Prior to the merge ethereum’s trust was controlled by the organizations with the most money who bought/built massive data centers to mine it.
With the merge & staking that abstraction layer has disappeared and it’s still the organizations with the most money who control it.
Sure it’s great that non-productive math problems no longer need to be solved & consume so much energy and hardware to make it all work. And it may be an incremental improvement over traditional global finance because there is a much greater ability to publicly scrutinize what goes on.
But no one should consider this a fundamental paradigm shift & democratization compare to traditional financial systems controlled by a a very small number of big players. Their influence still can override the mining process that’s supposed to be the final word on transactions.
Although I’ll clarify a bit: I’m actually a proponent of having a layer of human judgement that can fix a problem when things go off the rails. The issue is that in crypto this layer is even less accessible to smaller players than in traditional finance. The DAO was able to throw its weight around and get a hard fork, but how many other groups with much less influence have suffered from similar problems and exploits without that same benefit?
Yes, even in traditional finance there are some types of irreversible fraud. But for every day transactions, for using money as a daily part of transactions necessary to live your life and not just as a speculative investment, crypto falls far short.
If a criminal spies on my credit card # as I make a purchase and uses that to go on a spending spree I can fix it with the credit card company with little cost but a few hours of time and frustration. If my wallet is pick pocketed or I simply lose it by accident I have a similar recourse to mitigate the fallout. Crypto? No. It may, eventually, have some other benefits though that’s yet to be seen. But as a major change & liberation of people from massively powerful banks and governments there seems to be nothing more that shouted rhetoric and wishful thinking.
Not using up a goat load of electricity is like 99% of why this change is great. Let people speculate on their funny money without harming everyone. A lateral move on the other details is rather unsurprising.
Agreed. My top concern with cryptocurrency is the huge waste of energy inherent to PoW. It's really, really good to see ETH pull this off. There are a pile of other problems in crypto, but it's fantastic to see this biggest (IMO) issue addressed by the #2 cryptocurrency. I actually thought it might never happen. It's a day to celebrate for sure.
Honestly, PoW seems like a big problem but the reality is that miners have been boosting the solar companies. Solar is cheaper than most other power sources and any miner will tell you that the cheaper the power the more profit they make.
What does it help to build solar power plants only to use up all of that capacity on useless computations?
All else being equal, building solar panels is a negative; producing and transporting solar panels consumes materials and produces CO2. The reason building solar power plants is usually good is that they reduce the need for even worse forms of energy production. If you build a solar farm, just to waste all or most of the energy it generates, what you have done is a net negative for the environment.
This is in addition to the fact that a whole lot of mining uses existing infrastructure, which negates the gains from building out clean energy and keeps demand high enough to require dirty energy, as /u/oofbey covered.
> What does it help to build solar power plants only to use up all of that capacity on useless computations?
> All else being equal, building solar panels is a negative; producing and transporting solar panels consumes materials and produces CO2. The reason building solar power plants is usually good is that they reduce the need for even worse forms of energy production. If you build a solar farm, just to waste all or most of the energy it generates, what you have done is a net negative for the environment.
I agree with this in the short term, but my argument is more about economies of scale: The more people want large amounts of solar, the better companies get at producing it and the cheaper it gets. Because of that cheapness fossil fuels could be taken off the table completely resulting in a short-term downside (losing resources and producing CO2 for unnecessary computations), but a long-term win (a world free from fossil fuels)
> This is in addition to the fact that a whole lot of mining uses existing infrastructure, which negates the gains from building out clean energy and keeps demand high enough to require dirty energy, as /u/oofbey covered.
Fair. Just because miners in general are ravenous for solar does not mean that all individual miners are able or willing to use solar “off the grid”. I’m not saying it’s perfect or that PoW is the right direction, I’m only pointing out that it’s not the absolute evil that it’s been painted as.
Another way to look at it is that by using solar for mining, other forms of capacity are not wasted in the same way. The waste is then in using up of materials and manufacturing that would go to "ordinary" use otherwise.
1. We build 1TW of solar panels, PoW mining uses that 1TW to do useless work.
2. We don't build 1TW of solar panels, and don't do that additional 1TW of useless work.
Worlds 1 and 2 have the same impact on the electricity grid. But in world 1, we're emitting a whole lot of CO2 and consuming a whole lot of rare materials to build solar farms and electronics, while in world 2 we don't. Clearly world 2 is better for the environment?
Unless some very serious technical breakthroughs happens in more efficient manufacture, energy capture efficiency and energy storage, by the point that around 1% of Earth is covered in solar panels, Earth probably ran out of "useless" land space and materials to make solar panels and the associated infrastructure to actually use said energy to something useful.
That's rather the point; tech breakthroughs happen when there is a drive to achieve something, increased demand for solar causes that pressure to strive and thus increases the likelihood of innovation. The more panels that are built, the better we get at building them, innovate, repeat.
The answer to your question is simply Halvings, every four year the quantity of energy used halves in bitcoin terms but the infrastructure remain and can be repurposed to more profitable uses.
Miners are turning back on shuttered fossil fuel burning power stations. Pumping carbon into the air for zero public benefit. of course they’d prefer cheaper power if they could get it - everybody does. But just because they prefer clean power in no way excuses the huge waste of carbon that powers most mining.
Imagine trying to quantify the amount of energy that goes into the current financial system with all its inefficiencies and manpower, time and energy that it takes.
I would love to see this number compared to the amount of energy PoW consumes.
While I can’t compare “manpower” energy, someone did the math comparing ethereum to ec2 - ethereum was 1 million times less efficient in processing power, network costs, and storage.
Those numbers were obviously from the POW network, so unknown how they will change post merge, but arguing that current systems waste energy too seems a bit biased.
You got downvoted because “PoW is bad for the environment” is a strong mainstream argument.
PoS is pure oligarchy but people loves it because “it saves the planet!!1”
Eventually, people will understand differences.
PoW is worse w.r.t power concentration. PoW is just PoS with additional steps. Such as having connections with energy providers, being able to buy newest bitmain ASICs early, etc.
Using electricity isn't the problem. Anyone could use vast amounts of electricity as long as they are willing to pay the price for it. The problem is carbon emissions.
The switch to PoS is a non-issue from my perspective: a centralized system changed from using method A to method B, I don't understand why I should care.
Bitcoin mining is increasingly being used to prevent methane emissions in stranded gas reserves. Having an economic incentive to not flare or emit methane but instead using it for generating bitcoin allows Bitcoin mining to become net carbon negative.
Reducing methane emissions is vastly more effective at preventing climate change than reducing co2 emissions.
> The switch to PoS is a non-issue from my perspective: a centralized system changed from using method A to method B, I don't understand why I should care.
Because every bitcoin transaction costs $60 in electricity. That is a monumentally stupid amount to pay. It's $125 per kB.
Proof of stake incentivizes capital directly. Proof of work incentivizes capital via the ability to find prime numbers, which limits you to people who are willing to spend $1000s to millions of dollars to do it efficiently. Limiting the validators like that drives up costs massively.
> Bitcoin mining is increasingly being used to prevent methane emissions in stranded gas reserves. Having an economic incentive to not flare or emit methane but instead using it for generating bitcoin allows Bitcoin mining to become net carbon negative.
No, it is not. Projects like that may be branded with bitcoin, but bitcoin miners are buying the same electricity as everyone else. The rising cost of electricity is causing new sources of power to be exploited.
Instead of being used for something useful, that electricity is being turned into waste heat.
«Because every bitcoin transaction costs $60 in electricity.»
A common misconception. Only a fraction (about 1% at the moment) of Bitcoin's electricity consumption is derived from transactions, because transaction fees account for only about 1% of miners revenues. The average transaction fee is about $1 at the moment, so a transaction "costs" only $1 in electricity because it provides $1 of extra revenue to miners who can subsequently spend it on opex (electricity).
I haven't computed it, but you need to take into account the energy it takes to mine a block and the number of transactions in that block.
The transaction fee is irrelevant, as the fees being paid were mined in the past and already "paid for" with electicity.
In the end, transactions drive the chain forward. You don't need (a lot of?) them to continue mining, but they are the only "useful" part of the blockchain.
I have no idea if bitcoin operates at max capacity, but I think it does. If so, I think it's perfectly fair to attach mining energy use to transactions.
«I haven't computed it, but you need to take into account the energy it takes to mine a block»
No, because the energy consumption is the same regardless if a block contains zero or a thousand transactions. Therefore it is misleading to attribute mining energy as the "cost" of transactions. And Bitcoin doesn't operate at max capacity: its lightning network is very under-used at the moment.
As to the transaction fee, it is relevant: even though it was already "paid for", it is being redistributed to miners again, therefore drives energy consumption further up than if it was not being redistributed.
Also worth considering: Proof of Transfer consensus mechanisms like Stacks allow entire networks to run in paralleled with Bitcoin by piggybacking on Bitcoin's consensus mechanism. That's a whole big pile of transactions happening that go entirely unaccounted for by folks who just count the number of transactions in a block.
It is intellectually dishonest to use marginal cost here and not average cost.
A transactions costs $60, in the sense that all transactions together over some period, say N, cost $60*N over that period.
That is invisible to the user insofar as it is financed through an increase in money supply [1] which accrues to the miners at the expense of all other BTC holders.
[1] Increase in money supply is sometimes, particularly by Austrian economists and crypto acolytes, identified with inflation. The irony...
It would be intellectually dishonest, if the foundations of your reasoning were sound.
The increase in the money supply, aka block subsidy, is a value transfer from BTC holders to miners compensating them for enforcing the consensus rules of the ledger. Very similar to if you were paying fees to a mega secure vault company, though no vault company can provide decentralised value storage; value storage without any single point of failure. Considering the unprecedented level of security on offer, the value for money is astonishing.
The miners job is to construct a block.
They're paid via a special transaction called a coinbase (a large American exchange named their company after this special transaction), which they can make payable to whomever they wish.
They take incoming transactions and may include a certain number of those; the limit is 4 million weight units, as opposed to a certain number of kB as is commonly believed.
Each transaction they include will usually include in addition to fixed recipients, a special "spend to anyone" transaction output, this is to encourage a miner to include your transaction preferentially as they can make this portion payable to themselves.
They may attempt to include multiple transactions spending the same funds to different recipients, or to insert a coinbase transaction wherein they have made payable to themselves any number of bitcoin, or include more than 4 million weight units worth of transactions, or make some other attempt to break the rules of consensus that any block they published will be tested against by thousands of other computers who will then choose to store locally the new block as the new strongest valid chain tip, or disregard.
Before publishing the transaction though, the miner must also solve the double spending problem, by providing proof of work.
They do this by going back to that block they're constructing, and firstly putting a random number in the nonce field of the header. Then, they pass the blocks bits into a sha256 hash function, take the resulting hash and hash it again with the sha256 function.
The result must meet the current block height difficulty, for example to just happen to start with 18 leading zeroes.
If it doesn't, the nonce is incremented in the header and the block is hashed again.
Without an appropriately difficult proof, first of all you wouldn't know which valid block had come first, and so would have double spend problems where after receiving payment, the block containing your payment was dropped and replaced with another, or outside of bitcoin, anyone can for example send you a transaction receipt via e-mail stating you have been paid, on its own it's worthless though, you will have to rely on PayPal or a bank to ultimately tell you if you have received a payment, and PayPal or bank payments are reversible in a way Bitcoin transactions are not so even then, you don't have the same degree of certainty (furthermore your funds are not in your custody, instead you have lent your money to the bank; they owe you it).
I hope this clears up the difference between these different fees and what they are in payment for, please DYOR next time before speaking on a subject as though you have some knowledge of it, much of the confusion around Bitcoin results from people who have not studied it wanting to sound knowledgeable.
I don't know much about cryptocurrency, but I'm not sure I understand how your response relates to the question of whether, on average, bitcoin transactions use about $60 worth of electricity.
Thanks for this summary of the basics of mining (that most people here are familiar with). None of it presents a challenge to my two arguments:
1. BTC holders pay a fee of around 1.7% p.a. of their holdings (until the next halving) to miners (through an increase in money supply),
2. which amounts to around $60 per transaction currently. (Higher if BTCUSD rises or the number of transactions falls; lower if BTCUSD falls or the number of transaction increases, which it cannot much because BTC operates not too far from the limit.)
> please DYOR next time before speaking on a subject as though you have some knowledge of it,
Ah, the old "you just don't understand crypto" chestnut...
The time taken to refute bs is much greater than the time it takes to generate bs. Your argument is at best mistaken and at worst intentionally misleading. My summary of mining is better than most you will find online and, only lacking in mention that the previous blocks hash is also included in each new proposed block to ensure each builds upon the chain tip.
Even if I hadn't studied the source code and game theory myself, I think I trust the technical analysis of the Steve Wozniak's of the world over yours.
A simple way to see through this argument that transactions cost $60 would be to say, that being the case, why can I currently pay $1-2 for a transaction. And if no transactions occur, why would miners still be able to continue creating blocks?
I think it's very likely you simply dislike Bitcoin and want to mislead people about it, for personal reasons.
$60 (or, more currently, ~$83) is the block reward, at the current price, divided by the average number of transactions per block. It does not even include the added incentives from fees.
The value you try to compute is currently exactly $79, including fees (which are about $1). If the number of transactions were to double (or halve) tomorrow, that value would halve (or double). You are just dividing fixed ongoing rewards by a variable metric unrelated to the rewards (transactions). You are propagating a misconception that somehow this represents the cost of a transaction.
Yes, and the block reward can be claimed without any transactions in the block.
On BTC this never happens, on other chains it's quite common, since no one uses them.
That $60 in electricity 'per transaction' is simply not correct, the value of the block reward doesn't come from transactions. The transaction fee does.
> Because every bitcoin transaction costs $60 in electricity. That is a monumentally stupid amount to pay. It's $125 per kB.
Its incredibly fallacious to measure the cost of electricity per transaction on Bitcoin. Blocks can be completely full or utterly empty and still use the amount of power. You're also missing the point of the power consumption. Its not used to move capital from one person to another, its used to secure the network from attacks and preserve its integrity. Measuring the cost of electricity per transaction is like measuring the amount of energy bank vaults and the US army use per dollar transaction. Stats like the one you quoted don't take into account the number of Lightning network transactions happening off-chain but is secured by a past on-chain transaction.
> No, it is not. Projects like that may be branded with bitcoin, but bitcoin miners are buying the same electricity as everyone else. The rising cost of electricity is causing new sources of power to be exploited.
> Instead of being used for something useful, that electricity is being turned into waste heat.
One, value and usefulness is subjective. Because something is "useless" for someone like you doesn't mean its useless to others. I, and many people around the world, find Bitcoin to be incredibly useful and worth the electricity. Secondly, if oil and gas companies could profitably monetize flared methane, they would have already. They don't because trapping and transporting the methane would lose them money. Its an industry standard to simply release or burn the methane instead. So Bitcoin IS useful in that respect.
> Blocks can be completely full or utterly empty and still use the amount of power.
It has been steady around 1500 tx/block for years.
> You're also missing the point of the power consumption. Its not used to move capital from one person to another, its used to secure the network from attacks and preserve its integrity.
I'm not. That's a completely insane amount of money to pay for that service. It's totally unnecessary.
> Stats like the one you quoted don't take into account the number of Lightning network transactions happening off-chain but is secured by a past on-chain transaction.
They don't have to. All those techniques are equally applicable to POW, but POW doesn't spend $18 million daily on electricity to do it.
> Secondly, if oil and gas companies could profitably monetize flared methane, they would have already.
Oil and gas companies sell oil and gas, not electricity. Bitcoin miners are not running methane gas turbines. Electricity companies are.
>>It has been steady around 1500 tx/block for years.
>>That's a completely insane amount of money to pay for that service. It's totally unnecessary.
You cant know exactly how many transactions are processed per bitcoin block. The introduction of the lightning network and other 2nd layers mean any one of the ~1500txs per block could in reality be a batch of a 1,000,000 or more transactions being settled. There could easily be 15,000,000,000,000,000 txs per block, think about what that does to any $/tx calculation.
Bitcoin is cheaper than visa because it is designed to process infinite transactions for a fixed security cost.
The energy is not used to handle the transactions, the energy is used to secure the network.
> Instead of being used for something useful
Bitcoin uses less energy than YouTube. Wether you think having a decentralized, global monetary system that gives everyone an opportunity to own sound money that the government cannot take away is more or less useful than YouTube is of course something everyone is entitled to have an opinion on.
It might be that you are correct, it is too early to tell, but you are no the final judge of what is useful in the world or not, so this quote is just your personal opinion and nothing more.
I believe this is totally wrong - I think Bitcoin uses significantly more than YouTube. Where did you get your numbers?
The 2020 Google Environmental Report [1] lists the total energy consumption of all Google/Alphabet data centers as ~12.2 TWh/year in 2019 and growing at about 2 TWh/year. (See page 32.) So in 2022 the approximate usage for all Google/Alphabet properties, not just YouTube, would be about 18.2 TWh.
Meanwhile, Statista estimates Bitcoin as consuming about 177 TWh/year [2].
So this means Bitcoin consumes about 10x as much as not just YouTube but all Google/Alphabet data centers combined!
There are some urban legends about YouTube using much more energy than it does; some of those urban legends are refuted here: [3]
Whether Bitcoin uses less energy today than YouTube is immaterial. (As is whether Bitcoin counts as "sound money", which I'll leave to the side.) What's important is the energy use per transaction, the total of which -- if scaled up to match what's handled by traditional banking -- would be absolutely staggering.
My lifestyle of keeping my high-end PC running all the time, cranking the AC down to 68, turning all the lights on, and so on, would of course use less energy than YouTube. But if everyone behaved as I do it'd be a bad thing (don't tell Kant).
"If scaled up" presumes incorrectly that the costs are somehow linearly bound to the number of transactions, they are not, so that whole line of reasoning is flawed.
Let's add up the carbon footprint of the traditional financial ecosystem, in whole. I think once all the externalities are factored in (including things like minting and handling physical cash and coin), doing it all on a computer makes more sense even if POW is energy intensive.
Converting energy into economic value is the opposite of waste. That is what mining does.
> I think once all the externalities are factored in, doing it all on a computer makes more sense even if POW is energy intensive.
No, it's not even close. Bitcoin currently uses as much electricity as 31 million US residents. One transaction uses more than two months of average residential usage.
> (including things like minting and handling physical cash and coin)
Why would you include that? Do you think people won't want to carry money? Do you think bitcoin makes cards, POS processors, and cash obsolete? Do physical wallets not take energy to make and run?
Regardless, the amount of energy used to make and use physical money is very small:
1. coins are irrelevant; the most expensive coins are cents, which cost about a cent to make. The total amount of coins made is much smaller than the amount of paper dollars made, so the value of energy used is small compared to the total cash made.
2. The US spends 1 billion annually to mint currency. Bitcoin spends 6.5 billion USD on electricity directly.
Transactions do not have an energy cost unto themselves, blocks do. If the entire world were to stop sending Bitcoin transactions for one hour, it would make almost no difference in the power consumption of the world's miners. Roughly 7 to 10 empty blocks would be produced. The mining process provides network security all on its own, transactions or no transactions.
>Why would you include that?
Because I said "all externalities". Bitcoin competes with the traditional financial system, including all the people and infrastructure involved in cash handling. That includes not just minting, but distributing it, collecting it, counting it, securing it, and so forth. And that is a cost borne not just by the United States federal government, but every government with physical currency and every bank on the planet. The idea that doing all this with physical objects is less power consuming than doing it with data is ridiculous.
If you want to make an honest apples to apples comparison, you include everything. Mining power usage is the single largest driver of bitcoin energy footprint granted, but it has a lot less other stuff attached.
You're telling us that since mining costs don't vary with the number of transactions processed, they don't count. Production costs that don't depend on the level of output are called fixed costs. [1] They're still costs. Pretending that a cost doesn't exist doesn't make it cease to exist.
And I'm telling you that the production cost is tied up in blocks, not transactions. This is not up for debate, it is intrinsic to how bitcoin works. If you send a transaction, the only power consumption involved in that act is involved in the transmission of the data and its broadcast to the network.
The monstrous energy usage comes from trying to brute force a single hash. It is entirely decoupled from transaction volume.
> production cost is tied up in blocks, not transactions
Fixed costs are amortized. The block's footprint is spread across transactions. Arguing otherwise is like someone taking the power bill of a bank to infer the cost per teller-window transaction, and the manager arguing that teller-window transactions don't burn energy, branches do. Yes, sure. But also irrelevant.
And yes, if the branch tripled in size its energy use would reduce the per-teller energy footprint. (Assuming constant transaction volume.) But that's a hypothetical.
>You can still amortize the cost of the block across its transactions
Sure, if you're more interested in talking points then useful metrics. Increasing or decreasing the block size limit would lower or increase the "cost of a transaction" (since blocks are generated on a schedule commensurate with difficulty, which is roughly a function of how many miners there are) without actually changing the amount of power consumed.
What you're doing is basically correlating the world's average temperature versus the number of pirates and declaring that pirates are responsible for global warming. In reality, the two variables are unrelated and not even correlated.
Are you really arguing that the number of blocks and the number of transactions in BitCoin are two variables that are “unrelated and not even correlated“?
> the block size limit would lower or increase the "cost of a transaction"
Assuming constant transaction volume and other factors related to difficulty. You have a point. But it's far from a panacea for proof of work, and certainly not at the threshold to derail coming taxes and regulation. (Though one might find a way to structure the taxes such that they reward a productive increase in the block size.)
But what do you amortize the fixed cost over? Refugees can use bitcoin to hold money while fleeing dangerous situations. Not being forced to do a transaction is the value in such a case.
You can't send a transaction without mining a block. Therefore all the costs that are incurred mining a block are costs that are incurred sending transactions.
Changing the maximum block size would change the "energy used by a transaction" since block production is a factor of fixed time, not transaction volume, so the comparison is absurd on its face.
It's not a comparison. The fact is that the costs of processing bitcoin transactions are predominantly fixed. This tells us that bitcoin doesn't have economies of scale. The average cost of a bitcoin transaction doesn't decrease as the number of transactions increases. This makes bitcoin uncompetitive in relation to pretty much any other transaction processing technology.
And once that block size changes, the energy used per transaction will go down. It's really very simple, stop making it complicated. Blocks are there to hold transactions - that's their whole purpose. The fact that technically you can mine an empty block is an irrelevant detail of the protocol: bitcoin would not keep getting mined if there were no more transactions.
> The mining process provides network security all on its own, transactions or no transactions.
The mining process provides a fixed amount of network security. $125,000 per 15000 transactions. The fact that it would still cost that much money even with zero transactions is not a feature. It's not a good thing.
Each individual block is secured. You can't just add more and more transactions to each block without reducing security.
> Bitcoin competes with the traditional financial system, including all the people and infrastructure involved in cash handling.
Right now bitcoin competes with practically nothing. How much pizza is bought with bitcoin vs cash? You're effectively assuming that all those other functions are either irrelevant or that bitcoin can somehow do them for zero cost. Neither is true.
> And that is a cost borne not just by the United States federal government, but every government with physical currency and every bank on the planet.
60% of global federal reserves are in dollars. Dollars are the world's dominant currency. Compared to the massive disparity in energy use, it doesn't matter if even only 10% of global currency is in dollars. Dollars win.
Plus, if you're trying to compare with the places where cash really matters -where they can't use VISA or cell phones to transfer money- then bitcoin is certainly at a huge disadvantage after you have to buy computers for all those people.
> The idea that doing all this with physical objects is less power consuming than doing it with data is ridiculous.
Again, you're not replacing coins with data. You're replacing coins with USB sticks.
But you're right! It IS ridiculous, because it's completely insane how pathetically inefficient bitcoin is.
>The mining process provides a fixed amount of network security. $125,000 per 15000 transactions. The fact that it would still cost that much money even with zero transactions is not a feature. It's not a good thing.
Completely wrong, you cant know exactly how many transactions are processed per bitcoin block. The introduction of the lightning network and other 2nd layers mean any one of the ~1500txs per block could in reality be a batch of a 1,000,000 or more transactions being settled. There could easily be 15,000,000,000,000,000 txs per block, think about what that does to any $/tx calculation.
Bitcoin is cheaper than visa because it is designed to process infinite transactions for a fixed security cost.
Lightning network and other Layer 2 solutions are a joke. Those are only created because the Bitcoin network was intentionally designed to be slow and congested, to make it artificially expensive, and waste ridiculous amounts of electricity in the process. If those things actually worked then someone could make them work with anything else as a settlement layer, even traditional currencies. There is no actual reason for them to use Bitcoin.
So, the reason these systems use something like Bitcoin (or Ethereum, whatever) is because the goal is to build programmatic money, and you can build that on Ethereum and you simply can't directly build that on a "traditional currency" without first writing an adapter (such as some stable coin, as either a centralized regulated entity or as a decentralized protocol) to some decentralized programmatic system that you can then piggy-back on top of as a settlement layer.
The way that then, for example, (and this is really glossing) Lightning works is to provide a number of hypothetical signed Bitcoin transactions that rely on each other in a way where, if someone attempts to screw you over, you can put down one of the other transactions and move to a different state. You make it sound like Bitcoin is purposefully crippled to prevent this kind of performance enhancement, but one of the few and subtle big changes to Bitcoin was to support this!
> The mining process provides network security all on its own, transactions or no transactions.
It seems to me that if nobody transacted, nobody would be able to sell Bitcoin, mining rewards would be rendered worthless, and mining would stop.
Sure, you can't point at any given transaction and blame any particular emissions on it, but surely it's reasonable to amortize it and assign a fraction of the emissions during each block to each transaction, considering that Bitcoin has no value without them.
No, because there is no relation between transaction volume and block production times, and this is a protocol level constraint. The network aims to produce a constant number of blocks per hour, which happens no matter how many transactions are available to be included in that block.
Here's an example: If, say, the maximum block size was doubled so they could hold twice as many transactions, this would cut your energy usage figure in half, but actual energy consumption by miners would barely change at all. Similarly, if the maximum block size was halved, your figure would double, but the energy consumed would not. If there were no such thing as a maximum block size, your value then scales linearly with the amount of transactions that can be crammed into 10-ish minutes of time.
I dunno, isn't that like saying "if planes were all half-empty, the carbon emissions of the plane would barely change, so you can't blame the carbon emissions on any of the passengers"? Yes, the "marginal carbon emissions" of a single transaction is ~0, much like the marginal carbon emission of taking an empty seat on an airplane is ~0, but by this logic nobody on the plane is responsible for any carbon emissions, which is obviously silly, so in lieu of any better accounting method, you just amortize the carbon emission of the plane across the passengers.
If the block size was reduced to, say, one transaction, then the economic value of the Bitcoin network would surely drop, mining rewards would be worth less, miners would quit, and the electricity use would fall. It's the economic value of the transactions that end up rewarding miners; I can't see how people transacting on the chain aren't partly responsible for the miners' emissions.
I can't think of any obviously better way to assign a number to that than just amortizing it across the number of transactions. It's a meaningful number that explains something about how much usefulness the network produces per unit of electricity. Doubling that by doubling the block size (or, halving it by halving the block size) would be a meaningful change!
>But by this logic nobody on the plane is responsible for any carbon emissions
That is strictly true. This is why the concept of a personal carbon footprint (something dreamed up by a British Petroleum marketing team) is inherently inane.
>Doubling that by doubling the block size (or, halving it by halving the block size) would be a meaningful change!
How and why? It would change your metric, but it wouldn't make the network consume one single watt less or more power. Its efficiency is unchanged.
A machine that spits out one widget per watt is less efficient than a machine that spits out 10 widgets per watt. Even if there is exactly one widget machine in the world, it is always turned on and always draws the same amount of energy, one type of machine would produce more widgets than the other. That machine is more efficient. It is more useful for the same energy input. It's a totally reasonable metric to compare widget-producing machines by!
If the bitcoin network is a transaction-producing machine, the more energy it takes to produce the same number of transactions, the less efficient it is. All else being equal, spending more money and energy for the same result is worse than spending less money and energy.
> If the entire world were to stop sending Bitcoin transactions for one hour, it would make almost no difference in the power consumption of the world's miners. Roughly 7 to 10 empty blocks would be produced
Yes, and then the average cost of a transaction would be even higher than the ridiculously high amount it already is.
> Let's add up the carbon footprint of the traditional financial ecosystem, in whole. I think once all the externalities are factored in (including things like minting and handling physical cash and coin), doing it all on a computer makes more sense even if POW is energy intensive.
Cryptocurrency didn't event the idea of using computer ledgers instead of physical cash and doesn't get to take credit for it. There are dozens of ways to pay by computer that don't involve wasteful PoW.
> Converting energy into economic value is the opposite of waste.
Agreed, but I still don't see the value being produced by the cryptocurrency system. The value (not price, but value) that it delivers compared to traditional visa/mastercard/etc. seems marginal at best (and perhaps even negative once you account for the externalities that cryptocurrency-enabled crime imposes).
PoW crypto was using over 1.2 percent of the world's electricity. That's an insane waste irrespective of any kind of comparison to whatever other industries.
I looked into your statement about bitcoin mining preventing methane emissions and it doesn't add up to me. Oil drillers already flare the methane, which turns it into carbon dioxide. The solution these bitcoin miners are implementing is to burn the methane in a controlled manner so they can harness the energy produced for electricity to mine bitcoin. The same chemical reaction occurs, converting methane into carbon dioxide. The companies internal research claims this reduces carbon dioxide equivalent units, but I'm pretty skeptical. Of course, they would want their research to show they are doing something good. Sure, I guess it is more useful to harness the energy than to just burn it fruitlessly, but I don't see how it reduces emissions. Is there something I'm missing as to why this would make sense?
I have been on oil and gas pads and drill sites. Flares have significant incomplete combustion. A financial incentive (lots outside north America) to pipe it into a generator encourages those with troublesome gas leaks to fix it.
If you release the CO2 into the atmosphere, it doesn't really reduce emissions. However, because miners can harness the energy in a profitable way, they could afford to sequester or scrub the CO2. That would make oil and gas companies look a little greener, which is even more of an incentive. I believe some miners are doing this already.
They may or may not be able to afford to sequester the carbon. Even if they do that (and I have never heard before that they do), in the long run would surely be out-competed by other miners who don't bother.
I agree Bitcoin probably won't be carbon negative any time soon if ever. But electricity is definitely not fungible as production is not always in the same place as demand.
If something is not 100% fungible, it can still be fungible to some extent. Given the size of our electricity grids and to a lesser extent the capacity to store energy, electricity is definitely fungible at some level. I don’t have the numbers but I’d say this level is pretty high.
OP didn't say there were no goods as fungible, they said few. Fossil fuels can be more fungible without them being wrong.
Arguably, "fossil fuels" are not as fungible as electricity anyway. I can take electricity from any outlet and, with the right adapter, use it to power any electric appliance. I cannot take gasoline intended for my car and use it in a grill, or in the furnace, or in a jet, no matter what equipment I buy.
It’s the other way around. You can transport barrels of oil overseas and use for trading but sending electricity requires infrastructure that may take some time to deploy. It’s the same problem with gas pipelines.
Genuinely curious: how does burning methane to generate electricity make an organization carbon negative? Do you have a reference for this?
I understand that methane is orders of magnitude more significant from a greenhouse effect point of view than CO2, but I don't see how it would be economically viable to burn methane "in stranded gas reserves" to generate electricity for Bitcoin mining but somehow it's not viable for other electrical consumption purposes.
The methane gas has already been burned for decades, adding bitcoin to the equation just made you look
No other use case has been profitable for the gas by products so the sites pump it directly into the atmosphere
Bitcoin mining is profitable and so the methane is not burned into the atmosphere, the molecules are stripped for electricity in simple catalytic converters and energy used on the spot (some sites are completely disconnected from the grid, these are the best use cases of this. others are connected to the grid which gets the most debate. in both cases no other solution exists in bitcoin mining’s absence and there was no political will to meet climate goals ever)
So the solution solves itself simply because it is an environmental solution that is profitable
I asked my question because I doubted the assertion being made without any math to back it up. It seems unlikely that
1) this could ever be a significant enough amount of Bitcoin mining energy to make Bitcoin "carbon neutral", and
2) if it ever did become a significant source of energy for Bitcoin, it would likely also be viable for other uses, eliminating the carbon offset argument
I'm not doubting that you can put a cheap and inefficient boiler generator on top of a methane flare and label it "green energy."
1) North America has lots of this kind of energy. Gigawatts/hr being spewed into the atmosphere as an unprofitable waste byproduct as is.
2) Transporting this energy is a cost. Storing and then transporting the energy is a cost. And other kinds of computation on site requires much greater infrastructure, like internet and big box data centers, which these remote sites do not have. Bitcoin mining barely needs any internet bandwidth and doesn't need a low latency connection either. It creates an asset that can be easily sold to people willing to buy that asset at a price far greater than the costs to create it.
Its important to understand that these are partnerships between two companies.
The existing energy producer who is taking a risk on a dangerous operation, largely technophobic and takes far too long to understand how it benefits them. And a separate crypto mining company searching for cheap energy, driven purely by the market.
The mining company sees the energy. The energy producer needs to reduce their waste byproducts.
Its semantics and pure coincidence about whether “less hydrocarbons billowing directly into the atmosphere” meets your criteria for “carbon offset” or “green energy”, its also what happens
Interesting framing. I'd frame it as Bitcoin having a local unexpected environmental positive externality. (As opposed to negative, which it has most other places without an unplugged methane leak.)
It's not negative or unexpected. Bitcoin naturally uses the cheapest energy it can find (arbitrage), which usually ends up being stranded energy. Something like a third of all electricity generated is wasted. So the idea that Bitcoin is unique compared to any other arbitrary & subjective use of energy is just anti-Bitcoin propaganda & green dis-information.
Whereas it may be difficult for one reason or another to transmit energy from where it's most abundant (a desert, or other remote areas), it's not hard to co-locate miners in those places & incentivize further development & utilization of that energy resource.
Does the expression "perverse incentives" mean anything?
This argument is like energy incentives in the world were mostly fine, except that some energy was stranded and could only be picked up by Bitcoin.
For something that is supposed to "change the System" it for sure is often pitched like the System can never change. That missing (enforcement of) regulation makes it economically beneficial to just vent methane without even flaring, is not something to celebrate. It's nice that the incentives lined up decently, this time. We should work on fixing the incentives so the methane can stay in the ground where it belongs. Don't dig that well.
Say, you have access to cheap hydro power somewhere. The powerlines are not yet completed to export the electricity to where it could be more useful. Along comes a Bitcoin factory and sets up shop. Suddenly, the incentives are not in favour of ever completing that powerline, for benefits amortized over decades, when you can sell that sweet, sweet Bitcoin today.
Of course, the owners of the Bitcoin factory would never try to exert their influence and try to keep their cheap source of hydro power, or keep the methane flowing. /s
I will make sure to bring popcorn for the future culture wars between ETH and BTC, now that their incentives are so divorced.
> For something that is supposed to "change the System" it for sure is often pitched like the System can never change. That missing (enforcement of) regulation makes it economically beneficial to just vent methane without even flaring, is not something to celebrate. It's nice that the incentives lined up decently, this time. We should work on fixing the incentives so the methane can stay in the ground where it belongs. Don't dig that well.
Bitcoin was never billed to change that system, and yet it is anyway.
You're trying to let perfect get in the way of good, failing all modes of consensus until the world is uninhabitable, while this just works and fulfills the goals of all political parties at the moment: reducing emissions and being economical.
Bitcoin mining on existing fracking sites is a stop-gap solution at best, right now nobody is making new wells with the perk of adding miners or renting space to mining firms. Right now, the fracking operations are just meeting their climate goals, the captured state regulator no longer needs to be in the awkward position to rubber stamp emissions exemptions, the governor no longer needs to run interference for the whole fracking industry. Its only a stop gap solution because if 10x more wells were made after a 90% drop in emissions, then we're at the same place we were, so if you begin seeing that then be vigilant about that. But thats really not a bitcoin issue, thats a fracking issue that you're putting on bitcoin because you've had zero influence your entire life on the oil and gas sector, the separate higher standard doesn't make sense though, as - for now - this stop-gap solution is here and working. "oh no but its bitcoin, that other thing I spent so much of my energy hating" cope, my guy. this is working.
> Of course, the owners of the Bitcoin factory would never try to exert their influence and try to keep their cheap source of hydro power, or keep the methane flowing. /s
You see how you just substantiated my argument that Bitcoin naturally ends up favoring renewables, linking up the most efficient use of energy?
It’s not like there is (or should be) a limit on renewable energy production.
In order to argue that wicked corporations are wasting massive amounts energy for profit, yes this requires the idea of finding very cheap power, i.e. something like off-peak or excess.
miners are driven purely by the market to find cheap energy sources
its not altruism by any means and it doesn't matter
this is what happens, frame it any way you prefer, it doesn’t really matter as the constant is that North America is the best market for this
all levels of government are noticing and investors are noticing and they all need the sustainability framing, I don’t think I had made any framing in my reply
Articles that talk about the “amount” of energy bitcoin mining uses are going to keep coming out, if you’re more familiar with that framing, the source of energy has been more important than the amount for a very long time, to convey environmental impact, and this is just one example
I don't think I get your point. To me, any renewable power going into bitcoin mining, is contributing nothing except "securing the blockchain".
I don't even have a stake in this game, except living on the same planet as everyone else. And it's getting warmer. Any power spent on bitcoin is power not spent solving more practical problems elsewhere.
As I wrote in my other reply to your other comment
You're trying to let perfect get in the way of good
The power is never ever ever going to be spent on anything else, the energy used would be purely hydrocarbons in the atmosphere. This is what is happening for decades. Absolutely zero sentiment and protest has or would change that.
Bitcoin mining has changed that. If that is what makes you think of a solution that nobody else has thought of for decades, just because bitcoin makes your tummy ache, be our guest.
> To me, any renewable power going into bitcoin mining, is contributing nothing
I also think it will be helpful for you to get the terms accurate, this benefit comes from stranded energy, using this energy is more sustainable. This doesn't necessarily mean renewable or clean, it can though. Since we are talking about reducing methane emission, this isn't a renewable or clean source, it just has 90% drop in methane and hydrocarbons going into the atmosphere while stripping them apart in catalytic converters just like cars do. This is good!
> Reducing methane emissions is vastly more effective at preventing climate change than reducing co2 emissions.
This statement caused me to do some light research. I discovered that methane is 25 times as potent as carbon dioxide at trapping heat in the atmosphere.
> Methane emissions decay gradually, with an average lifetime of about 12 years (“perturbation lifetime”, which is what matters for climate purposes).
> This will increase by roughly 35% if methane concentrations double, or decrease roughly 25% if concentrations return to pre-industrial levels.
Methane is actually 150x-ish worse than CO2, but it breaks down over time. Ameliorated over a long time it's 25-30x worse.
Rough part is that breaking down methane depends on OH radicals in the air, of which there are a fixed amount. The more methane there is, the slower methane is broken down. If there were a sudden massive release of methane, it would stay at that 150x potency for a very long time. Fun!
> OH radicals in the air, of which there are a fixed amount
To make the complexity really mind-blowing, no, the amount is not fixed. It varies, and temperature is one of the largest factors. But it's not a simple relation, because air currents are also very important, and temperature also changes those.
Which is why oil production without a gas connection tends to flare the methane. With the renewable transition we will in a not too distant future just leave the oil in the ground instead.
Messaging and information on actual greenhouse gas emissions and impact have long been god awful, often to the point of borderline misinformation. It's a source of tremendous frustration, in part because spending enormous political capital solving the wrong problems is actively counter-productive
I hope you’re not reading any paper books - the environmental impact of paperbacks is phenomenal when compared to eReaders.
And of course, you would never waste energy by purchasing a hardcover, that would be morally reprehensible.
Honestly wouldn’t surprise me if a kid playing minecraft on an old computer had drastically less impact on the environment than your average book snob - especially the “I buy paper for the experience” kind.
Here’s one analysis that takes those factors into account, and eReaders still come out massively on top on average.
Paper isn’t the problem, it’s the fact that’s books are heavy and bulky, so the transportation and storage have massive carbon implications.
On top of that, most books end up in landfill as a result of not selling in stores. If you care about the environment and read books an eReader is a worthy investment.
Do they have an API for refusing to accept ETH mined via proof of work? This is a start, but personally I'm still never going to accept BTC or ETH as payment; their history taints them forever. The real value burned in the mining of these currencies is lost forever, and the people who did the burning should absolutely not be rewarded.
The thing is, most "crypto haters" on HN are just regretful no-coiners. Crypto is exactly the type of thing you would except HN to love, it ticks the box in so many ways, except for the one where... They forgot to buy some and are forever resentful.
I honestly struggle to believe this group of people truly care that much about crypto's effects on the environment; from the people I've spoken about this with personally, they always come across as hyperbolic and dishonest.
To some degree I believe it is their brain subconsciously trying to justify their hared because they were "left out," the same way some people, for example, irrationally hate The Avengers because they never saw it and got sick of hearing people talk so much about it around its release. Each reminder of being left out burns you just that little bit more, and it's hard to be objective and come around to something once you feel that way about it.
I'm not surprised this "ya but, crypto still bad" comment is the top comment here on HN. It's pretty funny to me.
I made money on crypto, and still believe it's just a Ponzi scheme that's wretched for carbon emissions. I'm certain that I'm not alone.
The fact is that crypto doesn't really solve any pressing problems for normal people. Fiat currency and related digital networks work just fine, all of the time.
People working on cutting edge technology are all speculators in one way or another even if they don't realize or can't quantify the opportunity cost.
The one thing I will agree with the OP about is, HN had some of the earliest posts about Bitcoin and it was generally poo pood by the audience potentially due to an inadequate analysis. The long term HN readers that missed the boat may suffer from some forms of regret which can surface as disdain or hatred.
I mean, how many assets that come across this site have 20,000,000% to 69,000,000% returns and just require you to pay attention to benefit?
Do I wish I'd invested in Bitcoin early? Sure! I'd love to be a millionaire (or billionaire). Who wouldn't?
Using that as an excuse to dismiss criticisms out of hand isn't particularly sporting, though. I feel like my criticisms of crypto (such as they are) are independent of whether I'd prefer to have been a millionaire.
My view is that crypto's goals (e.g. decentralized, deflationary, no transaction reversals) are non-goals, but even if those non-goals were goals, both PoW and PoS fail to effectively solve them, especially the decentralized part. PoS sucks more than PoW on this axis: PoS encourages centralization within the system (those with more ETH control the chain), and PoW encourages centralization outside the system (those who command more assets to buy GPUs and energy controls the system), so it's really silly and funny and pathetic both fail at the same thing, with PoS moving the needle in the wrong direction, but also, it was a non-goal to begin with so who cares I'll just go with the one that doesn't set the planet on fire please.
As in with PoW I can migrate once the ecosystem is damaged (i.e. just mine something else, sell the hardware, w/e) with PoS I need that ecosystem to thrive to profit or to even exit it.
> liberation of people from massively powerful banks and governments
The difference between business and governments is that in business every dollar has a vote, whereas in a democracy every adult has a vote.
"liberation of people" can only happen by having a working democracy. And a working democracy can only exist when there is (democratically elected) government. So it's not like people should be liberated from government, people should be the government.
Therefore I think the best situation is where government controls the money, and we the people control the government.
No it wouldn't. There is no definition of democracy where 51% of the people enslaving the 49% would constitute a democracy. Except the one you just imagined for the purposes of "winning" an argument on the internet.
This is why people who give a shit about Democracy talk about minority rights, and free media, and non-discrimination. These are the core tenets of democracy.
replace “enslave” with gradually weaker words until you find the statement you, personally, agree with.
51% decide that 49% shouldn’t be allowed to drink alcohol. that’s a comparatively minor example of “tyranny of the majority” (which happened within living memory). now explore all battles you’ve been on the losing side of. abortion access? funding of overseas wars? legality of drugs?
i find it incomprehensible that if you look at things honestly you won’t find at least some instance when you’ve felt repressed by the democratic rule of the majority. “enslavement” is simply that repression exaggerated for the purpose of making you see it.
> This is why people who give a shit about Democracy talk about minority rights, and free media, and non-discrimination. These are the core tenets of democracy.
no, these are the core tenets of egalitarianism. democracy is merely one process by which we may approximate egalitarian ends. if you care about egalitarian ideals (or above, “liberation of the people”), you should be open to other processes which achieve them — not just the one you were raised to know.
As long as I'm still free to try to persuade the 51% that I was right in the last election I lost and I have a chance to win next time, then it sounds like a perfectly good system to me.
Just because sometimes you lose in a democracy doesn't make it tyranny. Quite the reverse. If you can't accept a political system that doesn't always let you get your way, then you're the tyrant.
WWII Japanese-American internment camps: though done by executive order, polls show 59-93% support, so it would have passed even through ordinary processes. is it good that this extremely non-egalitarian outcome is legitimate within a democratic political system?
if “yes”, we have radically different views that probably can’t be reconciled on a HN thread (could talk about them on a different platform — check my bio).
if “no”, then i’m not sure i understand your argument.
That argument essentially boils down to "democracy is illegitimate because sometimes majorities vote for awful things." There are many formulations of that argument. It gets repeated over and over.
But I've never seen a satisfactory answer to the followup question which is what political system do you envision can prevent such bad outcomes? Surely non-democratic societies produce similar bad outcomes more often.
That's why these arguments frequently reduce to one person saying "democracy is illegitimate because sometimes majorities vote for awful things" and the other person replying "democracy is the worst form of government, except for all the others."
In a democratic system I believe the majority of people would vote for a constitution that says no group can enslave another group and that such a "constitution" then can not be changed by 51% majority. In other words protect the rights of minorities.
That's how all democracies work, 51% can't just make any enslavement-law they want. It is still democracy because the constitution that says so was approved democratically.
Democracy is not a single "thing". It is an adjective describing societies. Some have more of it, some less. Not so long ago women couldn't vote, nor blacks. A clear dividing line in current-day politics is that some people seem to think we should have less of it.
i think we're on the same page then. thanks for summarizing the conflict so clearly.
earlier in the thread we touched on (literal) slavery, and it was pointed out that it's basically irrelevant to modern, established states.
but how much of this is political, v.s. social and economic/technological? to state the obvious, slaves didn't gain legal rights by voting or participating in the political system. but moreover: if you took a democracy today, picked one race within it, excluded them from the political process and let everyone else vote on whether to enslave that race or not, would they do it?
i can't really imagine it. social norms have shifted so much that the politics just play a substantially more minor role here.
now take the WWII internment camps. if this replayed today, how would it be different? we didn't have RVs in the 40's, but today anyone with one could reasonably escape to the hills and live in only mild discomfort for at least a few months. information flows are generally faster, so anyone at risk of being interned would probably have more time to react. on the downside, surveillance means your bank account might be frozen, and your employment -- even if remote -- jeopardized. who really knows exactly what would happen -- more importantly technology plays a huge role in shaping what at first looks to be a strictly political outcome.
to get to the point: social norms and technology are inextricably linked to the same outcomes which political processes seek to control. to ask "what political system ... can prevent such bad outcomes" is incomplete: because that's only one of three large systems which drive these outcomes.
an extremely simplified view of these systems is something like this:
- social norms: the informal ways we relate to and interact with each other.
- political systems: formal process for legitimizing large-scale power relations between individuals and groups. underpinned -- especially in democracies -- by social norms or myths (widespread belief in a founding body of law like a constitution).
- technology: tools which change the specific dependencies between individuals. often they supplement the ways people relate to each other: in the past if i wanted to read a book i had to purchase it through a bookstore; now i have the choice to print it myself at home.
while political systems are about taking powers which are presumed to be necessary and deciding exactly how they should be distributed across the citizenry, technology uniquely offers a path toward diminishing if not altogether escaping those power relations.
> what political system do you envision can prevent such bad outcomes?
none. in both senses of the word. democracy gets us further along than any other political system we've explored by distributing power, and choice.
to bring choice where there was none before, at this point, technology is the remaining lever.
a generation from today, that person with the RV in the hills can manufacture their supplies on some 3d printer. they can purchase food through Bitcoin over some P2P internet link, maybe pick it up without exposing themselves with a drone. a generation from then, they can just grow food lab-style. utopian, dystopian, it's not a panacea, but it's better than being locked in a camp. it's better to have the choice.
if "liberation" means choice, and increasing choice means decreasing order, then infinite choice would imply anarchy in the political sense. not as a goal but as a side effect of pursuing desirable social outcomes. that's not to say people wouldn't self-organize into groups within this environment, some of which might have hierarchy and even formal decision making systems (even the most unconstrained successful non-profits leverage such systems) -- just that these would always be escapable: the risks would be minimal whenever those structures turn against you.
now that's a very distant, hypothetical future. we need a state to ensure the negative rights that protect choice in the first place: i don't see that changing in my lifetime. my point is just that we're at the point where the fruitful thing to do is gradually decrease the powers we hold over each other via political systems.
so what kind of political system allows itself to shrink over time? over the last century, the borders between democracies have been largely stable, most of the growth has been inward. in the US, i don't think we'd see any internal warring if we got rid of our central federal government. i think the path forward in my lifetime is just toward smaller democracies, connected by trade and treaties. during covid, here on the west coast CA, OR and WA were already coordinating outside of federal processes. distribute the powers held by the federal government back to the states, and from there on to the metro regions. in the political sphere, that seems the easy/low-risk direction to proliferating choice.
i'm arguing politics in a cryptocurrency thread. so to bring it back: now is our opportunity to remove one of the political levers we wield over each other. OP is right that Ethereum isn't democratic. head-to-head it might not be better than a democratic state's currency. but the coexistence of the two insulates against some possibility of "the majority voting for something awful". if the tyrannical majority vote me out of my home during WWIII, at least it's that much harder for them to vote away my ability to buy an RV and retreat to the hills.
That is because it is a business, not a government elected by people. And I'm fine with that. It's not too different from credit card companies. Problem of course is if it becomes a monopoly.
Nope, you are using a definition of democracy that is "all the things I like". Democracy is widely understood as voting-based mechanism for conflict resolution, it's just the implications that are not widely appreciated - if you take out "doing all the things I support", what remains under "democracy" is "doing all the things I don't support but the majority does". For every person, democracy IS just the ugly parts - the rest is "what I'd do anyway in my personal dictatorship utopia".
On a completely separate track, what is described above is just an extreme example of what is actually happening. Some proxy of majority voting forced me to finance, in addition to the things I would gladly finance out of necessity like police and roads; or even unnecessary things I'd gladly donate to like NASA or National Parks; such things as e.g. the continuation of the war in Afghanistan, student loan forgiveness, healthcare subsidies, TSA security theater, etc. They did it by taking some part of my earnings, i.e. forcing me to work extra instead of having more free time for the same salary. Then they used the money to bomb a foreign wedding or give some deadbeat a chance at grievance studies. I guess it's good it is only a part-time enslavement.
You should look up the definition of “democracy” in a dictionary before accusing others of making up a definition.
Im not just trying to “win an argument”, like you accuse me of, I’m pointing out an inaccuracy of your statement. Through your childish outburst I can see that you’re defining democracy to include other aspects of what you deem to be “good governance” — fine, but that’s confusing given the well known definition which doesn’t necessarily include those things.
The government is no longer democratic if it is attempting to enslave it's own people. Your example is just one of a democracy voting to no longer be a democracy. This does not mean that the people of the democracy were never free or empowered.
51% of people being able to enslave the other 49% of people is terrible, and there absolutely should be measures in a democracy to protect minorities against majorities.
But what's usually left out when people bring out that argument, is that the alternative is worse. If the 51% can enslave the 49% in a democracy, then the 1% can enslave the 99% in a system where people vote with their money. In both versions, you need to protect groups with less power, but democracies distribute power much, much better than "capitalocracies" where 1 dollar = 1 vote.
Well the course we are on will result in the poor 99 percent murderinging the 1 percent which I am curious about, and my tone is neutral and I am steelmanning the 1 percent
If you have a society where there is that clear distinction in between the 51% and 49%, then you dont have one country. You have two countries. Its not applicable.
Very good point and scenario. The 49& would revolt and form their own "country" and government.
And then the 51% of the other country would perhaps try to enslave the original 49%. But that would not be democratic any more. That would be juts one country starting a war against another.
This is correct. Look towards "proof-of-personhood" protocols and other crypto projects that ensure one-person-one-vote voting - popping up now. Online democracy is coming and has only in the last couple years been doable safely, anonymously (and frankly, I'd like a few more years/decades of that being proven out in the wild before I'd trust it). We needed zero knowledge proofs to do it anonymously. We still need a somewhat-better proof-of-identity system but just passports and networks of people vouching for each other should carry us pretty far to start.
That's a tough combination. If it's powerful, how does it remain accountable. Sure, maybe a few election cycles are fine, but eventually it will degrade.
I want a weak government. I'd rather have warlords compete for my allegiance than be subject to one all powerful warlord who has no powerful enemies to worry about. A capitalism of polycentric governance, if you will.
Warlords typically 'compete' for your allegiance by conscripting you to fight for them, and killing you and your family when you refuse.
Or, if you and nobody in your family is of 'military age', they 'compete' for it, by rolling into your town, and stealing half of what you own. The 'competing' warlord that rolls in next week will, of course, steal the other half. If you're lucky, they won't make an example out of your town for 'supporting' the first warlord.
I'll take a strong, stable government over that horror-show any day of the week, but if you'd like to give it a try, much of Mexico has quite a bit of that sort of thing going on right now. Anyone who moves to the right parts of it can enjoy life amid 'competing' cartels.
Meh I fought alongside the YPG in Syria, under a rather weak government. They let me come in or leave as I pleased. They didn't steal from me. We fought against the other 'warlord' ISIS and all in all it was nice having a pretty diverse pick of militias to choose from.
All in all it was definitely a more freeing environment than a lot of life in the US.
------------
>Why do you live in the US, then? That should make you think a bit harder about failed states.
If the government wants to leave the territory I'm in, I'm all good with that. I've never demanded the government stay here.
Why does anyone live somewhere under a government they're not happy with? Why do women live in states with abortion laws they disagree with, is it because they're edgy teens? Why don't you personally live somewhere else that is closer to your goals of governance, surely US is not the most ideal for what you seek?
I don't really think you want to go down the road that presumes someone isn't thinking hard enough if they don't run away from where they're currently living. Personally when I did leave the US I did it to help the Kurds, not to abandon my own family, and without the permission of the mother of my child to expatriate it isn't exactly proof I'm not thinking 'harder' because I live here right now. Regardless of how fucked up the US government is I have certain obligations to my family who happen to be here more for logistical reasons than political reasons.
If it were just about me, or if I had permission from the mother to expatriate our child, sure I'd likely not be where I am right now.
> If a criminal spies on my credit card # as I make a purchase and uses that to go on a spending spree I can fix it with the credit card company with little cost but a few hours of time and frustration.
I'll take this one step further.
My credit card company has caught every instance of fraud on my card. So I've had zero hours of frustration yet multiple instances of people trying to use my credit card number. One time they even had the card - they had stolen it that night and tried to use it at a local gas station. A fraud alert woke me up.
This is not a shining example of the security of credit cards, but an example of how insecure they are. We regularly carry passwords into our bank accounts in our pockets, and punch them into random ATM machines on the street in a foreign country, say them over the phone, or type them in while using the coffee shop WiFi. It is no wonder our cards are frequently compromised and the total cost of card fraud is many dozens of billions of dollars per year.
Usually, the credit card company is the one absorbing the cost of this fraud - the food or physical goods that the fraudster purchased doesn't just magically leave their possession.
It is entirely possible to build a company that holds custody of your crypto, extracts rent on transactions or borrows with your deposits, and uses their profits to give you some financial protection up to a certain limit. Most likely within 10+ years your local bank will have some account that will custodially hold some limited amount of funds in crypto that are FDIC insured. But not everybody in the world wants this system, and not everybody wants all of their assets to be held in this way.
Perhaps, but it IS a good example of a system that protects the end user from monetary loss in the event of fraud due to leaked credentials (in this case the card number + CVV + exp date). In my opinion, any system that seeks to replace credit cards needs to have a similar ability to recover user funds in the case of inevitable security leaks, which is something many crypto systems struggle with.
> due to leaked credentials (in this case the card number + CVV + exp date)
That information is practically public already, since you have to provide it to everyone you purchase from online with your card. If you regularly buy things online with your credit or debit card it's less a matter of if the credentials will leak than when. Regular checking and savings accounts are at least as bad given the existence of Direct Debit, a system where practically anyone can take money out of any account just by knowing the routing number (public information) and account number (printed on every check).
Cryptocurrency aside, just compare that to something like PayPal, where the authorization happens directly between you and the payment processor: the merchant never gets your credentials and can't take money out of your account without your express permission. The traditional banking system has the worst security procedures; the design is reminiscent of the early days of the Internet where plaintext passwords were commonplace in protocols like rlogin, FTP, SMTP, and unencrypted HTTP, when authentication was used at all. The only thing keeping it from complete collapse is the absolute fortune they spend on statistical anti-fraud analysis, which completely coincidentally requires them to have deep insight into every transaction passing through their network. Not that they would ever think of using that immensely valuable data for their own gain, of course. Perish the thought.
In any case, Bitcoin and most other cryptocurrencies weren't built to replace credit cards, but rather to replace cash. If someone steals your cash or you somehow manage to hand it to the wrong person or simply destroy it you can't just call up the U.S. Treasury and expect them to put things right. Holding cash and transacting in cash has its downsides, and yet those same risky properties can be extremely useful if proper care is taken. Escrow and human-mediated reversible payments can be implemented on top of a system of irreversible transactions. The reverse doesn't work; you can't very well run an escrow service where the payer can reverse their payment into the escrow account without following the escrow procedures after getting the goods.
Compared to physical cash, as a digital good crypto has several advantages and a few disadvantages. In the latter category you have the obvious risk of hackers compromising the wallet; IMHO a separate, secure, hardware wallet is mandatory if you keep any significant amount of self-custodial crypto. On the flip side, however, it's not all that difficult or expensive to make your crypto more secure against would-be thieves than the gold in Fort Knox if you're willing to put in a modicum of effort, and the possibility of geographically-distributed encrypted backups makes it much harder to separate you from your money if you plan ahead a bit.
That's because they're far more convenient and user friendly, and the fraud detection makes up for that compromise in security. As far as user experience goes, it's a win-win and a superior experience to paying with cryptocurrency.
There can't be fraud of the sort that you get with credit cards on a blockchain unless you leak your private keys.
The fact that security is built around a 16 digit number and 3 digit pin that you share with everyone and can be reused is embarrassing for credit card companies, not a win. Amazing.
good luck building a good UX for a financial system where a small OpsSec error can wipe out your family's fortune.
And you need the private keys to conduct business so obvi they can exit the HSM
And if my 1M USD bitcoin is in some hardware wallet, won't that just incentivize someone to kidnap my kids until i send bitcoin, much like bitcoin breathed new life into ransonware economy after banks mostly shut it down?
Perhaps, despite the examples of ICOs, EVM smart contracts, NFT rugs, and the general flood of fake discords and so on, people assume the central banks and retail banks are a bigger threat than the criminal minds attracted to untraceable and unreversable payment methods?
> And you need the private keys to conduct business so obvi they can exit the HSM
While I agree with you in general, this is false; the whole point is that the HSM can sign transactions using the keys inside it but will never expose them to outside.
Touché on the use, but you propose a non transferable wallet? Or will it replicate to other HSMs with certain credentials? Will the car dealership owner people them replicated cross availability zones or to diverse geolocations? And will the HSM replicate the keys to a hacked HSM if I get the signing keys from an employee of the HSM with a promise of 10% of the winnings?
I'm not proposing anything, and I think these are hard problems. Potentially there are solutions to some of the things you say, but ultimately it's hard to escape the choice between trusting some entity and being able to lose your keys.
My point is that for large important financial amounts, irrevocable transactions are terrible UX.
For instance, my retirement now such as it is, remains pretty safe. I would have to read some financial meme (in the old sense of reproductive ideas) online and go thru a number of complex paper work steps to remove it from the boring fiat place it is now and send it to a much riskier place. The massive too big to fail institution could fail and not have 401ks bailed out, or society could collapse.
If it were some digital wallet, I could loose it just by signing something unrelated to “take all my money” with my private key and boom my wife and my self and my kids and other dependents are SOL.
Given that I have to trust society not to fail anyways to enjoy “stored value” where all value is embodied in and protected by society, i can’t find a way in which the irrevocable transactions benefit me more than the risk of my own laxness and occasional errors endangers the well being of my loved ones.
I don't understand your response. I wasn't debating the intricacies of self-sovereignty. I was pointing out that your understanding of hardware wallets is wrong.
> good luck building a good UX for a financial system where a small OpsSec error can wipe out your family's fortune
You are correct that the key need not leave the HSM to transact, touché. However it is an essential property of valuable keys that they can be extracted for backup or replacement of the HSM, and often for availability. At least the various HSM systems I have worked with.
As I understand it, people have lost their wallet contents due to trusting email, Discord, DNS and SSL protected websites. So if there is no basis for trusting the other parties in an online transaction, it seems any action whatsoever could lead to financial ruin. Even moving my assets to cold storage makes the scenario that my heirs forget how multiparty sig recovery works or just some eager relative throwing away the box of USB drives away.
Mine are minimal; I pay no annual fee and no interest if I pay off in time. So they're effectively just the transaction overhead, which debit demands as well.
Minimal in terms of direct costs to you, but merchants pay 2-3% on EVERY transaction, and I can guarantee you that does end up baked into the prices you pay.
> And it may be an incremental improvement over traditional global finance because there is a much greater ability to publicly scrutinize what goes on.
The flip side is that it’s creating new opportunities for massive privacy problems which would be irrecoverable. People who are trying to hide their activity will take precautions like using shell companies but normal people won’t think to do that or realize that they’re making that level of trust by using a wallet, exchange, etc.
There are some obvious big problems (“do voters know you paid for this porn site 15 years ago?”) but also more personal ones: imagine if employers, insurers, dating apps, etc. started data mining? Again, there are possible ways to mitigate that risk but I’d hesitate to make a lifetime commitment on those being effective and perfectly operated.
How i see it, when a group of powerful people wanted to control ETH to some direction or block a party, they needed to do some physical work , which acted as a time-delay lock. Now all they need to do is think about it. I m not sure why the second case has the same level of trust as the first.
I think this begins the search for another trustless transaction system that is neither PoW nor PoS.
With pow, the cash you burn on that mining farm is gone after you give up on your vote or your attack. With PoS, the simple act of being rich means you get more vote, you don't need to burn it or spend it. You even get richer while you do it
If the existing miners don't want to rent to you, you can build your own mining hardware. But if a cartel owns all the ETH and don't want to sell to you, you're SOL.
A cartel that owns all the ETH and doesn't want to let anyone have any? That sort of behavior would quickly reduce the value of the cartel's ETH to zero, on account of it destroying the network. This seems about as likely as you building your own specialized ASIC hardware that could produce within even a order of magnitude of the hashing power per dollar spent that the main mining cartels enjoy.
This argument is straining so hard to find a way in which these two things are different but PoS and PoW are absolutely the same thing, just one of them is cheaper, more decentralized, and cleaner. PoW doesn't imply greater decentralization, in fact it implies the opposite. I can go build a $100 computer right now, load it up with 32 ETH, and begin validating transactions in minutes. I am on an even footing with every other participant investing a similar level of resources. If I want to mine some PoW BTC, for example, i first need the industry alliances to get the latest greatest mining ASICs (which are mostly not available, because the manufacturers are strongly incentivized to use them for themselves and a small group of allies) or I had to get a team of engineers to design one and contract a custom silicon foundry to produce one, wait a year or two, and then plug in my new miners with an enormous capital investment.
It sure seems like one of these is more decentralized, and I don't think it's the one you want it to be.
>If a criminal spies on my credit card # as I make a purchase and uses that to go on a spending spree I can fix it with the credit card company with little cost but a few hours of time and frustration.
However, if a much more powerful criminal spies on your credit card # as you send money to Wikileaks or a bunch of truckers who drive to Ottowa for a protest you can never fix it when your card is cancelled and your bank account is seized. Or when you face a variety of other sanctions and persecutions for spending or donating your own hard-earned money.
>Crypto? No. It may, eventually, have some other benefits though that’s yet to be seen.
These benefits have already been seen and realized by people targeted by authoritarian governments and banking cabals all over the globe.
That argument could be made for anything if you are the one targeted. I mean, prison is authoritarian an oppressive. There are innocent people in them. Do we make it so that it is not possible to track crimes and put people in prison?
It is all about motives. If you think that the government is doing something wrong, change that, don't make it impossible for anyone to enforce laws at all.
I disagree completely. Motive is completely irrelevant. Mass surveillance and government spying (among other things) on people who have done nothing to suggest they are engaged in criminal activity is absolutely wrong and a violation of human rights and human dignity no matter what the motive.
>If you think that the government is doing something wrong, change that, don't make it impossible for anyone to enforce laws at all.
The issue is that people with morality and dignity believe that the government is doing something wrong by violating the privacy and human dignity of every citizen (by spying on their communications and tapping their phones), while those who don't see the value of privacy or human dignity don't believe the government is doing anything wrong. That is the crux of the issue. Trying to explain the importance of privacy and human dignity who people who don't believe that privacy and human dignity have any value is like trying to explain what blue looks like to someone who has been blind since birth.
>I mean, prison is authoritarian an oppressive. There are innocent people in them. Do we make it so that it is not possible to track crimes and put people in prison?
We have a Constitution that theoretically prevents the government from violating the rights of every person so that it may catch those few people who are committing crimes. Unfortunately the system of checks and balances that is supposed to be in place to stop the government from violating our privacy, rights and human dignity is entirely broken (if not non-existent) as abundantly chronicled for everyone who has paid attention.
I was speaking of the motives of the institution with the power. In the crypto case, the people with the power are motivated by greed. In the government's case, it could be anything, but at least they are theoretically accountable in a representative democracy.
> The issue is that people with morality and dignity believe that the government is doing something wrong by violating the privacy and human dignity...
What does this have to do with reversibility of financial transactions? If you think there is some government conspiracy with the 'bankers' against you or your group, what is taking away basic consumer protections going to do to help you?
>what is taking away basic consumer protections going to do to help you?
You define centralized control over wealth and the ability of an individual to send and receive payments to whomever they choose, without sanction, as "basic consumer protection", while I define it as unacceptable authoritarianism. Yes, it is true, an all-powerful governing entity that has complete control over how everyone sends, receives and stores their own money has the power to reverse fraudulent transactions, which is desirable in some circumstances. It also has the power to monitor, regulate, control and prevent individuals from sending and receiving their own money, as well as punishing them for sending, receiving, or trying to send or receive, money from those who are frowned upon by the controlling authority - which is incredibly undesirable.
>If you think there is some government conspiracy with the 'bankers' against you or your group
There's no conspiracy - this is happening right out in the open - and the powers-that-be are happy to brag about their unfettered power.
> You define centralized control over wealth and the ability of an individual to send and receive payments to whomever they choose
No, I define that as 'oversight' which is necessary for a functioning macroeconomic system. If we can't do that then we can't collect taxes. If you are opposed to all taxation then we have a fundamental disagreement on the function of society.
> There's no conspiracy - this is happening right out in the open - and the powers-that-be are happy to brag about their unfettered power.
You linked to two things from the past that were proposed and never occurred. What does that prove? The government is working as intended and bad ideas are usually stopped in their tracts. The difference is that if money is the be-all-end-all of power, then any rich person can just make their own laws, and I fail to see how that is a better option than a government accountable to its citizens.
> If you are opposed to all taxation then we have a fundamental disagreement on the function of society.
If you think that the government should have the power to monitor every transaction, communication and movement of everyone, all the time, so that they can make sure people aren't cheating on their taxes, then we have a fundamental disagreement on the function of government and society. If the government can't figure out how to raise revenue without violating the privacy and human dignity of every American then that government should not exist.
> The government is working as intended and bad ideas are usually stopped in their tracts.
We clearly live in two different realities. In my reality, people have had their ability to send and receive funds to a wide variety of locales and causes blocked by the government. In my reality, the credit card companies blocked the ability of individuals to send donations to Wikileaks just after they were publicly threatened by Senator Joe Lieberman (but before the founder of Wikileaks was thrown in a dungeon at the behest of the US government).
>The difference is that if money is the be-all-end-all of power, then any rich person can just make their own laws
Money isn't the be-all-end-all, but centralized control of money comes very close. It is very different to be a rich person with a lot of money and to be a government entity that decides, at the point of a gun, who is allowed to have and/or spend money and what they are allowed to spend it on. The right to privacy, the right to human dignity, the right to autonomy, and the right to send your hard-earned money to whoever you want to send it to is all part of the same struggle for human rights and freedom. The push to eliminate privacy, to eliminate cash, to consolidate the power of government to control every facet of your personal, medical and financial life are all inextricably linked, and are all leading to an incredibly dystopian future that in many respects has already arrived.
You have pivoted the conversation completely from crypto lacking certain abilities consumers find crucial, specifically reversing transactions and protection from fraud, into a conversation about state surveillance. I am not going to defend police states or mass surveillance.
>You have pivoted the conversation completely from crypto lacking certain abilities consumers find crucial, specifically reversing transactions and protection from fraud, into a conversation about state surveillance. I am not going to defend police states or mass surveillance.
A conversation about the power of the government to have real-time, granular information about every dollar you spend, send or receive and total control over whether to allow or prevent your transactions is a conversation about state surveillance.
Almost no one is going to give up the benefits of consumer protections because of the possibility that their government is out to get them. Thus I don't see how any of this is relevant.
Your concerns are valid. And you're free to commit to projects that align with your values.
To me, the immutability of an actual blockchain is non-negotiable. I've given up on Ethereum after the DAO fork out of principle.
But that's the beauty. Unlike our current financial system, you're not bound to use Ethereum. You have sovereignty and can make your own choices (and drive change).
-- (I only discuss part of your comment, don't have time for the rest)
Just FYI, the biggest problem for crypto fraud is phishing, not theft. A thief can't get your private keys from a hardware wallet. And there are many, many, MANY strategies you can use against phishing.
I'm not talking about tampering, not in the sense of a 51% double spend or anything. I'm talking about off-chain real world human influence. I'm talking about things like The DAO, an organization that was such a huge player in ethereum at the time that when they suffered an exploit like so many others have over the years ethereum did a hard fork for just them to fix things.
How many smaller players in the crypto scene have received that kind white glove treatment, going against the "code is law" principle, when they've lost huge sums of money? Code was law right up until The DAO massively screwed up and was deemed Too Big to Fail. No different than traditional financial institutions.
As the mining resources of the various trustless Proof of $X models needed to makes crypto work are increasingly centralized into the hands of massive players in the field the principle of crypto democratizing control of money & finance is becoming an Emperor With [increasingly] No Clothes.
If all the large entities band together and frame the issue as something negative that needs to be prevented/reverted, then nobody will care enough to attempt punishment. We've seen this when ETH and ETC split after Vitalik used ETH in the premine to vote for a split, then framed it as "the majority wants to split".
"Majority" doesn't mean anything better than traditional finance when the majority is increasingly a small handful of massive players using their control to avoid the consequences of massive screwups. Instead they make a hard turn towards the same exact "too big to fail" dynamics in traditional finance.
With proof of stake there will be no more abstraction layer to hide this fact any more either. Majority will mean the very small number of organizations holding a majority of ethereum, not the majority of __people__ holding ethereum.
Very roughly by eyeballing the numbers here [1] about 450 walled own about 51% of ethereum. Out of about 0.000225% of ethereum wallets in control of 51%, and that's not even taking into account whales that may control multiple of those largest wallets.
So your what's your definition of "majority" here when it comes to future governance issues, the 450 or the 200,000,000 other holders?
True democratization of crypto would have it be the latter, but that's not where I see things going.
Ethereum, like any financial instrument, has always been valued by willingness to pay. It is unavoidable that willingness to pay is impacted more by those with more wealth. You cannot sell an asset if nobody wants to buy it and people with money can buy things.
If someone told you otherwise, I am sorry that you were misled.
My ability to address screwups or fraud on an individual level with banks is significantly higher than anything I'd have with crypto.
All your statement does is agree with my sentiment that crypto like ethereum is controlled by a very small number of very large players in the field. It is not the democratization of money & finance that proponents & crypto idealists use in their rhetoric to promote a supposed revolution in the field. It's substantially similar to traditional systems with a few minor (relative to the proposed revolution) features that might offer improvements on the traditional systems.
And yes, lots of people have told me otherwise-- that crypto will put the the aggregated power of traditional financial systems into the hands of the people and all sorts of things along those lines. It's not hard to find such crypto evangelicals. But no I have __never__ been misled by them.
It's always been obvious to me that any actual promise that crypto may have in improving financial systems falls massively short of promises made.
> My ability to address screwups or fraud on an individual level with banks is significantly higher than anything I'd have with crypto.
Yes, nobody ever suggested that irreversible transactions would make it easier to address fraud. You don't have a central entity to appeal to.
> All your statement does is agree with my sentiment that crypto like ethereum is controlled by a very small number of very large players in the field.
No, it does not agree with that. But the value of ethereum is determined by willingness to pay. There are not a "very small number" of actors with willingness to pay for ethereum.
Crypto is explicitly anti-democratic in that you cannot democratically (ie. by vote) decide to take away someone's asset.
It sounds like your chief concerns are around transacting on and storing all your money on a layer 1. It would be very similar to walking around with your life savings in cash in a briefcase. But just like cash has banks, custodians, and settlement layers so can (for example) bitcoin.
If all services sitting on top of bitcoin were equal to the USD (settlement, fraud protection, PayPal/Venmo, etcetc) then you’d really need to compare the “tokenomics” of the currencies. With bitcoin, you have complete predictability in terms of when new bitcoins are created (inflation). With USD it’s purely up to the government.
You do fractional reserve banking with BTC the same way you do it with any other currency: You only keep enough BTC on hand to cover the projected worst-case withdrawals, and take the risk of needing to shut down or possibly declare bankruptcy in the event of a bank run. There is no "lender of last resort" to bail you out, but banks were doing fractional reserve banking long before the creation of the FDIC. It wasn't quite so extreme in the Free Banking era, of course, compared to the state today where no bank holds much more than the legally-mandated bare minimum of reserves.
Of course you also have the option of running an honest bank, one which simply holds its customers money (for a fee) without lending it out, and perhaps offering separate investment products for those who are interested with full disclosure of the risk involved should the investments fail.
It's an open secret that money "in your bank account" isn't actually in your account waiting to be withdrawn—the banks will openly acknowledge that if asked, though it's not something they like to draw attention to in their advertising or when you're opening an account—but they aren't so open about the fact that this practice comes with investment risk, including the possibility of losing any money you've deposited with them, or at least being forced to wait longer than usual to get it back because the bank is having cash-flow issues. (Which, naturally, causes even more severe cash-flow issues for the depositors.) They have the mandatory insurance, of course, but the FDIC is more of a placebo to prevent bank runs than actual protection against systemic issues affecting many banks at the same time. The FDIC can bail out any one bank easily, but if everyone wanted their deposits back there wouldn't be nearly enough to cover the banks' obligations. The only way to avoid bank failures in that scenario would be to print more money, which would drive inflation and penalize those who put their money in less risk-prone, higher-reserve banks.
At the very least it makes something that is the world's problem -- massive energy waste due to PoW -- into an economic problem that is self-contained to the Ethereum block chain.
That defeats the point. People keep forgetting that the single innovative aspect of cryptocurrencies was the invention of a way to do completely anonymous and trustless transactions. That's it. The second you wrap that in a layer that eliminates that, you're better off just skipping the blockchain altogether since it's an otherwise extremely awful performing persistence.
I'm not sure what makes you think that is the 'single innovative aspect' (besides, unless we're talking about Monero, most crypto transactions are not anonymous). One of the reasons I'm excited is for truly borderless transactions with friends and family overseas without every bank in the middle taking their (unknown ahead of time) cut. Even Wise incurs extra costs, as it doesn't support their native currency and USD/SWIFT is the only option. I'm absolutely sick of the unfairness built into the financial system and I get the feeling that much of the cynicism around crypto comes from a position of privilege.
Anyway, back to your point. Why should a layer on top 'eliminate' the layer underneath? Card companies did not eliminate cash.
> I'm not sure what makes you think that is the 'single innovative aspect'
Because that is the single innovative aspect of crypto: circumventing regulation (by virtue of not having a central authority). Every single other thing can be done better by a non-decentralised system.
> much of the cynicism around crypto comes from a position of privilege.
Boo-hoo. I would think that more rich people are circumventing capital controls in China, Korea, and Argentina using crypto than poor, unbanked people are using crypto.
You talk like cryptocurrencies are a valid alternative, even though they have a terrible UX that makes their adoption in the real world near non-existent. Hell, losing or getting your private keys stolen could also nuke your business. Yes, every option comes with its issues, and so far cryptocurrency's issues far exceed other options for businesses.
It will be a solution for everyone running a legal business (i.e. one that doesn't impose significant negative externalities on others). Making life harder for criminals is a feature not a bug.
As a business you'd have to pay taxes, deal with customer support, accept multiple currencies, etc, so even when accepting cryptocurrency payments it's likely you would use a payment processor. Those payment processors would probably be just as reliable as the fiat ones... (hell they'll probably be the same companies)
Remember, Stripe is not known to be reliable, just convenient. People will go for the convenience with cryptocurrency as well, there is no reason to believe otherwise.
Why bother paying more for a slow database if you’re not going to rely on the one feature which can’t be done faster, cheaper, and more reliably than the current financial system?
Everything gives people options: the question of whether those options actually increase competition comes down to what a particular option does better than the alternatives. For example, if I'm not in the business of selling blockchain services I don't care about Visa's backend infrastructure. I care about things like how much overhead I'm paying on each transaction, how hard it is for my customers to use, how quickly transactions go through (especially in retail settings – I don't want someone blocking the line while they wait for a miner to approve a block), and the cost / risk of fraud.
Currently, it's by far easier for everyone to use Visa: most people have access to that system, services are widely available for businesses of all sizes, etc. The primary drawbacks are transaction costs and businesses being on the hook for most fraudulent transactions.
Switching to Ethereum would make things slower, but that could improve. Since it's not tied to a hard currency, however, there's a much bigger problem cost management: I know exactly how much a Visa transaction will cost but gas fees are unpredictable and volatile, and the exchange rates for ETH vary both independently and more than most currencies. Similarly, there's a real appeal to not automatically being on the hook for a disputed transaction but that's significantly undercut if you have to worry about being one mistake away from irrecoverably losing everything in your account and so far customers have not been jumping to take on more personal risk either.
The big question here is also what competitive businesses do in response: for example, if at some point in the future Ethereum actually became cost-competitive what happens when Visa simply lowers their transaction fees until that's no longer the case again? They have a lot of margin to do that and the merchants don't need to change anything about how they do business. Similarly, Ethereum is nowhere near the speed of a traditional credit card transaction but even if it hit that speed it'd be playing catch-up with Apple/Google Pay – businesses care a lot about things like that since it's often highly visible to customers and can affect things like retail lines, so the question is whether that can be improved faster than companies like Apple/Google, Stripe, Square, etc. can improve their services.
I think most of those problems are being worked on and have a very real chance of being solved.
Right now, on layer 2, you can transact for a $0.01 fee no matter the size of the transaction. I’m not a Visa expert but from what I understand they take a percentage of the transaction. Visa could lower their fees but I see that as a win-win. They faced competition and either way consumers win.
Granted if Eth exploded in popularity the fees would go up potentially 10x. However there are upgrades on the way to lower fees even further. Namely danksharding (excuse the silly name).
Things like UX, and fraudulent transactions are much harder. However UX can get better and there are actually things we can do about fraudulent transactions. A Visa competitor could build their own smart wallet where the financial institution has keys to the wallet as well as users. This would allow them to administer the wallet for the user similarly to current bank accounts.
A competitors could also create their own layer 2 which would only confirm transactions on the main ethereum network after X amount of time. This would allow the company to revert fraudulent transactions within that time window.
> on layer 2, you can transact for a $0.01 fee no matter the size of the transaction. I’m not a Visa expert but from what I understand they take a percentage of the transaction. Visa could lower their fees but I see that as a win-win
The competition is P2P interbank transfers, which are being rolled out to be free in the U.S. (And are free in Europe.) Credit card transactions come with additional perks for the consumer, like anti-fraud and rewards, which bias the coin. Someone not caring for those protections can, again, use interbank transfer.
Now try sending that money overseas. Depending on the countries and currencies involved you may be in for a world of pain (personal experience). It's great if you don't have that problem, but once you do you start to really see how arcane, bloated, and inefficient the current systems are.
Sure, anything is potentially possible but notice how often you had to describe things in uncertain future terms. If you are running a business, that sounds like “call me back when you can do this” — and in particular, consider that while Ethereum-based companies are spending large amounts of effort working around the architectural drawbacks of using a blockchain, everyone else is working on user-visible features.
Sure, by all means wait until these features are ready.
They’re not as uncertain as I made it sound though. Smart wallets already exist and layer 2’s exist where users can submit proof of fraud. Danksharding isn't going to take 8 years like proof of stake.
The biggest issue I see is building trust, which takes a lot of time. A smart wallet is great but it’s going to take years before the community trusts the builder of the wallet.
With that said, I do think crypto has a chance of offering things that the current financial institutions will find very difficult to compete with. I’d love to see Visa reduce their fees to a flat $0.01 per transaction but that that would massively reduce their profits.
Also, with a standardized financial API it opens the door to more competition in other areas. For example, a fairer and more transparent alternative to credit scores. Current credit score providers rely on the fact that their system is opaque. Competing with a transparent credit score would be very difficult.
The reason I’m so interested in crypto is the possibility of taking away power from these large institutions.
> With that said, I do think crypto has a chance of offering things that the current financial institutions will find very difficult to compete with. I’d love to see Visa reduce their fees to a flat $0.01 per transaction but that that would massively reduce their profits.
That's 60 times lower than Ethereum's transaction fee. Now, an L2 service could go lower but then they're taking on more risk which they'll want to be paid for and it's basically reinventing Venmo or Square Cash.
> Also, with a standardized financial API it opens the door to more competition in other areas. For example, a fairer and more transparent alternative to credit scores. Current credit score providers rely on the fact that their system is opaque. Competing with a transparent credit score would be very difficult.
There are two problems here. The most obvious is that it's at cross-purposes with privacy but the more subtle one is that as people build layers on top of the Ethereum network to compensate for design deficiencies, that transparency evaporates and you're left with the same need for individual companies to share data with each other and near-certainty that in the absence of regulation they will do so even when it's not in their customers' best interest.
I think it's important to understand that L2 is considered the future of Ethereum. So when we are talking about fees it's important to use the numbers that people will actually be paying in the future. Right now those are hovering around $0.10 and it's expected that danksharding will reduce those by a couple orders of magnitude in the near/mid term future.
IMO L2's are fundamentally better than Venmo and Square Cash. Firstly, they are much more transparent to the user. Switching to a different L2 is usually as simple as selecting an option from a dropdown in your wallet app. There are also protocols for allowing users to buy crypto straight on L2 without paying L1 fees and transferring from one L2 to another (for a small fee). Additionally, if an L2 goes down there are escape hatches that allow users to pull money out onto L1. The same cannot be said for Venmo or Square. This transparency also means users are less tied to a single provider. If I want to accept money on Venmo I have to sign up for a whole new app, vs selecting an L2 from a dropdown like I mentioned before.
Regarding credit scores and privacy, there is strong reason to believe that zero-knowledge proofs will be very useful here. These are much more cutting edge but zk-proofs allow people to prove things about themselves without giving away their private info. This could allow a privacy-respecting credit score where users can prove certain things about their financial history without giving everything away.
I will admit privacy is still very much a concern. The recent controversy over Tornado Cash proves that governments are not comfortable with total privacy. However, I will say that this isn't the first time the government has tried to stop cryptography. Originally, there were legal battles over public-key encryption when it was first invented but now we use it every day.
> Now, an L2 service could go lower but then they're taking on more risk which they'll want to be paid for and it's basically reinventing Venmo or Square Cash.
It feels like there is a subtle misunderstanding here: Credit cards are at least L2 systems, not L1. Physical cash, the foundational raw-unit-of-account layer most comparable to Bitcoin or Etherium, is the L1. Something like Venmo or Square Cash would be L3, built on top of the credit networks or electronic bank transfers which are themselves a layer of abstraction over transacting in cash.
You may not realize this, but credit bureaus are a way for lenders, who compete, to share anonyminized customer data amongst themselves. I don't see why the lenders would be willing to share this very valuable data to the whole world.
The bureaus are regulated because of their power but they were not created by the government but by the value to lenders to having a trusted third party to merge and reshare the customer data in a safe fashion.
And I would have to guess most people can master "understand your credit score" better than we can master "good ops sec for a 100K dollar private key"
Also those over 40, but that still doesn’t mean everything advertised as the solution is actually the right answer. This is especially true when the sales pitch is “buy now, you’ll make a killing!” but all of the real problems get a response along the lines of “we’re working on that but it was harder than we thought”.
>Prior to the merge ethereum’s trust was controlled by the organizations with the most money who bought/built massive data centers to mine it.
>With the merge & staking that abstraction layer has disappeared and it’s still the organizations with the most money who control it.
In the prior state, the folks with control were the ones willing to invest in it. In the after state, the folks with control are the ones willing to invest, OR the ones willing to get others to invest - i.e. coinbase.
> If a criminal spies on my credit card # as I make a purchase and uses that to go on a spending spree I can fix it with the credit card company with little cost but a few hours of time and frustration.
No, you can't.
It if someone hacks you mobile bank and transfers money to another country, all you can do is go to police, which can do fuck off.
Prior to this merge at least theoretically you could have a consortium of people collaborate to combat centralization.
Now, all big players have to do to print money is nothing. It is now actually impossible to ever overcome the mechanisms.
My young son the other day said “I’ll get money from the store and buy what ever I want”.
I explained you had to exchange work for money. So you can work for the store, then they give you money to buy things.
Then I thought about how banks or large lenders just give people money. They magically create a loan, which people have to pay back with interest. The bank assesses the risk they won’t and profit they want and that’s the interest rate. The FED works the same way, just handing out money. Those people don’t work for their money. They just get free labor for controlling the money.
Here it’s like the store printing money at 5-8% a year or what ever just for having money in the bank. They can then spend 4% or what ever of that and still always guarantee growth in their money supply. It’s the exact same.
Theoretically, someone can make something the store finds valuable enough in the real world to trade their reserves. However, they’d have to find it more valuable than the static growth rate.
The difference in POW is that anyone can enter the market. And large lenders won’t have an advantage. Sure they could PAY for more processing power, but they have no advantage of printing money over the next guy.
the basic point of crypto is to protect us from human judgment yes, this means the individual is responsible for their own security, privacy etc. but when this responsibility is taken away for the sake of convenience we all lose
Well, currently it looks like it will be more centralized, because before one could mine with just a single GPU, now one has to have a bunch of ETH to start.
If you keep posting this sort of low-value flamewar comment we are going to have to ban you. We have cut you miles of slack for years, but the slack is not infinite.
I still feel like absolutely bonkers stuff is posted about crypto and they get a pass - extremely low-effort lies and drivel - then I post my counterpoint hot take and it’s “You flame bait moron!”
Similarly I am passionate about China and communism given… the murders in my family… but again, we are supposed to call out certain topics but not others.
My defense, but noted on I’m on my final final warning.
Thanks. I know it always feels like the other side started it and did worse [1]. There are always datapoints around to support that idea, since we don't come close to seeing everything that gets posted here [2].
But if people feel like that makes it ok to break the rules themselves, we end up with a downward spiral [3], so that can't be right. The solution is to stick to the site guidelines no matter what other people do, and let us know about the other cases by flagging them or emailing us.
>If you keep posting this sort of low-value flamewar comment we are going to have to ban you. We have cut you miles of slack for years, but the slack is not infinite.
Turnabout should be fair play here. Dang's continual low-value abuse of users to enforce suppression of seibelj and others' speech should be met with flagging and every possible option to reduce the effect of these threats.
If it is possible to ban dang, we need to be finding ways to do so. If not, consider his abuse behavior like the payment processor 'Stripe.' Robust alternatives must be used to minimize the deterretive effect of threats.
Either way, we should stop cutting slack to Dang's efforts and focus on how to ensure adjusting of behavior is bilateral. Our slack for Dang is not infinite. If Dang does not enjoy the comments of others perhaps he should move to another platform :)
If you’re gonna make wild prophecies about how crypto is going to completely democratize control of the money supply - and crypto boosters love to rant about stuff like that - then yeah, people are going to keep on finding fault with it until someone comes up with a new replacement for “proof of turning a fuckton of energy into waste heat” that isn’t “proof of having a fuckton of money invested in the coin”.
The number two crypto left Proof of Waste and that’s good, yay! But the whole scene is still in the shadow of Bitcoin’s Proof of Waste, and until that does the same, or shrinks to an irreverent shitcoin, people are gonna hate on all crypto for its energy usage.
This has never been an issue that can be discussed in such an abbreviated form. So you're criticizing earlier simplistic dismissals of crypto because of their over simplifications. Yet now you're also trying to dismiss a more detailed bit of thinking on crypto when it tries to correct the exact faults you found in those simplistic criticism precisely because it is more detailed. You can't have it both ways.
I think it's hilarious that you call this moving the goalposts. As if the critiques about country-sized energy waste were the only issue raised until this moment. When that was actually a later-stage critique as "mining" grew and grew.
"If a criminal spies on my credit card # as I make a purchase and uses that to go on a spending spree I can fix it with the credit card company with little cost but a few hours of time and frustration."
You just made a great case for why crypto as a backend for balance transfer that's abstracted by centralized payment options built on top of the transfer network for funding balances but directly interfaces with POS outside the crypto network will almost certainly continue to grow into a thing as crypto grows.
Get rid of bank accounts, and then firewall balances behind 3rd party abstractions powered by your crypto wallet.
By all means charge my vendors 3.25% of the transaction to firewall and insure my wallet against theft.
Give me 1-2% cash back and I'll be even more excited about the prospect.
You are saying two contradictory things. First that those with the most money control Ethereum, and then that transactions can't be controls be reversed, indicating that you want a human layer of control that is currently missing. This is a conflating of layers and evidence of a fundamental misunderstanding of of how it works.
The fact that these types of get off my lawn comments get voted to the top of HN that make me wonder if I'm on a ship of fools that is no longer the center of gravity of interesting and creative tech thought.
Crypto has been around for over a decade and isn't going away, and it's an complex technology that has massive depth and a lot of interest. These sorts of negative superficial comments that get repeated ad infinitum are tiring and provide no value.
If you prefer credit cards then use them. No one is taking that away from you. That isn't the main use case that Ethereum is going after.
>You are saying two contradictory things. First that those with the most money control Ethereum, and then that transactions can't be controls be reversed
No, absolutely not. I'm saying it's controlled by those with the most money, and history has show as that transactions __can__ be reversed when those large players throw their weight around in a too-big-to-fail sort of way.
I'm also saying that I don't mind there being a human layer of judgment, but also that it goes very much against the trustless ethos of crypto. And also that the currently layer of human judgement is vastly less accessible to the average crypto hold than it is in traditional banking & finance.
The reversal was not great, but also just a one time thing that still required the concensus of many entities and widespread code change and deployment distributed across countless nodes. If it was a bad call then it wouldn't have been adopted or would have forked the network in a more serious fashion than ETC. If reversals a regular occurance, then ETH would not be trusted and it would lose traction. It's like comparing an asteroid strike with a car accident. The DAO reversal is a single event and says almost nothing about the general reversibility of individual small transactions. Future reversals are very unlikely now and would have to be some huge event and gather concensus like any other change to the protocol.
A singular huge change is just not comparable to credit card chargebacks that can be executed by anyone. Not comparable at all. Chargebacks are part of the CC protocol. Eth has no such mechanism.
(1) in both traditional finance and crypto, a relatively small group of big players control the rules of the game
(2) in traditional finance, there are established ways for small players (Eg consumers) to appeal to big players (eg retail bank) to make exceptions and provide redress
(3) in crypto, there are not yet established pathways for small players to petition big players for redress in this way.
This makes a false equivalency. Petition in traditional finance is with regards to individual transactions. In crypto, petition would be how the protocol works. The equivalent in traditional finance would be the credit card EULA, rules and conditions. Small players definitely have no redress here.
With the merge & staking that abstraction layer has disappeared and it’s still the organizations with the most money who control it.
Sure it’s great that non-productive math problems no longer need to be solved & consume so much energy and hardware to make it all work. And it may be an incremental improvement over traditional global finance because there is a much greater ability to publicly scrutinize what goes on.
But no one should consider this a fundamental paradigm shift & democratization compare to traditional financial systems controlled by a a very small number of big players. Their influence still can override the mining process that’s supposed to be the final word on transactions.
Although I’ll clarify a bit: I’m actually a proponent of having a layer of human judgement that can fix a problem when things go off the rails. The issue is that in crypto this layer is even less accessible to smaller players than in traditional finance. The DAO was able to throw its weight around and get a hard fork, but how many other groups with much less influence have suffered from similar problems and exploits without that same benefit?
Yes, even in traditional finance there are some types of irreversible fraud. But for every day transactions, for using money as a daily part of transactions necessary to live your life and not just as a speculative investment, crypto falls far short.
If a criminal spies on my credit card # as I make a purchase and uses that to go on a spending spree I can fix it with the credit card company with little cost but a few hours of time and frustration. If my wallet is pick pocketed or I simply lose it by accident I have a similar recourse to mitigate the fallout. Crypto? No. It may, eventually, have some other benefits though that’s yet to be seen. But as a major change & liberation of people from massively powerful banks and governments there seems to be nothing more that shouted rhetoric and wishful thinking.