Bitcoin is not a store of value
cryptostackers.substack.com
cryptostackers.substack.com
Proof of work plays many roles in the Bitcoin. One role it plays is that it ties a digital token to a real world, scarce, valuable resource. The only thing a digital token can be tied to: computation, or energy. Closed loop staking tokens have no tie. It is a formless, virtual, free floating concept. Not to mention that they are all highly centralized, so they don’t even have confidence in their monetary policy to fall back on.
With Ethereum, Cardano, Solana, etc, your value is in the hands of where the developers choose to take the protocols. They can and have changed their monetary policies, and they will again.
This person’s real concern appears to be “number go up”. It seems to have infected their thinking. They see a system that decided to engineer for NGU instead of stability and confidence, and thinks that’s “not leaky”. It is extremely short sighted.
In the stormy world of crypto, Bitcoin is the port.
No it doesn't. It has one purpose, and one purpose only: to secure the network against double-spending attacks by making it infeasible to reverse transactions.
I won't comment on PoS. I am not familiar with it, but it seems like it bypasses this need simply because it is more of a compromise based on classical consensus.
> With Ethereum, Cardano, Solana, etc, your value is in the hands of where the developers choose to take the protocols. They can and have changed their monetary policies, and they will again.
This is a bad premise because it frames the discussion as a false dichotomy: between Bitcoin and Ethereum/Cardano/Solana/etc. There are PoW cryptocurrencies like Monero, Litecoin, and many others that have community-driven development and institute a less dangerous emission schedule than Bitcoin.
> This person’s real concern appears to be “number go up”. It seems to have infected their thinking. They see a system that decided to engineer for NGU instead of stability and confidence, and thinks that’s “not leaky”. It is extremely short sighted.
This is a misreading of the post. The problem is that (this is an over-generalization) bitcoin's resilience to attacks requires that the price of bitcoin increase twofold every halfening, or the relative hashrate to some outside attacker will be cut in half.
>In the stormy world of crypto, Bitcoin is the port.
This is an idiotic statement. Bitcoin development has completely succumbed to corporate capture at this point by Blockstream and the likes.
I won’t argue with you on this point. A better way to phrase it might be to say “POW has many features or implications for Bitcoin…”
> There are PoW cryptocurrencies like Monero, Litecoin, and many others that have community-driven development and institute a less dangerous emission schedule than Bitcoin.
Disagree that it is dangerous. We don’t have enough information about the future to determine that. It is just as likely that fee markets will be enough, thus implementing some kind of “perpetual emission” would only damage the value of the network.
Nobody will know the answer until it happens.
As the author mentions, the "L2" scaling solutions like LN still require security on "L1". However, to the extent that "L2" is scalable, it will not increase "L1" fees.
I disagree. Bitcoin has never had a hard fork. There isn’t a “Bitcoin classic” chain floating around with an old set of consensus rules. Block stream and/or minors can’t force a hard fork like ETH devs can.
> There isn’t a “Bitcoin classic” chain floating around with an old set of consensus rules.
Yes, there literally is a Bitcoin Classic, and prior to that was a Bitcoin XT. There's also Bitcoin Cash, and many others.
Even excluding hard forks which were chain splits (so upgrade only), there have been several. There were two hard forks in 2010, one to add OP_NOP and one fixing a critical bug where anyone could spend any Bitcoin. There was a hard fork in 2013 (BIP-50) because a block broke a limit and at least one double spend occurred.
Why comment if you aren't educated on the topic? Or rather, why actively spread misinformation?
https://decrypt.co/39750/184-billion-bitcoin-anonymous-creat...
ETC forked because the main project made a change some people disagreed with. They forked because ethereum changed too much.
Around blocksize if I remember correctly.
I'm not saying that blocksize, LN, etc are solved problems. But I am saying that the indecision and lack of community involvement is slowly killing bitcoin. It is succumbing to corporate capture. They continue to invent increasingly custodial methods of using bitcoin.
Because of all that, making a case that someone controls Bitcoin just because they are preventing changes is rather far-fetched. So, while your other points may be valid, this is certanly an invalid one.
Proof of Work and Proof of Stake round to the same thing.
In PoW you input cash to buy miners and power to obtain coins. Cash > ??? > Coins.
In PoS you input cash to buy coins to obtain coins. Cash > ??? > Coins.
In both PoS and PoS those with the most money get to control the system. PoW adds a layer of indirection by wasting mountains of components and a country worth of power but at the end of the day there's no real difference.
In Proof-of-Stake, you are incentivized to keep your money into the system so you can control more and more of it. It's like a ponzi scheme where you are incentivized to re-invest your winnings. This falls apart when everyone starts to cash out.
The use of bitcoin mining as indoor heating is one such example of a dis-economy of scale (but this is an oversimplification because it does not factor depreciation costs). Also, there are systems like RandomX which encourage CPU-based mining, which has economies of scale for home miners or botnets over larger mining operations.
According to whattomine.com, with an electricity cost of $0.03/kWh your cost is about 2/3 of the Bitcoin reward. Combined with a 10X higher reward, that means a Bitcoin miner with that electricity cost gets about three times as much return on investment, as a percentage basis, as an Ethereum staker. That's money they can reinvest in new mining equipment.
So you think the stock market is a ponzi scheme? Shares pay dividends, you are insentivised to keep putting money into the system
Crypto only has investor participants. You cannot ever get more money out of a Bitcoin than someone else puts in buying Bitcoin. Less, actually, because you have to pay miners to operate the network.
Stocks as a whole are positive-sum due to the contributions of non-investor participants.
Futures, options and PoS crypto are zero-sum.
PoW cryptos are negative-sum due to the contributions of miners.
In the long run yes but mining equipment is an asset which can be sold or used as collateral for a loan.
I’m not an accountant but I’m sure there are some tax benefits to depreciation. In a bull run the miners even appreciate in value too so I don’t know how that would work out.
A better way of thinking about mining is it’s a way to dollar cost average into Bitcoin if you have access to cheap power.
Staked coins in PoS can be withdrawn / used to the same effect.
AFAIK it's not possible to simultaneously stake a coin and use it as collateral for a loan without giving up custody.
The markets disagree with your opinion
The market can't disagree with definitions of words. What it can do, is encourage the waste.
PoW may tie the token value to a real resource, but that's a correlation where many advocates get the causation reversed. Because of difficulty adjustment, the energy devoted to hashing is the result of the current price, not the other way around.
Even if we maintain proof of work chains as the fundamental consensus tech, there is absolutely nothing (aside from momentum) stopping the community from decreasing the block reward to the a lower value required to prevent double spends of reasonable size. The current hashing power and energy burn in Bitcoin is absurdly oversized for that specific purpose.
You could even maintain the current coin issuance schedule - there is absolutely no need to burn coins into existence, you could simply distribute them randomly to existing holders.
The gold storage cost is the equivalent of buying a cold wallet and keeping it in a safe place (crypto has that as well, but it's not a problem). The 'mining' is the equivalent of subsidising a banking system
But surely the gold-owner would have to cash out some of their gold to pay the guard in cash? Does it make a difference if he pays the guard in gold and then lets the guard cash it out?
The Protection Department would not last long against a nation-state attack. In contrast, BTC has no nation-state or military protection.
If people decided that gold was not valuable as money, it would retain at least some value based on its usefulness alone.
The consensus mechanism has nothing to do with governance in most chains. Bitcoin and Ethereum governance is both determined off-chain through social consensus, based on what node and client software the honest users of the chain choose to run.
To me, it seems like an interesting take and makes a lot of sense. If the network is kept running by miners, and they need a certain price to make it profitable, then the price needs to keep going up as the rewards halve. Seems straightforward. It's also made clear that the price will eventually need to be astronomical. The second argument is that the price will need to go up even more, since the hashrate will need to go up as well, plus electricity prices will also go up. I wouldn't mind hearing where the author is wrong here.
The argument about Ethereum I am less interested in.
https://jochen-hoenicke.de/queue/#BTC,30d,weight
Constant supply and fluctuating demand will lead to times where you must choose between paying low fees and waiting a long time for confirmation, or paying high fees for faster confirmation. If you zoom out all the way, you can see this has played out with every halving so far.
Not really, once the token exists the real world, scarce, valuable resource no longer exists.
If I tie a fiat currency token (USD, GBP, NOK, etc.) to a real world resource I can exchange the token for the resource.
Source?
https://www.engadget.com/the-morning-after-cryptocurrency-ma...
Even if you only factor the value of human life alone, just the time saved by the hundreds of thousands or millions of worldwide fiat employees who's positions largely would not need to exist anymore should surely be factored into these discussions about resource consumption. And that's before factoring things like wages. Or the ultra-weathy executives. Let alone physical infrastructures, skyscrapers, data centers, private jets, marketing, R&D, legal teams, IT/security, fraud depts, and loads of other internal costs.
I just don't buy that it's much worse than many existing costs we already turn a blind eye to. I believe that the growing use of safe nuclear power and other future alternative energy sources make this a moot position in these arguments anyway.
I opened up my banking app, photographed both sides, input a few key values and, the money was added to my (uncleared) balance instantly.
You don't need bitcoin, you just need better tech in general.
Did I got right?
[0] https://www.joc.com/brazil-brings-end-its-failed-economic-pl... - "But Ms. Cardoso had no regrets. If necessary, she told O Globo newspaper, she would confiscate the money all over again."
Yeah, the american banking system is stuck in the stone age for some reason. You don't need crypto to solve that.
Ask Europeans how often they use checks.
Would it? Would you have actual cash at that point? Physical banknotes in your hand you can then spend in an ordinary shop? Are you genuinely comparing similar things here?
also, how many checks are cashed in person nowadays? they can be submitted via a photo at most big banks, no?
At the very minimum crypto showed that you can run an efficient, highly liquid, double digit billion dollar, fungible or non fungible exchange market in a fully automated and distributed manner.
A huge fiat equity market such as NYSE averages $3B/d, crypto DEXes alone is around $2B/d.
Crypto also completely removes the need for middle and back offices, clearing houses, etc. on these platforms.
Just technology wise (if we were to drop the self-sovereignty of crypto tokens and just use central bank backed crypto euro/dollar/etc to replace the current financial system) a monstrous amount of manpower and energy could be saved by removing the banks, exchanges, brokers, clearing houses, compensation chambers, back office, etc. industries.
In practice, crypto markets are not any more decentralized than others. In real life people use hosted wallets on exchange platform. Transactions happen on a distributed (not decentralized!) ledger. The underlying network is only somewhat decentralized (the mining economy tends to the concentration of big players).
Also the way you seem to imagine we could be "removing the banks, exchanges, brokers, clearing houses, compensation chambers, back office, etc." just shows how much you don't know about how an economy works. Real-world transactions need to be reversible, need escrow, guarantees and a lot of other mechanisms that are by design not available using blockchains based assets (if they are there, it means the assumptions which would have made a blockchain useful have been broken, and that we can achieve the same features and services without a blockchain in a more efficient manner).
Regardless, I suppose that I agree with your point here. But I think that cryptocurrency could possible be useful for everyday transactions: it must first overcome network effects.
> Now some of you are already thinking, hey 7.125/568 is only 1.25% per year. But that’s not exactly how market cap works. This 1.25% system leak doesn’t necessarily translate to a 1.25% price decrease per year.
Far from “not exactly how market cap works”, this is more or less “not even close to how market cap works”.
Econ 101 time: value is subjective. Human beings merely use value as a description - it does not exist inside of any object or inside of any equation. A “store of value” has always been an ill considered term - but this is not the argument against it.
What Bitcoin is good for is being internet dollars that can’t be spent twice. That’s a nontrivial feature.
Funny. My bank account does that too and transactions don't cost me anything. I can even use trusted services to do direct banking when I want to buy something online so the seller can instantly verify the transaction and I don't have to deal with entering numbers.
But then again I live in Europe and our banking system doesn't run on physical paper checks delivered by carrier pigeons. I wonder how much it would cost to upgrade and maintain the US banking system compared to moving the entire US to crypto or Bitcoin.
Crypto/Bitcoin is frequently touted as a solution for banking the unbanked. But the transaction fees alone make the technology useless for that. Existing solutions like M-Pesa are widely adopted and work. They don't even have to make up new currencies to use it.
Just because YOU don't doesn't mean it doesn't happen.
With crypto the proportions are reversed. Those who use it as a currency are a tiny minority compared to those who speculate on it.
Its as if someone traded a tulip bulb for a sack of flour and claimed it was the "new Danish currency".
Econ 201 time: value is concrete, the definition of value is subjective. I can say that the value of two exchanged objects are concrete - that they have the same embedded value.
Most transactions below $100 or so basically happen because monkey brain like shiny banana.
similarly we are bad at managing spread out risks (climate change, road traffic incidents)
But knowing that someone bought something on Amazon doesn't tell you how much the buyer would have paid or how low the seller would have been willing to go. (There are gains from trade and who gets them depends on negotiations and the competitive situation.) Also, one or even both of them may have made a mistake. People return things they purchased all the time, and they may regret purchases they don't return.
We are fortunate that for many kinds of goods, we usually don't have to pay the full value of what we buy, due to competition.
>Econ 101 time: value is subjective. Human beings merely use value as a description - it does not exist inside of any object or inside of any equation. A “store of value” has always been an ill considered term - but this is not the argument against it.
Who cares? The general point here still stands: bitcoin's valuation will have to double every halfening (in terms of some indicator like USD) in order for the cost of security (total block reward) to stay constant in (terms of some indicator like USD).
>What Bitcoin is good for is being internet dollars that can’t be spent twice. That’s a nontrivial feature.
Any cryptocurrency can do this, and many do not have bitcoin's crippled market cap or development structure. The question is this: "Why bitcoin?". Bitcoin's sole advantage over other cryptocurrencies is its name brand.
- Miners fall off the face of the Earth. Bitcoin is still valuable so others rush to their place because there is money to be made.
- Bitcoin stops having any meaningful value due to other factors, so there is no reason to mine.
There is no option that Bitcoin is valuable and everybody stops mining thus opening the network to attack.
Your logic does not follow. What I am saying is this: You cannot continue to halve the mining rewards while maintaining network security.
At some point you reach a point where the cost/benefit of attacking bitcoin (whether that be a deliberate 51% attack or a selfish mining scheme) outweighs the cost/benefit of mining faithfully.
There may be some irrational agents who continue to mine at a loss, but they will be outnumbered by rational agents with more capital.
Look for a boom in that, with all those underutilized GPU miners.
Sure, the protocol will adjust for the falloff in hash-rate as miners ditch their hardware- a perfect opportunity for a malicious entity to buy up their hardware and use it to attack the network.
The world is filled with situations where something with lesser economic value secures something with higher value. That's a sign of efficiency.
My house is worth $250K. But you couldn't capture that much value by breaking in, so I haven't spent $250K on a security system. If I did need another $250K to secure my first $250K investment, it wouldn't be a great investment.
Suppose it only takes $3.5B to attack a $7.3T network. So what? Unless your plan is to burn billions of dollars for funsies, you'll need to capture at least $4B worth of value for that attack to be worth it. You think you can find someone to anonymously make a $4B crypto sale to you, who won't know where to hunt you down when you try to 51% away the transaction after the next block in 10 minutes?
The other aspect is that adopting these systems just increases inequality since the early adopters are massively wealthy. It doesn't work as a liberating medium. At best it works as a useful temporary measure for poorly run inflationary countries. Instead of being at the mercy of a commercial or central bank, you are at the mercy of a small range of individuals who either hold almost all of the cards or develop and thus determine the monetary policy of the coin in question.
Also in the US, transferring Bitcoin to say Russia is sanctioned and illegal. Is it technically possible to push the button and the transaction go through? 100%.
Does it mean it that you wont get in trouble for it? Absolutely not. Congress has an entire page about it. 1 year, 5 years down the line as soon as the govt gets a whiff, all your past dubious transactions that you used to evade sanctions are now Public and used as evidence against you at your trial.
Think of someone wanting to move out of Russia or, say, North Korea.
What about using Bitcoin to overcome such situations?
Are you saying that such uses are breaking the law and therefore they should NOT be possible? And so Bitcoin enabling them is a negative thing?
Most markets are primarily based on speculation: equities, real estate, art, VC.
> you are at the mercy of a small range of individuals who either hold almost all of the cards or develop and thus determine the monetary policy of the coin in question.
In crypto this policy is determined by users. The protocols are open source, development happens in public, and the tech is permissionless - anybody can develop new proposals and contribute changes. This is a far cry from most monetary policies in the world.
There is "art" and there is "art market." If you look at NFT and only see a market, you will only find speculation. If you look at the "art" part, it turns out a lot of people just appreciate the work itself.
[1] https://twitter.com/joepease/status/1542224719365017600
[2] https://superrare.com/artwork-v2/open-the-floodgates-35629
[3] https://www.koeniggalerie.com/blogs/exhibitions/refik-anadol...
>In crypto this policy is determined by users. The protocols are open source, development happens in public, and the tech is permissionless - anybody can develop new proposals and contribute changes. This is a far cry from most monetary policies in the world.
Maybe we would need to explore the differences in more detail, but the value of coins like Ethereum will still depend on the will of the devs who end up having the most influence or the users who have influence over those devs. And despite the openness of it only a minority of users have an active role in determining policy, just like in any large nominally-democratic structure.
> And despite the openness of it only a minority of users have an active role in determining policy, just like in any large nominally-democratic structure.
To be expected - same with open source software like Blender and VLC, not all users of it are also developers, but we all benefit from its openness and can create new forks of the software over time, if necessary. It also spans borders - making governance far more accessible worldwide than the monetary policies of state-backed dollars.
I stopped reading as soon as they quoted that silly inaccurate UoC website that gets quoted over and over again.
Why? Because they even admit, in their own methodology (https://ccaf.io/cbeci/mining_map/methodology), that it is an extrapolation from less than 50% of the total hash. Even worse, is the pools they extrapolate from have been Chinese based. Although, that's changed over time, which invalidates their numbers even more.
Even still, there is no way to know how that power is generated, how much it offsets other power generation, etc... there are just too many variables to simply quote UoC.
At the end of the day, read this: https://www.lynalden.com/bitcoin-energy/
You stopped reading because you don't like what they had to say. Even mining groups who are incentivized to provide the rosiest picture are within the ballpark.
Current hash rate is 245.32M TH/s. An AntMiner S19 Pro consumes 29.7 J/TH, so assuming they're all S19s (a big if) we'd be consuming 7226MJ/s or 2007.5kWh/s. That's 64TWh/yr.
So your absolute best case is 1/2 of the Cambridge number. Which is exactly what they list as the "minimum" number.
As soon as we start factoring in things inefficiency and losses along the way - and the fact not everyone has an S19 Pro - we start to get closer and closer to that flagship number.
But let's make no mistake - even the minimum number is a staggering, mind-boggling disaster of unprecedented scale.
> At the end of the day, read this: https://www.lynalden.com/bitcoin-energy/
Lyn is a zealot and a shill, and her arguments on basically any topic are trivially wrong. I would strongly recommend against trusting anything on that blog and instead look for different sources.
If you want to listen to someone interesting who isn't just performing mental cartwheels to defend the indefensible, listen to Boaz Sobrado, Mario Gibney from Ledn, Lily Francus, Josh Cincinnati, etc.
Lyn is just rewarmed long-form talking points from r/Bitcoin presented uncritically. There’s interesting people in the space but Lyn is more of a millennial William DeVane shilling gold on Fox at 2am with a substack.
Yes, I literally said that. Glad we are in agreement.
> Lyn is a zealot and a shill, and her arguments on basically any topic are trivially wrong.
Yes, trust the guy on HN who is consistently negative about crypto about who to listen to. Sorry, but when people are so adamantly negative about something, I tend to run towards it because it often has a lot of interesting value. You have chosen the 'Chief Censor 451' role in life.
I didn't tell you who to read, I suggested you dug around and found someone else who isn't a zealot and a shill. There's good authors out there, this isn't one. I follow a number of pro-crypto authors too, ones who I disagree with but respect. They're out there.
Lyn is in my opinion only slightly above Pomp (who I know has retired to spend more time with his fiat) and Saylor (who was promoted to customer).
The Bitcoin network pays 238,500 BTC annually for its maintenance, plus fees. This is the amount that will be paid regardless of network difficulty, price of bitcoin, mining capacity, cost of electricity, capital cost of mining equipment, etc.
That seems unconvincing. In fact how much energy is required per hash is something that's really quite easy to measure accurately. At any given time there are no more than a few dozen hardware platforms in use (they get priced out rapidly, everyone is running the newest stuff in the BTC world). Just plug them in and measure them.
All that's left from there is to come up with second order corrections about stuff like grid efficiency. But we absolutely know to quite high precision how many joules were spent to produce the coins we observe to have been created.
That's not true. The profitability of a miner is not measured with their hardware generation but with the energy cost needed to operate them. If you have access to very cheap energy, they can still be very profitable. There is a reason the market price of old mining rigs is not 0.
Electrical costs vary by a factor of two or three around the world. Maybe five at the extreme outliers. Modern mining hardware is tens of thousands of times more efficient than the stuff used less than a decade ago. Also due to growth in the market, the rate of production has been increasing rapidly so the total number of old rigs is negligible anyway.[1]
To rather accurate first approximation, all BTC mining is done with hardware less than two years old or so.
[1] Also also, the recent crash has had the effect of depressing mining revenue and accelerating the retirement of the old junk.
what you know is an estimate of total network hashrate. that's it.
but! total network hashrate moves around all the time, so it is really just an estimate. it has gotten better over time, but these machines don't operate perfectly 24/7 and older hardware is still in use. power outages happen too. stuff is just coming on and offline all the time.
you don't know efficiency (watts to hash) of the equipment on a global scale. you can extrapolate, but it is impossible to know for sure.
there are other losses, like stale and invalid shares. also impossible to know. you don't know how much is 'wasted' either... every single power supply on the planet is a snowflake. this would actually increase power usage estimates since it is effectively truly wasted energy.
disclaimer: I've PoW mined since 2014. Even I, with many many megawatts of power, have a hard time calculating exactly how much power we use and that's having access to the raw data!
What you should be able to do is:
a) Open up your electricity bill and look at the total energy consumption for a given period. Admittedly, I'm not familiar with how electricity is invoiced, but I'd be surprised if there wasn't something that was at least coarsely indicating total energy consumption for a billing period. (Or you can skip several middlemen steps and just take the total cost of the electric bill.)
b) Tot up all the bitcoin mining rewards you received in the same time period.
c) Count how many bitcoin blocks were mined in the same time period.
d) Divide b by c, now you know what fraction you are of the total bitcoin mining network.
e) Divide a by d, now you have an estimate of total worldwide energy consumption of bitcoin.
The only reason I can see that might make this hard is if you mine more than just bitcoin, in which case, replace "bitcoin" in the above steps with "sum over all of the cryptocurrencies you mine"--which is closer to what people want to know anyways. Even then, you can use crude weighting metrics to estimate what the consumption of just bitcoin is, which would at least let you know if the estimate is in the right ballpark or not. The exact number doesn't matter; it instead matters if the real number is closer to 14 TWh/yr, 140 TWh/yr or 1400 TWh/yr.
you don't know efficiency (watts to hash) of the equipment on a global scale
In other words, one person might use 1watt to produce 1hash. Someone else might use 2watts -> 1hash.
That would be literally half as efficient and muck up any quantifiable numbers on a global scale.
Never mind all of the other things I mentioned above.
The reason why this is always such a highly debated topic is literally because it is something impossible to quantify.
And, iirc, then they estimated total consumption from well-funded and very active mining pools. I.e. exactly the operators that you would expect to run the most efficient mining equipment. Meaning all you do is being overly optimistic, as in "we claim mining uses less energy than it actually does"
And, FWIW, the kind of methodology that was used to produce the Bitcoin energy consumption is the same kind of methodology that is used to produce statistics like GDP, inflation, employment--basically every macroeconomic indicator. If you're going to complain that you can't quantify Bitcoin's energy consumption, then to be intellectually honest, you need to complain that the true inflation rate or the true size of any country's economy is impossible to quantify as well.
But a factor of two wouldn't change any of the analysis! If the article said "60 TWh" instead, would that be any less horrifying? No, it wouldn't.
2. The arguments youre responding to about BTC being a waste of energy etc. aren't being made in this post. He's just using energy to estimate leak rate, not to assign any moral value to it.
Also, calling papers "silly" doesn't bolster your argument.
What would you prefer me to call it? The pure definition of silly is "having or showing a lack of common sense or judgment; absurd and foolish." Seems pretty accurate to me.
Of course plenty of people here like to fixate on telling people what a good or not good use of energy is. Which is so ironic to me given that here we are using energy to have this debate and I'm sure someone out there thinks it is equally wasteful.
I'm not sure where the author gets this from, but it doesn't make sense.
Buying and selling bitcoin does not change the size of the pot of bitcoin. Look on the block chain and you'll find no mention of USD, alpaca socks, or Lambos purchased. What you'll find are state transitions with value being unlocked and simultaneously re-locked.
The one exception is a block reward, which requires no unlock (input).
The block reward can be viewed from one of two perspectives:
1. value being created
2. value being unlocked
Either way, the block reward comes into existence on a fixed schedule known to all participants.
The author tries to once again bring in the US dollar as follows:
> In this more accurate representation, we have miners pulling money out of the pot in two ways: transaction fees, and the selling of their Bitcoin mining rewards. The latter is harmful to BTC’s value in two ways. It dilutes the circulating supply of BTC which decreases its value, and it pulls money from the pot to cover energy costs. A majority portion of the money miners are pulling from the system is being burned forever in the form of energy costs, meaning it has no way of ever re-entering the system.
Again, bitcoin transactions merely unlock and re-lock value as an atomic operation. What the author characterizes as "value" is an off-chain phenomenon.
That last part about "being burned forever" is debatable. The residual value of the energy expenditure is proof-of-work that the author conveniently ignores. That proof-of-work is what stands between the Bitcoin network and an attack that rewrites history. So to characterize mining as "burning forever" value misleads the reader into thinking nothing of value remains. This is demonstrably false.
It makes sense if you look at bitcoin like a speculative asset with a cash value, which is how most people who own bitcoin treat it. Bitcoin has a market cap based on its current exchange value, which is the "pot of money". As more people buy bitcoin, it's cash value goes up, and vice versa.
One can argue whether this adheres to the purist view of Nakamoto et al but this is simply how crypto is marketed to consumers, for better or worse. And in this system, the ways in which these various exchanges and defi platforms facilitate access to blockchain technology through cash transactions ultimately define its value, as we've seen these tokens plummet this year.
> Again, bitcoin transactions merely unlock and re-lock value as an atomic operation. What the author characterizes as "value" is an off-chain phenomenon.
People only care about bitcoin nowadays precisely because of what happens "off-chain". If 1 bitcoin was still a penny, nobody outside the crypto enthusiasts would care more than a decade into this experiment.
It's not a "pot of money" because the market cap is not determined by the amount of government currency traded for bitcoin. Trading $100,000,000 for 5,000 bitcoin does not increase the market cap by $100,000,000.
Similarly, trading 5,000 bitcoin for $100,000,000 does not decrease the market cap by $100,000,000.
Since there's a seller for every buyer, there's zero money going into any "pot".
The market cap is determined by what price buyers and sellers agree on at any point in time. That means the market cap can double, or halve, instantly, even though trading volume is a tiny fraction of the change in market cap.
There is no pot.
And it works the same way for every other market, from stocks to bonds to gold and real estate.
The reality is the market value of anything is influenced a great deal by human sentiment, as well as raw intrinsic properties of an underlying asset or the performance of a business.
Investors like to think they are actually "investing" in Google when they buy Alphabet shares even though not a single penny of their money is going to Google for the board to direct toward productive endeavours.
Even earned income in a savings account is an act of faith... in a system that we hope will continue to value an hour of our labour today to something close to what it will be a year from now. The savings account itself isn't a store of value, it's the nature of the labour market here that is actually the store of value.
Every cryptocurrency is its own pot of money. When people sell, they are taking money out of the pot. When people buy, they are putting money into the pot.
It's a popular myth but it's obviously bogus when you realize that for every buyer there is a seller.
So when people buy a gold bar, or 100 shares of AAPL or a cabin at the lake, the money the buyer puts in is exactly offset by the money the seller takes out.
a) are still recognized as being yours and that
b) some entity will be willing and able to exchange it for something of the same or higher value as you think it has now
Ignoring mining, every purchase is a sale, and vice versa. Lots of new people could buy bitcoin and its price could drop in the process. What you maybe mean is something else about supply and demand?
This is not how trading and market cap works, at all. There is no "pot of money" either.
It’s been curious to me just how related all these coins are, even as speculation devices.
When Bitcoin falls, they all fall, when it rises for the most part they all rise.
The correlation to completely separate pots is something I don’t think anyone can fully explain.
It is only relatively recently that ETH significantly decoupled from BTC in this sense.
There are also infinite ways to construct and weight a price index. Go to different websites and you will notice significant discrepancies. One doesn't necessarily have to be more "accurate" or "better" than the other.
Right now everything seems to be tracking the NASDAQ, though...
It's the same reason the bubble in tech stocks crashed in the same general time frame that all of the crypto crashed, and the housing market began to freeze up.
It's risk off, as the Fed pushes up rates and investors and speculators grow increasingly fearful of more to come. The cost of debt and leverage also went up considerably.
Or as Warren Buffett likes to put it, you can think of interest rates as gravity as it pertains to asset prices and speculation.
If you add up the net worth of all the people who deeply understand how each coin works, you don't get anywhere near $500 billion.
I translate the original title to "Bitcoin is a terrible store of value", which I already knew, especially since the 75% drop in value. Yes I know, it's gone up a bazillion percent since 2012, but trees don't grow to the sky and saying otherwise is the kind of thing they tell suckers at casinos along with "There's only 21 million that can ever be mined so they are guaranteed to go up due to scarcity that can't fulfill demand." The demand part of the equation is unknowable and could go to zero.
> Some people actually believe that Bitcoin is “thermodynamically backed”. This is utter nonsense. There's no such thing. BTC is backed by demand just like everything else in the world. Remove the demand and price falls.
How am I so far off? Author is talking about value measured by price and the effect on that value by demand.
Whether some think it's leaky, or that it is a melting ice cube or ultrasound money is irrelevant. Despite or with support from opinions of others, it is ultimately you who makes the decision where to store your value.
Only time can say if you've made a good decision, as not one person can predict the future, and likewise you must suffer or enjoy the consequences of your decision.
The irony is that the whole message is that it doesn't matter if you disagree or disagree, only the quality of the decisions you apply your framework towards. Time will reward those who take time to understand this stuff and punish those who don't. Liking the message is entirely besides the point.
Depends on the laborer. There's no law of nature that grants me the ability to make good financial decisions as an award for my labor. The ability to manage risk is not an ability that gets unlocked once you accumulate enough money to invest. Now, I have to both work hard to make money, and gamble to protect my future.
PoW is easy mode and PoS is the logical consequence of it.
First, letting people calculate random hashes is easy to implement, because you don't have to check useful stuff, just a hash.
PoS then is just giving people that did these calculatios, who now value their tokens because of the work they put in their creation, an incentive to validate txs, or they will lose that work.
Chains like Filecoin, Sia and Arweave go a harder route. Their PoW is storing real data of real users, so the "miners" get rewarded to do actual work. It's a decentralized version of S3, and S3 also was one of the first services AWS started with.
I think, in the next years, we will see more and more of these useful proofs cropping up. And people will understand the value they're "storing", no pun intended.
You could be right, but the first time something like this was discussed was around 2011 [1], and here we are 12 years later, still waiting for a widespread implementation of a "useful" proof of work.
[1] https://primecoin.io/ was the first result of that.
People easily understand when you take money to store their data. That might not be the case for prime calculations.
Just ask the poor slobs in Russia or Venezuela who can’t sell their software and feed their families, or in Canada who threw $50 to support their trucker buddy and got their bank account frozen.
Also - there is easily $7B of “stranded” energy in flare gas and hydro “rotating reserve” available to secure Bitcoin and similar systems. Besides, the limiting factor for a successful 51% attack isn’t the energy — it’s the capacity to actually create the hash capacity to execute the attack. Not even the NSA could do that, let alone some non-state attacker.
At least, speaking as a European, this is where the large majority of my tax euros go. If your government spends your tax on less useful things then maybe the solution is to work towards a better government, rather than trying to hide your savings in untaxable havens.
(Actually I have no idea how easy it is to hide money from the tax collectors using crypto, but I assume that's one of the appeals).
EDIT: user above me edited their comment to reference Russia and Venezuela. My comment about working towards a better government still stands although I recognize it's not an easy task.
Actually this isn't true. your tax euros go to paying down the debt on loans taken out to pay for these things. Under this system ultimately one of two things happens -- it's either unsustainable and you lose those niceties, or, the euro gets devalued and the only way you get those niceties is by absolutely routing the lower class (even under European gas and water socialism the divide between rich and poor is increasing. Get ready for a big hike in this divide over the next five years as the euro loses its PPP and needs to start defense spending to safeguard trading relationships). Especially hurt will be underprivileged Europeans, like stateless Turks in Germany or immigrants living in banlieues in France.
Depends on which one but let's take pure bitcoin because that's what the post is about.
Governments have 3 main tools, tracing, freezing and recovering. The breakdown is different in crypto vs fiat.
In BTC, the blockchain contains all previous transactions, everything is public. If you send your BTC through middlemen it'll be mixed in with their assets but you can still follow the trail perfectly. So tracing is easier with BTC than fiat, because you won't have to convince some Cayman island bank to hand over the cash.
Next, there's freezing, which is harder. You can't block transactions to Iran on the chain, but you can block entry and exit points when trading with fiat, on most exchanges. Since freezing is technically equal to censoring, it's a feature.
Recovery is almost impossible, to the point of you can even lose your own private key, let alone someone who stole from you. The government can't produce a valid private key any more than your quad-core IOT fridge.
TL;DR avoiding tax is hard to do for retail people, simply because the regulators are watching the entry and exit points. So even if you tornado cashed and zcash yadda yadda and your funds are untraceable you eventually need to buy fiat for them, because you'll need the fiat for the Lamborghini.
> rather than trying to hide your savings in untaxable havens.
Kinda OT, but why suddenly is tax evasion a problem with retail crypto of all things? We have institutionalized tax avoidance for the biggest players (megacorps & ultra rich) to the point where nobody raises an eyebrow anymore. Seems inconsistent to me.
The name, of course, tells you, but people seem to think that "currency conversion" is some transformative process where rubles just become bitcoin.
Which is of course: false. To turn rubles into bitcoin, someone who wants to buy rubles has to be willing to buy them for bitcoin. This means someone local, who can transact in rubles, needs to have a supply of bitcoin.
Where are they getting it from? They can't buy it overseas because if you could exchange rubles with foreigners then you could also just buy USD. They could mine it, but that still means they need to be willing to accept rubles for their bitcoin, and yet the scenario presented suggests there's a path to exchange rubles for USD which is more favorable.
In fact at every step of the process, you have the problem that the only way to get Bitcoin from your stranded currency, is to buy it from another party locally.
It's just Forex concerns, and you're going to be paying out the nose constantly on a "what if". Of course, while there's no sanctions, you could also just buy USD directly.
The cost of securing bitcoin is not just in electricity, it is also in the depreciation cost of ASIC hardware.
I guess it would be easy for the NSA to pull off the 51% attack if they are able to backdoor the handful of ASIC manufacturers.
I don't see why. The current value of BTC mined in a year is around $6.5 billion. Hardware lasts, let's be generous, 2 years. No one will mine BTC at a loss, so the total cost of mining BTC for 2 years must be less than $13 billion. So for less than $13 billion, the NSA can create a new BTC mining network at 50%. That seems well within their budget. And if they sell their BTC, they can probably be cashflow positive before destroying the network.
The NSA doesn't go to the NVIDIA store to buy $13 billion of GPUs. Measuring only the monetary value conveniently ignores the bottleneck of underlying resources to build the hardware to do the mining. Where does the NSA find $13 billion worth of top-shelf GPUs or ASICs? Having money is not enough if there is no one to sell you.
That hardware takes natural resources, knowledge know-how found only in a few companies and a non-negligible amount of rare earth minerals to build. That's a serious bottleneck and not something you can stealthily enter in in that capacity, NSA or not.
Leaving aside the fact that they could have private secret production capability and I would believe it, the market is probably being flooded now as BTC is tanking. GPUs are apparently getting cheap again.
Wait why are they slobs?
https://news.ycombinator.com/item?id=32854528
Considering that a USD payment company can literally destroy a business without a reason, how confident are you about that "little or no guaranteed demand" part?
Blockchain, for all it's promises of decentralization, has rapidly centralized on a few players who's interpretation of the chain are practically law, and thus, is subject to the same problems as any other centrally governed system. The many differences include that stripe (and it's competitors) can handle millions of transactions whereas bitcoin struggles on a few thousand.
More specifically, policies like "know your customer" are great in theory but very hard to implement in practice, which is why companies like Stripe tend to be ruthless with their merchants.
Crypto tries to sidestep this entirely by arguing that it's trustless from the ground up. The problem with this is that it facilitates the creation of an unstable marketplace full of interconnected players and nobody knows who is legit and who is a complete crook. Projects like Terra show that when the crypto market recedes, entire segments of the blockchain ecosystem are at risk of being wiped out because there is no transparency to their underlying operation. It's all gravy in a boom cycle, but the bust always happens.
Crypto and its derivative products can only truly thrive in an environment that is free of market downturns because there's absolutely nobody at the wheel making sure that these companies are actually doing what they claim to be doing.
Using the argument of what happened to one coin as a proof that blockchain is necessarily bad is like saying the Internet is useless because there are scams that happen online.
OpenSea and NFTs have nothing to do with Bitcoin nor blockchain, the technology.
Those who use centralized custody services are not using Bitcoin. They are aping. They are posing. They have no clue what they are doing.
A $25 trillion economy, a massive payments ecosystem, a large payments company in Stripe, and you're talking about isolated examples. Even if there are ten examples, it's ten in tens of thousands of counter examples where businesses aren't having that problem.
The obvious point being: all those other businesses aren't worried because your premise is so rare. And for the small number of businesses that end up in the negative scenario, they're not prominent enough to matter as a warning sign to everybody else.
You'd need a very big, very common problem to spur the kind of adoption premise you're suggesting. It doesn't exist at present. A big share of Stripe's customers (along with other processors) would need to be suffering like that example.
This is literally extrapolating from outliers (notable news stories about fraud or mishaps) to make predictions about whole data sets (reliability of transactions using the US Dollar).
No one can prove to you that dollars are safe if you don't believe it. But no one has come up with a more reliable alternative yet, and BTC is laughably far down the list of challengers.
If the daily block rewards (subsidy + fees) becomes a small enough fraction of market cap, then 51% attacks become likely.
I'm pretty sure he's got that backwards.
A summary for those of you not quite grasping it is, mining means bitcoin has capital outflows, and to maintain a stable price needs equal capital inflows in the form of new demand. It's security is proportional to this inflow/outflow value, so if you lower the capital outflow you require less capital inflow but reduce it's security. A network with no capital outflow is a network with no mining happening at all, a network with high security means a network with either high capital inflows or a steady drop in price for each coin. The more spent on mining, the quicker the price will drop if new money doesn't enter the market. Compound this with the relationship between market cap and liquidity and it paints a very bad picture. Add the business about halvenings and it's worse. An asset that requires capital inflows cannot store value, an asset that has no security cannot store value, and those are your only options with bitcoin, so it isn't a store of value.
I'd love if someone could refute it, I couldn't find a comment in this thread that did, the only refutation I can come up with is if bitcoin were actually used as money by everyone that would be the same as capital inflows equaling capital outflows and you'd have no change in value, although you'd have a change in value for an entire economy as you burn resources to secure it which would be price inflationary which amounts to the same thing.
The network pays miners to secure the network.
The network earns transaction fees. It also mints new money through inflation.
In its bootstrap phase, while the network isn't earning enough in transaction fees, the network relies on inflation to supplement its earnings in transaction fees. It pays its miners with a combination of the two. This is not too different from a startup relying on stock options to incentivize employees, contractors, painters of art pieces etc, while still in its growth phase.
The rest of the article conflates the market for BTC, buyers, sellers, holders etc, with the above.
To be clear, I'm not making a declaration on what is or is not a store of value.
> "$7.125B / 91,250,000 tx = $78 per transaction."
> "But we just proved the store-of-value narrative breaks down because of the $7.125B/year leak and the fact that mining is unsustainable long-term unless it is subsidized by transaction fees, which will not exist because transacting on Bitcoin is slow and expensive."
Every time a miner sells their reward, whether it be a coinbase transaction or fees, it puts sell pressure and drives the price down. For bitcoin to even stay at a stable price requires corresponding buy pressure, new capital. An asset that continuously requires new money to enter it's market to maintain its value is not a store of value.
It’s not a store of value as the supply is infinite. You’ll read in many places that only 21 million tokens will be produced. This is false. You can freely create as many new ones as you want by copying and pasting the source code any time you like.
That one is on the “real” chain and another is not, hasn’t actually mattered at all - as long as another chain can be perceived to have any value, the original is undermined.
Satoshi wrote about this at the very start - the notion that if it ever came to have any perceived value, even a minuscule value, then it’s achieved its goal of being transferable. That’s true of any and all others too, though.
This has been seen many times over the decade since: any time the perceived value climbs steeply it’s seen as being “overpriced” and money starts flowing into smaller “underpriced” tokens, nullifying it’s use case as a store of value.
Slowly and eventually I think the passive speculators will come to learn this, it’ll stagflate, then it’ll decline back close to nothing when it’s not producing the 300% CAGR it’s holders demand.
Bitcoin mining is not comparable to gold mining because the purpose of bitcoin mining is to secure the network's transactions, the fact that bitcoin mining produces bitcoin is merely a side-effect of this. If gold mining ceases to exist, or if a single company dominates the world's gold mines, that doesn't prevent people from moving gold ingots around. It doesn't allow the gold mining monopoly to double spend. But this is true of bitcoin. So it's unwise to make such a comparison.
I think it's clear that the cryptocurrency market is chiefly driven by speculation in its current state, and this strongly perturbs the nature of cryptocurrency in a strange way. But I think it is more interesting to discuss what happens at some equilibrium state as t -> inf.
> The Bitcoin network is doing around 250k transactions per day (source).
With lightning network Bitcoin scales to far greater magnitude than that, amongst other things it collapses the entire premise of the article.
https://blog.kraken.com/post/13502/kraken-now-supports-insta...
I also dont want to be richer or join a club.
Note: with the current network hashrate. If some miners become unprofitable - they turn off their equipment, total network difficulty decreases, and the hashrate needed decreases too.
If it was that would mean all stock investments are "pyramid schemes" too. Did early investors in companies like Apple, Amazon, Google, or Tesla benefit from a "pyramid scheme"? They saw value before others did, got in early, and reaped the rewards once the majority cottoned on to their value proposition.
It's no different with Bitcoin. People see value in it before others have and may reap the benefits if demand continues to rise from society seeing value in its properties. You can argue about whether that perceived value is justified or not, but ultimately only time (and the market) will tell.
There was a great article, probably lost in time, which explained how the dot-com crash of the 00s was basically the collapse of an internet advertising Pyramid, and a smaller collapse of a dark-fiber pyramid.
(Not saying that crypto is any scheme; because there is not one cryptocurrency and because it's a dumb oversimplification of the problem)
Really? Just google "bitcoin pyramid scheme"
It's a very common criticism.
I won't bother to respond to his core argument because it has been countered plenty of times before and as I said above it's ultimately a pointless endeavour to debate, but I did want to pick out what I found to be the most egregious part.
> Bitcoin was a phenomenal first attempt, just like Blockbuster was amazing while it lasted. But to think that we nailed it on the first try is crazy. I cannot think of a single piece of technology that hasn’t been improved for the better over time. Would you prefer to use a computer from 1988? A tablet from 2014? A car from 1932? Would you attempt to fly across the Atlantic ocean in the first airplane ever made? Of course not. Technology gets better with time. Period.
This is an outstandingly poor take from someone who clearly doesn't know the history of "e-money" or understand the core promise of Bitcoin, and is a common argument by "crypto defi bros".
The first, but lesser problem is that... no, Bitcoin isn't the first attempt at "digital money". The whitepaper specifically references previous attempts, why they failed, and how Bitcoin addresses those shortcomings. Bitcoin was just the first, arguably, successful attempt.
The second, but more significant problem is that the author thinks "crypto" is the new technology that's just starting out and being evolved here. Perhaps it is in a way, but that's missing the point. The technology been evolved here is almost as old as civilization itself.
Money.
Money has an incredibly long history of evolution through various technologies from stones on the island of Yap, shells, cloth, glass beads, ledgers, and yes, gold and other metals. In the modern age we saw paper certificates appear as IOUs for gold, then this link was severed in 1971 by Nixon, we saw the emergence of credit cards and e-commerce which all come with their various advantages and disadvantages.
So framing Bitcoin as the "first" of a new technology is recently and historically... wrong.
There's also the argument that the design space of money is limited. Bitcoin arguably fills in the final properties of money that needed to be improved on from gold (salability across space and divisibility) and fiat (scarcity i.e. salability across time). Vijay covers the properties of good money in his well-known article [1] (now book) better than I could. If you buy this argument the logic goes that there's not much more room for improvement when it comes to money.
But who knows what someone might think up next...
[1] https://vijayboyapati.medium.com/the-bullish-case-for-bitcoi...
https://newsletter.banklesshq.com/p/why-the-flippening-is-go...
But then wallets inevitably get lost and become impossible to recover.
Is this a planned feature? What’s the economic effect of a currency that can only decrease in quantity of issued notes?
But really, I don't think anyone knows what a deflationary currency would be like. It's not like fiat currency will go away.
There will probably be some people who want to fork Bitcoin to increase the supply.
That makes no sense. The entire point of difficulty adjustments is to keep a constant average blocktime.
There is no "pure" store of value. All investments, including gold, all currencies, art, baseball collectibles, even food change their value over time. When people mean "store of value" they mean something that appreciates more than the commodity they exchange it for.
Ethereum is leaky, too. Since the merge, supply has grown by more than 2500 ETH.
Supply growth is not a bad thing for a crypto currency. Ideally the protocol rewards participants enough to incentivize them to secure the network, but no more.
The reason it was able to do this without lowering the cost of a 51% attack is that it no longer has to rely on rewards alone. It can also apply penalties. Certain provable attacks result in automatic destruction of stake. In PoW terms, it's as if a 51% attack caused the attacker's mining rig to burn down.
On top of that, a portion of Ethereum fees are burned instead of paid to stakers. The supply is still slowly increasing, but at a (fairly modest) fee level of around 16 gwei the supply starts to shrink. The higher the demand for blockspace, the faster the supply shrinks.
"the ETH supply will begin to shrink" https://news.ycombinator.com/item?id=29080421
> only issues about 10% as much
10% is 3 halvings. I'll take a nap.
If nothing else governments will maintain the network so that China, Russia, USA... does not control 51%
"It dilutes the circulating supply of BTC which decreases its value" isn't necessarily true. Although a lot of Bitcoiners say an increased supply decreases value and that a decreased supply increases the value, that's assuming demand stays constant. If demand rises with an increase in supply then the price may remain the same or increase (if the demand was high enough), and likewise if the demand lowered with a decrease in supply then the price may remain the same or decrease (depending on how low the demand gets). The author mentions supply and demand later in their post but fails to reference it here.
>If the network is valued at $568B, but costs $7.125B/year or more to secure, that’s a pretty big leak for something that is supposed to preserve value.
It sounds like the author is trying to say that selling is a "leak" of value. This premise doesn't sound right to me considering that a miner has to sell their Bitcoin to someone who is buying in, and an exchange of Bitcoin shouldn't be seen as value leaving the system. I think the word "leaky" also doesn't help convey the overall message of the post which is that Bitcoin cannot be a store of value because the mining that secures the network is unsustainable over time and the fees will not be enough to cover this unsustainable cost ("mining is unsustainable long-term unless it is subsidized by transaction fees, which will not exist because transacting on Bitcoin is slow and expensive").
>According to Glassnode, (as of April 2022) ~63% of BTC’s supply had not moved in over a year. So it looks like our denominator is actually closer to 0.37 * $568B = $210B
It doesn't make sense to claim that the value of the network decreases by the proportion of users who don't move their Bitcoin within a year.
>So now imagine two Michael Saylor whales are just dumping ~700 BTC on the market every day or around 250,000 BTC/year. That’s essentially the energy cost of running the Bitcoin network. Who pays for that cost? Not the miners. They are profitable. They pass it onto the Bitcoin holders. Bitcoin holders pay for it in the decreased value of Bitcoin caused by this energy expense.
The miners shouldn't be assumed to remain profitable if Saylor is dumping Bitcoin. Assuming demand is consistent and the supply of Bitcoin rises, then that Bitcoin dump would negatively affect the order books and therefore the price and the amount of money a miner would get for every Bitcoin sold.
>Bitcoin was originally designed to be peer-to-peer cash, then when everyone realized it doesn’t scale, the store-of-value narrative emerged.
This is false, the store-of-value narrative didn't "emerge". Satoshi wanted Bitcoin to be used for payments, yes, but that wouldn't restrict its usage to only be for payments. Satoshi mentioned in the bitcointalk.org forums that the currency would be "deflationary" (implying it can act as a store of value as well): https://bitcointalk.org/index.php?topic=12.msg62#msg62
>What about the lightning network? I can do a separate write-up on the the lightning network, but it would simply be a more poorly written version of this article: ...
The linked article also makes a lot of assumptions about how big centralized hubs will get and ignores potential future solutions for smaller hubs of centralization and locality. They also attack the known fundamental problems with Lightning network scaling while ignoring the advances made for things like liquidity, etc.
>Would you like to know how else I know Bitcoin is not thermodynamically backed? If you could remove the high energy consumption without sacrificing security or decentralization, it would be a net positive for Bitcoin.
I agree with this, energy consumption is not the end goal but it is the only plausible way to achieve the goals Bitcoin desires. POW creates an independently verifiable ledger based off something that can't be replicated easily by the parties that secure the network (which other algos like POS can't pride themselves on).
My conclusion: While I believe the author has a point, I also believe that the mining model is sustainable. In my opinion the way forward is to build numerous decentralized protocols on top of the Bitcoin blockchain and shift the Bitcoin blockchain's primary source of transaction traffic as layer 2 settlements. This will help decouple the value of Bitcoin as an asset with the number of transactions on the blockchain and will still allow demand for on-chain transactions to grow and meet the supply-demand curve.
BTC miners er being build on places with excess energy or wasted energy places and on renewable energy which have lower costs and mining chips are becoming more and more efficient. So the 'leak' to miners probably goes down.
NOBODY is in control of BTC anymore which is big plus IMHO.
BTC is the coin that created and made the crypto space possible.
So If you force me to buy something that has to be around in 20 years. I would buy BTC.
The most significant recent upgrade is Taproot: https://www.investopedia.com/bitcoin-taproot-upgrade-5210039