It's the same reason that Ford doesn't build a tunnel under the US/Mexico border to ferry car parts to America.
That's a lot of energy going into a system that can commit a new block of transactions once every 10 minutes on average. It solves a problem in an interesting way, but it's nowhere near quick enough or efficient enough to solve 99% of engineering problems. That's why only 1% of engineers are working on it.
What have you found that is cheaper to proof-of-work that works on a global system?[1]
[1] "Nothing is Cheaper than Proof of Work" http://www.truthcoin.info/blog/pow-cheapest/
Cryptocurrency is backed entirely by free market incentives. You can fight the market if you want, but you will lose.
Maybe there's a happy medium where trustworthiness of central authorities is appropriately distributed, but common operations are quicker and less wasteful.
Centralized authority isn't cheaper. It trades proof of work for violence or denial of liberty.
Correct or not, your point is orthogonal to the issue mentioned.
Heck, everywhere you look there's a solution to the trust problem; it's fundamental to human interactions.
- There are courts. If you try to screw me, I can drag you into one. Nothing's perfect and there's probably a minimum amount I'd not bother Judge Judy for, but it's a solution a LOT of people rely on. And I can tack all sorts of things on to this like warranties and insurances.
- Brands. Look, we burn all this money on getting sports stars to pose for pictures. And there's reviews of our product in papers. If we did something stupid, you'd know. Again, it ain't perfect.
- Escrow. Don't trust me? Trust this guy.
What has been will be again,
what has been done will be done again;
there is nothing new under the sun.I’m working on this. It’s an implementation of a protocol called Stroem, which uses payment channels to transfer bitcoins from consumers to so-called issuers, who issue payments in exchange which consumers then send to merchants. Then merchants collect these off-chain payments from issuers, and redeem them into bitcoins on the blockchain when they wish.
This system compromises with the security of the payment receivers only (the merchants). Everything is trustlessness for the payment sender/consumer, while merchants need to trust issuers. But, if desired, the merchant-issuer trust can be reduced to almost nothing by the merchant redeeming very often (at the cost of higher fees).
And, importantly, the open nature of the protocol will ensure competition between issuers, since anyone can join the network.
Visa, MasterCard, AmEX, &c along with each individual bank, not to mention the intermediaries and gateways all of them use also consume a tremendous amount of power. It's not as if our current system uses a negligible amount of power, not to mention the number of steps and entities a transaction needs in order to be finalized.
The person I replied to compalined about "wasting" power to run the bitcoin network. It's only a valid comparison when compared against current usage, as our current system also "wastes" power to run the current system.
> PoW incentivizes miners to use as much power as possible because that is a necessary requirement for increasing hash output.
It also incentives them to get the most performance per Watt. I'm just saying it's meaningless to complain that bitcoin uses power, it only matters how it compares to the current system.
No, even if "the current system" was an apt comparison, there is still a fundamental difference between PoW and everything else. The power consumed in the process of facilitating a bank or any type of business is incidental to the useful work being performed. Power is burned so there are lights for people to see, power is burned so computers can perform calculations so that employees can get their jobs done faster, power is burned so that people can go back home after their shift is over; all this is incidental, the power is expended to make the business process more efficient, but the business could still run (though much less efficiently) without spending power on lights, computers and transportation. On the other hand, PoW is literally a waste of work because the nature of the work itself does not matter, the only thing that matters is that the unbounded cost of wasting energy keeps everyone honest.
> I'm just saying it's meaningless to complain that bitcoin uses power, it only matters how it compares to the current system.
The comparison is meaningless because "the current system" continues to exist regardless of any developments in bitcoin, if anything ubiquitous bitcoin would almost certainly increase the power impact of the finance industry.
If you raise the block size to put more transactions into a single block, you will end up with a normal banking system because nobody can carry the whole blockchain with them to pay and has to trust providers that manage wallets.
But is it more or less than the equivalent amount of power it would take for Bitcoin (or something like it) to scale to Visa, MC, AMEX, etc. global levels?
Our current system does in fact use a negligible amount of power. Each $2 latte you put on a credit card uses an amount of electricity so infinitesimal that it can only be measured in the aggregate.
The percentage of the power used to generate a single bitcoin block for a single transaction can power an average US household for (approximately) an entire week.
To put it in perspective: If the bitcoin network scaled up to the size of the VISA network it would require 100% of all energy used for all purposes planet-wide, from transportation, manufacturing, agriculture, etc. Everything you could possibly want to buy with bitcoin would be unavailable, as 100% of all human activity would go to powering the miners.
Those costs specifically end up being reified in the fee those processors charge to their customers, so we can determine an upper limit to how much is spent on energy in that way.
We don't really know the relationship between transaction rate and electrical usage in a mature BTC system, because mining is mainly used to prevent double-spends and the minimum required mining rate to support a given transaction rate is a game-theoretical concern and not a technical one. We can only really observe what has happened so far in the Bitcoin ecosystem.
Otherwise there will be a point where it is cost effective to attack the network.
Bitcoin is designed to be wasteful.
"I'm working on these hashes. You know I'm not taking a shortcut, because there's not yet a known way to do that with this secure hash. And because you know I'm doing the work, you should reward me with some coins."
Alternatives have been considered, like proof-of-stake.
Bitcoin network scaling has to do with transactions per second, and it is a protocol problem, and an storage problem, but it is independent of the hash capacity of the system.
We can theoretically improve the Bitcoin network capacity to handle 100x the number of transactions, while having the same hash rate.
In fact, if hash rate were halved each month, and the protocol unchanged, Bitcoin network transaction capacity would still be the same after Bitcoin difficulty is auto adjusted.
Hash rate and transaction capacity are orthogonal issues.
Now if you want a system used by 0.01% of the global population then that's a very different problem, but far less useful.
Also, everything is done via two-way payment channels in LN, which means that you need to lock X BTC in a channel in order to send it, which becomes very capital intensive for nodes close to merchants who need to lock millions of dollars worth of bitcoins to cover merchants’ monthly turnover (this is in addition to the BTC locked up by other nodes who participate in the transfer but are not directly connected to merchants). If you want to send 0.1 BTC through 10 nodes, each of these 10 nodes must have locked up 0.1 BTC on the blockchain, and you’ll pay blockchain fees if just a single channel/node in your path doesn’t have at least as much as you need to send.
A proper payment network needs two different types of nodes: senders and receivers. Using a single type of node for both doesn’t make much sense, since merchants and consumers have completely different needs. Senders need to be able to send relatively small amounts relatively frequently (a consumer making a few purchases per day), while receivers (merchants) need to redeem relatively large amounts (e.g. one week’s worth of payments) relatively rarely for bitcoins (on the blockchain).
https://medium.com/@jonaldfyookball/mathematical-proof-that-...
This is unsupported. LN is a research project, not a production-ready payment system. It has plenty of limitations (trustlessness is a huge limitation), and the topology of the network doesn’t match that of a real economy (routes to fellow consumers are practically useless, since everyone wants to pay merchants). There’s plenty of work left before LN can scale properly, if it ever manages to (again, trustlessness for both senders and receivers is setting the bar as high as it can possibly go).
Scalability is secondondary for LN, trustlessness is primary. Due to this choice I predict difficulty in scaling sufficiently.
PS: USD actually operate on a 3 tiered system that works well (Fed, Banks, cash) but doing the same thing in a *coin seems like just giving up.
What do you mean by this, exactly? Bitcoin miners look more than willing to earn money on brute forcing hard problems.
The point of proof-of-work is that it shouldn’t matter what anyone thinks about it. It’s basically impossible to ban (anyone can do a SHA256 calculation), and the difficulty automatically adjusts. In addition to this, the block reward — currently 12.5 BTC per block — halves every ~4 years, so less and less electricity will be consumed until only transaction fees provide capital for proof-of-work[1].
[1] http://www.bitcoinnotbombs.com/wp-content/uploads/2014/06/37...
Furthermore, the miners are here for the direct mining rewards. I think the future transaction fees approach will be significantly less attractive, so I'll be very interested to see how that change plays out once the era of rewarded mining is over.
"Let me explain why. In economic organization, we must distinguish between enforcing rules and making rules. Laws are rules enforced by state bureaucracy and made by a legislature. The SWIFT Protocol is a set of rules enforced by SWIFTNet (a centralized computational system) and made, ultimately, by SWIFT’s Board of Directors. The Bitcoin Protocol is a set of rules enforced by the Bitcoin Network (a distributed network of computers) made by — whom exactly? Who makes the rules matters at least as much as who enforces them. Blockchain technology may provide for completely impartial rule-enforcement, but that is of little comfort if the rules themselves are changed. This rule-making is what we refer to as governance."
Bitcoin and Blockchains are an opt-in rule system. You literally subscribe to the rule set (called consensus) that you wish to participate in. No one coerces you into participating in a rule system you do not want to participate it.
Your capitalist||socialist country is invaded by socialist||capitalists and they change the rules of your country's bank? Your blockchain doesn't care, it is enforced at the user level, at the edge.
>either you follow the fork supported by the majority [...], or you run the risk of finding your coins worthless
Any thing is only worth what others will pay for it. This is the case regardless if you are using a blockchain or not. If the world suddenly decided USD were worthless and you held lots of USD, yes you would find that your USD are now worthless.
There are so many examples, from Canadian Tire Money https://en.wikipedia.org/wiki/Canadian_Tire_money to Microsoft Points https://en.wikipedia.org/wiki/Microsoft_Points showing you can create private currencies granting the bearer certain privileges without a blockchain.
Massive institutions with billions of dollars at stake would rather have a predictable and stable regulatory regime to conduct transactions in the shadow of then to rely on a technical solution that supposedly obviates the need for one. Things come up -- bugs, acts of god, internal fraud, hacking, flash crashes, and so forth and so on. They want to be able to go to arbitrator and ask for a sensible and reasonable result and not be reliant on a totally inflexible mechanical rule set. Not the least of which because they can afford the very best lawyers to try to convince those arbitrators that what they want is sensible and reasonable.
With a technology like bitcoin, where receivers are pseudononymous, that would have never been possible.
Noone except for those who wish to remain pseudononymous will ever use bitcoin for any real-world scenarios. The costs are higher, the risks are higher, it doesn't scale, there are no checks and balances.
I don't want bitcoin for the same reason I don't want an AI to run national defenses.
How does that stop governments from engaging in Iran-Contra behavior?
How is that better than a government mandate requiring a list of expenditures PGP-signed by the government and their vendors?