Bitcoin Is Acting Like Just Another Tech Stock
nytimes.com
nytimes.com
Energy =/= pollute
Focus on the bad actors that are polluting, occasionally you’ll find a miner
The question is what’s the minimum to do something. Bitcoin uses more energy than the alternatives.
A wood burning stove is wasteful, a heat pump, not so much. Why? Because what’s important is the difference in energy between the action taken and the most efficient action to complete a task.
Typically this desire for any other use of energy to occur relies on not understanding why that wasnt occurring beforehand
Clean energy is obviously better, but suffers from a fundamental problem: energy is fungible.
If mining takes up 10 MWh of juice, anyone else who would have used that energy can’t. So they have to use other energy. Often fossil fuel based energy has to make up the difference. For all intents and purposes the mining used that fossil fuel energy.
If mining only used excess electricity produced by clean power plants, there would be no problem. But it’s not incentivized to use extra energy, it’s incentivized to use cheap energy. If energy can be generated by fossil fuels cheaper than what you can earn from mining, miners will use that energy. Producing pollution that wouldn’t have otherwise existed.
Even if mining only used spare energy generated from clean sources, using that energy means it can’t be stored to be used later, like at night. Possibly necessitating polluting generation later. (I know storage isn’t common today.)
If you can explain how mining either does or feasibly could given real incentives use only spare non-polluting energy I would love to know.
There are likely several gigawatts of this kind of energy in north america and the amount of energy used this way and for mining in total will continue to increase without causing more pollution
This is due completely to market forces as well, which is worth saying because more mining will migrate to this without it being some altruistic response to environmental outcry
Bitcoin actually does a lot of good things here because it is location insensitive. For stranded energy, say methane flare gas, there is not an economical way to use the energy of this gas because transport is too expensive and demand is too far away. In this way, the bitcoin mining is consuming energy that wouldn't actually otherwise be marketable. It is also greatly reducing greenhouse emissions without demand for the energy, the methane would be burned, which has much worse emissions than when consumed in a generator.
Energy==pollute, actually. Energy is fungible and most of it comes from fossil fuels.
1. It's not the most efficient way and there's an alternative (e.g. Proof of Stake)
or
2. It may or may not be the most efficient way, but Bitcoin doesn't provide the value to justify the carbon emissions ('just tax carbon commensurate to its negative externalities and let people decide for themselves', he says helplessly)
As its not taking away from another use of energy and it’s reducing pollution, and is more likely to be the majority kind of bitcoin mining
Controversial Take:
There is effectively no ceiling on the value potential of Bitcoin.
If you live in a hyperinflationary environment, of which there are tons of examples in the last 100 years, the value is known. To people living with the $dollar and expecting endless monetary superiority, it is hard to recognize.
It's important to note, there is incentive for miners to use renewable energy. Vast amounts of capital have propped up renewables that languish for lack of a proper demand. Wind isn't on demand, nor is solar. But there's never any discussion of the waste and pollution that subsidized unproductive green energy solutions produce. Mining can utilize 100% of that supply. It acts as a reinforcing mechanism for investment in clean energy. How is this lost on people?
This is true of lots of industries, but even our most wasteful (raw aluminum processing?) or grossly extractive (gold mining?) industries produce actual materials of value.
That being said, I wouldn't rest on your "Bitcoin is free of slave labor" laurels so quickly[1].
I agree with everything in your comment, I just think it's worse than an energy intensive, non contributing tech stock, it also doesn't do any of the things that people talk up as reasons to buy it.
I see no floor for crypto.
That doesn't mean there is a floor. If there is no demand for any of those assets they would be worth nothing.
USD doesn't have a floor either. One day everyone could just decide it's worthless scraps of cloth.
I'm not ignoring hyperinflation, but clearly it has nothing to do with Zimbabwe or Venezuela. The only comparison could be the Weimar republic, as this disaster was caused too by production deficits (France invading the Ruhr valley+ loosing colonial income), but obviously similarities stop there.
Drugs, remittance, ransom, exiting a crashing fiat, and a 21st century gambling experience.
Drugs, too, I defend the actions of the victims of the opioid epidemic in seeking drugs, they were actively tortured for most of their waking hours by a multi-level-marketing pharmaceutical scam. Those drugs weren't recreational, they were an anaesthetic in response to malpractice. Like the Sacklers are literally hard drug dealers, they literally have a monopoly on legal heroin and cocaine. Or should I say OxyContin and Adhansia. They did that through legal bribes as a cover for additional fully illegal bribes, inviting doctors to hedonistic islands to get compromat, treating the FDA like their personal lapdog, disgusting acts of philanthropy with their ill-gotten gains, medical media, and the ordinary media.
So like if they are cornering the market and intentionally cheating the patients out of antidote while increasing the doses of poison, you know what, don't tell me black is white. The legal market is shit and the illegal market is superior. And in fact the only limit to their cheating their patients out of medicine is presented by the black market, that's the resistance and why the problem wasn't even worse.
I would say fentanyl sounds disgusting, but OxyContin is even worse, because at least fentanyl you're not being tortured for ten hours a day. The dealer isn't gaslighting you about dosage. There are opioids that strong and there are like jeweler's scales you can use to mete them out.
So in particular I never had an interest in hard street drugs, just sounded highly unattractive. Like falling into a black hole. To feel happy? Come on.
The USA army could be dissolved and the economy could switch to use something else. Of course these events have a low probability of happening but if someone wants to say something else doesn't have a floor because demand could dry up you can't say something else does have a floor even though demand could dry up just the same.
It's hard to imagine, but basically a state does need some level of force to be able to protect property rights. Without that you can't have much of an economy period, nevermind a digital economy.
Which is ironic because every time it fails to do that people come up with a new raison d’être.
Cash replacement, ownership ledger, replacement for the existence of fiat, probably a ton more.
Pseudo-gold/store of value is just one of the more recent ones.
The headline doesn't quite convey this meaning.
But in my mind it’s still an unfair comparison because tech stocks generally have some kind of fundamental tangible value. It may be worth 1/500th what the market cap is, but it’s there.
I don’t see that with Bitcoin. Just insane wastes of resources and pollution creation.
Anyway, I say all this because I really find it clever, and I really wanted it to be able to do something useful, but the reality is, it doesn't. It's never going to be useful, it's been adopted by scammers and mountebanks, it has no utility and will cause so much harms in the scams that it supports.
So while it seems like a cool innovation, and from a purely technological standpoint it is, in reality it's poison. In that regard, it has (sorry for the tired analogy) a lot in common with communism. Cool idea, doesn't work at all, destroys lives. We need to let it go.
Interesting, could you elaborate on the Forth bit? Where does this fit in? This is the first I've heard of it but admittedly I don't know that much about Bitcoin.
But more compelling to me is that it allows you to do what bittorrent did but in general - with bittorrent anyone can host a file and a static link can help you find those people and download the file (with no need to trust that the person serving the file hasn’t replaced it with some other file). This is possible because of cryptographic primitives like hashes that let you use a few bytes to uniquely identify the contents of any file, distributed hash tables that let you come to agreement on which IP addresses are serving which files, etc. (If you don’t think bittorrent is useful, that’s fine, but me and many others think it is.)
There’s still a lot of work to be done, but we’re approaching a point where you can “bittorrent-ize” a much broader class of services. Bittorrent works only for serving files whose hashes you already know, but doing the same for a service like HN is much more difficult. You need to allow posts from many different people and know when they were submitted, and maintain vote counts, but a distributed ledger is perfect for this. It’s not practical to do this on any decentralized cryptocurrency right now, but we’re slowly getting there.
Like I said, scaling this is a very difficult problem, for example you need to have data sharding so that not every node has to store the full ledger, but over the last few years cryptocurrency people have come up with very good data sharding systems like danksharding (which will hopefully be implemented on Ethereum in the next decade).
You also don’t want every node to have to redo all the computation, but ZK-proofs (which were basically only used in academia before cryptocurrencies came along and poured billions of dollars of funding into making them practical) make that unnecessary at the cost of some significant overhead when performing the computation. Despite that cost, we already have really good layers on top of Ethereum called ZK-rollups that lower the transaction cost to almost zero and introduce no new trust assumptions.
You also want state expiry or state rent so the network state doesn’t grow monotonically, but that’s also being developed and in the past few years we’ve also developed some really good state expiry schemes.
You also want fast finality so that you don’t have to wait 10 minutes for the contents of the ledger to stabilize, but we finally have scalable permissionless byzantine fault tolerant consensus schemes that have very fast finality (<30s), one of which is being implemented on ethereum (called casper).
There’s other cool stuff too, but I think this direction is one of the most exciting ones.
Disclosure: I’m a protocol developer for a major cryptocurrency (although not ethereum or bitcoin)
If Bitcoin's price can get this high without the 'intrinsic value' or producing something, then this effect probably also exists for other stocks. And this made me wonder: how big of a factor is this in other tech companies.
The more I think about it, the more I feel that it must be the majority for many of them. Many companies operate at a loss and are just pumped up to push up metrics, just so someone else will pay more for it in the next round.
first dot com crash tech learned you actually need a product when the markets go south - now (second) tech is learning you need an actual good product when the markets go south --
But they still use concrete financials (e.g. growth of revenue is just the derivative of revenue) to make those decisions, and are assuming that the future buyers will be looking at similar numbers that are based in the same real economic business process.
The fundamental case for bitcoin-as-an-investment[0] is much less well-defined, and differs far more depending on who you ask.
[0] bitcoin-as-currency is a different frequently-talked-about potential future state, but not as relevant to the "acting like a tech stock" discussion
This makes sense to me, but I wonder how many VCs will pump money into a business, having a pretty good hunch that the business model will never make that much sense at a meaningful scale, but the numbers will probably look good enough for a return of investment until the pyramid collapses after the series C.
These companies are restructured for increase of perceived value, not multi-decade sustainability. Bitcoin to me is just the purest form of this culture.
If there's good news, though, it's that this appears to be slowing down. Lot of folks getting disillusioned with WeWork, Uber, etc now that those exits happened and went nowhere. I'm assuming investors are realizing they won't be able to play that trick too many more times.
But really, I'd hardly call QE-driven financials "concrete". We Work, anyone?
You saying "I don't trust an adjusted ebidta metric" is perfectly valid, of course, but that number was there and the business processes behind it were there. A bit different from "i'm a bunch of bits stored on a computer."
Suppose you open a spreadsheet right now, discount 100 years of cash flows, and measure each cash flow as a % contribution to the sum (aka npv). You will find that at medium to higher rates years 0-20 make up the greatest percentage of the npv by far. But as you lower them, that relationship flips and cash flows for years 20 to 100 become the lion's share of the valuation.
WeWork isn't the only 'ridiculous promise-the-future' company we saw over QE, just the first I could name off the top of my head. But through the lens I described above, all those weird 'how could investors be so stupid' situations make more sense because the valuation math was slanted to favor such situations.
In the stock market, because if everyone in the world wanted to sell all their stock in some companies, some folks would snap up the opportunity to take control of at least most of those companies. Yes, this is several levels obfuscated by the time you get to retail investors (and if you look just at news media sources targeted at retail investors, it's almost all short-term reactionary bullshit), but ultimately that's the fallback for the system that is gonna keep prices non-zero. Very recent tangible example: Elon Musk willing to pay real money to take control of Twitter.
In the crypto market... what's the ultimate backing? Hope of various sorts of a future new world financial infrastructure, reserve currency, store of value? I've heard a thousand stories, none of them are true yet though.
Sure, if you believe in one of those futures, you should invest in the appropriate crypto tokens. You'll be better off if fewer of the rest of us believe in it now when you're about to buy, after all. ;) But if your analysis of where to put your money - trying to figure out what's likely to hold or gain value vs lose it - comes down to "eh it's all the same yolo" then just recognize that it's a gamble to invest in crypto - saying "I believe that it's also a gamble to invest in stocks" doesn't really make it a better gamble.
BTC at least has very few humans, and humans consume resources and create waste.
So, what does a more comprehensive measure than core time look like wrt global warming and payments?
I’m not sure the answer, but I’m also sure it is not simple.
Regarding your question: whatever they do, those humans will consume resources and create waste. We can't delete them if we do away with Visa :). Sure, they, in theory, would be able to work on something else, freeing up their resources, but that wouldn't decrease the resource use of humanity.
Also, people keep comparing BTC's current resource use to the bank system (I think that includes the CC companies as well). However, very few transactions are done with BTC compared to the world financial system (or even just Visa). And if adoption grows, BTC price grows and if BTC price grows (or, in other words everything devalues relative to BTC) then mining rewards grow (measured in other assets) and if mining rewards grow then new miners will join and that means using more energy.
I think I've seen a comparison between Visa and BTC measuring how much energy each used for doing a single transaction (or for moving a set amount). Visa was 10 or 100 fold more efficient. Even back then.
However, crypto does not behave to act effectively as a currency; it would be an awful idea to replace the global financial infrastructure with crypto thus the energy costs are here to stay.
So I think the energy argument fails on it's own. Also, it should come at least with strong supporting arguments claiming the actual benefits. But I do agree that cryptos are worse than the currencies we have and existing block chains (I'm aware of) don't make sense even as a distributed transaction tracking system for fiat currencies.
In terms of automating away humans, aren't we building society to improve human life? You're wasting human life by requiring labor, what is more valuable than that? At least as a heuristic, looking at human history it seems obvious that automation is the best way forward when people don't want or need a personable, smiling face serving them. I need to go apply for a bank account right now and know it is going to take weeks and several meetings, I passionately hate this.
>if mining rewards grow then new miners will join and that means using more energy.
The block reward continually decreases with time, so it isn't clear that more adoption will increase energy usage. I'd say the opposite seems likely - I worry how bitcoin will incentivise miners to secure the chain in the long term.
>I think I've seen a comparison between Visa and BTC measuring how much energy each used for doing a single transaction (or for moving a set amount). Visa was 10 or 100 fold more efficient. Even back then.
One on-chain transaction can be a settlement of many off-chain lightning network transactions, so in future the efficiency should increase dramatically.
Like the other poster I don't know the quantitative answer when it comes to efficiency and expected energy usage, but I'm again pointing out that there are other factors.
It's a serious indictment of this generation that they talk about useless, wasteful distributed hash functions in the way previous generations talked about things that matter(ed).
Also your essay has nothing to do with issue of the posts above.
The topics of the thread have everything to do with each other as I read it: the value of the technology, human resources and efficiency (waste vs value).
I thought past generations valued freedom and privacy even more.
> The block reward continually decreases with time, so it isn't clear that more adoption will increase energy usage.
It's weird. You quoted the very end of the sentence that contains the explanation why I say that the rewards grow. The part that you didn't quote literally is a response to what you have just said: "And if adoption grows, BTC price grows and if BTC price grows (or, in other words everything devalues relative to BTC) then mining rewards grow (measured in other assets)"
In other words, while the block reward (denominated in BTC) does decrease, its value keeps increasing while adoption keeps growing. (Value here means either other currencies, or, if you think they will cease to exist, then the goods you can buy for the BTCs you get as a block reward.)
It's pretty obvious, this is, actually, part of the reason why people buy BTC: because they think its price will increase due to increased adoption. And it has to, because BTC is deflationary (again, yet another property that the proponents see as a selling point). You have 21M coins and those should replace who knows how many trillions of USD. (It depends on what level of adoption we're talking about.) IIUC, 90% has already been mined, but the adoption is pretty minimal, so the value of the coins will increase substantially with adoption. Halving seems to occur every ~3 years. I've checked and the earliest I could easily find a price for, happened in 2013. Then one BTC was ~16USD, the block reward went down to 25BTC, so $400. Now it's 6.25BTC, with today's rate that's $181k(!) as of now. To get back to $400, you'd need 8-9 other halvings if the BTC value (price) didn't increase. But it has to, if adoption grows, because demand will grow and supply can only grow minimally.
> In terms of automating away humans, aren't we building society to improve human life
Again, the comment I've responded to talked about the resource use. Also, you'd need a pretty strong proof that VISA (and/or the banking system) cannot be automated, made more efficient without BTC and/or crypto in general.
> so in future the efficiency should increase dramatically.
Well, maybe you should start making claims (or starting arguments) about the efficiency when you have the data. At least as an estimate, for which you'd need to know how the system will work.
> There is a social and political impact. Intermediaries like banks infringe on our basic freedoms to hold our own money,
Nope. They provide a service. You can hold your own money, of course. Competition, thanks to automation(!) should also continue driving down the price of digital banking services.
> to have privacy,
It's the state, not the banks that want to have the right to look into your transactions in well defined cases. And it is the very interest of the society. Complete, unbreakable anonymity sounds good as long as you only think about yourself. It stops being a good idea when you realize that there are criminals, tax avoiders, etc. (Unless, you are one of them, of course.)
> and transact with each other as we wish. Therefore there will always be value to such a system that allows us to transact directly peer-to-peer;
Maybe. I'm not so sure about this. There will definitely always be some demand for this. But let's face it: debit cards and digital bank accounts are a pretty reasonable user experience. It's not that expensive either. (Esp. if you go with these up and coming service providers, like Revolut, Wise, N26 - whichever makes sense for you.)
> it is unstoppable that people will seek this, regardless of anything, even legality.
Sure, there are use cases where legality doesn't matter. :) For most people it does, though.
And second, every dollar blockchain companies make is a dividend of that army patrolling the bank.
Not a whole lot of counterfeit bitcoins going around, unlike some currencies I could mention. Treasuries also spend a lot of money protecting their currency, the Secret Service for instance, which works for the Treasury of USG, is mandated to stop counterfeiting. Who gets better results for the money, bitcoin or the Treasury?
And Bitcoin sure seems like a new iteration of that scam and/or conspiracy theory. At least with precious metals, you’d end up with something shiny at the end of it, and not a string of numerals on your phone.
Fiat with inflation is designed to reduce the burden of debt (among other things). If I borrow lots of money for a long time, I want the money to be worth less as time goes on. Then, when I pay my debt, the cost to me is lower every month, even though the dollar amount is the same.
If you have capital and leverage debt, this system is fantastic.
If you are poor and cannot borrow, i.e. leverage debt, then your money supply is constantly reduced.
Most people are poor, sad fact. Most people are not benefitting from this system.
Bitcoin is designed to be free of control. Institutions have lots of control currently because they have more capital to invest and sophisticated trading techniques. They have purchased their way into a powerful position within the environment. This is irrelevant.
Those people that have experienced hyper inflation already understand the implied value of Bitcoin. In time, everyone else will as well
so sure they still have a shiny metal that they hope retains its value, but they dont recoup anything
I don't hold any bitcoin and I don't feel strongly either way. But this piece by Lyn Alden provides some good insights into situations where Bitcoin might be valuable and why it may well have a strong future. Particularly compared to other, less widely-held cryptocurrencies:
> Since Jan. 1, the 30-day average of the Bitcoin-Nasdaq score has approached 1, reaching 0.82 this week, the closest it had ever been to an exact, one-to-one correlation. At the same time, Bitcoin’s price movement has diverged from fluctuations in the price of gold, the asset to which it has been most often compared.
Without context, this analysis is meaningless. What's the correlation to various tenors of US treasury over the same periods, for example? What about Nasdaq/Dow correlation? How bout the correlation with gold?
> “There was this undeniable retail belief that Bitcoin at the end of last year was an inflation hedge — it was a safe haven, it was going to replace the dollar,” said Ed Moya, a cryptocurrency analyst at the trading company OANDA. “And what happened was inflation started to become very ugly, and Bitcoin lost half of its value.”
Selective amnesia. Zoom out and you'll see a massive bull market leading up to the first signs of sustained CPI growth. Buy the rumor, sell the news could also explain it as could many other things.
More long-term, https://www.sciencedirect.com/science/article/abs/pii/S22146... - "near zero" between BTC and Gold.
People said that Bitcoin is like gold, an actual physical asset?
If you cut the supply of gold tonight, tomorrow morning there will be lost utility in the society irreparably.
If bitcoin disappears tonight, tomorrow will be Thursday.
Look up gold’s use by mass. It is dominated by gold’s value being a social construct.
Because your wife says so. Yes jewelry in genaral is a social construct, but it is not replaceable. At least it was not for the past 5000 years.
When the Spanish discovered the “new world” they didn’t have to convince the locals that gold was valuable they’d been hoarding it too. For centuries, without any communication or contact at all.
It’s been held as a high value asset in basically every iteration of humanity that’s existed, including today’s. That’s about as close a definition of intrinsic as you’re going to get in this world.
This is very much a tangent, but my favorite fun fact is that if you got all the gold humans have ever mined and put it in one place, its smaller then you'd think. It would be a cube about 70 feet on each side. Most metals, including gold, are infinitely recyclable. There's a good chance any gold jewelry you have has quite a past, having been melted down and reforged quite a few times.
gold is actually not doing very well either in this inflationary environment due to rising interest rates. Gold bugs are pissed.
Seems like it's doing it's job quite nicely.
It's not but there's definitely a difference between:
BTC: 0.5 trillion market cap
USD: ~1,000.0 trillion market cap
Also, BTC could just dissapear overnight, really, while USD is the de facto currency of the world so ...
Economically, a 51% attack is unlikely: it would fundamentally compromise trust in the network, which would probably lead to selloffs and a crash.
[1]: https://www.theguardian.com/technology/2022/feb/18/bitcoin-m...
https://www.afar.com/magazine/the-dollar-and-euro-are-almost...
How's that USDT dollar peg going at the moment btw...
But it’s an absolute, unmitigated scam and will collapse with the slightest pressure. As BTC declines, Tether’s backing declines as well, even as they print more Tether to pump up the price of BTC.
What failed over the last few days (and caused the big dump on the rest of the market beyond just the correlation to stocks) is a stablecoin called UST.
If you want a heavy dose of whataboutism though... look at EURO/USD.
I hope if you've got some you've read their terms and conditions.
Do you remember the 42Mil fine they paid a couple of years ago for not actually holding reserves? I'm sure they're honest now though
Edit: 98.7