This uses Ethereum so when they eventually move to proof-of-stake I'll mostly retract my scorn, but for now I stand by this being counterproductive and dumb.
It's not pointless. Have you read the arguments in http://blog.zorinaq.com/bitcoin-mining-is-not-wasteful/ ? It's not Ethereum-specific but the same logic applies. I feel I post that link too frequently, but people get too often mentally blocked on one technical detail (hashing) and fail to think about the big picture (renewables, jobs created, real utility of cryptos, etc). If cars with internal combustion engines were introduced today, would HNers complain its a dumb tech because it wastes 97% of the fuel's energy?[1]
[1] 90% wasted moving 1.5 tons of metal and only 150 kg of useful cargo/passengers, and remaining 7% wasted mostly as heat/friction.
https://en.wikipedia.org/wiki/Proof-of-stake#Criticism
These problems seem fairly significant and unresolved. Thoughts?
Statistical simulations have shown that simultaneous forging on several chains is possible, even profitable. But Proof of Stake advocates believe most described attack scenarios are impossible or so unpredictable that they are only theoretical.
Any system that will eventually attain a $1T market cap probably can't have theoretical issues like this.
https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ
That said, this all looks hard to get right...
... for return to date of zero. This is literally broken-windows economics.
Compare that to say air travel
How are crypto-currencies any different than that?
The fact is it is different
(1) fundamentally, because BoA would use 0 electricity if it could, while it will ALWAYS be worthwhile to spend a certain fraction of Bitcoin's transaction volume on electricity in order to capture transaction fees, and that will ALWAYS involve pointless hashes. GPU /ASIC efficiency gains will only drive more miners to mine.
(2) obviously, just look at the comment chains on previous posts for numbers (https://news.ycombinator.com/item?id=14751971); bitcoin burns a stupid amount of electricity to process a minute fraction of BoA's volume
There are efforts RIGHT NOW to solve this problem. So just like how BOA wastes electricity right now, and is trying to reduce its electricity use, so too are cryptocurrencies.
For example, one way to do it is to power the blockchain via "wasted" electricity from other sources, that was going to do nothing anyway. For example, a heater literally sends electricity through wires, and "wastes" that energy to create heat. One could imagine a heater that uses the electricity/heat from mining for "free".
Or even at a more basic level, imagine a electric dam, that produces so much power during certain times in the day, that it has to sell it for negative prices on the market. Thats Free energy right there!
Another example is Proof of Space algorithms. The way it works is instead of using GPU heavy hashing algorithms, you use "Space" intensive hashing algorithms.
The reason why you do this is because there is a TON of extra hard disk space that is just lying around doing nothing. We could take that extra space for "free" and use it to secure a blockchain (while allowing the user to reclaim the space at any time with no effort), and it would cost very little electricity.
Right, but once people do that, mining becomes more efficient. If mining becomes more efficient, more people start mining, then the difficulty adjusts, and then you're back at the beginning.
It's not a bad thing: efficiency gains are good. But they don't reduce the total energy expenditure, because they incentivise increased mining.
The only people who would be mining are the ones who are spending 0$ on electricity, because the electricity would otherwise be wasted.
By heater, I meant literally a heater in someone's house.
The idea is that the only electricity that would be spent on the blockchain is electricity that was going to be sent down the drain anyway.
Intuitively, you're right. However, I read an article (can't find it now, still looking) that presented a convincing case that if there is $X up for grabs for doing a certain amount of work (mining), then the amount of work that is done increases until $X is being spent on the work. So if you're getting heating out of it as well, X increases, but that just means more mining is done until it's no longer marginally profitable.
But intuitively you're right. So I don't quite know where the mistake lies.
I think it's a stretch to say the two are perfectly linked.
If you dropped someone's electricity price in half, would they buy twice the equipment to mine? If you dropped it to 1%, would they buy 100x as much equipment?
For BoA (or other financial institutions), simply sending a message through the trusted financial network saying "I pay you $5" is sufficient. Whereas for BitCoin (or other crypt currencies), a difficult hash has to be calculated that takes many orders of magnitude more energy.