> Wasteful compared to what though? How much energy, human capital, and resources are consumed by the banking industry?
The article actually answers this to some degree. See the following graphic: https://i.imgur.com/8TdKevG.png
The article actually answers this to some degree. See the following graphic: https://i.imgur.com/8TdKevG.png
With something like lightning network, a single Bitcoin transaction can facilitate millions of 'lightning' transactions.
Can you name a better metric that we can measure?
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With regard to the Lightning Network, it seems that it requires a bit of supervision to be secure. https://themoneymongers.com/lightning-network-watchtowers/
That supervision probably will have a cost of some kind.
> You can hire watchtowers nodes for a fee and design the revocation transaction in such a way that the watchtowers will also receive their service fee when you get funds of the other party as a penalty.
So we're adding many, many more middlemen to the picture. Not only do we have to pay for the final transaction (which requires a large amount of electricity to be "mined" into the blockchain), we have to hire watchtowers to ensure that our Lightning Network transactions remain correct even if our counterparty tries to screw with our transaction history. (Remember: the full transaction history in the Lightning network is off-chain).
Being a watchtower is extremely low cost, it only requires a small amount of memory. Every full lightning node is watching the blockchain anyway so it is easy to watch for some extra transaction ids with a certain prefix. Transaction IDs are sufficiently long that only part of the txn ID (half) needs to be shared with the watchtower. The tower can only decrypt and send the revocation txn once the malicious txn is broadcast, and the watchtower reward can be built in to the revocation txn.
How much will watchtower rewards cost?
The economics aren't fully studied. But I'd expect a good watchtower would be proportional to the amount of the transaction. That is, if you wanted to protect a 100 BTC transaction, you'd want to spend more on the watchtower reward than if you wanted to protect a 1 BTC transaction.
Hypothetically, if you spend too little, the watchtower + your opponent can collude to effectively steal some of your money. (Ex: the Watchtower could be paid by your opponent to NOT send the revocation message).
The reward only has to be high enough for it to be worthwhile for other nodes to spend a small amount of memory storing your txn.
In the case of 100x watchtowers watching one transaction, each watchtower only has a 1% chance of actually getting the reward.
There are some services currently providing watchtower for a flat fee instead, and the going rate is low (1 satoshi / txn watched) =~ $ 0.00008
So I don't think "mining gold" is an appropriate analogy.
EDIT: Case in point: how much did it cost for Visa + Bank to increase a credit-card from $500 credit limit to $2000 credit limit? $1500 of credit appeared out of thin air.
The first credit limit increase "from scratch" costs hundreds of billions of dollars in creating a system of legal compliance, accounting, communication, internal and external risk management, executive compensation, regulatory oversight, credit ratings, cybersecurity, salaries of millions of workers, building public trust in the credit system, writing and passing legislation, even Fed responsibility of building and maintaining a fiat currency.
The second credit limit increase once this system exists is essentially free.
To what extent do these costs need to be accounted for in creating an accurately comparable 'per transaction' metric? By replacing much of the logic with 'just math', Bitcoin has the potential for a much higher theoretical efficiency than the current banking system. Whether market penetration will ever reach the current banking systems levels - and function without replicating these same structures - is certainly highly debatable and for many of the above items implausible.
Bitcoin transactions in isolation are also essentially free - it's the maintenance of the system which keeps it secure and trustworthy that is expensive.
As such, the question is interesting: how much energy required to produce one new ounce of gold? vs one bitcoin?
From the US Mint's financial statement [1]:
2017 cost $13.5 million dollars in "Communications, utilities, and misc charges", which presumably is the bucket that electricity bills falls under. There's no breakdown of overhead between currency coinage production and bullion/numismatic production, but the manufacturing obligation suggests that currency is roughly ⅕ of their total costs, which suggests that we might ascribe about $3 million in utility cost to produce coinage. The coins themselves were worth about $870 million, which suggests about 250 kJ (or 0.07 kWh) per $1 of coinage if we assume the Mint pays $0.05/kWh. I'm not including the energy cost of metal production itself, because I don't want to spend the time to track down that information.
[1] https://www.treasury.gov/about/budget-performance/CJ19/23.%2...
Neither is Bitcoin, so it should be a perfectly valid comparison?