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Comment by fermienrico | Hacker News Reader

What if I told you that you can use this "useless" BTC to purchase carbon offsets, invest in renewable energy (which otherwise would have no funding), etc?

Sure, money has no value when you're stuck on an island, but a bow and arrow does. Similarly, a bow and arrow has little value in Tokyo city and money does. Money is the engine that drives motivation - it can be used to compel others to do good things.

Also, people don't understand what Bitcoin mining in wholistic sense is.

Model A: Energy -> Factory (Assets) + Labor -> Revenue

Model B: Energy -> Mining hardware (Assets) -> Revenue

It is surprisingly the same (we can even argue that labor is involved in building mining assets, GPUs don't grow naturally). You can argue that any economic endeavor is a waste.

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Not only is nobody using bitcoin for that, bitcoin is also a negative-sum game, and no actual new wealth is created. If you were going to buy those credits, you would get more if you cut bitcoin out of the equation entirely.

That's assuming it never creates any utility, which might be a fair assessment now but the same argument could have been made about many early stage innovations

How many decades is it going to take for bitcoin to not be “early stage”?

Maybe never, but just dismissing the technology as worse than useless seems a bit irrational. If your position is that the entire crypto space is just delusion, it's probably good to take a step back and consider that you are the one that's missing something.

I am not actually doing any of those things, even though they would all be fair to say.

I am saying that the economic system built around bitcoin is, by definition, negative-sum. And there is nothing about the technology that can change that.

Can you give an example of why an economy using bitcoin would be negative sum? If I'm producing widgets and transacting in crypto, value (widgets) are created, the transaction medium seems irrelevant to me.

I don't actually think switching exclusively to a deflationary currency is a good idea, but I don't buy that it creates a situation where value can only be destroyed..

The only input of wealth is people buying tokens on the market. The only output is people selling tokens on the market. There is a constant drain of this wealth from both market fees and from miners minting new coins and cashing them out.

There is no wealth creation anywhere else in this system. There are only these factors, and they are negative-sum, except for market operators and miners.

If you are producing widgets on the side, that is entirely unrelated to the token market. You can do that with any currency, and it is entirely orthogonal to the tokens. You are not creating wealth within that market, you are creating it outside that market, and possibly transferring it into as a separate step, to be siphoned off by market operators and miners.

Maybe I misunderstood what you meant by "the economic system built around bitcoin", I thought you meant "the economy if bitcoin were adopted would be negative sum".

Now that I understand your point: how is this different from any currency? Currencies are a medium of exchange, by definition they don't have intrinsic value. The value is defined by what you can buy. They are simply a convenient accounting system for value, not the source of value.

How does your argument not apply to every other currency?

Currencies do not exist in a vacuum, like bitcoin, it is an instrument of an entire country's economy. There is wealth created inside that economy, unlike bitcoin.

Right that's exactly my point, you're critiquing bitcoin as an alternative to the "economy" part, but that's not something it has ever claimed to be. It's an alternative for the "currency" part.

Those are not two different things. They are one and the same, in a regular currency.

Bitcoin implements only half of it, and pretends this is just as good. It is not. It is just gambling.

> Bitcoin implements only half of it

What does that mean? That the dollar implements the entirety of the economy? No currency "creates value"

I understand what you mean by saying bitcoin is zero sum, but I'm asking for an explanation of how that's any different (for example how is the dollar NOT zero sum)? I don't think you've explained what, in your opinion, is the differentiating characteristic here.

The dollar does not exist on its own. It is an integral part of the US economy. The two can not be separated. The dollar represents, in some sense, a unit of the US economy.

Bitcoin has nothing like this.

Bitcoin could theoretically become an integral part of some economy (or a smaller part of every economy). Then by your standards it would no longer have a problem?

It seems like a catch 22 you're presenting. It's a bad currency because nobody uses it, and nobody uses it because it's a bad currency. To me that's kind of a circular argument, and the same argument could be made about any early-stage network (the internet, facebook, etc.)

No, this can not be changed. It doesn't matter how many people use it or not. It very deliberately, by design and implementation, does not represent anything at all. This would not change even if an entire country used it (putting aside that it is not technically capable of doing so).

> This would not change even if an entire country used it (putting aside that it is not technically capable of doing so).

This is the point you need to expand on. When I asked what the difference between bitcoin and the dollar is, you said the defining difference is that the dollar is used by a country. So if that's not the difference what is?

If bitcoin was adopted, would it not also represent a unit of the economy?

Does your argument boil down to "it's not officially backed by country therefor it cannot serve as a medium of exchange"? If so I ask you WHY that prevents it from being a medium of exchange?

I really don't follow the "negative sum" argument. It seems like that applies to every currency, so it's kind of an irrelevant point

It is not that it is USED by a country. It is that it is an INTEGRAL PART of the country's economic policy. The country can, as part of managing its economy, also manage the currency.

Bitcoin is not managed this way. It has rules set in stone it follows entirely on its own, without external input. This means it exists in isolation, unaffected by whatever economic activity takes place around it. This is entirely unlike a national currency.

> The country can, as part of managing its economy, also manage the currency.

You think a requirement for currency is that the country using it can manage it? What about all the non-US countries that use the dollar? They absolutely cannot manage their currency. What about in the past when the US and others were on the gold standard? There are a million counterexamples.

And again, let me reiterate (because it seems we're drifting away from the point here) that we were originally discussing whether bitcoin was "negative sum". I'm telling you that if it has utility (like any other currency) there is value being created.

> This means it exists in isolation, unaffected by whatever economic activity takes place around it.

I don't really know what that means, everything is subject to outside economic forces.

They moved away from the gold standard for some pretty good reasons. And countries don't use other currencies unless they are in a very bad position and have no other choice. Bitcoin is gleefully copying all the bad features of these kinds of systems, and not really any of the benefits.

And I have explained why it is negative sum. It is an exceedingly simple system and easy to analyse. There is no value creation involved at any point. Any value creation happens outside of the bitcoin economy.

There are only three factors:

1. People putting real money into markets. 2. People taking real money out of markets. 3. Exchanges taking a cut of that real money.

Nothing else involves actual value.

The combination of 3 and the fact that miners are allowed to do 2 without transferring any value in means that for the reason of the users, the sum is negative.

> What if I told you that you can use this "useless" BTC to purchase carbon offsets, invest in renewable energy (which otherwise would have no funding), etc?

Unless they actually are using it to purchase carbon offsets, I don't see what's the point of this hypothetical?

> Also, people don't understand what Bitcoin mining in wholistic sense is.

Sure, some Bitcoin critics don't understand it well, but don't paint us all with that brush. Some of us have a very good understanding of what Bitcoin mining is and still find it tremendously wasteful.

I think it is just to make a point - that BTC generated from this "wasteful" activity can be used for any purpose. It could pay off executives or the government can use it to propel society forward or offset carbon credits or build warheads. The right or wrong is not in the action of mining BTC, it is the same as any other economic acivity.

I've added some more clarity.

> Sure, some Bitcoin critics don't understand it well, but don't paint us all with that brush. Some of us have a very good understanding of what Bitcoin mining is and still find it tremendously wasteful.

By all means, expand on this and enlighten me, I am curious to hear both sides.

It is wasteful because it is expending fossil fuels, manufacturing and raw materials to build the compute resources to perform calculations that don’t produce any intrinsic value, but rather just another way to represent and redistribute the value that already exists. It is as worthless as options/RSUs until you convert it to currency, and no currency is created in that transaction.

It’s like writing an unnecessary API wrapper or similar abstraction layer. YAGNI

> By all means, expand on this and enlighten me, I am curious to hear both sides.

Sure. My concern with Bitcoin mining is that (#1) it absorbs efficiency improvements by design, and that (#2) it is structurally an environmental race to the bottom.

By #1, I mean that even if you could magically halve the energy use of mining overnight, you wouldn't meaningfully reduce Bitcoin's footprint: mining would use less energy, so it would be (temporarily) more profitable, so miners would scale up until it was back at equilibrium. It's back in equilibrium when the cost of mining is the market value of a coin, and since energy costs dominate the cost of mining, this is (roughly) when energy use is on par with what it was before the efficiency improvement.

By #2, I mean that mining naturally gravitates to places where the externalities are not priced in. If Country A has a carbon tax and Country B does not, mining will just move (pushed by the invisible hand) to Country B, rendering the carbon tax ineffectual with regards to coin mining. Of course this is just part of a bigger problem of enforcing global externalities locally, but the tools that would usually help here (trade policy, etc.) do not really apply to crypto mining.

That's not the same at all. You left out an important step in the first model:

Energy -> Factory + Labor -> Goods and Services -> Revenue

Goods and services improve the life of people, and we have deliberately organized our society in such a way that providing goods and services is incentivized with revenue.

That you can also leech revenue for yourself by shuffling liquid assets around while providing no net benefit to the world is a side effect nobody intended. If you happen to reinvest that revenue into something more positive than what the other suckers would have, then no harm no foul, I suppose, but then "Revenue" shouldn't be the endpoint of your model. Something like "Well-being" should.

This is a really good counterpoint, thanks. What, if any, government interventions could be put in place to somehow add value to BTC mining?

What are your thoughts of governments using a resource such as hydroelectric dam or wind power to mine BTC and using it to build infrastructure (Goods), healthcare (Service), etc.? It kind of sounds like trickle down economics though, I am afraid.

> What, if any, government interventions could be put in place to somehow add value to BTC mining?

Well, the typical answer to "what can government do about this thing that is bad for society, but not bad enough to ban outright" is "tax it", though as another poster pointed out offshoring limits the efficacy of this strategy.

I'm going to interpret your second question as "What are your thoughts of governments using a resource such as hydroelectric dam or wind power to mine BTC and using it to increase their budget?" since in general, money spent on Expense X doesn't remember whether it was generated from Assets Y or Z; money in the budget is money in the budget. That said, I suppose I'm not strictly opposed to the idea, though I'd be interested in an analysis of the returns you can get on those CPUs when you're optimizing for a community rather than an individual - for example, how much benefit does society get from putting all that CPU to work for something like folding@home?

Except in Model A the products have some utilitarian/recreational value to humanity (coats, iPhones, ect.)

In Model B the product is a transaction network that is horribly inefficient in terms of $$$ transferred per unit of energy input. It probably makes sense to buy Cocaine (even then other cryptos are likely more efficient energy wise/secure) with Bitcoin, it doesn't make any sense to buy a car with it when there's already a banking system

You raise a good point, but sidestep a good conclusion I feel like. I can agree that it is surprisingly similar. However the root of the issue is that we need to speak in terms of environmental impact to get to Revenue.

I think the (implied) argument that the GP is making is such that Bitcoin is having too large of a cost to the value add to society.

I have no idea if this is true or not. I don't even know how we can quantify environmental damage relative to revenue.

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