[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.

[cocktailpeanuts]

> 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?

Let me ask you back. Can you prove with 100% certainty that banks are more "efficient" than bitcoin? What does "efficient" even mean? Did you take into account all the jobs required to run the banks? Did you take into account all the energy these bank employees consume? Did you take into account all the side industries that arise around banking system? Did you take into account all the corruption that took place over and over and over throughout history that eventually took everything down to zero? This question is really meaningless when you consider all these factors.

People tend to arrogantly think that they understand the world when they don't. All they do is try their best to make sense of things, and even with these scientific theories, nothing is absolute. Note that I'm not calling YOU arrogant. I'm calling humans as a whole.

I am not saying PoW is better. I'm saying people who think PoS is absolutely better than PoW are leaving a lot of things out of the picture when they draw that conclusion. Nobody knows what's better or what's more efficient. Maybe banking IS more efficient, but maybe in the long term (as in 100 years) it may be more inefficient. (History shows that there's A LOT of invisible inefficiency in the banking system, manifested as economic depressions)

[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

[cocktailpeanuts]

suit yourself :)

[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.