Betting Against Bitcoin
paulbutler.org
paulbutler.org
A lot of his arguments against Bitcoin are based on the idea that proof of work and mining in general are unnecessary and don't serve any purpose. He also talks about how mining fees are basically a tax. But the miners are securing the network. The larger the network grows in value (ie Bitcoin price), the more important the function of securing the network is. Proof of stake is talked about as a plug in alternative, but what that really means is that the people with the most money have the most amount of control over the protocol (sound familiar?). With proof of work on the other hand, anyone can start participating and its much more democratic than proof of stak.
> It’s all wealth redistribution, not value creation.
The argument that digital gold has no value outside of speculation usually comes from people in rich developed countries with a strong financial system. They can't imagine anyone lives in a country where it's illegal to hold certain currencies or assets. Where they see their wealth shrink double digit amount every year. Where they have to go through great lengths to spend their money as soon as they get it due to inflation. Bitcoin is obviously too volatile to be used in transactions or a safe store of value, but theres a lot of work to be done in expanding financialization to the developing world
Whereas they could simply buy 10 million dollars worth of video cards, and thus solve their economic problems, lol.
This is New York and San Francisco buying , don’t kid yourself.
For sure it ain’t Lagos and and Caracas pumping the price to 65k
Doesn't that have the same fault? People with the most money can prove the most work.
There's already been decisions made with this in mind. For instance, during the DAO hack, a big consideration when considering a hard fork was that the hacker got a sizable portion of all ETH. Knowing that Ethereum would move over to proof of stake in the near future, that was simply unacceptable so they decided for a hard fork invalidating the stolen funds.
Ether already suffers from concentrated ownership and has practically no defined monetary policy. So it's very centralized. Switching to proof of stake will further centralize control.
Proof of work however anyone can start / stop mining at any time with no resistance, making it more decentralized.
[0] https://www.gemini.com/cryptopedia/the-dao-hack-makerdao
Ethereum doesn't have a monetary policy, it has a security policy: the minimum issuance necessary to secure the network.
You can't simply start mining to any significant degree on Bitcoin without setting up a data center filled with customized ASIC chips that are useless for anything else but mining Bitcoin.
At least Ether's current proof of work mining is GPU based. And at least the GPUs will be valuable for AI and graphics rendering after the network migrates fully to proof of stake.
Ethereum has more than 200K validators on the proof of stake Beacon chain right now and is expected to rise dramatically as the Merge gets closer. It is highly decentralized.
Wait, how is that? Anyone can mine Bitcoin by buying 100s of dollars of purpose-built mining hardware. Anyone can stake Algorand by... buying hundreds of dollars of Algorand. Anyone can control a huge portion of either network by spending millions. I'm not sure what the difference is here, except for the e-waste and electricity, of course.
You can't credibly say "I'm not sure what the difference is" and then say "except for the actual difference."
Throwing millions at Bitcoin mining will work if and only if you also have access to cheap energy. The only way to turn a profit is to have access to cheap energy. The key component isn't hardware but energy. (You can see this in how old mining rigs become profitable as price rises.)
It is in this way, the fact of required cheap energy, that Bitcoin enables decentralised mining. There is a strong incentive for any energy producer, and a race amongst energy producers globally, to source the cheapest energy because they can mine Bitcoin with it, no matter where on the planet, no matter how remote or off-grid the energy is as long as they can connect their miners to a satellite or fibre connection, hash blocks, and earn bitcoin.
Is this democratic? It doesn't sound like it. But if democracy is "rule by the people", and people are distributed all over the planet and energy resources are also distributed all over the planet, and these people are free to organise their sources of energy, then anyone is free to mine, whether from home[0] or industrially.
In proof-of-stake, there is no such natural/physical constraint to centralisation. Capital simply isn't distributed the way energy is. It seems also that there are incentives to acquire as much capital as possible to control the pos network. Is this certain? Hard to say but we will soon get to find out.
The number-go-up thesis for Ethereum's proof-of-stake seems to be something like: we can get something for nothing: the more that controllers of large amounts of capital stake for sweet rewards, the more eth is locked up, the more eth supply is constrained, the more price rises, the more profitable it is for everyone else to simply stake. In this endless spiral upwards, everyone will be forced to stake simply to earn increasingly valuable rewards.[1] Perhaps they've engineered a kind of democracy?
[0]: https://www.econoalchemist.com/post/home-mining-for-non-kyc-...
[1]: https://twitter.com/SquishChaos/status/1387074095007817730?s...
You're overthinking and confusing yourself. Locating energy off grid is far cheaper than connecting a source to a grid. It's a free voluntary global market and it is a competition, obviously. Like any competition, those who are uncompetitive either find a way to compete or accept they will lose.
> If China has the cheapest energy and 80% of the miners in the world pay to physically locate their rigs there, can't a single country take over the entire network at a whim?
Hypothetical and immaterial. If no one else in the whole world can compete with China's cost of energy production then we have much bigger problems to focus on than mere bitcoin mining, for China will simply leapfrog the rest of human civilization technologically and economically.
Also, see: - https://www.coindesk.com/policy/2021/06/22/go-west-bitcoin-u...
- https://www.coindesk.com/business/2020/05/19/the-last-word-o...
Irrelevant because whether costs are internalised or externalised is up to the humans in a jurisdiction to decide. If you choose to legislate yourself out of competitiveness in any field, that's your choice. Finally, everyone in a free market is incentivised to reduce cost basis and increase efficiency. So, nuclear.
Some developing countries even have shitcoins as their official currency, like the Brazilian Real. So for us crypto comes almost naturally.
Not far ago, bitcoin's market price tanked down to around half it's value in a matter of days, and it stayed down for a long time. That would have been a nice payday for a shorter with good timing.
Once you have a mining farm, it takes nothing but electricity to keep it going, & electricity is cheap.
Over the long term the mining difficulty does shift, which presumably would attract more miners (and vice versa) that would affect the elasticity. However, that's not the creation of a price floor that Bitcoin advocates claim.
Bigger worries for Bitcoiners stem from centralization of hash power, and whether transaction fees alone will sustain the network as it exits the inflationary period.