This just strikes me as a colossal waste of energy & time. I understand that there may be good profit in doing it, but that doesn't shirk off any of my feelings.
I blame Satoshi for choosing the unfortunate word "mining" as the name of the technical process that confirms bitcoin transactions. I feel it is responsible for a big part of the scammy reputation Bitcoin has today.
If only it was called something like "transaction security auditing" or "ledger integrity verification" so that people would take it more seriously for what it really is.
I call it "accounting". Some day, when bitcoins can no longer be mined, all of the "miners" will just be accountants collecting accounting fees and ensuring the integrity of the blockchain.
I am not so sure that "transaction security auditing" would be accurate though. That makes it sound like this company is doing something altruistic. The truth is that this facility was created for one simple reason: to earn Bitcoin.
If I go out and hire (say) tptacek (and the rest of Matasano) to perform a software security audit, aren't they're doing it to earn dollars? When a corporate board hires external financial auditor to look over their records, same thing. I don't see where your inference of altruism comes in.
The difference is that tptacek won't claim that he's doing it because he cares about your software; he will say he's doing it to earn money. He will definitely try to do it well to maintain his opinion of a professional, but he won't be pretending he does something altruistic.
I'm not saying doing things for money is inherently bad. I'm just saying, let's call things what they are.
I still don't see where the claim of altruism comes in. We're labelling things for their effects. Matasano secures your software in exchange for dollars. I'm currently making software respond quickly to network events in exchange for dollars. The sandwich vendor makes me a sandwich in exchange for dollars. Calling us all "dollar miners", simply because we're doing it mostly for the dollars, is not really "calling things what they are" - it's a horrendously lossy focus on one particular aspect of "what they are".
I think I got the wrong sentiment from baddox's post and have been arguing against the "claim of altruism" that wasn't really made by anyone. See https://news.ycombinator.com/item?id=8244741.
The difference is that you are exchanging money for a service between two willing parties. Bitcoin miners don't take anyone else's money in exchange for verifying transactions.
"Bitcoin miners don't take anyone else's money in exchange for verifying transactions."
Yes they do. Your whole point, I thought, was that they're being paid to do it. They presently take a small fraction of value from every bitcoin. They also receive any transaction fees offered by any of the transactions they are processing, but in practice those are presently (almost?) always zero.
I would say it was created for the simple reason of maintaining the security of the blockchain. That's the fundamental idea of Bitcoin: the blockchain is protected in a decntralized manner due to proof of work. The reward is added to incentivize people to help maintain the security of the blockchain.
So in other words, they're doing it for the reward, with a side effect of maintaining security of the blockchain. I doubt that they're doing it for an idea.
But why is that contradictory, or a problem at all? When I buy a sandwich, I do so primarily because I want the sandwich, but the reason the vendor makes and sells sandwiches isn't to satisfy me, but to make money. Both of us are "selfish" in a sense, but it's not contradictory and not a bad thing.
Sure, but the difference is well pointed out by @thedaveoflife. The sandwitch vendor doesn't care about me being not hungry, and they would gladly switch to selling toilet paper to me if it was more profitable to them. Likewise, the miners don't give a damn about blockchain security. They have this black box - put electicity in, get money out. They don't care about what's going on inside. If the black box produced sandwitches, or widgets, or just spun and made sounds that make some millionaire happy, it would make no difference to them, as long as when the electricity flows in, the money comes out.
It's the difference between terminal and instrumental values. It's one of the reason why some people are bewildered by what Tesla or SpaceX is doing - because they're missing the point that for Elon rockets and electric cars are terminal values and the money is just instrumental, while most of the companies we interact with have this the other way around.
It's debatable whether all Bitcoin miners are doing it for the reward, or whether some are doing it for an idea.
On the one hand, I think I'm doing it to help the network, but on the other hand I kept the pitiful few coins I've got thereby, and didn't give them away. Why do I keep Bitcoins? Not as an investment, surely; I think of Bitcoin as more of another currency that I keep some money in all the time, like £ or €, so I can buy stuff when I'm there. But my little Bitcoin mining operation is being run for the purpose of "transaction security auditing" [thanks, qnr!] for the same reason I run a tor exit node: because I want to encourage such things to exist.
A fair point, but also misleading. That's like saying a HFT trader is hoping to provide market liquidity... Really they're trying to make money. The market liquidity (or in this case blockchain verification) is an indirect benefit.
More inefficient than producing and maintaining paper currency? Than mining actual gold?
They really are just throwing tons of electricity and hardware at "nothing", but if this kind of activity helps replace the current inefficient systems of currency, then I'm all for it.
Yes? Going either by volume or number of transaction, Bitcoin transactions are currently ludicrously expensive, though this is somewhat hidden by subsidizing the miners.
I don't know why you mention paper currencies and gold when most money today is transferred electronically, in a far more efficient way than Bitcoins.
The cost of mining blocks is designed to remain roughly consistent as technology advances. The "economy of scale" comes in when you use one block (which costs about the same regardless) to secure more transactions.
The bank bailouts had a huge negative return in real terms, just not in nominal terms.
They required the devaluation of the dollar via Fed 'printing.' The Fed had to take trillions in nuked assets off the balance sheet of Bank of America, Citi, and others.
The primary bailout was not the Treasury program TARP, but the Fed programs.
That stole purchasing power from everyone that uses the US Dollar. That purchasing power will never be returned. Trillions in real wealth were destroyed, that is gone. Even if you supposed all assets returned to their previous value, the time cost, wrecked credit ratings, debt accumulation, etc. that was involved in that loss of wealth is still massive when it has to do with tens of trillions in total asset value.
The collapse of Mt Gox isn't even a rounding error compared to the real wealth destroyed by the Fed in the last five years through dollar devaluation. It's equivalent to about ten hours, from one day, of QE the past year.
Not to mention, any bitcoins lost in the collapse of Mt Gox, increases the value of all other bitcoins over time due to the reduction in supply. To be like the bank bailouts ala the Fed, Mt Gox would have had to create a lot of new bitcoins in the process of being destroyed.
Compared to what? You can't compare it to the results of not having done bailouts, so the comparison is largely a matter of economic prediction, and economic prediction is obviously very controversial. The only non-controversial part is that the bailouts were certainly very good for the banks receiving them.
In an accounting sense. The government received more money back then they put in - even, IIRC, adjusted for inflation. I agree that this is not actually a great metric, but then "bailouts" aren't actually a great example of the costs of dollars vs bitcoin - they mostly had to do with debt, and you could certainly still issue debt in a world run on bitcoin.
Compared to adding to the transnational cost of USD, which is the context of this entire comment thread.
The bail outs stabilized the currency in lieu of massive wealth loss (e.g. toxic debt), while not adding to transnational costs because the returns were positive.
Most bitcoin evangelists fail to grasp the negative impact that volatility has on currencies, and instead think of bitcoins like assets, even hording them.
"I don't know why you mention paper currencies and gold when most money today is transferred electronically, in a far more efficient way than Bitcoins."
Revenues of Brink's alone, sayeth Google, are roughly $4 billion. My understanding is that a substantive portion of that represents cost of transporting cash and gold, and of course they are only one of several such companies.
The vast majority of fiat currency in circulation isn't in the form of banknotes or coins. (Gold isn't really a currency anymore, so let's ignore that one.) It exists electronically. In a fractional-reserve system, it's also mostly created by its users, but that happens as a by-product of normal economic activity. And it takes a lot less computer work per economic transaction for a fractional-reserve system to create money than it does in a cryptocurrency.
You are completely ignoring the issue. Just because a majority of money exists electronically doesn't mean a lot of money isn't spent on paper and metal versions.
The United States alone spends tens of millions of dollars a year on producing pennies - beyond the face value of the pennies.
So the entirety spent on mining bitcoin is not too far off from what one country spends just on minting pennies.
No, I'm trying to focus on the forest instead of the trees.
It's true, pennies are a horrible waste. It costs almost $0.02 to make one, and nobody even likes them very much, but the mint still churns out billions of the things ever year. That should probably stop.
But overall, coinage is a tiny fraction of the overall dollar economy. And Bitcoin isn't really comparable to coinage, anyway, since BTC is not a fast, convenient, anonymous, peer-to-peer mechanism for exchange that's appropriate for use in small transactions. Compared on that level, BTC seems sub-optimal long before we start worrying about details like energy efficiency of production.
What BTC really compares to is a currency in general, such as the dollar. There BTC at least has a chance of comparing on a vaguely level playing field. And at that scale, pennies are insignificant.
Bitcoin could become a means for payment and other things, but can not possibly replace the current systems of currency, since those are essential political instruments.
Consider the impact of minimal fluctuations of exchange and interest rates. No one could just say "fuck it" and buy into a completely unpredictable new system. Governments would give up control, and random people who happened to have mined Bitcoin until that point would hold the world's wealth? I don't think so.
Governments have given up control before... small governments, where after running their existing currencies into the ground with hyperinflation they adopted the US dollar.
Currencies can only be political instruments up until a point -- and then people get tired of it and start looking for other mediums of exchange, units of account, and stores of value. Bitcoin is theoretically something people could turn to for one or more of those, though it would have to be a pretty bad situation to make Bitcoin's volatility look good.
(Disclaimer. The overall likelihood of this happening at a large scale is not something endorsed by this post.)
"This means that we can expect our current industry best efficiency of 0.733 W/GH to reach 0.0000000873804 W/GH – so even the most ignorant, arrogant, narrow-minded and pseudo-intellectual critics and arm-chair academics should note that in the event that Bitcoin scales to a million times its current size and market cap over the next 30 years, it’s environmental impact will still be insignificant compared to existing systems."
Moore's law is in effect right now, and yet mining keeps getting more expensive.
The exact number of hashes per joule is irrelevant since the work being done isn't useful. This is purely a competition about spending the most. If hashes get 1000 times cheaper, they'll do 1000 times as many.
> Given the application of new primes is far less than, say, sending humans to live on the mars ...
Yes, but researching primes is way, way less expensive than sending humans to the Red Planet. It's all about cost versus benefit. As one example, some mathematicians think the Riemann Zeta function might reveal something basic about primes, and if so, it would be well worth our time spent studying it, and primes in general.
I get what you are saying. And I think primes research may be a good thing. But to say, all the heat and power and physical hardware waste of Bitcoin/altcoin mining is offset even somewhat by the helping primes research is kind of silly.
I could say that my handling and use of physical dollar bills could help microbiologists understand how organisms can spread. Technically true, but of dubious value at best.
Primecoin has nothing to do with finding new prime numbers. It does NOT find new prime numbers, but only finds 'chains of prime numbers'. See http://en.wikipedia.org/wiki/Primecoin
Well, when "mining" happens at the break-even point, the value of Bitcoin represents the amount of money that was transfered from the real economy to ..this.
Since "waste" is a loaded term, let's call it "the cost of Bitcoin".
Current market cap is 6.7 billion $, with 13.2 million of a total of 21 million btc mined. Early "mining" was very cheap, but now costs are only going up (barring any surprising breakthroughs in computing).
Anyone care to speculate the total cost of Bitcoin?
It's not a cost. They spend electricity and get money back. It's basically an indirect currency exchange. They obviously do it because the resulting conversion rate is slightly better than the market rate.
No doubt people get "money back". Contrast this however with a system where "numbers" (= the new "Randomcurrency") were randomly, or evenly distributed among the general population, which could be done basically for free.
Compared to that, there is a cost, if you will. n powerplants had to be built, or x tons coal had to be burnt to do all the calculations. Does that make sense?
I agree completely. It seems such a waste, especially given that mining bitcoin is deliberately made difficult. The main cost/waste of bitcoin mining is electricity, and yet we could reduce the cost to almost nothing.
In an ideal world, imagine instead a variant of bitcoin that works like this:
* All miners do their hashing & number crunching for a second or so, then report their peak hashing rates to each other.
* Instead of one of them randomly mining the next block of bitcoin, the next block gets divided out proportionately according to hash rate.
* All miners then agree not to do any more hashing for (say) a minute or so.
* Process repeats.
Ta-da! We have a bitcoin system which uses a fraction of the electricity. If we were back in the days of mining on general purpose computers, then we could even put them to some other use at the same time as mining bitcoins.
Obviously, this has massive flaws. How to trust that everyone doesn't lie about their hash rates? Perhaps this could be solved by keeping the mining but setting the difficulty so that a block would only take a couple of seconds to mine. That way, there's still a numeric problem that requires real CPU work to solve.
Secondly, how to ensure that the systems don't do any more hashing for a fixed time? Perhaps the system could be tied to an unguessable source of randomness that won't be known in advance of the next block mining time. (This is the really tricky bit; you need a source that is trusted by everyone and not predictable or alterable or knowable in advance).
The problem with this is that mining isn't just about reporting hash rates, it's a critical part of the Byzantine failure tolerant consensus algorithm that was bitcoin's key contribution. If miners had a lower duty cycle as you suggest, any dishonest miner could execute a majority attack with little resistance, absent some other kind of mitigation.
While proofs of work are wasteful, the only alternative I know of is simply entrusting some third party with control of the network.
You could keep the blockchain and run with vastly reduced difficulty, but with one alteration: the next block needs to include a specific magic secret number. This magic key is unknowable in advance of a specific time, preventing workers from doing the hash work until the key is 'published'. This forces the miners to pause and not do any hashing for a set time.
Now, this gets to the real issue: We need a source for these magic numbers, it needs to be trusted and available and verifiable by everyone, and it needs to be unpredictable and unknowable until a specific time.
What possible sources are there? You could imagine a centralized system, where some computer on the internet spits out a random number for the next 'magic key' every minute. But of course, you have to trust the owner of this computer and so we'd lose all the decentralized features of Bitcoin.
Another possibility: Tie the magic key to some public knowledge, e.g. the value of the NASDAQ at a specific time. Again, this still has problems as 1) there's a limited range of possible values, so miners could pre-compute various versions, and 2) the value could be gamed by market traders.
Anyway, I don't have an answer for the ideal source of these 'magic keys', but if someone could come up with one, you could keep all of bitcoin's mechanisms while vastly reducing its energy waste
You could require some other kind of block interleaved between proof-of-work blocks. For instance, imagine you do proof-of-stake as follows: Any account with more than X btc (as of the previous block in the chain) can mint a block by including as the nonce the previous hash value signed with their private key, constraining the rest of the block such that the only thing to vary in the new block is the time value, adding a rule that between two chains with equal difficulty the one with the earlier most recent POS block wins, and forbidding acceptance of blocks "from the future".
This would seem to lead to a situation where, after a proof-of-work block is minted, those minting POW blocks relax and those minting POS blocks march things forward for each of their accounts until they find the earliest time that satisfies any of them - at which point they simply wait until that time arrives (for themselves or anyone else playing).
I have a suggestion for how to deal with these magic numbers. Make 9 out of 10 blocks duds (and it should be known in advance which), that contain very little reward. This means that, most mining power will switch of for these blocks, and only be active for the other 1 of 10 blocks.
But that time serves a purpose for security. So for the proposed solution the time would have to increase from 10 minutes to 10 minutes + how ever much time we want to save hashing energy for.
I couldn't agree more. The overhead must be staggering. New construction, all that equipment to purchase, set up and keep running, the amount of electricity it takes to power the whole thing, monthly warehouse rent.
This has to be a loss leader, I see no way this is a positive ROI anywhere in the near future.
What's cost of the new construction? Maybe 5-10 million? What's the upfront costs of all the miners? Maybe another 2-3 million? What's the electricity costs to run the machines per month? Maybe a few hundred thousand?
Even at 90K/day, this guy has a gigantic hole to crawl out from under before he starts to sniff a profit. That's assuming that 90K is a constant for the next 6-8 months. What if his production slows down or the market swings down in a day and he loses a few million?
BTC is anything but stable, and any way you look at it, it's a huge risk.
Given the human misery that has always come hand in hand with diamond mining (see http://www.nbcnews.com/id/15842524/ns/world_news/t/diamonds-..., for instance), yeah, that one seems like a tragic waste. All that suffering, just so people far away can have something shiny.
If only it was called something like "transaction security auditing" or "ledger integrity verification" so that people would take it more seriously for what it really is.