Hacker News Reader

Comment by beambot | Hacker News Reader

> Yet this is exactly how Bitcoin works: you are rewarded with new coins once your computer has consumed a certain amount of electricity (measured by the complexity of computing hashes of data, which takes time). Worse yet, the amount of electricity required to be wasted to earn a reward predictably increases, which means that the more Bitcoins one wants, the more one has to waste.

Couldn't the same be said of gold? Mining and extraction are resource (energy) intensive and yield a result (gold) that is less than it's practical intrinsic value (eg. for industrial purposes).

View on HN

Of course it could. Except there aren't any industrial uses for BitCoin yet :-) Understand that Aaron has a vested interest here (the whole FastCash thing) and so any chance he gets to complain about BitCoin, he does.

Nothing he says in the article is false, except that it is also not "correct." True anything can be used as a marker for value, from notched sticks in Egyptian times, to rocks on an island, to BitCoin. As long as a community exists which agree on their relative value, the marker continues to work as a marker. And the more difficult it is to counterfeit, the better marker it is. So far BitCoin meets that criteria and so it is not 'fools gold.'

He also missed the part where someone cracks your 256 bit key to your wallet and steals all your BitCoin. There is an interesting cryptography problem/question which looks at the cost of mining new BitCoins in comparison to the cost of attempting to guess BitCoin wallet keys.

>There is an interesting cryptography problem/question which looks at the cost of mining new BitCoins in comparison to the cost of attempting to guess BitCoin wallet keys.

http://directory.io/1

Except there aren't any industrial uses for BitCoin yet

I like the notion that the intrinsic value of bitcoins are as entries in a global distributed ledger (or even more fundamentally, timestamps in a distributed timestamp server)

A Satoshi is the small unit you can account for in that ledger, so there are actually 2,100,000,000,000,000 of them, making the intrinsic value way less than the extrinsic value, but that's true of gold as well.

The author is forgetting that the process of mining is not just to receive the block reward, but to support the entire bitcoin network. If there were no miners, no new transactions would get verified and bitcoin would not be secure. So it's wrong, and probably disingenuous for him to state that mining is a waste of electricity.

Am I correct when I say you can view it as distributed banking, where the miners are the distributed bank, and the mined btc are the fee you get for supporting the system - being the bank?

I think that's one correct way to think about it.

Yes. Also, "Waste" is a subjective term. Your computer is solving the problem of trust between humans. That's not a waste to me. It's certainly less wasteful than the energy that goes into hosting servers for popular MMORPGs.

As the rest of the essay indicates, the problem of trust is hardly "solved." I'll grant that it's an attempt to solve the problem, but the end result is Ponzi-scheme-level risk of losing everything for a given holder of value in Bitcoin.

No. If you want to mine x gold today, which will cost you y in resources, you do not predictably have to spend 1.5y or 2y tomorrow to get the same x.

This is not true. Like any resource, gold tends to cost more to extract from the earth over time. As deposits diminish, we must look elsewhere and settle for gold ore with fewer parts per million. This requires more expensive technology and newer techniques to be developed. Hence, it predictably will cost more to mine gold in the future than it does today.

Not really, the vast majority of gold being mined goes to some use other than just being a store of value. 2/3 of gold mined goes into Jewelry. About 1/9th of gold mined goes to dentistry. Some of the remainder is put to industrial use.

Reply on news.ycombinator.com