El Salvador Plans to Use Electricity Generated from Volcanoes to Mine Bitcoin
npr.org
npr.org
I believe that what the president, Nayib Bukele, and his team have done is monumental. The reason is that I also believe that the financial system crashed back in 2008 and has been kept alive by central banks worldwide. Last summer we saw how Lebanon banks reneged to pay back their customers their holdings in USD. This seems to be increasing. The thirst for USD around the world is increasing and all the so called printing by the FED is not getting to the other countries and international companies fast enough. El Salvador is in a though position since it does not control its main currency. The other one, the Colón, while still legal tender is for all practical purposes unusable. It would take too long to grow the economy enough for it to be valued appropriately against the USD. Mandating BTC as legal tender is an awesome move. To me the most important benefit is that the 70% of the population which was excluded from banking and relegated to use physical currency will now be included. If the economy is an engine and money is the oil, El Salvador, which had only some drops of oil, will now get a complete oil change with synthetic on top of that. Lets remember that the law obligates the government to instruct all citizens on the use of the technology and to provide the means if necessary. This means that the government now has to provide connectivity to all citizens and teach them. Nayib has shown that he’s up to the task. For example, El Salvador is providing every child in the public school system with a laptop and free internet connectivity.
So I think this is beyond if BTC goes up to 200k. It doesn’t matter. If it goes back to 10k is OK too. What matters is that every citizen will now be included as equal in this new financial system.
You are 100% incorrect. Bitcoin is wildly deflationary. Therefore it does not encourage an economy to function, it encourages people to hold onto it with white knuckles. It's not oil for the economy, it's sand.
> This means that the government now has to provide connectivity to all citizens and teach them.
And when they don't provide connectivity and teach citizens?
In my opinion, that's the biggest lie that people have been made to believe to justify constant stealing of their purchasing power over time.
People will always spend money for things they need, they will also spend money for things they want, our current system is forcing them to spend it for the sake of spending it causing unnecessary over-consumerism.
It doesn't matter how much Bitcoin price will appreciate in 5 years. If I need to eat, I'll have to spend today, if I want to buy a house, I'll have to spend too. Instead, I will think twice on upgrading to the shiny new iPhone every year, maybe doing it once every 2-3 years, which is a good thing.
In this world where the currency doesn't depreciate like ~95% over a 100 year period, only investments which make sense will get money thrown at them.
If the P/E is high, it mostly has to do with what i mentioned and your are late to the "party".
But high p/e stocks != Fiat money as the op mentioned.
BTC isn't good for any of that.
USD is good for 1 and 2.
The gov. can move to re-establish it's currency and have 3 as well.
That it's used widely and fungible is what gives it value.
If your own currency is destroyed, you use the one that has the most integrity that's relative to your country. For most nations the default would be USD. For Vietnam probably RMB. For Belarus either Euro or Rouble.
Then you develop integrity in governance and switch to a national currency.
A nations currency is actually a vert good measure of the competence and integrity of the leadership class.
How Inflation Is Stealing Your Wealth | Jeff Booth | Pomp Podcast #572 https://www.youtube.com/watch?v=RuCqFjU9Wi4
It's very simple. 100 euros in your hand right now is worth more than a possible/probable 100 euros in your hand next week. And Jeff Booth is arguing that we are trapped in a mental prison because we agree with this obvious fact.
A) time value of money
B) inflationary aspects of fiat currency vs hard currency
I mean, it's literally the #1 meme for cryptocurrency.
Life is short, you enjoy/spend what you have while you're here.
Inversely, with BTC, you would want to spend as little as humanly possible. Make whatever philosophical arguments you want: this is not adding oil to the engine. This is adding sand.
Sign me up. Hyper-consumerism has laid waste to our planet, commoditized every human interaction, and polluted our minds with its drivel.
Behold Denmark and its glorious decision to punish its citizenry for saving any amount of money at all. Hope you weren't thinking of saving your pennies for a ticket out of the renter's racket, Denmark would prefer you stuff it in stocks and pay them their cut.
It's time we seized control of the engine and refashioned it into a tool that serves our welfare.
If you don't want to consume, then you can just...not consume.
Why buy bitcoin in order to not sell it, ever?
If no one would spend money, the related countries would go bust within a year.
Sure. It's like the successful ipo's. While 1% succeeds and people want to have a startup, everyone forgets that 99% fails.
I earned the 2nd biggest amount of people i know personally and i can't buy a fancy car with it. On Reddit, you can see all people come together on a population of 10 billion, lol.
People that were interviewed for Bitcoin gains in the newspaper in 2020 had 20% of my gains in 2017. And it went life changing money either.
Seeing it on Reddit mostly means that you have found your "community".
[1] https://www.amazon.com/Their-Money-Oxford-India-Paperbacks/d...
It's called a 'deflationary trap' and everything falls apart.
Nations need a stable currency to function, BTC is untenable.
There's not much to debate here because it simply won't work, it's Banana Republic kind of stuff. They'll never switch over to BTC as a nation it's pragmatically impossible.
If they had the ability to effectively switch over to BTC, then they'd have the ability to responsibly issue and manage a currency.
The US gold standard collapsed. That's a fact of history.
In a sound currency world, interest rates are set by the relative availability of funds for investment - that is, they are counter-cyclically market-determined: if there is little investment, rates will be low, if the economy is booming, rates will naturally rise.
Secondly, the rate of deflation is determined by the rate of increase in the economy: if the economy is shrinking over time, there is no deflationary incentive to hold - so here again the currency is counter-cyclical, discouraging rapid growth while allowing for measured growth.
Is that sand? Or sanity?
It would be like saying 'we're going to fix the amount of roads we have' and 'people will be forced to use the roads more sensibly!'.
The only reason for 'fixing' currency would be to prevent bad actors from running the printing press. Now - this is actually a very real problem historically - however, it's a pretty crude solution.
The smart thing to do is manage your currency smartly - literally like everything else in civilization.
You need good Public Health Policy, you need good Monetary Policy.
Good monetary policy may be practicable by angels or saints, but not by men, who stand at the gates of unimaginable wealth that emanates from the printing press. Literal trillions of dollars - who can even conceive of that value, let alone decline the exercise thereof? Better to take it out of our hands.
If there was no elasticity in the monetary supply, then in both 2009 and 2021 the entire US economy would have collapsed probably taking down the world with in 2008, and most nations would have been wiped out in 2021 as well.
Also, most major currencies are managed well enough.
If you don't like your local fiat units, then don't hold on to them. Exchange them for anything else you value more and use local currency on as that - currency. Currency was never meant to be a long term store of value.
That a widely, blindly believed economist mantra without much basis.
People now don't want to spend money even at the time when interest rates are near negative.
The few countries still with relatively high rates, and credible economy are the ones which register growth.
But, I predict that the practicals are not going to be good. Bitcoin transaction fees are high. If anything, this is a gift to large criminal organizations with a large footprint in the country which will be far more able to make use of their BTC. The law enforcement arm of this will not be ready or able to deal with it.
There is a role for cryptocurrency in helping the underserved gain access to banking. This plan does not sound like the right one to me.
With the rapid increase of the Money Supply of the USD, this is no different than any other Asset, especially Buyback driven stocks(where the supply diminishes over time!). To store value you also need to hold onto them with white knuckles. It also does not encourage an economy to function, hence why our GDP growth has slowed to a halt.
Using a stablecoin on a proof of stake blockchain with high transaction rates would make a lot of sense.
But that wouldn't help the officials who pushed this get rich from their stash of bitcoin...
But yeah, if you sell this to me as a test of lightning at scale, then I'm definitely more interested in it, while still thinking a super volatile asset is a bad currency.
The volatility will come down as the market caps get larger, but it'll never go away (I mean even fiat currencies and gold's price fluctuate on a daily basis).
The energy usage (not waste if you consider it to be a useful thing) will only go up as the price goes up, but it'll use increasingly renewable % and stranded energy and even bankroll new renewable power plants that wouldn't have been profitable to start.
1: https://www.forbes.com/sites/tatianakoffman/2020/07/14/this-...
So, not the same kinds of returns and drawdowns as BTC/USD, but enough to make one's eyes water and stomach churn. Forex has always had a reputation for volatility.
I think when Bitcoin approaches Gold's price, you can expect similar volatility because by then large institutions/countries would be holding it.
Also on a long term basis, it appreciates an average of ~300% year over year which is much better than the dollar which is depreciating on purpose.
Gold isn't used directly because it's not convenient, are you gonna transport a heavy metal that you can't divide into small portions to pay for stuff? No! Lightning network wallets makes even tiny payments of couple satoshis very easy/instant/almost free.
1. Pay huge fees to take your money off the blockchain.
2. Whiz it around a new, totally independent, centralized network where you need an always-on connection to anyone you're paying or receiving from and need to trust any intermediaries you're using, with brand new fees for every transaction and even at rest (so you can pay a "watchtower" to help make sure you don't get cheated).
3. Pay more huge fees to put your money back on the blockchain when you're done.
4. Wonder how you got yourself into a situation where you have all the disadvantages of Visa and Bitcoin, with none of the advantages of either.
We already have existing coins, like Nano, that can handle transactions instantly, for zero fees, and with nearly no energy use, on the main chain.
Security and trust are a lot more important for currency, nano doesn't have that. It has easily been spammed [1]. It barely has a market cap of ~1B$ and has never recovered to it's 2017 prices, so it's not even remotely close to being an ideal candidate for a country's currency.
1: https://www.coindesk.com/nanos-network-flooded-spam-nodes-ou...
Ya know what doesn't have security and trust? Putting your entire country on two custodial wallets and having all your citizen's wealth in the hands of two foreign companies (channel factoried or no). No one in El Salvador actually owns any Bitcoin. It baffles me how anyone could get on board with the original ideals of BTC, then defend what's happening now.
The price didn't move much after the announcement. The whole point is to attract those who have already gotten rich from their stash of bitcoin to come to the country.
That could have been done with just like a public bank instead of bitcoin though.
It's a wildly irresponsible financial move.
1) It only takes a bare minimum of competence to create a currency that has integrity, and is stable.
2) Extending that digitally, should not be a hard.
3) Using energy supplies to calculate made up numbers seems like a giant waste of energy - that energy could be used to heat homes and power other things.
4) BTC is wildly unstable, since El Salvador depends on imports - and - nobody accepts BTC for payment - it's going to be a wild ride.
5) Nobody is going to be issuing debt in BTC so that part is moot.
6) BTC is inappropriate for 'unbanked' people - they're going to be the target of hackers worldwide. Sure, you could make a 'government wallet' that protects them from that ... but then why not just do regular banking.
6) For a currency ... if for some reason you can't do #1 ... the best option, by far, is to use USD. Prices in USD are stable. They're accepted globally. You don't have to issue debt in USD, but you can if you want. You can also digitally bank in USD if you want, it's not that hard.
7) If you really think that the best way to leverage volcanic heat is to mine BTC ... then fine. Do that - and exchange it for whatever currency you need.
This whole concept is fairly insane, regular people I feel are going to pay a heavy price.
Lastly - the problem is not 'finances' - it's the fools managing the country. If they acted with a modicum of responsibility, you'd be able to have all of the normal things other countries do i.e. a currency, basic banking. None of that is actually that hard.
A better solution would be to approach an established bank somewhere: US, Canada, Brazil, UK, Germany and ask them to provide online banking for your citizens, probably in USD or a mix of USD and local currency.
Do the BTC mining if you really want to, but as a secondary thing.
Final Note: this already has the stench of corruption. My bet is that the leadership already has a big stake in BTC and are 'Doing a Musk' by propping it up and they will be grafting off the top of the mining activity.
But I will say this, I think that your assumption in point 1 is wrong. I think that the mismanagement of the financial system worldwide has proven that there is no country currency invulnerable to manipulation.
Jeff Booth talks about this towards the end of this interview which is great in it's entirety IMO.
How Inflation Is Stealing Your Wealth | Jeff Booth | Pomp Podcast #572 https://www.youtube.com/watch?v=RuCqFjU9Wi4
A nations currency will have the integrity and competency of the governing class, so El Salvador will be able to have a basic currency when they are not corrupt.
Frankly, this whole thing stinks of corruption, my bet is that the leadership are already speculating on BTC and are making big statements like Musk to drive it up, and that their fingers will be in the pot of the BTC volcanic mining.
But it may be moot: you can't force people to use BTC and businesses, esp. those that import will balk at it, and citizens likely won't adopt it.
Ask a US, Canadian, UK, Brazilian bank to provide basic financial services for citizens and they'd do it in a heartbreat.
The 'currency problem' in El Salvador is just a symptom of underlying problems.
Notably, the British Pound Sterling is named such because 1 British pound originally represented a pound of Sterling Silver. Today it takes over 400 British pounds to buy 1 pound of sterling silver.
Twenty US Dollars were worth 1 oz of gold until 1933. Today it is nearly 2000 USD per oz.
I challenge your statement that it is easy for a government to manage a currency over the long term. In fact it seems impossible for politicians and central bankers to resist the temptation to inflate their currencies to infinity.
Why haven’t the US, Canadian, UK or Brazilian banks provided services to the 70% of El Salvadorans today? What are were they waiting for all this time? I believe it simply wasn’t profitable enough for them.
Ok, so I’m going to straight-up ask you to either retract this racist statement or justify your position with evidence.
I want to see your proof that the government of El Salvador is corrupt. This link seems to indicate the opposite [1].
To help you see the light, let me highlight the fact that El Salvador lost their own currency after a bloody 12 year long civil war that was funded by an interventionist US government that raised an army of child soldiers in the 1980s.
Per Wikipedia [2], the Carter and Reagan administrations spent $1-2 million per day in 1980 dollars to raise and train this army of child soldiers.
Tell me again why El Salvador is corrupt and that is why they lost their currency?
This is because all the Fed does is create reserves that it uses to purchase Treasuries on the open market. But when we talk of foreigners demanding USD, what they really demand are treasuries, thus more "printing" (it is electronic, reserves are just numbers in a database) actually reduces the supply of assets that foreigners want to hold. Of course the scale is not really relevant to make a big difference in either direction.
What would increase the supply of treasuries is more debt issuance. There is an insatiable thirst to hold risk free debt in stable jurisdictions where property rights are respected. That is why the U.S. can run enormous deficits every year and the yields on those deficits are negative in real terms. None of this has anything to do with the supply of Federal reserve liabilities, which are reserves, but with the supply of Treasury liabilities, both actual liabilities and the off-balance sheet stuff like mortgages which are federally insured and thus also risk-free. We live in a world where the globalization of capital means that the moment anyone has some money to save, they want to store it on account in some US Bank or as a US corporate bond or equity, as they don't trust their own local banks and their own local corporations. Thus the U.S. is the world's bank, and that's why there is a global demand for dollar-denominated assets independent of whatever the Federal reserve does to increase or decrease the supply of reserves within the US banking system. Adjusting those reserves with open market operations does absolutely nothing to supply more dollars to anyone in El Salvador (or in Kansas).
But the problem for El Salvador is not the technology of monetary systems, it is that El Salvador has an underground economy that prevents it from collecting taxes or having a working credit system. If all your dealings are under the table, you have nothing to show a loan officer. If you don't want to store your savings in a bank but want to instantly withdraw them and store them in a foreign bank or under your mattress, then you are not going to be able to get much in bank loans in your own currency. None of that will be solved or even improved with bitcoin. Proving once again that bitcoin is a solution in search of problem, even in the arena of El Salvador's monetary woes.
I do believe that the monetary system IS the problem since El Salvador is dollarized and is subject to a foreign central bank antics while having no say in the matter. Having their own would be marginally better perhaps but IMO bitcoin is a much better solution.
> Lets remember that the law obligates the government to instruct all citizens on the use of the technology and to provide the means if necessary. This means that the government now has to provide connectivity to all citizens and teach them.
It's like proposing to dismantle old but working streetcars, because when the only way people can get around is by cars then the government will have to build decent highways. Sure, maybe the government should, but if it couldn't until now then what makes you think it will suddenly be able to?
Option A: invest in that volcano and reduce greenhouse gas emissions.
Option B: invest in that volcano and mine bitcoin.
B makes them richer so long as other people keep expecting Bitcoin prices to rise (increasing demand), so I can see why they do this, but I'm not sure I like it. Even if the equipment, installation, and operation are all compensated for, it's wasting renewable energy on making heat and some money by gambling on future demand of a PoW-based system. But for a poor country, making money to get up to rich country living standards makes sense so... I can't even fault them.
They can subsidize the startup costs for harvesting geothermal energy from Bitcoin mining and then use the geothermal infrastructure to produce electricity for the country.
But the potential geothermal output for El Salvador is huge.
This idea was presented to President Bukele during a Twitter Spaces[1] session where he discussed the bill with the Bitcoin community whilst it was going through voting. Mining Bitcoin was not something he has previously considered and openly ideated on the call with the community. It seems like a fully proposed plan for how Bitcoin mining will play a part in the country's overall energy policy has likely not yet been fully formed.
I've looked at income statements of a bunch of public companies that mine Bitcoin, and one of the most striking things is how much of the cost is actually depreciation of hardware. Granted, part of this is that they are running the hardware to its limits, but another aspect is that new improved mining hardware comes out frequently and pushes the old hardware over the profitability edge.
Basically, I'm skeptical that anyone can mine Bitcoin profitably without running the hardware 24/7. Other coins that use commodity hardware, maybe.
May well be that it won't change the cost structure enough - I treat this as the president deciding an announcement like this, which amounts to little more than "I've asked them to look into it", as a way to get some publicity. It could very well end up being silently put aside if the costs don't stack up.
El Salvador is the largest producer of geothermal energy in Central America.
https://en.wikipedia.org/wiki/Electricity_sector_in_El_Salva...
And of course: why not do both, and more?
Edit: lots of downvotes, but at least a higher quality comment is on top now.
I'm not a fan of crypto or bitcoin, but if it funds their roll out of geothermal power, then that seems like a net-positive.
We'd all love if they did that instead of what was announced, but that's not the announcement.
Presumably because they have limited capital and can't solve all problems at once?
B makes the colonizing foreign investors richer. It won't do shit for the poor country.
1) owns a profitable state company
2) that does not require the cooperation of the population in order to be profitable
...the result is a dictatorship.
There are obviously also counter-examples, but a currently-democratic country finding a new way to make money from natural resources, I wouldn't expect we have a large enough sample size to really say anything about that with certainty.
Edit: The Norway thing being (for those interested):
> [The oil fund] was established in 1990 to invest the surplus revenues of the Norwegian petroleum sector. It has over US$1.3 trillion in assets, including 1.4% of global stocks and shares, making it the world’s largest sovereign wealth fund. In May 2021, it was worth about $248,000 per Norwegian citizen.
https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...
In contrast, El Salvador right now is still fighting barbarism and anarchy.
Option B does not as the mining is always running and near the source.
The long-term effect of Bitcoin mining will probably be to subsidize the creation of reliable constant-output power sources like geothermal and nuclear, with some of that capacity being used for consumer/industrial usage during peak hours.
There's an exponential decay of rewards of mining BTC (50% every 4 years).
Do you think the price of BTC will increase exponentially, faster than the decay over the long term? I don't think so.
This implies that the energy consumption of bitcoin mining will eventually decay exponentially too.
If they can really get their population using tools that would make it easier for the government to collect taxes, make it easier for tourists to visit and spend money, etc then the mining rewards are only one small part of their plan.
Of course none of this really needs to happen with crypto, they certainly could solve these problems in other ways, but I can't really blame them for trying this out.
The advantage of bitcoin is that once you mine the coins, it is a lot harder for someone to come and take them from you, whether that someone is a rebel group or a corrupt government official or just a local crime syndicate. Moreover you are not dependent on available network backbones or any of the other required infrastructure that a data center depends upon.
There has literally never been a more direct reward for efficient energy production.
And there is nothing stopping us from extracting gold using electricity. It's in basically all soil and sea water. Sure there are some required materials, but I'd water a guess that those materials are no harder to obtain than GPUs.
The only thing that stops this reckless mining are the forces of the market, and the same is true with crypto. Crypto miners tend to be extremely frugal, and I doubt any are any who are doing unprofitable mining in expectation of crypto going up.
Now from a crypto maximalist perspective, which I don't necessarily hold, isn't the cost of the electricity worth having a decentralized currency which enables all sort of different markets?
Crypto is always held up as wasteful in terms of energy, but I'd be curious to see the energy cost in comparison to current payment processing systems.
Can’t quite find a one for one measurement for Bitcoin, but due note this is the energy needs of all of Visa’s operations and they process in excess 100 billion transactions a year and Bitcoin (in 2020) averaged around 300,000 transactions a day[1].
If interested there is this[2] digiconomist article with more numbers (no clue as to the veracity of them).
[0]: https://usa.visa.com/dam/VCOM/download/corporate-responsibil.... [1]: https://www.blockchain.com/charts/n-transactions [2]: https://digiconomist.net/bitcoin-energy-consumption/
300k per day is around 100 million transactions per year, three orders of magnitude less than Visa.
BTC uses 110 terawatt hours per year right now[0], which is 396,000,000 gigajoules, a three order of magnitude difference in the other direction. Assuming everything scales nicely, if Bitcoin were the size of visa it would use ~6 orders of magnitude more energy.
OK, so that is way worse than I thought. I'm still not sold on the idea that it's a bad thing, but it's nice to put numbers to the situation.
[0] https://www.google.com/amp/s/hbr.org/amp/2021/05/how-much-en...
Money doesn't directly convert into food. Someone still has to consume the energy to actually make things. By using energy to mine bitcoin to buy food, one is potentially doubling energy consumed.
Crypto mining will allow places with cheap power sources to build up energy production. Once that's established it's easier to build up infrastructure for things like data centers.
Everybody would benefit from power being built in remote places, but nobody wants to be the one to pay to build it there. I'm not seeing why crypto mining is any different though; it's a for-profit endeavor like anything else.
In other consensus systems like PoS, whoever has the most capital controls pretty much everything and has 0 incentive to sell what they get since they aren't really spending any energy for their cryptographic signature.
It literally says "rich gets richer" in the protocol which is fundamentally broken in my humble opinion.
And my reward is linear with how much I stake or put down, whereas with economies of scale in mining the reward is more like quadratic. Seems to me that with PoS the rich get richer linearly, with PoW the rich get richer ~quadratically.
If I spend 0.01% of what the Chinese miners spend on my mining setup, I’m not getting 0.01% of the rewards.
So whatever Bitcoin reward you get barely covers your running cost + small profit margin. Imagine like you're running from a monster, you can't stop or you'll become irrelevant.
Whereas with ETH, I can buy 100M$ worth of it, I'll get say 5% back which means I'm making 5M$ every year, thing is I don't have any pressure to sell it whereas the poorer stakers will have to sell to cover their cost of living or other reasons, so over time the % of my stake in eth grows. Things get even worse when you include custodians into the mix, exchanges will have much larger wallets and get much larger rewards which they may not share with the actual holders or keep a small % for themselves.
PoW on the other hand will lead to consolidation around inexpensive energy: volcanoes in El Salvador, hydro in some northern countries, solar somewhere else, etc. However, those places will have some abstract voting power in the Bitcoin world, but exchanges, people, node operators, and businesses also have abstract voting power to balance against the cheap energy locations.
I should mention that the upside of all of this is that we can now choose the option to have accessible digital banking around the world, and people who print money will have less of an impact on world affairs.
However, PoS has an important role as the layer for specific applications and markets, since it acts more like central banking with the tradeoffs of such.
B) ensuring that third parties like banks are unable to steal my funds. Through fees, charges, unauthorized transfers or just plain theft…
C) portability of funds around the globe, independent of foreign or domestic currency. Ever tried to wire funds globally on a weekend? Trade?
You are still looking at bitcoin like it’s a dollar bill. It’s not — it’s digital gold with more computational security than any system ever built by humanity.
B: This is probably the strongest argument for Bitcoin and the original vision.
C: Sending BTC is immediate but since you can’t really use BTC to buy much (yet) you still need to sell and wait for funds to clear, which takes about as long as just wiring money.
A deflationary currency doesn’t mean no one will ever spend or invest. It simply means that there is less forced incentive to spend and consume in order to avoid inflation.
Inflationary currencies are like a tilted playing field, they artificially force savers to spend or invest in risky assets while skewing economic metrics to make the economy look better than it is.
While the gold standard was not deflationary, the relatively fixed supply resulted in strong stable economic growth until countries in Europe began secretly debasing their currencies in the run up to WWI.
Inflating fiat currencies gave the European countries the power to perpetuate the first endless war - I strongly believe if they had been forced to tax their citizens to pay for WWI instead of stealing the wealth of the people by inflation, the World wars would not have been so severe and so prolonged.
So why do governments prefer slight inflation? A slight amount of inflation first allows governments to print a bit more money than they're collecting, which allows them to spend a bit more. Comparatively, in a deflationary world, they would need to collect more taxes than they spend, which would be tough both politically and tough for balanced budgets, since government spending is useful.
Deflation would mean that you basically get a net worth bump just from holding on to cash. You would have a real, tangible benefit of not spending money but rather keeping it in a bank account. Money in a bank account does not contribute to productivity. Money spent, or invested in companies doing productive work, is preferable. To counter inflation you at the very least need to invest in something like a CD, which the bank can then use to loan out mortgages and the like, keeping the money flowing.
Avalanche already provides a compelling and less wasteful alternative, and it might not even be the last word.
This idea that Bitcoin got it all just right has become a quasi-religious belief, fueled by the motivated reasoning of monetary interest and ideological fantasy.
There's nothing "hard" about money that requires a nation's worth of energy simply to continue to exist.
Proof of stake isn't fundamentally flawed, and proof of work isn't perfect. They both have many variations, and there's certainly many more to explore yet.
The only free lunch I see people pining for is the idea that they can squat on a wasteful, moribund asset, expecting it to be worth much more in the future.
I could assert that I need a Maserati and no other vehicle will fit my requirements, and it would be pretty easy for others to counter that either my supposed need is really a want, or the requirements are arbitrary and unnecessary.
Likewise I think your needs regarding crypto are more of a want. What would be the consequence if you didn't get that? Would you die? Would your quality of life significantly decrease? How did you live most of your life already without Bitcoin?
This has been invented. If it didn’t exist now for some reason, it would significantly decrease quality of life — I would be powerless to watch my saving erode into nothing. I would be powerless when the state decided it wanted to adjust interest rates to be negative (again, attacking saving). I would be powerless when any state decided that another state should be disconnected from the legacy financial networks. I would be powerless when they payment card networks started enforcing morality de jour. It would be like being arrested - some liberty taken from the individual and make them beholden to the state.
They call it being “orange pilled”. Once you get it, there is no other option to avoid growing poor slowly.
So holding stock in companies that, I don't know, actually produce something isn't an alternative? That just doesn't pass the sniff test.
The valuation of companies should reflect production, however any sensible extrapolations of thus in recent times are no different than speculation in cryptocurrencies. It’s all perception. That’s all money is — a shared delusion that something stores value.
https://www.vice.com/en/article/pkby7z/a-fossil-fuel-power-p...
Claims like “Bitcoin uses more electricity than <some poor country that doesn’t use much electricity>.” are totally irrelevant. Good. I want humanity to climb the Kardashev scale. If we have an invention that can help fund the creation of billions of watts of efficient energy capacity then that’s great!
Is there any source for this, the first part, that it is currently powered overwhelmingly by green energy? Anything I can find suggests otherwise. And the part of the claim that Bitcoin will use a greater share of green energy in the future is not very meaningful if you expect that is also true of every other industry.
https://theconversation.com/bitcoin-isnt-getting-greener-fou...
https://www.infokreek.com/green-bitcoin-the-impact-and-impor...
https://medium.com/crypto-lucid/enough-with-bitcoins-greenwa...
https://www.motherjones.com/environment/2021/05/bitcoin-mini...
It's wild that it took the bitcoin subsidy less than 2 decades to become far too high proportional to it's externalities.
Imagine if there were a cryptocurrency based on proof-of-driving-things-between-cities with a mining reward, and Los Angeles invested in it. There would be an incredible incentive for expanding LA's highway infrastructure, and you'd expect LA to get a lot more highways, to but there would be no positive impact on actual commuters trying to use those highways to get around greater LA, and quite possibly a negative impact, because the more direct incentive is to use whatever highways are there - building more highways is an indirect incentive.
How is this different from any other consumer of electricity? Every consumer wants to buy the cheapest electricity, and every producer wants to produce the most of it per energy input.
I'm also not claiming that it's bad for energy to be produced and consumed. It's not! It's just irrelevant if you're looking to consume electricity, and someone else is producing and immediately consuming it. And it's bad for you as a consumer if production goes up and consumption goes up by even more.
I have no idea what your point is about the Sun.
In mining, revenue = efficiency * potential energy * BTC per unit produced energy
In selling energy, revenue = efficiency * potential energy * USD per unit produced energy
I don’t see the difference, other than the fact the former just adds to the pool of required energy (it’s strictly additive to the energy produced by the second)
With crypto the only really question is how will the price of the currency affect the break even point for hardware cost (assuming all mined tokens are sold immediately).
Yeah, too bad this happens not long after we discovered that energy production creates massive issues with regards to our future on this planet.
Not having to pay for the inefficiency in producing the energy you actually needs seems to be... more direct?
The idea that bitcoin incentivizing efficient power generation because it consumes all that power somehow being a justification for bitcoin is entirely bananas.
I think it's unknowable right now where we will land, and as an optimist I choose to believe we will end up on the right side of the trade off, based on the apparent efficiency of market forces.
This has Easter Island written all over it.
'Hey, let's use all our resources to build Giant Heads! The person with the most heads gets to be the King!'.
Bitcoin will give that money back to the people with the way lower cost of transfers, esp through the Lightning Network that is planned to be widely used.
Elizabeth Stark boldly said 7 yrs ago and Bitcoin is like TCP and needs an http, and then built Lightning on top of Bitcoin and this is super exciting to see.
EDIT: removed “fees”, it’s just remittance based
1: https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?lo... 2: https://www.imf.org/external/pubs/ft/bop/2005/05-09.pdf
Good things happen when people have more money in their pockets - people save more, invest more, build more.
I would argue that the population who can now operate and opt-out of a USD system where their money is being debased by 20%+ in the last year by a foreign government will be quite a bit better off.
You know Bitcoin has taken a 40% tumble in the last month, right?
The US created 20% of all the dollars that have ever been created, ever– last year. This is infinitely more harmful than a reduction in price compared to another currency.
Additionally ill ignore your point completely and only address Z now.
That's a big if. Bitcoin transfer fees might be cheaper, but you need to add the cost of converting dollars to bitcoin, plus the volatility of the coin, plus any fees from intermediaries and Lightning nodes.
> Good things happen when people have more money in their pockets
High amount of remittances are not a cause, but a symptom of underlying problems. Would you be as cavalier about the effects of this on ES economy if it was, say, Western Union saying they'd reduce 10% their transfer fees?
It's always the same thing with Bitcoin, apparently it's such a great technology that it can change anything despite the fact that the only "new" thing it can do is to be decentralized. Somehow the argument always ends up being that decreased transfer fees will revolutionize everything (despite the fact that transfer fees might not be lower, and that we've had continuously decreasing transfer fees for years and yet that didn't seem to bring any revolution).
Seems like a no-brainer win though? Even if it doesn’t revolutionize the country
So many conversations with Bitcoin advocates involve them putting ridiculous statements into the mouths of others.
No one said that or anything like it.
Of smaller ones, SCRT which is a whole privacy-focused smartchain would be my other pick.
El Salvador already uses the US Dollar as its official currency. A migrant worker in the USA is going to face a lot more fees, scams, and difficulty to buy and send BTC than just wiring the same currency he earns to to a relative who can then spend in the same currency.
This Bitcoin thing is a marketing ploy from the corrupt Salvadoran president, and an attempt to get a few crypto whales to move to the country and cash out, and buy real estate.
That couldn’t be more wrong.
Look into The Lightning Network
Nevermind that banks in smaller countries can be a huge source of thief.
The short summary is that the environmental effect of Bitcoin mining is very small at present (12 GW consumption out of the world's 18 TW), but probably positive, because it slightly accelerates the renewable transition. But this could change.
Generally I feel like the HN comments section is pretty aggressive and conformist, and there's a lot of people trolling. The social dynamic rewards rapid reaction, trolling, and conforming to the popular opinion (and especially cheering for it and denouncing those who disagree with it), and punishes the kind of careful investigation and thoughtful conversation that I value. I think it brings out the worst in me.
http://canonical.org/~kragen/dercuano
This has been true for decades. Not anymore. A couple of weeks back the US gov said that it would stop all USAID funding and give it instead to ONGs in El Salvador which are basically the opposition or anti-Bukele.
I assume that there are other ways that the US gov sends "aid" but I'm sure these will also stop soon enough.
US-protected elections in 3...2...
In no scenario does "they" refer to El Salvador's poor population, especially not the indigenous peoples. The money will go to the colonizing foreign investors and circulate in things like CDOs. A few crumbs that fall off the table will go to improving the lives of the upper end of El Salvador's people, and incidentally some crumbs of the crumbs might fall down to the rest of the population. Trickle down, eh?
There’s some other points to be argued such as people now are holding an asset that is volatile but deflationary in nature by default and they have the option to convert and hold a currency which will lose value over time (USD). I’m not saying “bitcoin is going to save them” but its at least a novel approach that i think is worth exploring for countries in this position.
Consider how much brain power and resources have been spent on quant finance and crypto now in the past 20 years.
Imagine if all those resources had been spent on something more productive.
- ES makes BTC fiat
- ES taps volcanoes to mine BTC
What next?
- ES uses natural wormholes to plot the future timeline and win Earth?
"What about you guys floating $1 billion in “Volcano Bonds” (backed by future #BTC mining output) for El Salvador to pay off the IMF loan - so they can tell the IMF to beat it."
Not to mention the effect that trying to sell $1B-worth of Bitcoin could have on the market (even just a portion, Bitcoin is accepted nowhere for so they'd need real currency).
Did I miss a memo?
Or is this a sort of Freduian slip wherein you said 'fiat' when you meant to say 'official'?
It seems to me that we've been conditioned to conflate the two.
> a command or act of will that creates something without or as if without further effort
A fiat currency is one whose supply can be inflated by a command or act of will. The supply of Bitcoin cannot be inflated in this manner, so it's not a fiat currency. As properties, official and fiat are orthogonal. A currency can be one, or both, or neither.
[0] https://www.investopedia.com/terms/f/fiatmoney.asp#:~:text=F....
> not backed by a physical commodity
Aren't these two ways of stating the same monetary property? The reason that fiat currencies can be created by fiat is they aren't backed by anything.
> Commodity-representative/redeemable currencies cam be created at will
No they certainly can not. Not without an actual supply of the commodity. At least not in the case of redeemables. Obviously some 'representative' currencies, like those that Zimbabwe has tried, have ended up turning into fiat.
> No they certainly can not. Not without an actual supply of the commodity.
Yes they can. (And there is plenty of historical example of that happening.) Heck, pre-state-monopoly banknotes were essentially a redeemable virtual currency over the currency in which they were denominated which often relied very heavily on this trait.
There is a risk associated with doing so, but that's also true of fiat currency, though the exact failure mode is different.
The alternatives would be that it is commodity money (which is not the case because you can't use a Bitcoin other than exchange it for something else) or representative money (which is not the case because Bitcoin isn't backed by anything else for which it can exchanged).
Up to this point, it's been a rather degenerate case of fiat money because the agreement that it has value has not been governmentally backed.
But now that's no longer the case. Congrats, Bitcoin, you now absolutely meet all the requirements of fiat money!
And are precious metals fiat by the standard you've laid out? Or are they commodities strictly on thin premise that you can use silver as a disinfectant, etc?
That's not what "fiat" means in this context. Fiat money is simply money that is asserted to be valuable. Control over issuance of money by those who assert the value of money is not an essential element of fiat money.
For example, the US dollar is adopted as the currency of the Republic of Palau, and yet the Republic of Palau has no control over the US dollar. Does that suggest to you that, in Palau, the US dollar is not the fiat currency?
>And are precious metals fiat by the standard you've laid out? Or are they commodities strictly on thin premise that you can use silver as a disinfectant, etc?
Precious metals are not money; they're commodities. No-one thinks they're money. The question "are precious metals fiat?" is meaningless.
No. This is absolutely not the historical or academic definition of this term.
From investopedia:
> Fiat money gives central banks greater control over the economy because they can control how much money is printed. [0]
To (in the passive voice, no less) that any money which "is asserted to be valuable" is fiat money makes every object ever valued by any human into fiat money.
Moreover, it manufactures consent because it takes away the crucial ability to talk about money which can be capriciously inflated vs. money which cannot. And being in the latter category is, according to Bitcoin proponents (heck, according to me), among Bitcoin's strengths.
As for "tapping volcanoes" it's a PR exercise - El Salvador is one of the countries in the world with largest geothermal generation capacity.
"Tapping volcanoes" here in effect simply means mining bitcoin with part of their geothermal generating capacity. But "tapping volcanoes" got this a whole lot more attention than it otherwise would.
- will those moves make the country a good location for laundering bitcoins?
- generally speaking, is there no other way of profiting from surplus electricity (which essentially, this is)?
Nah. Bitcoin is actually a lot easier to trace than paper US Dollars.
The problem comes from privacy coins like Monero, which arguably should be outlawed (if not already)
You cannot (and should not try to) outlaw maths.
But also: outlaw where? Math doesn't recognize borders; the two are like oil and water.
Are you also in favour of outlawing Tor, E2EE, HTTPS? I am always surprised that some people want privacy outlawed.
Disclaimer: Monero contributor
- of course there are other ways, but given the return on kW/h, what's the _most_ profitable?
Making hydrogen, smelting aluminium, de-salinating water. But bitcoin can be transferred over internet, so the logistics is easier.
Undoubtedly there is, e.g. steel making - with the attendant logistical challenges. But few ways to fairly directly convert electricity into money.
In terms of profiting from surplus electricity, Bitcoin (or cryptocurrency mining in general) is a great option as it's exceptionally simple to scale up and down in accordance with available cheap surplus. One major benefit that miners are taking advantage of is locating in close proximity to energy stations, reducing the inefficiency of transporting electrical energy over distance. This turns effectively "wasted" energy in to a solidly efficient energy store for infinite amount of time— for example: 1 BTC will always be equal to 1/21000000 of the total supply.
> This turns effectively "wasted" energy in to a solidly efficient energy store for infinite amount of time— for example: 1 BTC will always be equal to 1/21000000 of the total supply.
It's not an efficient energy store if you can't get the energy back, it's just energy usage. Also, yes, 1 BTC will always be the same fraction of the total supply, but the actual value of it varies.
As for the value of 1 BTC, it's value fluctuates if you operate on a base currency which is not BTC, but that is the same for any currency exchange.
(I am suggesting currency, though I also understand that BTC may not be unanimously agreed on as a currency— but in El Salvador's case it is)
Yes but also, even though 1 BTC will always be worth 1 BTC, the amount of work it buys you won't be the same, as with any currency. In theory, you can also store USD for an infinite amount of time (assuming you exchange the paper for new paper when it decays), but it, too, won't hold its value.
This is actually not true, as 1 USD does not equal a static percentage of all USD. If you look at the stock-to-flow of storing value in USD compared to Bitcoin or even Gold, it's immediately apparent that USD or central bank backed fiat currency is an exceptionally inefficient way to store value as it's being debased at alarming rates.
This is why $1000 was worth way more in 1980 than it is today.
Edit Note: I actually just re-read your comment and realised I misread. I read store value for an infinite amount of time
EDIT: corrected public key, I had written "public/private" for some reason.
This does not remove Bitcoin from the network, just because it is never spent.
> The developers/community may very well decide to change the total amount of bitcoins available in the future
Actually it's not possible. You can fork the network if you get some level of consensus from developers, miners and node runners (not to mention a community that is willing to accept their value be debased) and increase the supply, but then by definition your coin is not on the Bitcoin chain, it is on your new forked chain.
It seems you misunderstand. Illicit fiat and extortion can be used to access energy to mine Bitcoin, effectively laundering that illicit fiat.
The underlying problem actually lies in the fiat system, not the Bitcoin one.
How so?
Fiat currencies are exceptionally good instruments for exchange value for illicit purposes. Primarily this is because it is unknown what the total supply of fiat is (although there are reasonable models for estimation) and it's transactional history is impossible to define.
Both of these properties combined (although other factors undoubtably are at play) mean it's very easy for large amounts of fiat to exchange hands without any third parties knowing (i.e cash transactions).
This is the underlying issue that allows fiat currencies to be the best method for transacting for illicit purposes.
In summary, Bitcoin is bad because it allows money laundered using the existing financial system to flow into it. Forget the property, energy and hardware providers for accepting illicit funds. Bitcoin is the real problem.
By you as well!
1. Yes, they are transparent, however mixers are a thing.
2. The 2 things confounding mixers are KYC and volume. El Salvador, a country, is in a position to ignore KYC and thereby promote mixing (laundering as one of the benefits) under its jurisdiction. Now they just have to attract the volume. You could never get away with this in the US.
There's more to it than the bitcoin fundamentals. Laws do matter and they come into play by location.
This point comes back frequently, but it's actually not true.
In order to turn a profit from bitcoin, you need to offset hardware depreciation costs, and that usually means you need to mine 24/7.
> BTC lmao XDDD
This world is sick
"100% clean, 100% renewable, 0 emissions energy from our volcano" . So when a volcano is depleted you plant another one ?
You can say the same thing about the sun and solar