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Comment by josu | Hacker News Reader

Never. PoW is a fundamental part of what makes bitcoin valuable.

It's also fundamentally limits the growth potential of BTC. In a PoW system, the amount of work done must be proportional to the total value of all BTC (if not, it would make 51% attacks feasible).

So if BTC uses an Argentina's worth of energy now, if the value of BTC grew 10X it would have to use on the order of 10 Argentina's worth of electricity. Obviously, that is not sustainable, and it ensures BTC can never grow in value too much if it sticks with PoW.

Have you seen a graph of global energy use over time? It goes up.

Now I see that "throwaway" probably didn't mean "the amount of work done" but instead "the amount of money spent on work done".

It’s not really so clear cut.

Perhaps if a 51% attack let you fully steal coins yes. But there are only specific things a 51% attacker can do, and even attempting to pull off the attack has game-theoretic impact on the price if Bitcoin.

The more practical attacks are greedy miner type attacks which just boost a large miners win rate.

The 51%-esque chain rewriting, double-spending and transaction censorship stuff is a different story.

What you can definitely say is that economically the profitability of the block reward and transaction fees will drive new entrants into mining. As BTC price increases the willingness to spend more on mining (wasting electricity) increases. But the block reward also halves now and then to reduce the value of new blocks and prevent the waste from getting absurdly out of hand.

It also makes BTC positively radioactive to mainstream adoption. There are countless examples of $CORP announcing some bitcoin initiative or another only to roll it back almost immediately after the outrage expressed from a population that is increasingly aware of and concerned about climate change.

> In a PoW system, the amount of work done must be proportional to the total value of all BTC (if not, it would make 51% attacks feasible).

I’m confused. Why must this be the case and how would it lead to a 51% attack if it were not?

I know the difficult goes up when the price goes up because more people are able to mine profitably and the system will automatically scale the difficulty to maintain the 1 block per 10 minutes rate, but I don’t understand what the difficultly being proportional to value has to do with 51% attacks being feasible.

I'd argue it's susceptible to 51% attack already, but as BTC's value grows, the profitability from pulling off a 51% grows as well. Therefore, the hashrate not scaling with the market cap of BTC makes the prospect of funding a 51% attack more and more appealing.

1. The whole design of "Proof of Work" is that a miner must prove that he has spent a certain amount of money (in the form of electricity spend) to mine a block and win the block rewards and fees.

2. First of all, this means that (eventually) the amount of electricity spent on mining is proportional to the total rewards earned (again, block rewards PLUS fees). So if the value of BTC goes up, it's a classic arbitrage play - miners would spend more electricity to win the more valuable rewards. Of course, everyone with the capacity would do this, until the difficulty level is set at a higher level.

3. Similarly, the value to be gained from a nefarious mining attack is proportional to the total value of BTC, so the difficulty must increase to keep a 51% from being feasible.

The fact that electricity spend absolutely must be proportional (over time, there can be short term imbalances before they are arbitraged away) to total value of the coins in a PoW system is a fundamental, undeniable fact. It is simply how PoW works. Yet I still am amazed how many BTC fan boys try to wave this away.

If the hashrate can't keep up with the price increase because it has exhausted all sources of available electricity, then difficulty will adjust down.

This doesn't limit the potential growth of Bitcoin, it only puts an upper bound on the security per block.

lmao, this would be apocalyptic.

It should be clear that a lot of Bitcoin's value is in its established history, legacy and to some extent trust. This is it's key differentiator to any other chain. PoW is part of Bitcoin's history and legacy, but it isn't PoW itself that gives bitcoin value.

Thanks for expanding.

Not really - being able to resolve double spends in a decentralized cryptocurrency is what makes BTC valuable, and PoW is just one method for doing that. I don't think there is any evidence that PoW is the only way to resolve double spends with a decentralized cryptocurrency.

May I ask you to elaborate? This sounds intriguing.

It costs an average of ~5k USD to mine one bitcoin. Meaning even if the value drops at exchanges, no miner will sell below this value due to not breaking even on electricity. That's why also bitcoin miners go to places where electricity cost is low, and why they undervoltage their mining cards.

What cards? Bitcoin has not been mined on GPUs for a long time and I would have thought that the ASICs used were already optimal.

ASICs are also populated onto cards, and miner firmware handles tuning the hash rate of each chip (or card) based on inputs like desired temperature and power consumption. These inputs are often adjustable.

Heat causes chips and other components to degrade, so not everyone runs their miners at maximum output all the time.

Why does it make any difference for me (a hypothetical BTC holder) how BTC is minted?

> Meaning even if the value drops at exchanges, no miner will sell below this value due to not breaking even on electricity.

It does not work like that. If you need to pay your bills you will sell BTC for whatever price it is right now. Unless you want to long BTC, but that's a different story.

> Meaning even if the value drops at exchanges, no miner will sell below this value due to not breaking even on electricity

You have causation reversed here. It is not that bitcoin would not sell/be worth less than the amount to mine it.

Instead, it is that it wouldn't be mined if it were worth less than the cost to mine it.

At which point, miners would drop out, and the cost to mine it would reduce, as the difficulty goes down.

Wait, really? It only costs $5k to mine one when they sell for $21k?

I meant electricity cost, on average, is ~ 5k USD. I didn't factor anything else, like cost of hardware, rent/location, living expenses etc.

Basically, to validate a block, you need to bruteforce a SHA-256 hash of the block by incrementing a nonce in it. And by essence, bruteforceing is wasteful (and by extension, expensive).

And this is by design, as the only way to mint a new bitcoin is to throw away computational power (ie energy -> money). And the amount of power needing to be wasted is constantly adjusted by the network (it's targeting a certain amount of blocks / hour, adjusting the difficulty of the sha bruteforce, compensating for technological improvement).

Now, to create a bitcoin you need to mine a block (solving the bruteforce), inherently requiring a set (on average) amount of real world value (mostly energy) to be irrevocably wasted. For the miners to recoup those losses, they MUST sell the bitcoin they just created for at least their lost value. Which in turn, guarantee the minimum value of each bitcoin.

And with this system, the minimum value of each bitcoin is inversely equal to the amount of value "wasted".

And you can extrapolate this correlation between energy consumption and Bitcoin price into the idea that a Bitcoin represents some unit of energy.

I wonder if there's a graph anywhere showing the value of 1 BTC in kWh.

I know technical side of things really well, thank you. I'm talking about economical analysis - which is absolutely insane. Value of a thing is not determined by cost of its production. It is determined only by amount someone wants to pay for it.

Claiming that PoW cost gives BTC its value is bonkers.

This is a good explanation

https://news.ycombinator.com/item?id=32583540

Reply on news.ycombinator.com