Bitcoin's fundamental value is negative given its environmental impact
markets.businessinsider.com
markets.businessinsider.com
I don't know if it makes sense to merge these threads, because the point about environmental impact is mostly just a side comment in the original article.
Ever since humans learned to harness electricity our usage has increased, and with it our quality of life has also increased. That's not going to change. The only way to prevent electricity usage from causing climate change is to regulate emissions themselves (either through carbon taxes or outright bans: that's for regulators to decide) and invest in alternative forms for electricity generation (that includes nuclear).
Without Bitcoin, we could be retiring coal plants with the additional solar and wind that have been coming online. Instead, every additional Watt-hour we generate is used to mine Bitcoin on top of existing demand.
Nuclear is mostly baseload... not so much because its impossible to ramp-down nuclear, but because nuclear's initial-investment (site planning / engineering / regulations) are the bulk of its costs. Ongoing costs (ie: fuel) are miniscule.
There's "no point" ramping down Nuclear, given its miniscule fuel costs. Might as well keep pumping electricity as long as the price of electricity is non-negative.
So only gas ramps up-and-down.
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As such, Solar / Wind + Gas Peaker combinations are very good for ramping down Coal production. Because the bulk of electricity is needed in the daytime (due to the hot sun making AC work harder), Solar/Wind + Gas Peakers will use less fossil fuels than a Coal baseload generator over the same period.
For places like California which is facing a shortage of Water, Hydroelectric is a weaker option. Ex: if you run a dam in reverse for Pumped Storage, that implies sucking up the precious water from the lower-reservoir back up to the upper side.
Realistically speaking, the near term future is Solar + Gas peakers. We should build out as much Hydro-electric as possible, but most good river sites are already built out. (IE: Rivers which have a large change in elevation to make a Dam project actually worthwhile).
Maybe hydroelectric isn't an option for California, but in the east, there might be much more of an opportunity.
Its not like the East needs more hydro / energy storage. They've already got GW-hrs of energy storage. That's the "problem" about geography-based solutions: the places where Hydro already makes sense are already built up 50 years ago.
Not that that makes Hydro a "bad idea" or anything. If anything, it proves how Hydro has been tested for decades and is effective. It does mean that the East can build up more Solar Panels, since there's plenty of energy storage available.
Coal plants tend to be quite low on this list due to their poor scaling and obvious environmental impact - in fact for a while (I'm not certain if this is still accurate - it's about a decade out of date) one of the last entries on that list was a rarely activated coal power plant in downtown boston that had an extremely inefficient conversion ratio and was deemed exceptionally dangerous due to being located in a population center - still, in times of extreme demand it was standing ready to be activated.
it does, kind of. as we use up the easy to find deposits, the remaining deposits are harder to mine/refine, so essentially it does get harder.
Bitcoin adds artificial scarcity that isn't intrinsic. And unfortunately society as a whole pays for that additional scarcity by increasing the resources spent mining blocks.
I am not saying this is an unacceptable trade-off all things considered. I just think the gold analogy is flawed.
I disagree. Gold was specifically chosen to be rare and hard to counterfeit. That's why we don't use sea shells as a store of value. In that respect I don't see how awarding value to holders of a shinny yellow metal is any different than awarding value to holders of a hard to find hash.
(But yeah, gold hoarding is pretty wasteful in multiple ways too)
Isn't most hoarding wasteful?
When water prices are lower people water their lawns more and take more baths.
When shipping ePackets from China is cheap, people buy more stuff from there.
I just don’t see how Bitcoin responding to supply and demand is different from any other consumable.
It feels like the argument makes the unstated presumption that Bitcoin has no utility, which is a separate debate. Bitcoin advocates would say that more and more miners arguably provide greater security assurances making the currency itself more valuable.
This is human behavior responding to incentives. Yes, more energy is burned, but more people get places.
What I’m talking about is like if a car responded to the price of gas decreasing by 50% by revving in neutral until the total cost per mile was the same.
When the mining efficiency is increased, that isn't translated into more bitcoins being mined or more people benefiting from bitcoin. The matching mining difficulty increase ensures that all that extra efficiency will be turned into waste heat.
> Bitcoin is far from unique in this. When gas prices fall people have been shown to drive more. And buy less efficient cars and drive them less efficiently (faster, more aggressively).
I don't think that's true, or it's only true if you look at it from a consumption perspective that ignores important parts of the picture.
When gas prices fall, more energy is used, but travel miles increase. More work gets done per dollar.
When bitcoin mining gets more efficient or energy cheaper, the amount of bicoin "work" done stays constant, because the difficulty changes to compensate. It's like if roads got longer the cheaper gas gets.
Not quite. The extra work it does allows the network to secure itself better. We don't have to agree with this energy use, but it does do something.
Q: How do we imagine central banks would 'attack' a cryptocurrency, and how is a cryptocurrency (or its users/owners/proponents) going to defend against whatever form such attacks might take?
Bitcoin mining should soon be seen as national security threat for countries that have the most bitcoins, that's why having so much hashing power in China is dangerous.
(This is a genuine question, I'm not nearly as well-read on this as I should be) What would this achieve, and whom would benefit?
My naïve assumption would be that coordinated, deliberate (over-)regulating of cryptocurrencies and/or attempting to manipulate prices lower might be a) much cheaper, and b) much more effective.
If you bring enough political pressure to bear on any particular international financial flow, it takes quite a lot of (political!) effort to stand up to that.
Look at what happened between the US and Iran re: the reintroduction of sanctions; then look at the response from France, the United Kingdom, and Germany.[0][1]
Can Bitcoin and its backers (yet?) muster sufficient political muscle to respond if there's a coordinated political attack?
[0] https://www.europarl.europa.eu/thinktank/en/document.html?re... [1] https://ecfr.eu/article/commentary_trading_with_iran_special...
What you suggest is more similar to banning gold, which happened 100 years ago in US. Where do you think gold price went after that?
Where the gold price when after 1933 isn't that relevant to all those who were forced to sell their gold to the Federal Reserve at that time.[0]
Thought experiment: were your national government to pass a law forcing you to sell your Bitcoin to them at a price they pick, you would appear to have precisely two options: 1) sell, or 2) be prosecuted
There's plenty of precedent for 2) [1], so I'm guessing most people would end up opting to sell. That would appear to be the end of that... (?)
For clarity: no, I don't think this is right. It might happen anyway.
[0] https://en.wikipedia.org/wiki/Executive_Order_6102 [1] https://en.wikipedia.org/wiki/Executive_Order_6102#Prosecuti...
Turn off electricity to half of residents because you have this crazy idea that doesn't help them? Buy miners just to get nothing out of it at the end?
Also what do you think other billionaires with Bitcoin holdings do? Sell it all, or counteract by buying even more miner equipments?
It would be a political disaster unless all natiom states work together to take over all miners...which is a possibility.
https://en.wikipedia.org/wiki/Jevons_paradox
We can't simply just rely on improvements in efficiency to solve these problems.
Whereas there is very little change in the bitcoin mining, unless you have fetish for long zeros in hash values.
Let's assume for a moment that I live "off the grid" and run my full BTC node using my own solar power. Is that something that should be banned? Should it be shamed?
I don't know where to draw the line.
Should CEOs who put gold on their balance sheets be put to task for the environmental damage that causes? Should companies that buy conflict minerals be put to task for that as well? If so, you're just describing a pollution tax.
The difference between this and a tax is that it’s not done by the government, but for what it’s worth I don’t oppose that either.
They very frequently are.
Buying increases the market price, which increases the market value of the block reward, which increases the amount of energy miners are willing to use to earn the block reward.
But the comment I'm replying to seems to imply that it doesn't matter where the electricity comes from, that bitcoin is bad regardless of how the electricity is generated.
A global carbon tax would be great if it were enforceable but it’s not. Just look at how we treat our oceans. It’s especially a problem with Bitcoin since production will naturally shift to the cheapest location, and since it’s fungible and non-physical this can’t be accounted for with trade law/sanctions the same way it could with manufacturing.
I think the problem, though, is with the concept of value itself.
To my knowledge, the value of something is necessarily a personal assessment that individuals 1) make for themselves and 2) by a process that they do not and can not fully comprehend.
As Warren Buffett (I think) once said.
I have a very hard time understanding why people can't wrap their heads around this very basic concept.
It's just a restatement of the law of supply and demand.
BTC's scarcity is set by algorithm and BTC provides no value other than being a store for value.
USD's scarcity is set by the printers and databases at the Federal Reserve, and its value is derived from the faith that the US economy and government will honor its value.
And exchange medium.
Yet it is free. How's that for value?
Again: you need to get back to the one thing that models all of these things properly: supply (currently akin to infinite for air) and demand (huge, for air, but finite, hence air is free).
This whole notion that "I can eat it therefore it has value" is simply a corollary of the law of supply and demand.
If you use the more general, more powerful paradigm, you reasoning will become crisper.
"I genuinely believe that a hedge fund will be forced to pay me lot to take it off my hands" was a component of the demand for GME recently. Unfortunately this belief was not well founded, and so many buyers of GME did not realise the value expected from their purchase of GME. Of course, there is also demand for GME because it is a company with substantial assets which can plausibly return profits and pay dividends in future years, it just happens to be a lot less. The only people for whom peak price GME was worth what they thought it was worth were the people who got >$250 out of entertainment value from watching it fall.
All market prices are whatever people think its worth, but individual buyers can derive much more value than that price, or make mistakes and derive much less value.
I don't think that people talking about "fundamental value" have missed the fact that supply also affects price. I think they've avoided missing the fact that people valuing an asset based on predicting others will want it even more in future can be wrong. And that investors who are good at predicting assets other people might want more in future tend to look at intrinsic properties.
It's good to be reminded that value emerges from individual decisions made by individual traders that collectively form a market. Still, there is also benefit in understanding whether there is some external objective reality that is influencing those decisions.
Sometimes, value decisions are arbitrary or irrational—but over time, value decisions tend to be rational and based on underlying fundamentals of the thing in question, do they not?
People who buy and sell things have the same mental capacity, after all, as the observers who are on the outside asking about the "fundamental" utility of the thing to which value is being assigned.
Wouldn't the people who have something at stake in a transaction have more incentive to develop a theory of underlying value than would disinterested observers? If they do develop a theory of underlying value, wouldn't that theory guide their pricing decisions when buying and selling?
And if so, how is the "fundamental value" of a thing distinct from the aggregated theories of value that buyers and sellers of that thing hold over its lifetime? Accurately assessing this "fundamental value" might not help you as a short-term trader, but it surely can improve the decision making of a long-term investor, no?
I think it's emphatically not the case.
Edit: I looked it up on Wikipedia and found this:
>In FY 2006, the DoD used almost 30,000 gigawatt hours (GWH) of electricity, at a cost of almost $2.2 billion. The DoD's electricity use would supply enough electricity to power more than 2.3 million average American homes. In electricity consumption, if it were a country, the DoD would rank 58th in the world, using slightly less than Denmark and slightly more than Syria (CIA World Factbook, 2006).[1] The Department of Defense uses 4,600,000,000 US gallons (1.7×1010 L) of fuel annually, an average of 12,600,000 US gallons (48,000,000 L) of fuel per day. A large Army division may use about 6,000 US gallons (23,000 L) per day. According to the 2005 CIA World Factbook, if it were a country, the DoD would rank 34th in the world in average daily oil use, coming in just behind Iraq and just ahead of Sweden.
https://en.m.wikipedia.org/wiki/Energy_usage_of_the_United_S...
At the moment the topic seems to be Bitcoin, since it's currently skyrocketing due to Tesla.
But don't worry, they will return to gas/oil soon.
I suspect Bitcoin still comes out behind, but at least it would be a meaningful comparison.
Buying things at stores and shops that don't take card payments for one.
Buying weed for another.
Buying/selling small things in person, think garage sales, or even buying second hand cars.
The iron grip of the governments there is getting a lot tighter.
Here's a list: https://www.europe-consommateurs.eu/en/shopping-internet/cas...
[EDIT]: I should have been more precise: you can't buy a new car in those countries.
You can still probably buy a used car with 10k euro if the transaction is conducted between private persons.
But then: the seller will be left holding 10K euros in cash, which he is likely going to want to deposit into a bank and run into complications.
For large transactions like paying a mortgage it’s all electronic and very energy efficient.
Oh, btw, did you heat your house today?
Or did you happen to drive a car?
Or did you fly in a plane prior to COVID?
How much fossil fuel was burned to move your 80-ish kg from point A to point B in the air?
Energy consumption is on an exponential growth curve. Has been, will be for the foreseeable future.
The problem is how the energy is produced, not the fact that we use energy.
> At current rates, bitcoin mining uses the same amount of energy every year as the Netherlands did in 2019
Part of the problem is certainly in how the energy is produced. But another part of the equation is that this store of value, by itself, adds very significant amounts of consumption to that growth curve you mentioned.
Wish as we may that we could just snap our fingers and switch to clean energy, realistically that will not happen in the near future. Meanwhile, bitcoin mining will continue to consume as much energy annually as entire countries, and much of that energy will come from non-clean energy.
I'm not saying "let's burn bitcoin", or saying that I have a way out of this situation. But it's either a bit disingenuous or a bit naive to compare personal use of electricity to that of bitcoin's, in order to imply that only "self-righteous internet users" need to concern themselves with it.
Bitcoin was designed in part as a challenge to the monetary system, but it has ended up shining a light onto a much bigger problem: the economy itself is broken, it is sick, energy usage is just one of the symptoms. Resources in most industries are being wasted so much investors see no value in generating 'real' productivity. Hence the demand for cryptocurrencies.
(Same pattern I recall about climate change, ice caps melting, etc. Deny until it's impossible and then dismiss instead)
Both are renewable.
And even if it wasn't, who are we too tell people how to spend their energy? What we really need is a proper carbon tax.
Power generation isn't perfectly fungible, but it's enough so that this argument falls completely on its face. I wish people would stop making it. Bitcoin is an environmental disaster.
No, that power would have gone to reducing the price of power and people would have found new uses for it.
A lot of solar would be built with or without Bitcoin. If the cost to build and operate solar is cheaper than the cost to operate fossil fuel plants, it will get built regardless of Bitcoin's existence.
> they are not taking energy away from other enterprises but adding renewables to the pool
Only if you assume that a virtually all of that solar wouldn't have been built without the existence of Bitcoin.
> now solar is becoming economically feasible as an alternative to oil for example, that wouldn't have happened so soon without the demand from bitcoin.
[citation needed]
That's a purpose.
Cable boxes used to waste massive amounts of energy (because GI/SA don't pay your power bill) and eventually the government stepped in to force efficiency. So no, Bitcoin isn't being unfairly singled out for criticism.
This isn't an argument that it's worth the energy expenditure, or that there aren't alternate ways to get the same level of security, but it's an apples and oranges comparison.
Avalanche: < 1 MW
Keep telling me how "securing the network isn't waste".
That's a bit like saying the more resources you spend on something, the better it is. Are there crypto currencies that have comparable levels of security with less resources spent on it? Is it theoretically possible to have a crypto currency where the resource requirements don't scale as dramatically as they do with bitcoin?
Even if we grant that more energy == greater security, there's still the question of whether or not the resources per unit of security (however you want to measure "security") might be more efficient using some other methodology.
And yet gaming still wastes more energy than crypto. Poor argument.
This seems dubious.
There's a name for that particular ailment: it's called acute nocoiner syndrom.
Also how are you measuring the environmental impact of video gaming & or porn? Are their white papers out there with a comparative analysis?
I think what scares some well connected people that could use politics to influence things is that the people who got behind this revolution don’t need them now. We chose not to play that game anymore and made a new game that doesn’t care about the rules they (the well connected in journalism, universities, think tanks, lobbies, corporations, activists, etc) corrupted.
You have to understand what a threat this is as millions of individuals will be able to more or less remove themselves from the system and just not participate in their political power game. Financial independence is a threat.
Edit: I know I said I won't go on, but I started thinking about total power consumption from Netflix and all streaming servers, the load, the bandwidth etc because I'm quite familiar with how much a datacenter full of video streaming/conversion servers can pull. All just so people can sit at home totally unproductive sapping up bandwidth and power through multiple points.
Back in the days where all our electricity came from fossil fuels, I completely agree that marginal electricity usage was bad for the environment. However I think that thought has persisted with us even though it is no longer true 100% of the time. With renewables sometimes the marginal cost of electricity to our environment is near 0 or even negative (eg, during periods of higher winds and lower demand.)
I predict that in the future as bitcoin mining becomes more and more of an efficiency game that you will see bitcoin mining be kind of a load balancer the grid, effectively turning off during peak demand (or low supply) times and contributing to the base load during regular times.
For example, it may even help the economics of building new wind plants. Eg, currently it may not be profitable to build a new wind plant because base load is too low that the excess power generated would need to be sold off at 0 or even negative prices. However if bitcoin mining could be turned on during these times and off during periods of high demand, there will need to be fewer peaker plants in operation and it would positively affect the economics of opening a new wind plant.
Bitcoin mining only cares about the cost of electricity at a given time, it is not like most other electricity demands that are very time based. With the large variance of electricity generation by renewables, I think bitcoin can in the future help smooth demand according to the real supply/demand curve.
It's kind of like a different implementation of the Tesla utility grid batteries. Instead of deploying power, you force the grid to build more renewable capacity (that the miners are paying for) that you use except in peak periods, where you turn off and effectively provide the grid with more power.
Here are 2 articles of a bitcoin mining company doing just this: https://www.bloomberg.com/news/articles/2020-09-01/bitcoin-m... https://www.forbes.com/sites/christopherhelman/2020/05/21/ho...
Don't like something? Build something better. Opinions in news media are worthless.
Energy usage itself is not a bad thing, it’s the energy source that can be environmentally problematic.
Currently 39% of mining power is driven by renewables [1]. It’s not much but a good start.
The simplest solution to speed this up would be to create a law requiring that all mining must use renewable sources (or at least tax those that don’t). It would drive innovation, jobs, and make locations with renewable sources competitive places to live.
[1] https://www.jbs.cam.ac.uk/faculty-research/centres/alternati...
Since I have to pay for the electricity in dollars, and since I sell the bitcoin for dollars, I'm actually operating a machine that takes dollars as input and outputs dollars.
As long as I get more than a dollar out for every dollar I put in, I basically want to put as much money through the machine as it can handle, and I want to build as many more machines as I can afford. That will only change if the $ input:output ratio drops below 1.
If the cost of electricity goes up, my ratio suffers. I have to pay more to get the same amount of bitcoin out.
If the price of bitcoin goes down, my ratio suffers. I get less dollars out for the same input.
If you want me to burn less electricity, you need at least one of those two things to happen: Increase my electricity cost or decrease the price of bitcoin.
You may be rolling your eyes at the obviousness of this. That's because all industrial capitalism operates this way. You put money in to pay for power (to extract resources and fabricate), and you get money out the other end when you sell your product. The "use value" of the product never comes into it for the capitalist. All that matters is what it costs to produce vs what someone will pay at the end.
You may say "but industrial capitalism produces actually useful things like food and clothes" but when it does, that's just coincidental! The situation with bitcoin isn't unique, it just illustrates the phenomenon especially elegantly: the economy does not care whether it's producing useful things or destroying humanity. It only cares if the math works.
My take on this: I remain unconvinced that any form of Proof of Stake can give the same security properties we easily get from Proof of Work. I won't say never, but getting Bitcoin to move would take a very convincing argument about the viability of PoS, and so far that's not happening. (Especially given that the poster child for PoS does not actually _use_ PoS yet, they just keep promising it "soon".)
The merge from Eth1 to Eth2 is expected to happen this year or after. There shouldn’t be any significant delays now because Phase 0 was the biggest hurdle with research and technical dependencies that didn’t exist yet, like BLS signatures.
There’s no way Bitcoin will move to PoS without another contentious fork.
I guess news outlets also have to ride the hype whenever it happens.
In the future I hope we use this supply for something else but in the short term it solves the issue of no one wanting to invest in and improve renewables.
Yes, but there are vastly more energy efficient substitute DLTs with near-zero switching costs. Litecoin and scrypt (instead of AES256), for example.
Apply a USD/kWhr threshold across all industries.
Is this change (and focus on the external costs of energy production) more the result of penalties or incentives?
Pre-mined coins are vastly more energy efficient (with tx costs <1¢ and similarly minimal kWhr/tx costs), but the market doesn't trust undefined escrow terms that are fair game in commodities and retail markets.
We have trouble otherwise storing energy from noon to commute and dinner time; whereas a commodity like grain may keep for quite awhile.
Bitcoin serves as a demand subsidy when heavily-subsidized energy prices crash due to oversupply (that we should recognize as temporary because we are moving to electric vehicles and we need to reach production volumes so that, in comparison to alternatives, renewables are now more cost effective)
In the US, we have neither carbon taxes nor intraday prices. The EU has carbon taxes and electrical energy markets.
Like, no intraday electricity market?
This however seems a particularly bad attack on BTC, because we are not (spoilers) going to be able to to solve global warming, or even to mitigate it much. That ship has sailed, if it ever existed at all.