[lowkey]

No moving of goalposts here. OP claimed that Bitcoin’s primary purpose was transactions. I countered that the primary purpose was network security not txs, though pointed out two transaction use cases where Bitcoin beats every other payment method or monetary system.

You compared Bitcoin’s energy use to nation states. I compared it with hair dryers and one nation’s military, while pointing out that the US military’s energy consumption was only a small portion of it’s fully loaded cost in terms of externalities (others being: death, destruction, fossil fuel usage greater than any other entity to ever exist)

Again, no moving of goalposts. Simply fair comparisons of different forms of money.

Bitcoin never claimed to replace all uses of USD or gold, but it does reduce the total external costs in many important ways while providing the world with a powerful new alternative that is peer to peer, can be self-custodied, and has a fixed low inflation rate from now to infinity making it harder money than any that has ever existed.

[danShumway]

> Bitcoin never claimed to replace all uses of USD or gold

If Bitcoin is not going to replace USD or get rid of the externalities of USD, then it is a waste of time to argue that Bitcoin is more efficient because it doesn't have those externalities. You are propping up a currency that is less efficient than gold and USD in terms of energy usage, and does next to nothing to prevent the negative externalities of those systems.

> but it does reduce the total external costs in many important ways while providing the world with a powerful new alternative

Bitcoin in its current form is not an alternative to USD, it is at best a system that complements USD, and I see no evidence at all that the existence of Bitcoin has reduced military presence anywhere in the world. You don't get to act like Bitcoin can subtract the negative externalities of USD from its environmental ledger when it is not currently reducing those externalities.

> peer to peer, can be self-custodies, and has a fixed low inflation rate from now to infinity making it harder money than any that has ever existed.

I'm not going to get into it, but I disagree that Bitcoin is P2P in the way that most people actually care about P2P; Bitcoin relies on a mostly functioning Internet, there is no way to securely make payments on the blockchain without eventually connecting back to the rest of the network and reaching network consensus. This is in contrast to what people usually think of when they talk about P2P networks, where information often does not need to propagate to the rest of the network at all. The most exciting work in P2P networks are in areas where constant consensus isn't required at all.

I also think the inflation claim is ridiculous given that Bitcoin's price fluctuates wildly. And the inflation is not "to infinity", Bitcoin is set to eventually run out of coins on purpose. The inflation is set to eventually reduce to zero. Bitcoin is a deflationary asset, not an inflationary asset. This is actually one of the things that turns out to be bad for Bitcoin as a currency, Bitcoin has been a good demonstration in a lot of ways as to why a deflationary asset is inherently not particularly well suited for transactions.

And again, by your own admission, Bitcoin is primarily a store of value, not primarily a currency designed to be regularly exchanged. If you want to talk about Bitcoin like it's an alternative to USD, then I'm going to criticize the fact that its transaction rate and per-transaction environmental costs are garbage and unscalable.

[lowkey]

> Bitcoin in its current form is not an alternative to USD, it is at best a system that complements USD, and I see no evidence at all that the existence of Bitcoin has reduced military presence anywhere in the world.

I agree with this statement to date but in the future as Bitcoin grows in importance I believe we will all see a diminishment of USD petrodollar hegonomy.

> I'm not going to get into it, but I disagree that Bitcoin is P2P in the way that most people actually care about P2P

I wish you would get into it. To my knowledge most internet based p2p networks do rely on the internet. The internet allows for p2p networks that operate between any 2 players on the internet, effectively any 2 of 7 billion people, the very definition of p2p. What am I missing?

> I also think the inflation claim is ridiculous given that Bitcoin's price fluctuates wildly.

The inflation claim is sound and is based on the proportion of Bitcoin created per block not the speculative USD value of the created supply. It is like valuing the inflation of the gold supply based on the speculative nature of gold in USD fiat, rather than the gold supply itself.

> And the inflation is not "to infinity", Bitcoin is set to eventually run out of coins on purpose. The inflation is set to eventually reduce to zero. Bitcoin is a deflationary asset, not an inflationary asset.

I agree with this statement.

> This is actually one of the things that turns out to be bad for Bitcoin as a currency, Bitcoin has been a good demonstration in a lot of ways as to why a deflationary asset is inherently not particularly well suited for transactions.

This is a statement without substance that I fundamentally disagree with. Please provide evidence or back down on such baseless accusations

> And again, by your own admission, Bitcoin is primarily a store of value, not primarily a currency designed to be regularly exchanged.

Agree, but I did provide a couple examples where Bitcoin is a superior medium of exchange today than Gold or USD.

> If you want to talk about Bitcoin like it's an alternative to USD, then I'm going to criticize the fact that its transaction rate and per-transaction environmental costs are garbage and unscalable.

If you are going to focus singularly on the transaction use case, over the store of value use-case, I will call you out as missing the point. The only guarantee of the USD is that by design it will lose 2-8+% of its value per year, every year to infinitity. If you take the lower end of that at 2%, then over a 40 year average career, an income earner loses 40% of their income to an invisible tax. This theft is what Bitcoin’s deflationary asset backed system protects against. Infinity/21 million is better than 1/infinity (exponential inflationary money supply) over the long term. The only reason you don’t understand that yet is that you haven’t sufficiently studied Bitcoin. I encourage you to do so.

[danShumway]

> I agree with this statement to date but in the future as Bitcoin grows in importance

Bitcoin isn't scalable and part of the point I'm getting at is that its power consumption is out of control and would be even more out of control if it did rise in importance, since the price would rise and mining would increase to compensate.

You're asking me to imagine a world where Bitcoin has grown in the amount of value it's securing (which necessarily because Bitcoin is a deflationary asset requires that the price of Bitcoin increase dramatically), but you're also asking me to substitute in the current energy requirements of Bitcoin when I think about that world.

In a world where Bitcoin actually held a substantial portion of the world's value, the amount of energy required to actually secure that system against 51% attacks would be ridiculous, it would dwarf the energy requirements of any other financial system.

> To my knowledge most internet based p2p networks do rely on the internet

A lot of P2P applications are about allowing direct connections between devices even if the Internet goes down. But more importantly, when most people think about P2P they're thinking about systems where you don't need fast consensus. The blockchain is a distributed ledger that forces constant consensus. In contrast, if you look at something like (just as one example) P2P Matrix you can run rooms entirely offline, and essentially you can run rooms that don't immediately propagate their state to the entire rest of the network. They might never connect to the rest of the Matrix world.

One of the big advantages of P2P is the idea that you don't need to have access to the entire network. But Bitcoin fails that test, if you don't have at least indirect access to the entire network and you can't get your changes onto the chain in time, then it's too late.

This is part of what people mean when they say that Bitcoin is kind of like a decentralized way of running a centralized service. Bitcoin relies on a having a nearly always up-to-date shared consensus of everyone's transactions. It gets at the shared consensus in a decentralized way, but there is still one centralized "state" that everyone is relying on. The really interesting work in P2P networks does not rely on constant consensus or on having one singular state at all. A true P2P cryptocurrency in the way that most people understand P2P networks today (or at least the good P2P networks) wouldn't have the blockchain. It wouldn't require a single unified ledger that contained every block.

> It is like valuing the inflation of the gold supply based on the speculative nature of gold in USD fiat, rather than the gold supply itself.

Okay, but that's a ridiculous thing to do because if you think about inflation only in those terms then your inflation numbers don't really indicate how much value the asset is actually worth. But if you believe otherwise, I might have some Beanie Babies somewhere to sell you.

> This is a statement without substance that I fundamentally disagree with. Please provide evidence or back down on such baseless accusations

:) Crud, my evidence is the entire heckin history of Bitcoin, the fact that it is not being used primarily for transactions today even though a lot of the early proponents were arguing that it would be. My evidence is the "all" view on this price chart (https://www.coinbase.com/price/bitcoin). That is not the chart of a functioning currency.

The question of whether a deflationary asset was good as a currency got brought up a lot during early Bitcoin talks, and the answer that was often given was that other forces would come into play and people wouldn't just sit on their Bitcoin and treat it the same way they treat stocks. But it didn't happen, people do basically just sit on their Bitcoin the same way they sit on stocks. It turns out that when an asset experiences rapid growth, that's bad for its use-case as a currency.

Which, I mean... obviously. You're not on here arguing that Bitcoin is primarily about transactions, are you? You're arguing that it should be thought of like a bank vault. Early Bitcoin proponents back when I first entered the space were arguing differently. They turned out to be wrong. Bitcoin today is the evidence that deflationary assets are inherently poorly suited for currencies.

> Agree, but I did provide a couple examples where Bitcoin is a superior medium of exchange today than Gold or USD.

I'm not entirely unreasonable, there are some very minor things that Bitcoin does well. Most of them are done better by other cryptocurrencies, and it says something that the community continues to focus on a cryptocurrency that has been technologically obsoleted by other coins multiple times over, but even so, there are some things the coin does well.

But there aren't very many things, and my point is that the energy costs are too high to justify with those minor improvements. Bitcoin is not meaningfully changing the game on censorship for most people (even though that's what Bitcoin does best). It is not reducing military presence in the world. It isn't really democratizing finance in the way its proponents claim. And it introduces huge environmental costs and tons of negative externalities in exchange for such tiny, insignificant gains.

> If you are going to focus singularly on the transaction use case, over the store of value use-case, I will call you out as missing the point.

Cool, Bitcoin is garbage at both transactions and as a store of value. Mathematically, it's worse than the other systems we have at both of those tasks. Now, you are telling me to ignore that math because the existing systems also have a ton of separate externalities, and I actually agree with you that the existing systems have a ton of externalities.

But if you are arguing that Bitcoin is going to do anything about those externalities, then it needs to get a whole lot more usable and whole lot more efficient at being both a store of value and a method of transactions. Otherwise, I don't really care about the carbon emissions of the military in regards to Bitcoin because Bitcoin isn't going to do anything to reduce them.

Pointing out that existing systems are bad does not make Bitcoin magically good. Bitcoin is an ineffective way of addressing systemic problems with existing currencies, and yet it still imposes large environmental and social costs of its own.

I'm supposed to ignore the massive environmental costs of transactions and the lack of scaling, and yet somehow believe that Bitcoin will be able to meaningfully compete with any other currency. It won't, not unless it gets better at transactions. I'm supposed to ignore that Bitcoin's energy cost to secure money is out of control, but I'm also supposed to believe that it will outcompete gold in any meaningful way. It won't because it's bad at storing value. It can't address the negative externalities of gold because it's mathematically worse than gold at the primary purpose of storing value, and the other negative externalities of gold are not going to help Bitcoin compete with gold.

It's not enough to realize that gold and fiat money have problems, the alternative that you propose still has to actually work better than them.

> Infinity/21 million is better than 1/infinity (exponential inflationary money supply) over the long term.

Not if you're building a currency :)

> The only reason you don’t understand that yet is that you haven’t sufficiently studied Bitcoin. I encourage you to do so.

Oh please, I've been in this space for ages, I've gone to the talks, I've read the papers, I've learned the algorithms. I know the early economic theories that Bitcoin proponents were proposing back when it first started to break out of extreme niche circles, because I one-on-one talked to early proponents about how they thought this was going to work out and asked them questions about how they thought a deflationary asset would work as a currency. It was an interesting idea, and I was hoping that they would be correct. But they turned out to be wrong and their predictions about usage and human behavior on the network didn't actually come true. That's all there is to it.

Part of the reason I'm cynical about Bitcoin is because I'm not coming into Bitcoin discussions through the lens of revisionist history, and I'm not coming into Bitcoin discussions from a perspective that the technology must just magically have some way of dealing with scalability or efficiency problems. I've spent enough time studying both the technology and the economic theories, and I've spent enough time just sitting back and watching the space evolve, that I now know behind the complexity there are fundamental assumptions being made about how currencies work that are just... incorrect.

I wish they were correct, a decentralized currency would be great. But I'm not sticking my head in the sand and pretending that Bitcoin is capable of being that currency.

[lowkey]

First I want to thank you for your engagement. It is rare to find some one so deeply engaged in the topic with such a well considered point of view. Secondly I want to point out the areas where we agree.

For example I would like to agree with your perspective on bitcoin, p2p and the internet.

I fundamentally agree that Bitcoin was born of the internet and if the internet were to go down then Bitcoin would likely go down with it. I view Bitcoin as the native currency of the internet and it would be nothing without the internet. I don’t believe the internet is going to fail for many reasons but I do agree that Bitcoin would likely fail without the internet.

Where we disagree is: 1/ Bitcoin is bad as a transactional currency today. 2/ Bitcoin is a bad store of value today. 3/ Bitcoin’s energy usage is out of control and bad for the environment.

Let me elaborate: 1/ Bitcoin is the best transactional currency for any transfer outside the G8 countries for any value between $100USD and 10 billion USD, where the one of the parties exists outside of the G8. This represents over 70% of the global population. It is convenient for most on HN to ignore this fact but 70+% of the global population exists outside your bubble. For these transactions, Botcoin allows for perfect censorship resistant p2p transactions between two parties with zero compLexity.

2/ The gov and taxation policy has convinced you that 1+ years is the definition of a long-term investment but this is not the case. In Bitcoin terms, long-term means 3 years +. If you look at 3+ years as a timeframe, Bitcoin has returned an average of over 200% APR on average, handsomely beating any reasonable investment over a period of 13 years since inception.

3/ Bitcoin’s energy consumption is designed to consume only the lowest marginal cost of energy. It consumes the lowest cost energy sources which over the long term coincide with renewable energy sources for whom there is no other consumer. If there were then other consumers it would push them out at a higher marginal cost. By contrast, gold can only consume fossil fuels and rape the planet through strip mining while USD can only rape the planet through fossil fuels or through military violence.