Bitmain, the largest mining hardware company, made around $4B last year
coinsocial.io
coinsocial.io
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.
Or are you under the impression that larger pools of capital provide disproportionate rewards?
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
"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"
You mean the current system?
Normal capital flow with bonds, stocks, etc allow a legally binding agreement for mutually beneficial transfer of capital between parties.
PoS is a lottery with reusable tickets. Winners get more tickets.
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...
Do you have evidence of this?
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.
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.
Can you elaborate on what the shortcomings of the current consensus algorithms are?
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
“Puzzle” implies some cognition is required to come to a solution - not that effort is being wasted by brute-forcing something.
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.
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...
Crypto isn't charity. If you want better tech, you have to prove why it is worth it.
DRM makes it harder to pirate, which is something of value in my opinion.
DRM doesn't make it harder to pirate. DRM makes it infinitely more attractive to pirate.
I'm not aware of any actual metrics and like I originally said I'm pretty sure bitcoin mining still uses more energy.
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.
I wish people would dedicate a few minutes to reading about theoretical limits on consensus mechanisms.
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.
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.
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.
Also, unlike electricity, PoS has no negative externalities. PoW kills people with air pollution.
> 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)
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.
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.
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)
What? I thought you said you were well versed in economics. This is literally one of the core concepts for the benefits of economics because you can evaluate things on their "efficiency" (costs) versus the value they provide (revenue). Every "job", "energy cost", and "side industries that arise around banking system" are evaluated in the cost to run the business and if they were greater than the value they provided, they would not be in bunessines because revenue would be less than sum of those costs.
> 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?
Obviously corruption is not good for our systems neither are other economic problems such as negative externalities [0]. However, I don't see how cryptocurrencies solve them in a way that makes them better than current solutions as a whole.
> This question is really meaningless when you consider all these factors.
I'm not asking you to write a phd. Just give me one good economic use case outside of illegal markets for cryptocurrencies that is better than current technological solutions.
Transfer $1000 from your Coinbase (or other electronic) account in the US to cash in Indonesia, in less than 20 minutes, at a better rate than spot. I did it yesterday with ETH and even made $20 on the spread after all the fees.
The cheapest conventional alternative would have been a Visa or Plus ATM card which would have cost around $14-$47 depending on how good your card is.
How much did it cost to exchange USD -> crypto -> Indonesia money?
I don’t know how temporary it will be; I’ve been using crypto to transfer money internationally since 2013 when BTC was $800 and it’s always been the cheapest method (although I sometimes had to write bots and wait a few days to get a good deal). I imagine the spreads will continue to trend towards zero so I’ll be paying 0-1.5% total instead of earning 2% which is still much better than banks for three-figure to low four-figure amounts.
If banks and payment processors were more competent (like maybe processing transactions on Sunday) and less greedy, crypto would be a lot more useless.
Granted, Visa still makes a nice 33% profit margin but they also offer tons of other benefits which cryptocurrencies provide none of.
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?
I think I answered your last question elsewhere in this thread, if you're genuinely curious, read that one.
it's closed source though
May I suggest this one instead https://www.cnbc.com/2018/02/23/secretive-chinese-bitcoin-mi...
Comparing crypto mining to a war is unnecessarily evokative and manipulative.
Is that 1. End user, 2. Content provider (e.g. “fast lanes” for Netflix), and 3. Government subsidies?
It's better to be Aramco, Exxon or Shell than Baker Hughes or Schlumberger. Much less a lowely oil equipment maker (the shovel makers).
It's better to be the railroad (BNSF, etc) than the car maker (eg Greenbrier), or really any other rail equipment maker.
Better to be the largest natural gas companies, than the fracking sand provider (eg U.S. Silica), or the natural gas equipment makers.
It's better to be Glencore, BHP Biliton or Rio Tinto than the company that makes the mining equipment.
It's better to be DeBeers than a diamond jewelry equipment maker.
It's better to be Pfizer or Merck than a company making various equipment for big pharma.
It's better to be Intel than Applied Materials.
It's better to be Apple or Samsung than Foxconn or most any component maker.
It's better to be BMW, Toyota or Telsa than a parts supplier.
At this point, every scheming hustler is in the market for a bit coin miner. Same in a gold rush -- any fool can dig with a shovel. It's not until boredom or consolidation happens that the shovel maker margins start getting thinner.
If it’s BTC then a) the real figure is much lower because they can’t sell $4B of BTC without drastically moving the market, b) what portion of that is due to their BTC holdings increasing in value by more than 1000% in the past year?
Either way it’s still a lot of money, though.
a) I think you're mistaken. $4B per annum is unlikely to move the markets much.
It sure will if you try to sell it. Holding it certainly isn't the issue.
If liquidating their bitcoin tanked the market in 2017, it wasn't too noticable.
Are there estimates of how much (fiat) money flowed into cryptocurrencies in the last year? It would have to be much more than $4B for Bitmain to be able to sell $4B worth of BTC and still see the 1000% gain.
They're clever enough that they price it in USD and not in Bitcoin.
Since when is ebay considered the black market?
I always thought "buy low, sell high" was the ebay motto...
The important difference is that the money doesn't belong to any country, and is transformed purely into personal wealth. This will lead to wealth inequality the likes of which we have never seen. Governments should charge miners a lot more for just existing, and using all the infrastructure the public has funded to spin money out of thin air which will never help pay for that infrastructure or contribute to any of the economic activity which keeps a country going.
Why we let people dealing in financial instruments acquire so much wealth and power continues to baffle me.
[1]https://en.m.wikiquote.org/wiki/Talk:John_Maynard_Keynes#%22...
In what jurisdiction[1] is electric-grid transmission and distribution publicly funded? You're charged for the cost of your electric service.
[1] other than maybe communist or socialist governments
On the other hand, how come they are making 65% net margins? Where's the competition?
Mining in general can't be the solution to consensus issue. It's just horrible for the environment.
Another kind of ASIC-resistance might be using dynamically-generated algorithms employing self-modifying code. You’d have to own a Xeon Phi to get good figures for that, methinks.
It’s a shame PoW is based on arbitrary hashing instead of, say, “Proof-of-Folding@Home” - that would do some good at least, methinks.
It's already been figured out. The issue is that ASIC manufacturers don't see the need to switch from BTC, when they are already making money. Hint, it's the type of ram.
It already exists, it is called Gridcoin and is based on Proof-of-Research. Coins are awarded based on contributions to the Berkeley Open Infrastructure for Network Computing (BOINC). There are many scientific computing projects you can contribute processing power to that utilize the network.