Thus demonstrating the sheer idiocy of crypto-currencies -- they burn real resources on what is essentially bookkeeping.
Shame this isn't just arbitrary math instead of contributing to something like folding@home.
Creating/sustaining an inefficient financial industry [1] is a bad use of society's resources. Just like breaking a mirror for the sake of giving work to the repair man is a net loss to society.
[1] I claim "inefficiency" compared to crypto-currencies. Example: transferring $150 million via Bitcoin uses less resources than doing it via the legacy financial system: https://news.ycombinator.com/item?id=6782706
>Creating/sustaining an inefficient financial industry [1] is a bad use of society's resources.
Not only are you being reductionist and naive, that statement is 100% opinion. Its not "inefficient" to have banks and the services they provide. That's just your pie-in-the-sky take here.
But at least some activities of the traditional financial sector can be made more efficient by crypto-currencies, hence the value they provide to society. (Again I refer you to this one example: https://news.ycombinator.com/item?id=6782706)
That isn't to say you should break your windows on purpose. That's just stupid.
And all of those things are consuming real resources, far more than bitcoin ever will consume in electricity or "neckbeards going through garbage dumps". Building a bank is probably way worse for the environment, man-hours/wages spent for employees, armored cars transporting physical cash, etc.
Not to mention the other criticisms of banks which are way more significant than this.
1. Use cryptocurrency
2. Fire 10% of bank employees
3. ???
4. Profit!
I am no expert on banking, but I'd be really surprised if 10% of banking employees were doing things that become unneccessary with cryptocurrencies.
Most steps that can be automated are automated already, and the number of sysadmins certainly won't decrease.
That is, here in Europe. I've heared that there is some inefficient weirdness going on with "wire transfers" in the US, but that is not the case here.
In addition, when the market becomes more efficient we'll see all commercial mining done in places like Iceland that have dirt-cheap renewable energy sources and cheap cooling.
1) The total electricity used in Bitcoin mining is pegged to the bitcoin supply, which is decreasing towards zero. So the amount of electricity used should be decreasing. It may temporarily increase while prices go up, but the long term trend will be towards zero. And transaction fees shouldn't change this too much. Competition amongst miners should eventually drive those towards zero too.
2) It's not just bookkeeping that's happening, it's dispute resolution. Currently your financial disputes are solved by calling your credit card company and having them deal with it. There's a whole network of dispute resolution services going all the way up to the SCOTUS. All of which uses resources. Bitcoin does all that through mining.
3) It's not actually that much power. The hashrate is 7m GH/s. Let's assume 2 watts per GH/s, that's 14 megawatts. You could power that with three big wind turbines.
No, its not. "Mining" is a misleading term based on the early-phase reward. A better name for the function would be "providing resources for transaction processing". In the early phase, the reward is new bitcoins (hence, "mining" as the common name for the process), in the late phase it becomes transaction fees.
> And transaction fees shouldn't change this too much. Competition amongst miners should eventually drive those towards zero too.
Competition among miners only drives transaction fees to zero if there are a large number of miners compared to the number of transactions -- i.e., if either usage isn't high or lots of people are dedicating resources to mining (and thus, electricity usage isn't going to zero.)
> It's not just bookkeeping that's happening, it's dispute resolution.
No, its just bookkeeping.
> Currently your financial disputes are solved by calling your credit card company and having them deal with it.
True for certain classes of financial disputes when credit cards are used, but not generally the case. But, whatever.
> There's a whole network of dispute resolution services going all the way up to the SCOTUS. All of which uses resources. Bitcoin does all that through mining.
No, it does not do the same function as the entire court system in terms of financial dispute resolution. Disputes involving Bitcoin are still resolved through the legal process. In fact, the absence of chargeback like mechanisms means that any disputes require escalation to more expensive mechanisms of dispute resolution sooner.
(Now, if transactions are done in a manner which is anonymous, dispute resolution may be practically impossible in the same way that that can be become the case if you are doing anonymous drops to exchange cash and goods -- but that doesn't mean that mining is fulfilling the dispute resolution function, just that you've adopted a protocol which excludes dispute resolution.)
Describing the relationship as 'pegged' is also sort of aggressive. A better statement would be that most people will only spend electricity if they are able to recover that cost in bitcoin (and probably a small profit). So there is some upper limit of mining activity to be expected given the current bitcoin price, size of reward and typical efficiency of mining hardware (cost of electricity will also factor in, but that should be relatively stable).
So, if the upper bound and lower bound are pretty close, what's wrong with saying "pegged"?
For example, you've put the current electricity consumption at something like $100,000 a day (14,000 kw * 24 hours * $0.20 = $67,200). The mining reward is closer to $3 million per day.
1. http://www.ibtimes.com/secret-bitcoin-mine-chinese-facility-...
Sure, but the total energy being "wasted" by Bitcoin mining globally may still be increasing.
People pursue mining because of the rewards built into bitcoin, transaction fees are supposed to eventually replace that reward.