Jack Dorsey says Square is ‘considering’ building a Bitcoin mining system

The opportunity cost means there is effectively no difference. A megawatt hour used to mine from a clean source means that a megawatt hour used for something else doesn't come from a clean energy source. Even if this project is the difference between building additional clean energy capacity or not, the resources for building that capacity have an opportunity cost—something that can't be built that would create value. Mining cryptocurrency doesn't create wealth any more than mining gold or printing money, it creates value in a zero sum manner, by discounting the value of all other currencies by a very tiny amount.

I don't know which world people like Dorsey live in. There is a massive chip shortage (all over the world) and energy shortage (in China and Europe). We don't have enough energy to power homes, and there just aren't enough chips for automobiles. This got to be an absolutely worst time to start manufacturing bitcoin machines, opensource or otherwise.

> If the energy comes from a clean source, what does it matter?

It matters because we don’t have enough clean energy to go around. Since energy is fungible, this means that turning on a bitcoin mine means that the energy provider has to turn on a fossil fuel plant to meet demand.

Maybe if Dorsey agreed to only run his bitcoin machines when excess renewables were available and could not be stored that would be fine. But that’s tantamount to making him promise to never make a profit overnight or when the wind isn’t blowing. I don’t trust any company to keep that promise.

> I think Dorsey believes that if there were cost effective mining equipment that requires little maintenance and is simple to maintain, you'd be able to use it in places that have abundant cheap and renewable resources.

It’s worth pointing out that e waste is a thing. Mining equipment has an environmental cost even if it’s magically efficient.

Furthermore the design of bitcoin encourages extra consumption. If Dorsey makes a machine that consumes half the energy of its competitors per hash, is he going to consume half the power, or is he going to make 2x as many of them to make double the profit? No need to answer, we already know that bitcoin farms always push to purchase as much hardware as they can in pursuit of greater hashing power.

Oh, and that hardware gets thrown away the moment a slightly better machine gets invented. Unlike server hardware, the value of a bitcoin machine drops precipitously the moment it’s no longer the most efficient. There have been some darkly humorous videos of miners giving away free oranges in china as long as you agree to take an outdated ant miner off their hands.

> Sure you'll still bid up the price you consume, but that's the point of the difficulty adjustment.

Whoops. You undermined your own point here.

> The more valuable the network, the more valuable prize for a 51% attack. So you have to rely on market forces to ensure the network remains secure

Yeah, but why do we want that? Bitcoin has utterly failed as a currency, it’s just turned into a stupid casino for people to bet on because “number go up”. Why as a society do we want to tolerate literal nation states worth of electricity “securing” a network that doesn’t really do anything useful for society?

1. It is still wasted energy 2. This concept fails miserably in the global scale test...

I think there are a number of fallacies in this white paper. For one, energy consumed by pow is just spent energy, it does not contribute to societal development. Also, this sort of consumer specific investment disregards society because it disregards where society needs the energy (since society is not the target group). On another hand, this whole paper seems very short sighted and rand-ish. The fact of the matter is that the only effect that scaling PoW more will have is scorching the earth, so why not just invest in tech that actually can make a difference like all the working PoS projects?

I have to start out by saying there are a lot of creative people looking to make money, and am humbled reading the paper. Its definitely a little on the optimistic side, but its an interesting idea.

> Bitcoin miners are unique energy buyers in that they offer highly flexible and easily interruptible load, provide payout in a globally liquid cryptocurrency, and are completely location agnostic, requiring only an internet connection. These combined qualities constitute an extraordinary asset, an energy buyer of last resort that can be turned on or off at a moment’s notice anywhere in the world.

So for anyone else reading, the premise is to capitalize during times when there is excess energy being generated. So instead of trying to figure out how to store that excess, you can expend it mining bitcoins.

It does make investing in green energy more attractive, since you don't end up throwing away excess energy, which makes the claim "Key to and Abundant, Clean Energy Future" somewhat defensible. But investors will have to consider other things like cost of energy storage and cost of maintaining a competitive mining rig, and who knows, the reality might be that burning up the excess for bitcoin is still not a good trade.

I also don't see increased attractiveness of green energy to investors, mining efficiency, and pollution output of the bitcoin network having strong correlations with each other. Maybe it might help increase the percentage of green energy in the energy sector, which in turn reduces the amount of brown energy being expended mining bitcoin, but, that would be more of a second order effect, and we can only make postulations at that point.

Maybe I’m confused. I thought there is a finite supply of bitcoins. If they stop mining / hit the limit, the supply becomes fixed but the demand may increase. What happens then to the value of the coin?

> Even if it only earns them a few dollars a day, the opportunity cost could very well be zero.

You forgot the opportunity cost of the datacenter itself. It would be much more profitable to turn that into a colo or a VPS host with some new hardware.

Regardless, once the bitcoin reward goes low enough Bitcoin will probably become worthless. It's already not usable as a currency, and without the distributed ponzi system ofhanding out blocks to miners, what motive will anyone have to buy it?

Ultimately, PoW systems have to hit a scarce resource.

If power became free, it'd change into a race for chips. If we figured out super cheap ways of making chips, the endless race would move to building factories or repurposing land for the whole system. It has to grow until it hits something hard to grow further.

Security of the system depends on using so much resources all the time that an attacker can't waste resources any faster.