Mind saying more or linking? I keep hearing strong opinions against bitcoin but haven't heard details.
That's only if you're a scrooge and don't like spending anything. Since bitcoin started, I spent bitcoin on hosting and domain, t-shirt, musics, development bounties, writers, and other things that I forgot to mention.
I never spent a bitcent on mining hardware, though.
You have to remember that humanity is a not a paper wealth maximizing function. We don't exists to horde money, but to spend it doing things that we like.
Deflation increases the incentive to hoard cash. People respond to incentives. Economies based on deflationary currencies end up suffering from problems caused by this. You may not agree, but pretty much every economist does.
Do you have an example of a vibrant economy based on a deflationary currency? I have several historical counterexamples.
I'm hungry... really f%!#ng hungry, right now. I have $10.00, which - today - buys me 2 hotdogs and a soda. But, if I wait a year, that same $10.00 will buy me a nice steak, some corn chowder, a side of sweet potato fries and a margarita. What do I do? Hmmm....
No doubt... just emphasizing the point that we aren't dealing with absolutes here. People do spend money, even with deflationary currency. I'm not saying deflationary currencies are a good thing, or that there aren't some ramifications. But I think some bitcoin critics overstate the importance of the deflationary aspect, that's all.
In other words, in a deflationary economy there's less incentive to invest in productive activity and more incentive to stash cash under the mattress.
And it's not just held stock that works this way - it's also capital investments like that new more efficient widget-making machine.
I also happens to disagree with the idea of deflation being necessarily bad for society or actually discouraging spending and investment. I contend it that it only shift the timeframe longer into the future, and saving enabling people to buy higher quality lasting goods.
With inflation, it encourages short term thinking and shorter term investment.
Let calculate the revenue a miner would get if they win all the blocks:
50 bitcoin every 10 minutes mean 300 bitcoin, which mean 7200 bitcoin a day. The price of a bitcoin at the time I am writing this is 6.54 USD, so the total revenue is 47,088 USD per day.
That mean, assuming a miner can win all blocks at 50 bitcoin forever assuming the price and difficulty stay the same, he can afford to pay an electric bill of 47,088 per day assuming that the price hold stable. This equals to 17,187,120 USD in revenue every year.
The market cap of bitcoin is only 60,951,475 USD, which mean miner revenue equals 28% of the market cap. However, most economic activities are certainly not miners, but actually trading bots and speculators across exchanges. In the MtGox USD alone, about 8.7 million dollars worth of bitcoin were exchanged in 30 days. You can also add in the various economic activities other than trading currencies, such as virtual goods, hosting, ice creams, t-shirts, porn, illegal drugs, etc.
You can conclude that the miners are guaranteeing more than just revenues for themselves, as the various activities in the bitcoin economy which actually probably dwarf what the miners are making in term of revenues. As far as being actually efficient method of security for a currency? Probably not right now, assuming that security measures actually scale economically. It could be that the actual electricity cost grows slower as more and more efficient method of hashing are found.
> which means that the electricity used up by the Bitcoin network would be much larger on any reasonable measure than what you need to maintain other currencies
This is only true if the other currencies are fiat money. For a non-fiat currency, it is necessary that either (i) it is hard to make (or people will just make enormous amounts and its value will go away), or (ii) it has intrinsic value.
Since paper money is backed ultimately by the threat of violence against those who counterfeit it, wherever they may be in the world, we must include some fraction of our defense spending as well. In fact, the more valuable the currency, the more must be spent on defense to protect it. Isn't this closely isomorphic to your dichotomy?
I too have made this argument several times and I have gotten similar nonsense in response.
I recall reading a story about some guy who was visited by police as they thought he was running an indoor pot growing operation, only to find after searching the premises that he was a bitcoin miner. It takes quite a power surge to draw that kind of attention from police. Bitcoin is geeky, and maybe it's idealistic in some good ways, but it's not "green" and it's not practical.
What happens when there's a loss of electricity?
Do we fallback to paper currency then?
For merchants, just like if VISA/Mastercard/Debit card, etc., goes out due to power problems (and there there is no battery backup or local generation), a merchant can't accept payments until power is restored.
As far as power outages for those mining -- there is no disturbance to Bitcoin even for lots of power distruptions. If the entire world goes dark, your inability to spend bitcoins will be the least of your problems.
This things solve the computational work at a couple orders of magnitude greater than GPUs (the currently prevalent mining hardware) does.
So instead of 70% of the cost of mining going to pay for the electricity, it will be 10%, and the cost of the technology consuming the remaining 90%. I.e., in terms of total kWhs consumed for Bitcoin mining, we probably are already past the peak.
One single bank building in Manhattan consumes way more power than Bitcoin ever has.