[woodruffw]

To understand why people don't find this compelling (and are sick of hearing it), you probably need to first understand that people consider Bitcoin's profitability a false economy.

In other words: your scenario is identical to GP's except that someone is paying you to run your AC while you aren't at home, rather than just doing it because you can. The logical question is then to ask why they're paying you to run your AC, and that is the uncompelling part: it's not clear that we should be paying people to burn energy to crack hashes.

[wharvle]

People’d find it outrageous if beanie baby collectors were sacrificing 2% of US food production on altars to their beanie babies, because doing so made the beanie babies more valuable to other collectors. Even if some of the collectors were growing their own food for the purpose, et c, et c—it’d still bother a lot of people. Maybe most people.

[thereisnospork]

> it's not clear that we should be paying people to burn energy to crack hashes.

In particular when we artificially increase the energy require to crack said hashes. If hash-cracking was, for instance, bid out on a competitive marketplace[0] instead of limited by difficulty bitcoin would need far less power to perform its 'role' as a 'currency'.

[0]Want to mine a block? Bid for the mining rights (in USD or BTC).

[randomNumber7]

The point of bitcoin is, that you would need to burn the same amount of energy to fake the blockchain.

Im not saying this is good, but its the way it works...

[ruined]

and this is where it comes to a point: what can you possibly change about the world to deincentivize that, and make it uninteresting?

if you want a transition away from carbon, you have to solve that question.

[p1mrx]

> what can you possibly change about the world to deincentivize that

https://en.wikipedia.org/wiki/Carbon_fee_and_dividend

This would remove the incentive to mine crypto on any grid that is coincidentally emitting carbon.

[ephbit]

The carbon fee would lower and possibly sometimes completely remove the incentive to mine Bitcoin on a grid that is coincidentally emitting CO2, when the current electricity generation mix has a large share of fossil generation.

As most (if not all) uses of electricity, Bitcoin mining is sensitive to the electricity price. Introducing a a carbon tax / carbon dividend, doesn't magically make any particular use of electricity economically unviable all of the time. It just pushes the cost equilibria to different values.

[jonahbenton]

The why requires a few steps.

Money is just another technology. As a technology it has existed in various forms over thousands of years.

Technologies see continual innovation and change, with various actors and various motives influencing their use, function, reach.

Governments of various forms are our current best method- govern-ance- for managing human-scale assets, resources, and technologies with collective purpose and implication.

Moneys- currencies- as a technology are one of those human assets owned and managed by governments, like land, and other resources. There are over 200 distinct currencies in the world.

The mechanism for this management is based on the notion of a ledger- the record of balances, of debts, of interest, and the creation- inflation- of money supply in the context of that management.

Most governments are poor at this management when measured by how well their implementation of this technology that is money serves the needs of most of their populations.

Governments themselves- both "democratic" and non- in their current form are fragile and vulnerable, with the powers of governments utilized against portions of theirs and other populations.

BTC is a technology, a cryptographically-secured system of record- a ledger- that can be used as a money. It is not under the control of an existing government.

By collective agreement of its participants, a complex balance of users playing different roles with different incentives and risks, the rate of creation of assets recorded there is managed to a low level of inflation. As such, as a technology utilized for money, it is a stable "store of value" in contrast to the moneys supplied by literally every government.

The ledger, the system of record can be preserved- secured- if and only if it is too expensive for attackers to change it. The turning of energy into hash minting is the security for that system of record.

That's it.

Adopting a mindset where the above argument takes hold involves a kind of leap of faith. It is a belief. Sure, a religion. The game theory/mechanism design behind BTC is a true innovation, the first demonstrated solution to the Byzantine Generals problem.

There is an argument- won't people stop believing in it?

Maybe? I would suggest evaluating that argument against the lifespans of other innovative beliefs.

Is it something that comes and goes, or is it like the eye, an invention of evolution that solves a specific problem and appears distinctly and repeatedly in different organisms once they hit certain levels of complexity.

Cheers.

[lolc]

One thing I don't get about the "store of value" belief in Bitcoin is: why specifically this chain? It has only network effects going for it. Mindshare is a fickle thing.

[jonahbenton]

Yeah- well:

It was first, and first mover advantage is significant, which has turned into network effects and inertia, and now with the ETF recognition has gained "official" validation;

Anti-inflation is one of its core design principles, is the basis for store of value, and commitment to it has remained solid;

After ETH PoS changes it remains the only proof of work chain. PoS has belief failure modes that can lead to collapse of value. PoW-based value by definition is secured by the cost of the work. It is a financial equation- a ledger can be maintained at the underlying cost of recoverable energy- not a political/fashionable one.

Mindshare can be fickle, and if purely based on fashion, if there is no inertia and there are adjacent equivalents, value can be lost quickly. With BTC there is inertia, because at a deeper level there are no adjacent equivalents. BTC continues to occupy a unique niche in the design space of these artifacts/assets.

[lolc]

Sure as long as people believe in Bitcoin it will keep existing. Like other currencies.

I can see the inertia argument. Why switch when it works. I still don't see the store of value argument when Bitcoin requires such exorbitant amounts of energy to keep up. That's a tax on the value. "Look how much energy it's using, it must be worth a lot!"

[jonahbenton]

Yeah, the store of value idea is pretty abstract and most people are completely unfamiliar with the various functional aspects that make money in general a store of value, or, rather, a lack of store of value, given the pervasive practice of currency inflation practiced by every central bank.

People can wrap their heads around there being "value" in an "asset" because it has "revenue streams" associated with it- that's what property and being a landlord is about. You can charge rent, so your property has value. That is very familiar because everyone either owns property or rents property. And then they look at BTC and are like- there are no revenue streams, any "value" is just made up.

Gold, a scarce/low supply inflation asset, and former money, is a good mental model for BTC, but it is completely unfamiliar to most folks, and not even the notion of metal coin being intrinsically valuable applies in any economy any more. In fact if anyone thinks about gold, they probably think people who put value into it are deluded.

People also can understand different currencies having different relative values, some being stronger, some being weaker. Why that is is generally a complete mystery. People think of strong currencies coming from "strong" countries with "strong" economies and weak currencies coming from "weak" countries with "weak" economies, where strong and weak roughly correspond to military capability and economic industrial capacity and diversity.

There is some truth in that mental model, but since BTC is not really "used' as a currency, it doesn't get to be slotted in to the currency mental map.

The actual function that BTC is starting to serve and that is critical to the functioning of all modern economic entities, whether governments or private enterprises, the notion of a "financial settlement layer", is completely unfamiliar. So yeah. It is hard to get traction when the machine is mysterious, to abuse a metaphor a bit.

The unnecessary energy waste argument though is an interesting one, eg where BTC is wasteful like just running your A/C unnecessarily or whatever. The most relevant comparison is looking at something called "home idle load" which in the US is basically the background appliance energy use. BTC total electricity use is in fact a tiny fraction of home idle load, which people don't really get exercised about and many when buying new appliances pay little or no attention to.

If one doesn't see the purpose for the use of BTC energy- which again is an unfamiliar concept of the need for "security" for a system of record- people do see the purpose for the wasted home load energy. They need home appliances, they just wish they were more efficient. That BTC mining becoming more efficient would not result in the network using less energy, in fact, the opposite would occur- this is also strange.

Anyway- I agree with you, it is a set of completely novel concepts that interoperate in ways that are very different from existing related and familiar mental models.

That is why to my mind the only way "in" to arriving at an understanding is to look at money- all moneys- as technology, as technical machines that are different implementations of accounting rules.

BTC is a "store of value" "secured" by burning energy because it is an asset system of record, a ledger, that uniquely for the first time in human history cannot be changed either directly or indirectly (e.g. by inflation) by a political actor who "governs" it. The "value" of a BTC is mathematically related to the cost of energy, and to the demand for use of that sort of ledger. What we have seen is that there is significant and growing demand for this sort of ledger, a ledger that is independent of the political processes that exist in every government, and were some problem with BTC itself to emerge, there are now different implementations of the idea that this demand would shift onto. But most of the brains that have the capacity to study and find such problems in BTC's implementation have done so and have not yet found them, so its value is really as the best known solution to a problem that we didn't know we had, and now we do.

Not sure if that makes sense. Thanks for the engagement.

[lolc]

I don't like the comparison to gold, because gold just sits there. It's a stable element. Bitcoin needs a variable amount of watts for upkeep. Who is paying for those watts and why?

If we're talking about the value of a currency, we're talking about what we can get in exchange for it. And when we talk about the store of value, it's what we can get in the future. With Bitcoin, we know it must burn energy, so we can get something only less that energy. The currency may get more "believable" due to the burning, when you look at sacrifice as commitment. But what are they committing to? Burning more in the future, because they now have coins they want to keep their value?

The funny thing is that most people trade in virtual Bitcoin they don't control. Because it's more comfortable and the ledger doesn't support the volume. So they need a government to assert their claim on their coins. I guess one can't even get Bitcoin from their ETF and needs to round-trip to some other currency.

The market is settling out of chain, because it's cheaper.

[yrral]

I'm not arguing whether the use of electricity is compelling or not.

I'm arguing that the unique energy demand characteristics of bitcoin mining allow it to support building renewable energy projects and balance electricity costs and thus it has effective positive contribution to the environment.

Whether it's used to mine bitcoins or cool a house is irrelevant, except that the demand for cooling a house is location and time sensitive, whereas bitcoin mining is cost sensitive. This flexible consumption gives it unique properties that support deployment of renewables.

Please explain what you mean by "false economy". Is the economy for skins in a game you don't care about "false" because you don't like that game?

[woodruffw]

> except that the demand for cooling a house is location and time sensitive

Not if someone paid me to do it. That's the point. If there was money in hauling ACs around the US and running them on the cheapest electricity the local market could provide, we'd have exactly the same false economy.

(Besides: the GP points out that Bitcoin appears to be sufficiently profitable on NYC electricity prices, which are not cheap. They also appear to be sufficiently profitable on "retiring coal plant" prices[1], which undermines any kind of unique incentivization of renewals argument.)

[1]: https://www.indystar.com/story/news/environment/2023/12/05/c...

[ephbit]

> Not if someone paid me to do it. That's the point. If there was money in hauling ACs around the US and running them on the cheapest electricity the local market could provide, we'd have exactly the same false economy.

How is such a purely hypothetical scenario useful as an argument?

It's like saying: "If nobody ever did physical harm to anybody, we could get rid of some part of law enforcement." Not useful because it's simply not the case and very likely never will be.

> They also appear to be sufficiently profitable on "retiring coal plant" prices[1], which undermines any kind of unique incentivization of renewals argument.

Bitcoin mining incentivizes any kind of generation that cannot be consumed by a more profitable process or use case. If the price of electricity on a mostly fossil powered grid is low enough, then Bitcoin mining will be profitable. Same goes for a mostly renewables powered grid.

There are two ways, politics can handle this:

A) Impose a high enough carbon tax on fossil generation. This will lead to higher electricity prices for the fossil grid, possibly making Bitcoin mining unprofitable. But it will also make other uses of electricity unviable.

B) Regulate that Bitcoin mining is prohibited under certain conditions (location, grid generation mix, ...)

B doesn't appear wise to me. Since it's highly subjective what kind of energy/electricity use one deems useful/legitimate. I personally find the use of a > 100 horsepower private car or a private jet totally illegitimate and would welcome regulation that drastically hinders these absurd uses of energy.

[ianai]

I think the underlying argument also misses the “willingness to pay” on at least a couple parts of the transaction. Specifically assuming the grid provider is going to pay you to use their electricity. (Transmission is still costly and maybe turning off capacity is a better option.) Further, missing the core “willingness to pay” for btc or any other cryptocurrency.

Gold worked as a currency as it was independently verifiable from either side of a transaction. Modern currencies work so long as they’re backed by credible assurances of their value. Ie passing off fakes is dangerous and they may be used as “legal tender.” (That term could itself be further defined via google.) crypto currencies seem to lack this functionality. (Not wanting to abide by any law outside core network mechanics is functionally close to establishing a new form of sovereignty. Only sovereignty doesn’t work like that.) Also note how hyperinflation is dangerous to the assurance of value of a currency. Similarly, any form of instability could shake those assurances.

Modern currency is also almost trivially, embarrassingly parallel.

[lostlogin]

Would you say that bitcoin mining is good for the environment?

[alchemist1e9]

Bitcoin mining is not just an economic activity but a catalyst for innovation in renewable energy. By inherently seeking the most cost-effective power sources to maximize profitability, Bitcoin miners are driving the demand for, and thus the development of, cheap, renewable energy worldwide. This process aligns perfectly with the goal of expanding humanity’s energy supply, a necessity for continued growth and technological advancement. The decentralized, uncensored nature of Bitcoin provides invaluable financial infrastructure on a global scale, while simultaneously incentivizing the energy sector towards efficiency and sustainability. Viewing Bitcoin mining’s energy consumption as a problem overlooks the broader benefit: it acts as a buffer in energy markets, ensuring there’s always an incentive to increase supply and reduce costs. Criticisms focusing on environmental impacts should address the real issue—regulating harmful energy sources—not curbing the innovative push for more and cheaper energy that Bitcoin mining embodies. Condemning Bitcoin’s energy use echoes failed collectivist approaches, ignoring the potential for positive, market-driven environmental and economic outcomes.

[tsimionescu]

There is a finite amount of energy though, so even if it would be optimal to have infinite supply, we can't.

And even if that weren't the case, your argument still makes no sense. Every watt that Bitcoin mining incentivizes is then consumed on Bitcoin mining, it's a zero sum game.

It's like building heaters in the desert: if you're willing to spend money for 1GW of electricity to run your heater, someone will build a 1GW plant for you. Now there is nominally one more 1GW plant in the world, but there is 0 extra available power, you're using up all of it to heat the desert.

[alchemist1e9]

Your argument reflects a fundamental misunderstanding of both energy markets and the role of Bitcoin in the modern economy. Asserting there’s a ‘finite’ amount of energy oversimplifies the issue and ignores the capacity for human ingenuity to tap into ever-more efficient and renewable energy sources. The notion of energy being a zero-sum game is a defeatist and static view that hampers progress.

Bitcoin mining, far from the wasteful ‘heating the desert’ analogy you propose, incentivizes the development of excess energy infrastructure that can be redirected or scaled based on demand fluctuations, acting as a catalyst for innovation in energy production and management.

Moreover, your argument smacks of a dangerous ‘divide the cake’ mentality, suggesting we should cap our aspirations and limit access to energy and technological advancement to maintain a status quo. Should we tell emerging economies that they must forego the benefits of modern technology because we’ve decided there’s simply no more room for energy growth? That’s not only patronizing but inherently regressive.

The beauty of Bitcoin and its underlying energy consumption is that it encourages the search for more efficient, cost-effective, and often greener energy solutions. This is not about wasting resources; it’s about driving forward a future where energy is more abundant, accessible, and sustainable for all. To stifle this under the guise of protecting resources is to deny the very essence of human progress and innovation.

[jcranmer]

> ignores the capacity for human ingenuity to tap into ever-more efficient and renewable energy sources

> Bitcoin mining, far from the wasteful ‘heating the desert’ analogy you propose, incentivizes the development of excess energy infrastructure that can be redirected or scaled based on demand fluctuations, acting as a catalyst for innovation in energy production and management.

You do realize that the article here is directly pointing to evidence that the bulk of large bitcoin mining operations are being driven from existing fossil fuel plants that seemed to be on their way to decommissioning?

This is what I don't like about your argument: it's a standard Bitcoin talking point, but people struggle to point to actual examples of Bitcoin mining spurring investment in renewable energy, while it's easy to point to actual examples of Bitcoin mining spurring investment in decommissioned/decommissioning fossil fuel power plants. The facts on the ground just do not support your argument, period.

[anigbrowl]

Every industrial power user inherently makes the most cost-effective choices to maximize profitability. Some can't be selective, eg if you run trains or a steel mill you have to keep your power flowing whenever people want to move or prevent your furnace cooling off. But many industries can adjust production to fit power availability.

It's not clear to me that Bitcoin delivers sufficient economic value to justify the vast power demand. What utility do all these hashes provide, except to other people who bought into crypto trading? If there were some positive externality that'd be great, but there's no inherent value to crypto beyond the artificial scarcity.

[alchemist1e9]

Those who espouse the views you adhere to, which, let it be known, represent the prevailing orthodoxy, do so out of a marked deficiency in their comprehension of the true nature of currency. Their understanding is not founded upon rigorous study, nor is it informed by an appreciation of history and the lamentable legacy of state governance—the manifold tragedies it has authored, encompassing widespread destruction and the lamentation of countless souls. The auspicious circumstance in which humanity presently finds itself has been attained not because of, but rather in spite of, the modern nation-state and its fiat currency.

The worth of a decentralized and uncensored monetary framework is beyond imagination; it promises to unleash the inherent vigor and potential of an organic market-driven capitalism, unfettered and boundless. Such a system stands poised to precipitate the downfall of the fiat regime—a mechanism that has empowered governments of every stripe to engage in warfare and to subjugate their citizenry, not excluding even the most free and illustrious nation such as the United States.

[anigbrowl]

Spare me the GPT-generated pomposity, and try making an argument in your own voice instead. Are you seriously going to claim that all war has been caused by governments and private interests have never engaged in violence? What nonsense.