Crypto: When Will the Madness Stop? | Hacker News Reader

Crypto: When Will the Madness Stop?

beny23.github.io

62 pointsbeny2331 comments

Folding Ideas' new (2 hour podcast-ish) video "The Problem With NFTs" is a really good critique of cryptocurrency: https://youtu.be/YQ_xWvX1n9g

Covers pretty much every thought I've ever had regarding centralization, privacy issues, proof of work and proof of stake both rewarding the rich, economic incentives in speculative markets, NFT hucksterism — but with detailed research and examples of each. Some of the NFT security stuff is jaw-droppingly bad.

Two hours long, but it's definitely worth to watch till the end.

Great article, but as a dev working in the crypto sector, I can guarantee you that many people in the sector are strongly opposed to proof of work.

All these points are things I regularly bring up to bitcoin maxis. Usually they fall on deaf ears, but occasionally it does get through to people.

I think it's disingenuous to lump in all crypto with bitcoin however.

thank you for your feedback, it certainly was not my intention to lump everything together - can see where you're coming from and will look to do some refinements/edits to the article after doing more background reading. I just got frustrated with the feeling that the waste of energy appears to be accelerating. I've got no beef with blockchain per se, but it's the colossal waste of resources that gets me.

Excellent, and I am happy to see a well-presented criticism of the enormous waste of energy bitcoin has become.

And in full disclosure, I used to really like bitcoin, but my first time reading about the energy consumption was in 2020 which is when I started looking at other projects. Despite many other valid criticisms of the crypto space, there is something unique and interesting in decentralized technology. I knew bitcoin mining has an associated energy cost, but it never occurred to me prior to reading about it that it could consume as much energy globally as it does.

There are many people who still won't concede defeat for bitcoin/proof-of-work (likely because they have become emotionally invested), and I think a call to action for governments and the developers is really important.

For context though, the developers working on the second-largest cryptocurrency by market cap have acknowledged the problem (years ago, before the energy consumption was even so extreme) and are planning to complete their years-in-the-making transition to proof of stake this year.

People looking for a decentralized store of value and access to a form of banking and payments would not consider it a waste of resources at all. I think that is a very privileged position. I would recommend reading the work of Alex Gladstein, CSO of the Human Rights Foundation, for stories and data from all over the world from people living under corrupt or authoritarian government who consider this technology a lifeline. This is just the tip of the iceberg of the value Bitcoin can and does provide the world.

If you only squabble is proof of work, there are plenty of resources available detailing why proof of work is important to the fairness, security, and decentralization of the system. Incentives will ensure people working on or promoting any other blockchain will attack proof of work, because they know they can no longer compete with Bitcoin on security in a proof of work system, but that does not make it superior. I will not go into my personal feelings about proof of work vs proof of stake, but there is plenty of writing out there delving into the tradeoffs.

As someone who hangs their clothes on a drying line, and doesn't put Christmas lights up, I think those 2 uses of energy (which surpass the energy used for proof of work) are far more wasteful, but I am happy that the people who do value those activities are allowed to partake in them without demonization.

I don't necessarily have a problem with Proof of Work, I do however take significant issue with Proof of Non Useful Work (aka common PoW). PoW was useful for being simple and dumb which made it easy to reason about.

If PoW communities are really seriously interested in losing the "bad for the environment" tag, they need to be putting significant financial effort and brain power towards developing Proof of Useful Work (PoUW) systems.

I'm getting the impression that many crypto bros, especially the influencers, have never written one line of code.

So it will probably not reach them anyways and everything will continue as is.

Also embarassing on HBR's part for having a blockchain investor write a piece on how blockchain is environmentally friendly.

I mean. It's like making an argument against cars, by attacking cars running on petrol and then generalising towards every single car having the same characteristics and environmental disadvantages as petrol cars.

I would have agreed if Bitcoin was THE only cryptocurrency. It is not, and there are many alternatives that are not Proof-of-Work; at least the top 10 cryptocurrencies even.

So how come the energy consumption is still bigger than all but 22 countries on the planet? Saying that other coins don’t have the problem doesn’t make it ok, no?

> So how come the energy consumption is still bigger than all but 22 countries on the planet?

Maybe that is the reason why China [0], Kazakhstan [1], Kosovo [2] and now Russia [3] are taking action to discourage or 'ban' it and the use of PoW cryptocurrencies. We'll see how that goes, but it seems that they know about 'the problems', PoW cryptocurrencies are creating, hence the incentives to stop cryptocurrency mining via the law or taxation.

> Saying that other coins don’t have the problem doesn’t make it ok, no?

So having environmentally friendly cryptocurrencies is not 'ok' either?

What 'harm' is a cryptocurrency like for example, XRP, Stellar, Solana or Algorand doing to the environment? How exactly are they damaging the environment?

[0] https://fortune.com/2021/11/17/china-bitcoin-mining-ban-cryp...

[1] https://www.cnbc.com/2022/01/06/kazakhstan-bitcoin-mining-sh...

[2] https://www.bbc.co.uk/news/world-europe-59879760

[3] https://www.aljazeera.com/economy/2022/1/20/russias-central-...

Fair point on the criticism of lumping all cryptocurrency into the same pot as bitcoin. Will add an edit later. Thanks for the feedback!

I see lots of positive articles about crypto when the price is headed upwards, and lots of negative articles when the price is on a downswing. It's almost as if even here on HN, the pump-n-dump crew is getting their say in...

I don't think you see a lot of positive crypto opinions on HN regardless of the price movements.

Seems normal to me. Why would the pump-n-dump crew promote anything but positive articles?

They can promote negative article so the price go down, they buy, then they promote positively and sell.

It's possible to profit from the price going down via various short positions etc.

> But mining and transactions are conflated here!

The author is right to point out the HBR author's conflict of interest, but there's a more direct rebuttal to this. One of the purported advantages of bitcoin is that transactions are (practically) irreversible. It's extremely expensive for a bad actor to reverse a transaction because the mining power of the network is subsidized by mining. Since the people making transactions are the ones directly benefiting from the power spent on mining, it is reasonable to look at the energy use on a per-transaction basis.

> If the global bitcoin network is not designed to cope with a miniscule fraction of the global payment volumes and doing so at massively higher energy costs, how could it ever scale to take over from centralised currencies? And if it cannot do that, then it’s only purpose is speculation and - based on its volatility - gambling.

yes it's a massive pyramid scheme waiting to collapse. all the working class folks who are miseducated and not able to see it for what it is in time will pay a very heavy cost when it does collapse.

Speculative asset != pyramid scheme

(also != ponzi scheme)

It's not going to collapse-collapse for any fundamental reason. Worst case prices will go down (right now Bitcoin is almost 50% down from November's all time high prices), the hype will die out, many people will lose interest, some will still be into it etc.

It didn't go up for any fundamental reason either, the big rise was funded by (highly leveraged) speculation. Crypto has no inherent incoming cashflows from an underlying asset like stocks or bonds, and it has consistent selling pressure because miners need to pay electricity bills (and usually sell part of their mining rewards to fund that). Neither does it have a few millennia of cultural heritage like gold.

I don't even disagree with your worst case scenario in that some people might stay interested no matter how low it goes, but if prices fall back to the ~5 USD per bitcoin range I don't see how that would be anything other than a collapse.

I’ve made some edits to emphasise that I’m not against blockchain/crypto tech per se but that it’s the energy consumption of bitcoin in particular that concerns me. Thanks for all the feedback

>Over the last 12 years, it is hard to have lived and not notice the poster child of blockchains: Bitcoin

The funny thing is, it's actually pretty easy if you're not in the tech bubble. Despite the fact that the Bitcoin whitepaper carries the title "Bitcoin: A Peer-to-Peer Electronic Cash System" I still have not paid for a single actual thing in my life with Bitcoin or crypto, neither has almost anyone else except for maybe heroin on the internet.

The transaction costs and the bizarre price swings from one day to the next render it entirely useless. If the central bank is too unreliable because inflation goes up to 7% over a year, what does that make bitcoin where one stupid tweet from Elon Musk at three in the morning wipes out 15% of your net worth or purchasing power.

When someone makes a crypto currency that I can get a paycheck in that's roughly worth the same thing at the end of the month as it was at the beginning, and I can pay for a coffee faster than with Venmo, Alipay, or cash consider me excited

But why would this be exciting? You already have this now with the current banking system! I almost always pay for things with credit card with chip. I just tap the card on the console and boom, payment is instantly made. And... I have fraud protection if my card gets used without permission (this has happened, and I was quickly refunded). What could be easier and better than what we currently have for day to day transactions?

It'd be pretty good for everyone who does international payments like remittances or the few billion unbanked people or if you're stuck in a country like Japan where banking is hell.

But yes overall it'd be boring and mundane which was honestly my point. Improving the boring stuff that everyone uses in the real world is actually what's interesting at the end of the day.

Even for use-cases like international payments and remittances, sure its better now, but it is only a matter of time before any crypto versions become just as slow, bureaucratic, and rent-seeking as our current system. The poor being exploited by the rich and weak by the powerful is a mode of human behavior that cannot be fixed with hashes.

That's very true, we must only rely on the Big Banks, they are resource free, green, love the planet and the poor people.

Another article full of complains but without any idea or solution.

I'm sure the author, who consults to these banks, has the solutions.

Absolutely not :-) But sitting on my hands and saying “this is fine” didn’t sit right with me. If it triggers the odd conversation about “should this use so much energy” - then I consider this a win. Personally I’ve learned that there are centralised networks (XRP) which are much less power consumptive.

In most cases monopoly is bad, but with minting currency there is some sense in which it is good for a seniorage rents to exist.

Imagine demand for holding USD grows by $20, a central bank can profit from the minting, e.g. if they make a $20 note for $.5 dollars.

With proof of work, miners have to burn $20 in electricity in expectation (more if the electricity is stolen or subsidised) otherwise someone can profitabily enter.

Even with proof of stake, an opportunity cost of $20 has to occur to the staker to prevent entry.

It takes less effort and intelligence to just whine about things.

Reply on news.ycombinator.com