[hiccuphippo]

I wonder what happened to primecoin. Could Bitcoin switch to such a PoW in the future?

[undersuit]

Switch, no. The ASIC miners would never vote for something that would destroy half of their investment. A fork could totally happen. That's what Bitcoin Gold did by forking the blockchain to using the Equihash algorithm.

[shepardrtc]

Ripple, one of the top three cryptocurrencies uses a consensus algorithm. There are some others, further down the rankings, too.

[JustAnotherPat]

95% of people wouldn't be interested in crypto if it didn't make them money. You're asking people to give up the money to improve the system for what? So they can't make as money?

Crypto isn't charity. If you want better tech, you have to prove why it is worth it.

[testdeep]

Then shill your friends about Nano. Free Instant Transfers. No mining.

[noddy1]

This 4 billion dollars and all the money wasting on power and ASIC chips is a direct tax on the bitcoin ecosystem. This is the incentive you and your currency/consensus model have to beat bitcoin. In addition to the engineering problem, the number of people worldwide who prioritize environmental preservation mean that a currency that can preserve or even improve the environment are going to be preferred. What if we changed proof of work to be proof of not-cutting-down rainforests? 100 secure micro-satellites circle the globe taking pictures of areas prone to deforestation and distribute currency based on the areas not being logged?

[cocktailpeanuts]

This means you're an "engineer" but not yet an economist.

Try to study economics if you're really serious about your career in cryptocurrency area, you'll find yourself thinking completely differently. At least you'll get to a point where you don't make a wholesale criticism like this but can say "I know it would be better to have a tech that consumes less energy, but I also understand why it's not a trivial issue, because physics and economics."

One of the biggest fallacies in the history of economics that repeats itself over and over and over again is that people make decisions based on what they can see but they neglect what they can't see that happens as a result of what they can see.

As much as I would like to see PoS work, it may just be the case is that at the end of the day, PoS and PoW are the same in the grand scheme of things, not because of some greedy people with financial interest but because of physics. It's hard to make sense of this unless you study economics, no matter how great of an engineer you are.

[Edit] I hope my comment works as a wakeup call for those of you who are open minded enough to learn a piece of the puzzle that's obviously missing from your mindset (I shared it because once I learned it, I was so regretful for not having studied even a little bit of economics in my life until now), but looking at all the downvotes, looks like most people don't like to hear what they don't like to hear. I don't really mind, suit yourself. But just remember "Cryptocurrency" is "Crypto" + "Currency", which means it's not just CS, but also economics.

[mrep]

As I am reading your comments more, it seems like you just don't understand this trifecta of software engineering, security, and economics. All blockchains that run code on untrusted nodes have the extremely difficult problem of securely verifying other nodes transactions which usually devolve into solutions that solve O(constant) problems on O(N) nodes with N/2 majority consensus governing the network. That is literally the worst solution you can come up with in computer science because it does not scale whatsoever.

Contrast this with running code on nodes you trust which scales linearly and you should be able to see why everyone says blockchains are a solution in search of a problem.

> "I know it would be better to have a tech that consumes less energy, but I also understand why it's not a trivial issue, because physics and economics."

So thus I ask, what "physics and economic" problems do blockchains solve better than current solutions bar illegal markets?

[cocktailpeanuts]

What if I told you I already understand everything you just said?

I think I answered your last question elsewhere in this thread, if you're genuinely curious, read that one.

[slewis]

What do you mean “the same in the grand scheme of things”? By what metric?

[cocktailpeanuts]

Newton's 3rd law:

Proof of Work and Proof of Stake both waste tons of energy, and of course, the entire economic system both of them are trying to replace also waste tons of energy.

The problem is, Proof of Work is very objective and measurable, which is why most people criticize Bitcoin for its waste of energy since it's so easy to measure.

But proof of stake and the legacy economic system both lack such objective measures, which is why it's hard to compare them. The term "stake" itself is subjective and doesn't take into account the economic ripple effect it can trigger as a result.

And these ripple effects DO exist, it's just that most people are not aware of them and just take for granted. Which is why I think it's crucial that you study the history of money before you can confidently say you understand "how money works".

This is not to say proof of stake won't work. It's just saying that there's a high chance that there's hidden cost to proof of stake which in the long run can map to the amount of energy wasted by proof of stake, which is backed by newton's 3rd law. You can't create energy. Everything that happens on earth is simply a transfer of limited amount of energy from the sun.

If this sounds all woo-woo to you, that's why I suggest studying economics.

I personally think the only way to overcome energy consumption is to come up with innovation that's as different from newtonian physics to quantum physics.

[mrep]

> The problem is, Proof of Work is very objective and measurable, which is why most people criticize Bitcoin for its waste of energy since it's so easy to measure.

> But proof of stake and the legacy economic system both lack such objective measures, which is why it's hard to compare them.

Bitcoin is estimated to cost $2.5 Billion dollars per year [0] to validate about 77 million transactions per year.

Visa processed about 100 billion transactions in 2015 at the cost of 12 billion dollars (revenue - net income [1]).

That makes Visa 270 times more economically efficient for cost per transaction [2]. Also, I get many other benefits using Visa like fraud detection whereas bitcoins 1 way transactions make them extremely susceptible to hacks.

The economics seem pretty obvious to me.

[0]: https://digiconomist.net/bitcoin-energy-consumption

[1]: https://en.wikipedia.org/wiki/Visa_Inc

[2]: (100/12)/(.077/2.5)

[aianus]

Visa may well spend only $0.10 on a $1000 transaction but given that the total cost to me is $30 (either directly, in the case of a foreign ATM withdrawal, or indirectly through merchant fees), there are many use cases where crypto is currently more economical from the consumer's point of view.

If banks and payment processors were more competent (like maybe processing transactions on Sunday) and less greedy, crypto would be a lot more useless.

[mrep]

Most of those merchant fees are passed backed to the consumer through credit card incentive programs.

Granted, Visa still makes a nice 33% profit margin but they also offer tons of other benefits which cryptocurrencies provide none of.

[cocktailpeanuts]

There needs to be a HN bot that just copy and pastes the same old stuff to comments like mine so people don't have to waste energy doing it over and over again.

The fact that you're comparing Visa with Bitcoin is exactly my point: Humans make decisions based on the things they can immediately see and neglect things they can't see. That's what you're doing when you're comparing visa to bitcoin.

I can't really explain this in a single HN comment, which is why I recommended studying economics. If this was so easy that I could explain it in a page nobody would need to read books or take classes.

[mrep]

> The fact that you're comparing Visa with Bitcoin is exactly my point: Humans make decisions based on the things they can immediately see and neglect things they can't see. That's what you're doing when you're comparing visa to bitcoin.

Then can you explain the economic utility that bitcoin provides because it is more innificient way to store and exchange "value" than what banks provide?

> I can't really explain this in a single HN comment, which is why I recommended studying economics. If this was so easy that I could explain it in a page nobody would need to read books or take classes.

I have taken many econ classes and I have read dozens of econ textbooks. You are handwaving about "ripple effects" and that if I knew econ it would all make sense.

[goldenkey]

PoW requires brute force. PoS requires tied up capital. Do you really think the energy usage is the same...physically? Sounds like nonsense with no backing.

[cocktailpeanuts]

Where do you think "capital" comes from?

Also, I didn't say they ARE the same. It COULD be the same, or maybe PoS could come up with a tradeoff scheme that's just good enough to work but essentially conserves energy much more than PoW. But the thing about energy is when it is destroyed somewhere, it gets created elsewhere. That's how it simply works.

The most important fallacy in economics is that people can only observe what they can observe, not because they're idiots, but because it is spacially or temporally impossible. For example a huge global inflation can happen as a result of a very small stupid decision made by a government, but this may happen 10 years after the original decision.

This is why humans make bad decisions because they make decisions based on what is possible to observe, but historically these ALWAYS came back to haunt them. 100% of the time.

It MAY be the case that "this time it's different", but the more you study economics the more you become really humble. Trust me. Try it. Just need to read a couple of books.

[goldenkey]

"need to read a couple of books." No. Just no. You are wrong about energy. Power plants do not just burn a steady state amount of fuel. You are also wrong about capital if that is the "energy" you misnamed - capital is created all the time, not debt but actual prosperity through innovation. Please refrain from your "read a book to be like me" humdrum. I am a mathematician - I know enough economics to be quizzically annoyed by the falsities spoken

[aoeusnth1]

The capital comes out of thin air - it's created when ETH goes up in value, or destroyed when ETH goes down in value.

Also, unlike electricity, PoS has no negative externalities. PoW kills people with air pollution.