Used GPUs flood the market as Ethereum's price drops below $150

The intrinsic value of 1 BTC is ZERO

This assumes, of course, that cryptocurrency itself is necessary.

Depending on speculatively large future-values of cryptocurrencies is probably not the right way to evaluate the externalities, here.

10 years ago people would have told you there is no possible solution to this.

Proof-of-work cryptocurrency is a tremendous breakthrough. It will certainly be surpassed one day, but it's currently our best available option for a system of money.

2) Because a permission-less censorship-resistant decentralized financial system has the potential to truly improve society, hence worth spending energy on it.

I have presented multiple arguments why (Bitcoin) mining is not wasteful here: http://blog.zorinaq.com/bitcoin-mining-is-not-wasteful/

Note that this is zero-sum.

If a device is invented tomorrow that is 100x more efficient per dollar/watt to mine, the cost to 'secure the blockchain' remains the same because people will just buy 100x more computing power for the same investment and the difficulty ramps up to compensate.

> 1) Surely we can come up with a less wasteful solution to this

You are welcome to try. If you do come up with a less waisful solution you will be able to create your own altcoin and will make billions worth of dollars on it. Some very smart people have tried in the past and are still trying.

A brief search showed that the US mint used 694,462.4 gigajoules in 2011[1] (~0.2Twh). The US is ~25% of world GDP, so lets times this by 4 for a naive cost of minting across the whole world.

This gives a cost of ~1Twh annually for minting the entire world's supply of money, with a total Gross world product of ~$80 trillion[2].

Bitcoin is using ~1.3Twh[3] for a market cap of ~$35 billion[4].

Overall this means that bitcoins are ~3000x less efficient than physical money.

After writing this I've realised I should perhaps limit to the cash based economy.

The amount of US dollars in circulation is ~$1.3 trillion[5].

This gives a slightly better ratio of 222x less efficient.

Bitcoin is 222 times less efficient than a physical system of metal coins and paper/fabric/plastic.

[1] http://www.designlife-cycle.com/us-penny/ [2] https://en.wikipedia.org/wiki/Gross_world_product [3] http://blog.zorinaq.com/bitcoin-mining-is-not-wasteful/ [4] https://coinmarketcap.com/ [5] https://www.newyorkfed.org/aboutthefed/fedpoint/fed01.html

No one has found a solution yet that is as secure as proof of work, so this point is moot until then.

> 2) why should we assume that securing the block chain is a actually good use for the energy spent?

Who is this "we" you speak of? The energy is being paid for and the market demand demonstrates that it is a good use.

Primecoin is an example of this, where the mining process produces prime numbers which can be useful for.. something?

I think this wording obscures why the mining process gives the network trustworthiness.

You are changing the nonce over and over again until the HASH of the block meets some criteria. For example, your hash is below some value (it starts with a certain number of zeroes). This is important.

It's important because you can't 'fake' the work. The only physically possible way to come up with a block that has a conforming hash is to change the nonce and run the hashing algorithm and repeat this until your hash matches the criteria. There's no way I can know the nonce I need to use without running the hashing algorithm. Hence, if I present a block that hashes to a conforming value (you don't just take my word for it, you run the hashing algorithm on the block yourself to independently verify the work), you know that I've invested time and electricity (tangible, real-world things) in the creation of that conforming block.

Alone this doesn't seem like much, but the time and energy limitations it imposes gives a blockchain properties that make data more 'immutable' the longer it is stored in the chain by making it computationally more expensive to change data further back in time from the most recent block in the chain and makes it computationally expensive for a single bad actor to change past data that nodes in the network have 'agreed' upon. This computational expense is important when combined with the other rules that a node uses when receiving a new block and trying to independently determine that the block is valid and should be treated by that node as 'truth'.

The trustworthiness of the blockchain is an emergent network effect. It's not provided or enabled by one single thing, but by many things all contributing at the same time. Proof-of-work is just one small piece of a much larger system. For example, you also need to consider what other rules make proof-of-work useful in the system, such as the rule that a node must accept a chain with more work in it as more truthful than one with less work (hopefully I'm wording that somewhat right!).

Saying 'the miners provide security by hashing' is a massive oversimplification of what's going on. It's very much a sum-of-all-the-parts thing.

I found this helpful in particularly driving this process as a whole home: https://anders.com/blockchain/

I'm still really getting my head around blockchain itself, so if I'm way off base on anything in my understanding here I'm happy to be corrected :)

As I understand it, the challenging question is - is there something else we can use that's as independently verifiable as proof-of-work that's more energy efficient? What independent verification do we give up if we do choose something that's less energy consuming (but maybe less 'provable')?

Mining also solves the distribution and creation of value problem. People won't use your currency unless it has value. To have value it needs to have a market to use it. To have a market you need people using it. Mining creates an incentive to create it since it has some value. And mining means the currency is distributed to people who create value for the system.

[1] http://digiconomist.net/bitcoin-energy-consumption

The vast majority goes on hashing as fast as possible and getting the wrong answer many, many times... that seems pretty wasteful.

Edit: or cost per transaction.

As society lowers the cost of energy, we would expect even more energy to be wasted with all other variables remaining equal.

Halve the cost of energy and now you've doubled the amount of energy spent.

If the cost all energy worldwide improved dropped by a factor of 100, society should explode with new technology. Instead this formula says we'll just spend 100x as much of it mining.

At least with mining gold as technology improves, you gain efficiency in gold extracted per joule. Crypto mining works exactly reverse. The better technology gets, the more wasteful it has to become to compensate.

However all cryptocurrencies are pyramid schemes . I.e. earlier you get in more you make. That's fastest way to grow and make it viral. However like any pyramid scheme it is unsustainable after some point

This is not necessarily the price point we think it should be valued at though. I and am sure many ppl never expected bitcoin to have mcap of 30$ billion . As difficult it is think today It may even grow another say 30x again to 900 billion or even more. However it will crash eventually like all pyramid schemes when growth flattens and new money - in the form of money spent in mining - stops coming in at the expected rate.

Another way to look at it, for mining to be even marginally profitable price needs to keep increasing for bit coin style algorithms. Either ppl will abandon the coin or price __has__ to increase

What about: the government promises bitcoins mined with solar energy will be free of tax. Solar panels bought for mining bitcoins will be half-subsidized by the govt. For the next two years, at least.

Huge solar farms spin up as everyone wants to mine as much as they can on cheap energy. Two years pass, govt says it's end of the Bitcoin subsidy; miners fold, cheap used solar panels flood the market...

These cards also signify the use of electric generation towards 'mining' for virtual currency instead of more productive uses for society: even including entertainment. The mining raises the overall cost of electricity for everyone.

Solutions to the meaningless problem that must be solved to "win" a block are rejected if they don't match the network difficulty, so setting it low on your computer just wastes your computation entirely.

The difficulty constant is determined by an algorithm that takes into account the average time that it currently takes for a new block to be mined. It tries to balance difficulty so one block is mined every 10 minutes, on average (if blocks are being mined too fast the difficulty increases, if blocks are taking too long to mine it decreases). This algorithm is part of the "bitcoin protocol" and you can't just change it in your own mining code because the other nodes in the network will not recognize your blocks as valid if you use the wrong difficulty constant

> Does it follow that if most people in the network are duped into a ridiculously high difficulty, that it will be impossible to mine more BTC?

This is kind of what has already happened. Nowadays there is specialized bitcoin mining hardware out there which is has driven the difficulty into the stratosphere. Bitcoin mining using CPUs and GPUs has become unprofitable, which is why the small miners have moved on to alternative cryptocurrencies where they won't need to compete with specialized hardware.

You have it backwards. A 20% increase in difficulty would mean that a block was only being mined once every 18s. The intuition is that if there are fewer blocks, then it is harder to get one.

I think this change is due to the etherium difficulty bomb:

https://www.google.com/amp/s/themerkle.com/what-is-the-ether...

It seems the keys to doing well on that scale are:

- be a small African country without oil (low CO2/low GDP)

- be a financial services exporter (Switzerland, Ireland, UK)

The countries which are doing badly seem to be central Asian former USSR states, petro-states, China, and Zimbabwe.