The Bitcoin network is a global energy buyer with properties unlike any other. It will continue to bid for stranded and excess energy that cannot be used for other applications. With last year's Chinese mining ban the network has become more distributed than ever and is likely to be very resilient to US domestic energy-price swings.
PoW is the solution to an important set of interconnected problems, and as long as the network has value, PoW will keep bidding for energy to secure that network.
It's been said, correctly IMHO, there is only Proof-of-Work and obfuscated Proof-of-Work. Rephrased, nothing is cheaper than Proof-of-Work: https://www.truthcoin.info/blog/pow-cheapest/
It sounds like you've made up your mind about Bitcoin, but I believe you've missed the big picture. The above video, if you watch it with an open mind, will help you to glimpse it. Hint: it's not about cappuccino, it's about living in a world of competitively devaluing currencies and resulting asset inflation.
You haven't shared "the point" just a link to MicroStrategy, a failed software company whose CEO had to pay an $11 million dollar SEC settlement decades ago for cooking the books, making a desperate Hail Mary play buying near the top of a speculative mania in a bid to gain relevancy. MSTR is the new "Long Island Iced Tea" -> "Long Blockchain Inc" rebrand [1]
Humorously enough, the same is roughly true of Tesla, a car company which sells 5% as many cars at Toyota while valued about twice what the entire rest of the car market put together is worth.
Their only source of profit is selling carbon credits to traditional automakers who won't need them anymore as they're all moving electric too. One more Hail Mary distraction to maintain the one thousand three hundred P/E ratio. In a manufacturing business. Not software with zero marginal cost. Manufacturing. The industry average P/E is right around 15.
> ...it's about living in a world of competitively devaluing currencies and resulting asset inflation.
Currency is an intentionally-lossy temporary store of value. It only needs to hold its value for as long as it takes you to buy assets with them. At 2% inflation it does. Anything else is a straw-man you'd recognize if you attended ECON 101.
Asset inflation isn't inflation, it's an ROI. CPI is inflation.
This is a typical set of r/Bitcoin talking points that are easily debunked.
You know, your point about Tesla has given me lots of conflict. What did I miss? Obviously this question came when I sold off my TSLA stock at 500$ thinking — it was overvalued — and then watching it rise to the equivalent of 4,000$. I reached the conclusion it’s no longer solely about cash flow and debt ratios and market cap and addressable market and whatever other traditional metrics we previously used to value companies. The emotional component has become more important.
People are buying TSLA because they want to do something about climate change. Or maybe cause they worship Musk. This is probably holding for other companies in other industries. Bitcoin is definitely not only being bought because it’s digital gold. It’s being bought because people are emotionally attached to resetting the system. A bunch of middle fingers to the dollar rich (Bitcoin poor) by a bunch dollar poor (Bitcoin rich). This is why people are buying BTC.
Whether it is TSLA or BTC — value itself is being disrupted.
> People are buying TSLA because they want to do something about climate change.
I hope given Tesla's new affinity with Bitcoin that what they want to do is "make it worse" lol. Tesla is literally selling its green energy credits to dirty car companies, then throwing it at Chinese coal miners.
The market goes through particularly bubblicious periods of pricing mania from time to time. It's happening now, it's happened before, and it'll happen again. I wouldn't read too much into it.
"..in the short run, the market is like a voting machine--tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine--assessing the substance of a company." - Benjamin Graham
Prior to the pandemic stimmy money, poor people weren't investing and middle class folks were. When the pandemic hit, poor people lost their jobs, middle class folks kept them. Both poor and middle class folks received stimmy money. The middle class folks invested it.
The whole run up there were trillions on the side-line, and folks who remember 2008 weren't about to let another V shaped recovery pass them by. They plowed money into whatever they could. Literally everything exploded in value last year. My personal trading account is up almost 14X on a 1-year basis today.
It's nothing to do with fundamentals, just a bubble. It'll revert in time, and then it'll grow again.
Again, Tesla makes climate change worse by investing in Bitcoin so if climate change is the driver they should sell ASAP. I think you're overestimating the average speculator's love of the environment.
Yes, this time could be different. Past performance is not an indication of future performance. That said, it would be the first time something's gone parabolic upward (while lacking the fundamentals) without retracing, and I don't see any reason this time would be different.
I’m not debating the subtleties of Tesla’s carbon footprint. Im just asking what if the people buying TSLA are not buying for profit? What if they are buying because they believe it is the way they can fight climate change.
Will it eventually retrace? Probably. Almost surely. But it will probably not matter at that point relative to today.
I think we are in an era where stocks are mostly detached from fundamentals. Ask yourself who truly cares about fundamentals? It’s the uber wealthy who are trying to preserve their capital. Wealth disparity is huge so those numbers are fewer.
The Robinhood investors aren’t pouring over spreadsheets to decide where the best PE ratio tradeoff is most favorable. They aren’t trying to balance growth and income. They are literally buying whatever hyped them the most.
Now regarding the AMD chart. You should consider it in context of their defeat by Intel and subsequent turnaround. That, I think, drove the price movements shown in the chart. Did profit taking from amazing runs also matter? Probably. But you can’t ignore that AMD was nearly bankrupt and had to reinvent itself because it lost so much ground to Intel.
I think you can't judge whether TSLA is overvalued or not until they are no longer instantly selling out of all their products. People are bullish on TSLA because they have a product that many, many people want, more than they have the capability to supply.
Once they have their peak production capacity and have surplus stock across all markets we will get a better idea of their true value.
The most that the price of TSLA and BTC have in common is that both their values can be represented on a graph.
Yes, I agree, but I'm confident they're not worth twice the sum total of the entire car market by themselves.
> The most that the price of TSLA and BTC have in common is that both their values can be represented on a graph.
Well, that and one holds a chunk of the other. They're also surprisingly heavily correlated from a price action POV. I suspect there's a bit more going on than meets the eye. Burry tweeted the crazy level of correlation a few days ago.
CPI probably doesn't reflect inflation the way Fed looks at it. They use PCE[1]:
>An accurate measure of inflation is important for both the U.S. federal government and the Federal Reserve's Federal Open Market Committee (FOMC), but they focus on different measures. For example, the federal government uses the CPI to make inflation adjustments to certain kinds of benefits, such as Social Security.[3] In contrast, the FOMC focuses on PCE inflation in its quarterly economic projections and also states its longer-run inflation goal in terms of headline PCE.
That's quite interesting but the overall picture is the same in both CPI and PCE. It's just another way to measure inflation in consumer goods and services. Compare that to the usual Bitcoin advocates talking about inflation of the dollar relative to Bitcoin. It's measuring something completely different.
Your view on currency exposes your extremely elitist bias.
Are you aware that a large portion of the population is unable to purchase assets? What do you say to these people? What do you say as the dollars they earn pay less of their rent? Less of their healthcare? Soon...less of their groceries?
Nah quite the opposite. The world has had 14 years to buy Bitcoin. Happened at the same time as the iPhone. Everyone in these poor countries has iPhones or android devices and nobody wants Bitcoin for them except the first world pushers. I defer to the locals. If they thought it was any good they’d use it. They don’t.
I would tell those people that if their government is broken they have bigger problems than their currency and once they solve their leadership problems the currency won’t be an issue anymore. Tough but true. Nothing there changes with Bitcoin and it’s $20 transaction fees.
Right, yeah, if you pretend how much AAPL appreciated matters to anyone, asset inflation counts. Otherwise, it's CPI, and [citation needed] if you want to posit otherwise.
Housing, healthcare, education and childcare costs matter. I don’t believe CPI is accurately capturing the skyrocketing costs of these things, which are the most significant expenses for most households.
And yet you and everyone else are unable to produce any meaningful sources or analysis that justify your beliefs. [citation needed] and we can talk about it.
Healthcare is a social policy matter, not monetary policy, and nothing to do with increase in the money supply. You take that up with your representatives not the Fed.
Housing is a function of city council zoning policy. You take that up with your city council not the Fed, or with the federal government it you want Japanese style zoning rules. [1]
Childcare is social policy, not monetary policy, and you take that up with your representatives not the Fed.
You can't just point to anything you don't like and say the Fed Did It or is responsible for it. All they do is control the money supply. Nothing more.
A reduction in your welfare isn't inflation. Necessities can outpace inflation. It's bad social policy, but it happens. What you fail to understand is that these prices will continue to outstrip a platonic ideal even if denominated in Bitcoin because the increase in pricing has nothing to do with monetary policy. Any temporary reprieve is due to speculative mania.
On average, the price per square foot of housing in the US is exactly the same now as it was in the 1970s, on an inflation adjusted basis. [1] In major metros, that number is higher, because of city policy, but on average, the number is flat. That means on an inflation adjusted basis in rural areas houses are cheaper per square foot.
Once you take into account that interest rates are about 1/5th of what they were back then, it's clear, housing is actually more affordable now than it ever was (per square foot).
Yes, zoning matters in rural areas. Minimum size rules, minimum setback rules -- all sorts of code changes -- have conspired alongside the 20% decrease in average family size and the changing tastes for more space, to make houses twice as big. Same price per square foot -- or lower! -- Twice as big. Twice as expensive.
I was wrong to say it has "nothing" to do with it, but it is by far not the dominant force as evidenced by the numbers.
If you're unhappy about poor folks not being able to afford the houses that's again social policy not monetary policy. I am too. But inflation isn't why.
By all means have at those windmills though, and please, cite your sources so we can have a debate on facts.
[edit] You're missing my point. Pricing in metros is more expensive because of council policy. Pricing outside the city is higher because they're twice as big. End of story. Please CITE YOUR SOURCES. This. Is. Not. Inflation.
You having a worse quality of life is not inflation.
Yes, white flight may or may not contribute to it. That's not Fed policy. That's social policy. And that's my point.
You're not necessarily wrong that the causes of the increases in prices for things like healthcare, etc. are due to policy issues, among other things. But you can kind of make that argument for any good or service - that that the increase in the price of x is a "specific industry/policy issue" and not a "monetary issue".
That doesn't negate the fact that people are still paying higher prices. If the fed is mandated with controlling the increase in prices then it is still upon them to address it, no? The fact that monetary policy is not a primary cause of the good/service specific inflation is irrelevant.
> That doesn't negate the fact that people are still paying higher prices. If the fed is mandated with controlling the increase in prices then it is still upon them to address it, no? The fact that monetary policy is not a primary cause of the good/service specific inflation is irrelevant.
If 'everything is going up the same amount' then sure. If one particular contributor makes an outsized move in the wrong direction what's the fed to do? Fire up the printer at the cost of all of the other areas of life that aren't going up?
Healthcare contributes to inflation, sure, but if government passes a 50% tax on all healthcare procedures overnight, that's not the Fed's job to rectify. It's not their job to fight Congress on how relatively expensive certain things are. If the government decides healthcare should only be for the rich (...er) then it's not the Fed's job to change that.
They would account for what the newly more expensive healthcare cost does to inflation as a whole, and increase or decrease the money supply to match.
Their job is systemic, not targeted. Want cheaper healthcare? Talk to congress, not Janet Yellen.
>Housing costs have nothing to do with the Fed? Really? You don’t believe record low mortgage rates are driving demand at all?
Imagine if you are a bathroom remodeling company and people are building new bathrooms for $5k. You can build a bathroom for $4K. Suddenly the fed is loosening its monetary policy and people are building bathrooms like crazy with their bathroom mortgages. They are willing to pay $10k per bathroom but your costs didn't change. It's now extremely profitable to build bathrooms and that's exactly what you are going to do. You're going to hire lots of workers so that everyone can get their bathrooms. Turns out, a competitor does the exact same thing but they sell their bathrooms for $9k. Add more competitors and the price will be very close to the cost of construction.
Now replace the bathroom with the entire house. Suddenly you realize something. It's very difficult to find land to build your new house and even if you did you would have to upzone the property by tearing an existing property down and building a 2-3 story multifamily home there. Unfortunately, doing this is illegal in many places and where it is legal permits are being denied for arbitrary reasons.
You can't tell me that construction companies can't make money off new construction because the cost of housing is too low.
Rural and unincorporated areas have strict zoning too. Look at Tuolomne county (https://www.arcgis.com/apps/webappviewer/index.html?id=3e926...) for an example I could easily find a graphic for. The vast majority of privately-held land in the county is zoned RR (brown, 1 unit per 5 acres), AG (1 unit per 18.5 acres), or TPZ (1 unit per 37 acres).
Inflation adjusted $/sqft on average across the US housing costs exactly the same as it did in the 1970s. With interest rates 1/5 of what they were back then, each square foot is actually much more affordable.
I admit I misspoke, because of course, monetary policy controls interest rates, but I maintain that a change in affordability is not dominated by inflation but rather other social policies. Houses are twice is big and families are 20% smaller.
> Inflation adjusted $/sqft on average across the US housing costs exactly the same as it did in the 1970s.
> Inflation adjusted
Inflation is a result of monetary policy. So when you’ve adjusted the price for the monetary policy, you see that 50 years of capital accumulation and efficiency has been soaked up by monetary policy.
> I admit I misspoke, because of course, monetary policy controls interest rates, but I maintain that a change in affordability is not dominated by inflation but rather other social policies. Houses are twice is big and families are 20% smaller.
Things are supposed to get cheaper as capital accumulates. Social policies undoubtedly have an effect. So does increasing the money supply. An increase in the number of currency units necessarily causes each unit to be worth less, ceteris paribus.
> Happy to debate more but [citation needed].
I’m not sure how to proceed. The notion that one could print money and have each currency unit correspond to the same amount of physical goods is prima facie false.
> "I’m not sure how to proceed. The notion that one could print money and have each currency unit correspond to the same amount of physical goods is prima facie false."
No, it's not, you're looking at half the equation. Value of money is a function of both supply and velocity. If velocity drops but supply increases commensurately, each unit of currency corresponds to the same amount of physical goods. [1]
This should be dead obvious to you, as the money supply doubled last year but the price of Apples went up 2%. Not 100%. Same with the entire CPI basket. Housing actually got cheaper. Rent went down a ton.
> Inflation is a result of monetary policy. So when you’ve adjusted the price for the monetary policy, you see that 50 years of capital accumulation and efficiency has been soaked up by monetary policy.
We are talking in constant dollars that have a 0% notional rate of inflation. That's what inflation-adjusted means in this context.
What do you mean by "50 years of capital accumulation"? People don't accumulate or hold dollars for exactly this reason. They accumulate and hold assets and value, whose performance matches or exceeds inflation.
> Things are supposed to get cheaper as capital accumulates. Social policies undoubtedly have an effect. So does increasing the money supply. An increase in the number of currency units necessarily causes each unit to be worth less, ceteris paribus.
I'm not sure what that means. Things aren't supposed to get anything as capital accumulates.
An increase in number of currency units may or may not cause each unit to be worth less, as velocity is the missing half of the equation. With that in mind the goal is each unit to be worth 2% less each year, to incentivize higher velocity of money and investment.
It's a straw man to say that your buying power drops 2% each year as a result of inflation. You're only penalized for inflation for the period between you receiving the dollars and using them to purchase assets whose performance exceeds inflation.
> No, it's not, you're looking at half the equation. Value of money is a function of both supply and velocity. If velocity drops but supply increases commensurately, each unit of currency corresponds to the same amount of physical goods. [1]
for consumer goods, “velocity” is the rate at which those goods are consumed. People aren’t generally choosing to starve themselves or pay rent on 4 apartments according to economic conditions.
i should have included “ceteris paribus” with my statement but I thought it was obviously implied.
> This should be dead obvious to you, as the money supply doubled last year but the price of Apples went up 2%. Not 100%. Same with the entire CPI basket. Housing actually got cheaper. Rent went down a ton.
Ceteris is not paribus. The increase in money supply soaked up all the decrease in prices people ‘should’ have experienced.
> We are talking in constant dollars that have a 0% notional rate of inflation. That's what inflation-adjusted means in this context.
I understand what “inflation-adjusted” means. Once you adjust for the price increase due to people’s dollars being worth less, the commodity costs the same. Of course people aren’t paying in notional inflation-adjusted dollars, they are paying in the actual dollars that have depreciated, so they end up paying more for less, because of monetary policy. The value they miss out on accrues to people who get the new money earlier.
> What do you mean by "50 years of capital accumulation"?
I mean that the capital stock of the economy has increased over the past 50 years as a result of people investing their surplus in capital goods. This results in increased productivity and (ceteris paribus) a lower real cost of goods and services.
> People don't accumulate or hold dollars for exactly this reason. They accumulate and hold assets and value, whose performance matches or exceeds inflation.
Yes, because monetary policy results in depreciation of fiat currency.
> I'm not sure what that means. Things aren't supposed to get anything as capital accumulates.
Things are supposed to get cheaper as capital accumulates because labor is more efficient when combined with tools, resulting in more outputs and the subsequent decrease in real price.
> An increase in number of currency units may or may not cause each unit to be worth less, as velocity is the missing half of the equation.
You’re missing the part where I said “ceteris paribus”, a commonly specified requirement for assertions about the connection between theory and economic reality.
> It's a straw man to say that your buying power drops 2% each year as a result of inflation. You're only penalized for inflation for the period between you receiving the dollars and using them to purchase assets whose performance exceeds inflation.
It’s not a strawman, its literally the case.
Additionally this requirement to invest dollars before they depreciate leads to asset prices skyrocketing without support from the underlying fundamentals. This leads to people who are already invested (the rich, the wealthy, the established old money, the upper class) gaining disproportionately, and new investors being priced out. Hence monetary policy is directly responsible for the rich getting richer and the poor being left behind.
>I’m not sure how to proceed. The notion that one could print money and have each currency unit correspond to the same amount of physical goods is prima facie false.
The entire problem is that it's not false at all. There are various ways to produce more physical goods without employing more domestic workers. Every time the fed is printing money that money gets invested in a way that does not result in decreased unemployment. It's being used to produce more physical goods which keeps the price of physical goods constant.
Ultimately the only truly scarce "good" is labor. Everything derives from it. If prices are not rising that means labor is not scare at all, which is idiotic because there are lots of ways to productively deploy that labor.
> The entire problem is that it's not false at all. There are various ways to produce more physical goods without employing more domestic workers. Every time the fed is printing money that money gets invested in a way that does not result in decreased unemployment. It's being used to produce more physical goods which keeps the price of physical goods constant.
I was unclear and I should have included ceteris paribus, but you’re correct. The fed keeps the price of goods constant when it should be decreasing.
> Ultimately the only truly scarce "good" is labor. Everything derives from it. If prices are not rising that means labor is not scare at all, which is idiotic because there are lots of ways to productively deploy that labor.
Raw materials are also truly scarce, and you’ve neglected to apply the same level of analysis here as you did above.
There's actually considerable debate on the subject. I find it reasonable that things which are outside the CPI basket can indeed experience inflation.
If 25% of circulating USD were created last year, and our economic value is the same or even diminished, wouldn't it follow that there must be significant inflation?
> If 25% of circulating USD were created last year, and our economic value is the same or even diminished, wouldn't it follow that there must be significant inflation?
Not necessarily, no. The value of money is a function of supply and velocity. If the velocity went down and the supply went up 25% the fed can still nail its 2% target. [1, 2, 3] If the velocity increases next year the fed can shrink the supply commensurately to maintain its targets.
That's very interesting I was not familiar with the concept of velocity.
It still seems to me that velocity can vary depending on the underlying entity. So unless every asset has the same velocity measure as the items in the CPI basket, it seems that there has to be some amount of inflation somewhere like possibly US equities.
The idea of velocity is pretty simple. If you print a $1T coin and hand it to me, then I throw it in a safe and forget the code, did the increase in supply cause any material increase in inflation experienced at the point of sale by the average person? Probably not. The supply went up, but the average velocity went down commensurately.
How this interacts with assets is in my opinion not super clear. Pricing of assets is supply and demand, unlike the CPI basket. The CPI basket is based on human need. There's no human need for AAPL shares. However, there's a ton of stimulus money, and folks who remember 2008's V-shaped recovery, and a bunch of people stuck at home day trading. I think that's much more likely to be driving asset prices than supply. After all supply is enacted by changing lending parameters.
To the extent asset prices don't put pressure on CPI, they reflect an increase in welfare, not an increase in inflation.
The velocity of a particular Bitcoin arrives at 0 given enough time. Bitcoin get lost. These Bitcoin cannot move and thus contribute to the deflation of Bitcoin. They effectively shrink the money supply.
These people are all disingenuous actors. They know the point, but they want to flood all of these threads and act clueless. Bitcoin is digital gold, gold's replacement. It's been here for 12 years and yet, all these actors show up in every Bitcoin thread. It's the greatest monetary shift in hundreds of years.
ArcticBull below me shows up in EVERY single Bitcoin thread to trash talk Bitcoin. Here's where we are at; some love Bitcoin, and others show up just to talk trash. Bitcoin is only going to grow beyond $100k the next couple years regardless of how sourly "ArcticBull" wants to astroturf.
Bitcoin is a modern day example of what happens when you have a currency that has deflation instead of inflation at it's core.
It becomes actually more expensive to buy anything in the present, as a result, consumers stop purchasing, and as a result economic activity decreases.
DigitalGold is also non-sensical, because that is simply designed to track against inflation, to prevent the loss of today's buying power tomorrow because of inflation. But when something appreciates 10,000x it's not really a hedge against inflation anymore, but a different speculative instrument entirely.
The irony behind bubbles is that you cannot profit off of them by acting rationally. If everyone participating in the bubble were acting 100% rationally, the bubble wouldn't exist in the first place.
> ArcticBull below me shows up in EVERY single Bitcoin thread to trash talk Bitcoin. Here's where we are at; some love Bitcoin, and others show up just to talk trash. Bitcoin is only going to grow beyond $100k the next couple years regardless of how sourly "ArcticBull" wants to astroturf.
So what? My argument has never been about price but about fundamentals. The fundamentals are crap. I don't care if gets to $100K in the "next couple of years" and neither should you. The price going up doesn't make it good, the price going down doesn't make it bad.
Spending an Argentina of power for 7 tx/sec makes it horrifyingly bad.
Wanna make a 100% ROI? That's not that hard. Risky, but you can make one overnight if you spend some time on r/WallStreetBets.
Hedge fund managers are never going to publicise an impartial view about anything, especially not something they are heavily invested in. Forming a positive opinion about Bitcoin based on what two hedge fund managers, both bullish on BTC, have to say, seems pretty dumb.
Unless fiat is abolished, the price of something in BTC will always be pegged to USD. As USD devalues as a result of inflation, the price of a product in BTC decreases.
I don't see the difference between someone in Venezuela choosing to hold their net worth in BTC (which could halve at any moment), versus their native, rapid inflationary currency. Both are risky, but if the central bank sorted itself out and fixed the currency issue, no one will have any reason to hold BTC any more.
Please don't fall for the trap of calling actual money fiat as if bitcoin wasn't fiat. If at some point bitcoin becomes money it will be fiat money, as bitcoin is not backed by a commodity. So far bitcoin isn't money because it's not the most liquid asset. In order to buy anything with bitcoins, first you'll have sell them for actual money and use that to buy stuff, hence not money.
Indeed - if your government is crap, you have bigger problems to worry about than your currency. Once you sort out the government you no longer have to worry about your currency. There's no world where simultaneously you have an untrustworthy government and you can bandaid over it with crypto.
Any real value analysis of Bitcoin that doesn't take Tether into account isn't worth much. As long as the whole crypto market is built around a currency issued by an unregulated and unaudited company with a mile-long list of past controversies, any unbiased take on the future of Bitcoin has to allow for a significant downside risk.
Tether is a real Michael Burry moment for me. They claim to have 30 billion in reserves right now and are "printing" a billion tethers at a time. Yet nobody can confirm their reserves and the company itself is absurdly opaque.
Either there is an incredible amount of criminal fraud behind this or... this is perfectly reasonable?
Yes, but as long as nothing is stopping them from simply minting out of thin air, I wouldn't bet against their ability to keep pushing the prices up.
Daily volumes of tether trades are consistently a high multiple of the total supply. (Today it's 130bln vs 30bln.) So I don't know if it's safe to even trust that number.
As per Steins law, anything that cannot go on forever must eventually stop. Question is how long?
In many cases this is incorrect. Bitcoin's mining network is the first global energy market that unlocks stranded energy (energy produced too remotely to be profitably inserted into any grid) and brings its value to society.
Natural gas producers are TODAY starting up miners to burn excess gas that would otherwise be flared. The concept has been productized - https://www.upstreamdata.ca/ - and is live.
Rather than a case, how about a framework to evaluate going forward: the market. Given enough time, I'm pretty sure the market will root out the "real value" of bitcoin and keep assessing the "real value" of gaming.
Let's watch for 5-10 years. If you're right about bitcoin, I bet its price will be much lower and you can gloat. If you're wrong, I bet its price will be much higher (because I agree with the basic assessment that gaming "feels" much bigger today). Luckily, we can both place our bets based on our best assessments of the future.
How confident are you that you can present a substantive case against bitcoin that matches the diligence that Ross Stevens has done for years? https://www.youtube.com/watch?v=lczPTYf_tvA
Asset values don't reflect economic impact/relevance (as in a $100MM Picasso doesn't indicate $100MM of economic activity). That's why GDP is used as an indicator for economic growth, not market caps.
Market cap is an estimated resale value under current/predictable conditions. GDP is a total of cumulative annual transactions. We can measure Bitcoin both ways, and each is remarkable.
As it happens I just listened to a long talk by him, perhaps this one. He kept arguing that "bitcoin isn't volatile, because the price of various things measured in bitcoins keep falling".
Either he doesn't know what volatility means or he is trying to scam people.
Via Tesla, bitcoin is now implicitly held by all investors in the S&P 500, including, very likely, you. You are now a benefactor of bitcoin's growth, whether you're aware of it or not. This trend, where bitcoin quietly confers benefits to growing constituencies of people who remain completely unaware of the fact, will continue.
The "minuscule percentage" you quote (without reference) is very likely already clearly incorrect and will continue, over time, to become more incorrect.
Nic Carter's rebuttal to a Bloomberg comparison between Bitcoin/Visa, including assessments of total and per/transaction energy usage:
"First of all, Bitcoin and Visa are fundamentally different systems. Bitcoin is a complete, self-contained monetary settlement system; Visa transactions are non-final credit transactions that rely on external underlying settlement rails. Visa relies on ACH, Fedwire, SWIFT, the global correspondent banking system, the Federal Reserve and, of course, the military and diplomatic strength of the U.S. government to ensure all of the above are working smoothly.
Any energy comparison must take the above into account – including the externalities from the extraction of oil, which implicitly backs the dollar. As those who make this comparison inevitably fail to mention, the dollar’s ubiquity is partly due to a covert arrangement whereby the U.S. provides military support to countries like Saudi Arabia that agree to sell oil exclusively for dollars. It’s worth noting that the grossly oversized U.S. military, whose presence worldwide is necessary to backstop the international dollar system, is the largest single consumer of oil worldwide."
Nic Carter's point is intentionally obtuse and belies his conflicted interests.
The reality is that if you scaled up the bitcoin system linearly so it provided as much transaction capacity as Visa (let alone the entire world economy) [edit or rather worded differently if each Visa transaction consumed as much power as a Bitcoin transaction], it would require a number of times more power than the entire world produces, and produce as much e-waste as the entire world put together. Obviously this is not how bitcoin scales because even if you did that it would still process 7 tps.
That is, however, proof that it is drastically less efficient on a per transaction basis even factoring in any and all possible externalities including the army and mining and the fed (lol). This is a proof by contradiction.
Anything else is a talking point and also trivially falsifiable. The US Army protects the US not the dollar and its budget would not be reduced in a Bitcoin powered world. Neither would its oil consumption because tanks don't fill up on bitcoins.
The ubiquity of the dollar specifically is also irrelevant as we're not comparing crypto to US Dollars but rather to well-managed fiat systems. Any and all. Not just one albeit dominant one.
This is obvious stuff if you think about it for a half second without trying to justify the unjustifiable.
That's not how Bitcoin scales. The amount of transactions doesn't matter. Bitcoin can have a limited number of on-chain settlement transactions and unlimited number of off-chain payment transactions (Lightning, Paypal, Visa, etc.) and it doesn't consume a single bit of more energy. Energy consumption is proportional to its value and the current block reward.
That's not what I am arguing as it's not what Nic is arguing.
Nic doesn't say that Bitcoin consumes less power than you think on a per-transaction basis. He says that Visa consumes way, way more if you price in nebulous externalities.
I am rejecting his thesis by saying that if Visa used as much power per transaction as Bitcoin we'd need to generate 3X as much power as we currently do.
The quote is: "Any energy comparison must take the above into account – including the externalities from the extraction of oil, which implicitly backs the dollar."
I'm taking it into account. And I'm saying he's wrong.
> Nic doesn't say that Bitcoin consumes less power than you think on a per-transaction basis.
Sure he does:
> Second, metrics like the “per-transaction energy cost” are misleading because transactions themselves do not cost energy; nor does bitcoin’s CO2 footprint scale with transactional count.
The point is that transactions per second isn't the unit of value by which Bitcoin is priced. Bitcoin is not competing with other monetary systems simply on the basis of transactions per second, but also network trustworthiness/security
He's not disputing the per-transaction cost of Bitcoin OR Visa, and is explicitly pointing out how looking at it on a per-transaction basis is misleading.
He is disputing the overall total network costs, not considered on a per-transaction basis but in terms of the total value provided by the network to all its users.
Transactions per second is just one of the factors that could add value to a monetary system, but it isn't the only one.
I think you’re being intentionally disingenuous like Nic, but at least he was clear: “ Any energy comparison must take the above into account – including the externalities from the extraction of oil, which implicitly backs the dollar.”
I factored it in with my calculus and you and nic are wrong. If you believe otherwise please show your work like I did not gut feelings.
TPS is a means to an end re disproving the thesis not a talking point about utility.
I am not looking at value in terms of TPS. TPS an intermediate step in my calculation. I am looking at total system usage. Sorry bud, your system is the digital equivalent of rolling coal and no amount of mental gymnastics will change that.
But by all means show your work and let’s talk about it, don’t just say “nope try again” haha that’s what people who have no leg to stand on do.
Right, he is comparing the total usage of the network including externalities. But not on a per-transaction basis, since that would be meaningless, as the transactions per second can be scaled arbitrarily with almost no change in energy consumption.
The problem here is not about including the externalities (although that is an important thing to consider). The problem here is that it is a mistake to look at the value only in terms of transactions per second when transaction rate is just one factor by which you can judge a monetary system. It's not necessary for Bitcoin to compete with other monetary systems in terms of transaction rate for it to be useful.
Per-transaction basis is completely meaningless math. Both systems can be scaled as I said. The point is that it's more expensive to run the US dollar system than Bitcoin.
Per-transaction is only meaningful if you believe Bitcoin's only utility is by competing with Visa for everyday transactions like buying a cup of coffee.
But if you find that Bitcoin is a digital, permissionless, borderless, uncensorable store of value, a better gold than gold, then it doesn't need millions of transactions per second.
Bitcoin is just fine as the most secure settlement layer and long-term store of value for large, infrequent and expensive transactions.
Fiat money isn't going anywhere, Visa doesn't need to be replaced, and Bitcoin doesn't need to pay for your coffee to be useful. It can do what it does best, coexisting with fiat systems and other cryptocurrencies.
If I buy real estate or fine art to defend against the money printer, my transactions are large, infrequent, slow and expensive.
As Bitcoin's use as a store of value increases and transaction throughput remains constant, transactions will be larger, less frequent and more expensive.
I won't get pushed out onto L2 just like I'm not pushed to liquidate real estate or art collections. I don't transact in long-term stores of value more than once every few years, and then I expect the transaction will be large, slow and expensive.
Users can choose to adopt the trade-offs of second layer solutions if and when it is convenient for them, and with whatever portion of their wealth that they like.
Almost like classical finance has worked forever. Remind me what we’re Expending this energy for again? Or are we closing in on the end of the speedrun?
I've never said that. I've said it does literally nothing better than classical systems. That point remains in contention. The idea that it's somehow everything and nothing at the same time, just a perpetual number go up machine, is a pro-crypto argument.
>As far as scaling Bitcoin goes: prove it. It’s been a decade and it still does 4tps.
Sure. The Lightning Network already exists, is working and in use, and can in principle do essentially unlimited TPS.
Bitcoin doesn't need to scale to millions of TPS to be successful (since payments and microtransactions aren't its only use case), but it so happens that it can do that through second layer technologies.
That's exactly how the Bitcoin's payment layer scales. Visa is just one solution, but that's probably the most popular one. The settlement layer doesn't have to scale, because it's possible to scale the payment layer. You get all the benefits of sound money with the usability of fiat money.
How many transactions/day is Lightning handling? I recall this same discussion in late 2017. Have they managed to successfully get people using it yet?
You can't directly measure the number of transactions happening on lightning network unless every non leaf node publishes it's numbers, and even then you'd have to trust they're telling you the truth.
And it's even more complicated than that, because you'd have to take the data from every node, and reconstruct complete paths to identify a single transaction.
And yes, I personally use the Strike app + Fold app to collect satoshi rewards by buying gift cards for shopping. Strike also has a beta app that uses lightning as the rails for global p2p transfers, e.g. you can instantly send USD to EUR. https://twitter.com/JackMallers/status/1346867753253220356
> Have they managed to successfully get people using it yet?
I was trying to figure out the same thing a month back[0], but most of the responses I got boiled down to "you're asking the wrong question". It's hard to wade through the crowd of "it's just digital gold", but the best response I got[1] is that it works decently for places that accept it, but there are hiccups, usually around liquidity.
There is no number there on the number of transactions, simply because it’s impossible to measure. It’s only possible to see the lightning transactions flowing through your own node.
Each channel accommodates theoretically infinite amount of transaction.
Looking at that list, most of those are clearly crypto enthusiasts. I don't think "HODL Monkey" is a good indicator of where the market is going; ditto with exchanges.
As always, call me when I can buy a latte with it.
This shouldn't be surprising. The early adopters of a finicky new technology are always going to be enthusiasts.
You can buy a Starbucks gift card on fold app using LN and currently get 3% back in sats.
But seriously, why would anyone spend a ton of effort right now integrating a coffee shop directly with LN in the first world? Traditional payment systems work fine. Bitcoin was never primarily concerned with replacing Visa. Think bigger.
Is someone in the third world chomping at the bit to pay $40 to open and close a single LN channel when that’s 10% of the GDP per capita of some of those countries you plan to help? Probably not. The only places you can get away wanging people with such egregious fees simply don’t need crypto.
> Is someone in the third world chomping at the bit to pay $40 to open and close a single LN channel when that’s 10% of the GDP per capita of some of those countries you plan to help? Probably not.
In such cases, there is no reason such users can't "enter" bitcoin through a second layer such as the Lightning Network.
Why would they do that if it isn't real bitcoin?, you might ask. Well, for one, their local, tin-pot-dictator created currencies are often worthless, meaning that even second-layer bitcoin is a far more sound and reliable currency.
And who is to say $40 for an on-chain transaction is an "egregious fee"? It turns out having access to the world's most secure, decentralized, unstoppable, set-in-stone, uncensorable, trustless, non-inflationary monetary network is a valuable thing. Maybe so much so that $40 per on-chain transaction is a bargain in the bigger picture.
> In such cases, there is no reason such users can't "enter" bitcoin through a second layer such as the Lightning Network.
Yes there is they need a channel, which costs $20 to open and $20 to close.
> And who is to say $40 for an on-chain transaction is an "egregious fee"? It turns out having access to the world's most secure, decentralized, unstoppable, set-in-stone, uncensorable, trustless, non-inflationary monetary network is a valuable thing. Maybe so much so that $40 per on-chain transaction is a bargain in the bigger picture.
If you do that you lose 100% of the guarantees of the blockchain -- that account is centralized, permissioned and trustful. At that point they don't need the blockchain, smh.
Although it's true you introduce some level of trust in that scenario, it's patently false that you lose all the benefits of bitcoin. A company offering accounts via Lightning would have all of the standard reasons not to cheat customers.
And again, keep in mind we are talking about access to money -- a money that cannot be debased -- for those people living in the poorest and most terribly governed areas of the world, where debasement, hyperinflation, and the utter destruction of savings is commonplace.
Even if they don't get the full benefits of on-chain bitcoin transactions, they will still be light years ahead of where they were relying on failed local currencies. A massive improvement even in the worst case scenario, helping to lift real-world folks out of poverty. This is something to applaud and cheer for, not shake your head at or mock.
I was referring to the idea that a $40 channel fee might be palatable or even negligible for folks such as those in Malawi whose GDP per capita is $400 per year.
What does “think bigger” even mean here, aside from memes about Bitcoin prices going up? If your competitor is cheaper, more popular, more reliable, and more widely supported, aren’t you just straight up losing?
> The reality is that if you scaled up the bitcoin system linearly so it provided as much transaction capacity as Visa (let alone the entire world economy), it would require a number of times more power than the entire world produces, and produce as much e-waste as the entire world put together.
It's fair to judge Bitcoin's energy use by its tps, but the above is not true. Energy use and tps are, as you then acknowledge, not related. It is possible to increase the number of tps by many multiples. The trade-off is centralization due to hardware requirements.
Unfortunately for Bitcoin, it needs more than “many multiples” in order to actually handle function as a currency. At 4tps they’re several orders of magnitude short of what the market actually needs.
That's why second-layer technologies like the Lightning Network are being built.
Bitcoin doesn't have to function as a currency to be wildly successful (since being a currency isn't the only relevant use case), but with second layer networks it will be able to.
Once they increase it, which they won’t for philosophical reasons, I’ll update my assessment. Until then it’s strictly fair and accurate.
It’s representative of the world in which we live today not some hypothetical world that could exist in the future - that the team has promised and failed to deliver for a decade. I can make up numbers for visa that match too.
After all climate change doesn’t care about hypotheticals.
They will not increase it. I am merely pointing out the idea "to do twice the number of transactions it would consume twice as much energy" is not correct, because raising the block size would not necessarily increase energy consumption.
That’s not the point I’m making. The point I’m making is it takes more energy per transaction even after factoring in all specified and unspecified externalities because it’s not thermodynamically possible for visa to use as much energy per transaction. Visa would have to consume roughly 3X the entire worlds power output to match the sheer waste of Bitcoin.
Your argument is about as convincing as "well you couldn't make a payment billion dollars because a penny weighs 1 gram, and their combined weight would be too heavy to transport"
How so? I said on a per transaction basis by falsification it’s not possible, factoring in all externalities for a Bitcoin transaction to be more efficient than visa. It is not. End of story. The scaling is a thought experiment not a plan.
Your counter example is nonsense.
Could it be in the future more efficient given unspecified future changes? Who knows but it sure as shit isn’t today. I was pushing back on Nic’s theory on pricing in externalities.
The more efficient changes ALREADY HAPPENED years ago in the form of Lightning network.
The Bitcoin blockchain is the bedrock of this new peoples currency and upon it has been built the Lightning network which is a Bitcoin integrated sidechain for cheap and small transactions.
Lightning facilitates Bitcoin transaction capacity to scale in a ludicrously efficient manner and has now been technically maturing for years now. Please keep up.
The number of lightning transactions and channels rounds to zero, so in a way, I did include them. Same number of channels, about half the capacity per channel, same quantity of locked up value (about 1000BTC total) and the same number of users since 2019. [1]
Of course it's not a solution to scaling, because it requires one on-chain transaction to open, one to close, and if an intermediate node happens to go down your funds are locked. It's garbage. Vastly overcomplicated garbage.
By the way to just open a single channel for everyone on earth today and close it will take about 70 years, so right around the year 3000 if you (very optimistically) factor in births and deaths. And about $265 billion dollars at current fee rates - $18.99 as quoted today. Elon better pony up! This of course assumes the blockchain isn't used for anything else in the interim.
How small can the transactions be if a channel open/close costs almost $40?
The only L2 solutions that scale are permissioned, centralized and/or trustful. Because that's how you scale. And you can back those with anything as none of the guarantees of the underlying asset are conferred to these L2 networks simply because they notionally operate on top of Bitcoin for net settlement and the (soon to be unlawful) non-custodial wallet.
> By the way to just open a single channel for everyone on earth today and close it will take about 70 years, so right around the year 3000 if you (very optimistically) factor in births and deaths. And about $265 billion dollars at current fee rates - $18.99 as quoted today. Elon better pony up! This of course assumes the blockchain isn't used for anything else in the interim.
LOL. Nice. I like it even better than my other favorite example, that issuing a paycheck in Bitcoin to the 125 million full time employees in the US would take about a year to process.
> ... climate change doesn’t care about hypotheticals.
But increasing the block size limit wouldn't reduce the energy consumption. It would just make Bitcoin support a higher maximum transaction count per second, which perhaps the market doesn't even need or care about.
The power consumption of Bitcoin is proportional to the price of Bitcoin, it is not related to the demand for making transactions or how many transactions are being made.
You folks keep saying that like it’s a good thing but in my opinion that is a scathing indictment of the system. You’re talking about something that’s intentionally anti-efficient. It’s the only technology I’ve ever seen in my entire lifetime but becomes less efficient when more people try and use it. It’s horrifying.
[edit; to your reply: that sounds like a bad solution and I think you know that lol]
That fact says nothing about the efficiency. What it says is that market forces will decide what level of energy they want to dedicate to the security of the network. Whatever the market is willing to pay, it will be 100% efficiently spent on outcompeting attackers on the network.
> that sounds like a bad solution and I think you know that lol
I don't think it's a good or bad solution. It is basically just the same as how market forces control the values of fiat currencies which in turn affects how much energy is required to secure them.
Through a proof of waste of limited resources system. Just spell it out and I’ll agree.
[edit: this isn't about the army. this is about currency. stay on track, stay on topic - both of those things can be bad and having two of them can be additively much worse; having a debate with you is like trying to grab a fistful of jello, absolutely impossible]
Exactly, just like how with fiat currencies, the military serves as a proof-of-waste system which does nothing productive except to compete with other militaries. They compete by intentionally burning their limited resources (young individuals' lives) so as to make an enemy attack cost-prohibitive, thus securing the network.
> The army is to defend the country and its people, and would not be reduced in a bitcoin powered world.
Yes, they also defend other things besides the country's financial interests. So you'd expect them to cost a little more than Bitcoin, which only defends holders' financial interests. I am simply pointing out how they use the same proof-of-work system to accomplish it.
If the widespread adoption of Bitcoin led to a devaluation of existing fiat currencies, then you would expect military spending to go down (in terms of bitcoins). But I don't think that Bitcoin's adoption will decrease the use of fiat currencies (by any significant amount).
> both of those things can be bad and having two of them can be additively much worse
It's not clear why they would be additively worse. Creating a new place to store wealth doesn't increase the overall amount of wealth.
I agree that it is not a good thing that proof-of-work systems are wasteful, but perhaps it's the only way of solving the problem.
Proof-of-stake systems look promising but there are still some open questions about how it should be implemented and what the implications are for network security, and it will be at least a few years before they become battle-tested enough to have the same level of trust as Bitcoin.
When I say "number go up" I'm not being disrespectful to you, I'm borrowing a turn of phrase from the Bitcoin community which they use to justify just about anything. Apologies if that or anything else I said rubbed you the wrong way, tone often fails to carry on the internet.
What I'm saying is that I have, quantifiably and mathematically, shown that it's not possible for a crypto to take less energy than a visa transaction, due to thermodynamics.
Your retort continues to be that "the state spends way more energy and resources defending the currency that you're not factoring in" -- but you've failed to quantify that in any way. It spends some quantity, ok, I understand that. You haven't replied how much, you haven't done any analysis. Without any justification you state that it's at least as big if not bigger than a Bitcoin transaction.
I want to know why, when I've shown it's not thermodynamically possible.
I'd love to know how much of the state's "energy expenditure" you apportion to "currency protection," and how much that would decrease in a world where the entire economy is denominated in cryptocurrency. Some justification - anything - would be a great starting point, but so far you've just stated it as fact, in many unrelated contexts. This is not a generally accepted or understood fact.
Regarding your crypto energy argument, I think I addressed this in the other thread but I will try to explain again.
With the current 1MB block limit and current valuation of Bitcoin, you are absolutely right that the transaction rate per kilowatt can't exceed Visa.
The argument in Nic Carter's post which you are missing is that transaction rate per kilowatt is just one possible way of judging the usefulness of a monetary system.
Monetary systems can be useful for reasons other than their high transaction rate (for example, they might support a particularly high transaction volume, or have a particularly high cost to attack).
Increasing the maximum possible transaction rate per kilowatt would be as simple as increasing the maximum possible block size, since transactions are effectively free (it is only finding blocks which costs money).
There are trade-offs associated with changing the block size limit, but those trade-offs have nothing whatsoever to do with the energy usage of Bitcoin. Changing the block size limit won't affect the energy usage. If the market had enough demand for increased transaction rates, either Bitcoin will be forced to increase the block size or it will simply be outcompeted by a different coin which already has.
> Your retort continues to be that "the state spends way more energy and resources defending the currency that you're not factoring in" -- but you've failed to quantify that in any way.
I actually don't know that that is true, and I didn't mean to imply that I know that for sure.
But, it is what you would expect assuming the market is accurately pricing Bitcoin for the value it provides them.
If it weren't true, and USD is actually cheaper to secure for the value it provides, then it is an easy arbitrage opportunity where you can short Bitcoin and buy the relatively-cheaper-to-secure USD instead. Eventually with enough market participants it is sure to eventually reach the "fair price".
It's completely off topic, because the existing financial system is an emergent property of the state. It's a free-loader. Very limited energy is expended specifically to maintain the financial system. The bulk of it is to maintain the state which you have to do whether the financial system is shells, legos, gold or bitcoin. It's an irrelevant point, a red herring, nothing more.
After all far be it from replacing Visa and Mastercard, Visa and Mastercard have simply added crypto so you actually have to remove them from your energy savings estimates.
Further I disproved the energy utilization point in the original conjecture as impossible. If you have something to add add it and show you work.
Sorry man, you're just not right on this one. Number go up, we get it. That doesn't make it a fundamentally good, useful or interesting technology. All this flailing/pointing at everything that moves with no calculation, no evidence, is just to distract from the fundamental fact that it's a wasteful, borderline useless casino.
> the existing financial system is an emergent property of the state. It's a free-loader. Very limited energy is expended specifically to maintain the financial system. The bulk of it is to maintain the state
It isn't a matter of how much the financial system consumes. It is a matter of how much the state consumes to protect the wealth of its citizens (of which fiat is just an emergent property like you say).
> Further I disproved the energy utilization point in the original conjecture as impossible. If you have something to add add it and show you work.
You will have to clarify what point you mean or what work you want me to show.
> Number go up, we get it.
Please don't talk to me so disrespectfully. I have no interest in speculating on the price of cryptocurrencies.
"if you scaled up the bitcoin system linearly so it provided as much transaction capacity as Visa ... it would require a number of times more power than the entire world produces"
This is a complete fantasy - power consumption is driven by the desire to secure the network, it is not related to transaction volume.
There is an argument that power consumption would have to be significant because attacking the network has to be cost- prohibitive, and there are people working on POS and similar approaches.
Etherium is actually attempting to scale, their talks are very interesting .
How can you say "if you scaled up the bitcoin system" and "this is not how bitcoin scales" in the same argument?
Bitcoin could handle arbitrary scaling with little power-usage increase had it not been intentionally hamstrung by (for lack of a better term) "small-blockers". This is because the primary power usage of bitcoin (mining) does not scale linearly with transactions/block. The transactions to include are usually considered once by the miners who then make iterated attempts at solving by modifying the block nonce, not the included transactions.
When that changes I’ll update my math. Until then it doesn’t matter. Its less efficient on a per transaction basis by falsification. It is fundamentally thermodynamically impossible for it to be more efficient today on a per transaction basis. It’s been 14 years. Time to look in the mirror and stop making excuses for its devastating waste.
The case I am making is that it is not possible for Visa to use as much power as Bitcoin on a per transaction basis based on today's energy usage, factoring in all exernalities - because the world would be out of power.
I am simply countering Nic's trivially incorrect position.
You countered the position, but you did not spend time understanding it.
As an example, ACH is an FTP based system that largely runs once a day (maybe 2-3x now), fed by various backing mechanics for the bank itself, including the Fed and whatever else you’d want to suck in.
Visa’s transaction rate is completely orthogonal to that system. Visa could 10x their transaction rate without touching that underlying system if they wanted to, as could something attached to Bitcoin. So your argument about scaling Bitcoin up counters a poor understanding of the initial position—so poor as to make it a different position entirely.
It's not worth understanding because the goalpoast shifts every 5 minutes. Bitcoin is like a religion. Every point you tear down they come back and say ah but wait! The princess is in another castle!
Because there's nothing there.
The whole thesis of Bitcoin is that it's trustless, decentralized and permissionless. It's also obvious that it doesn't scale beyond a single Costco or a mid-sized flea market. The only way to scale it is "Layer 2" networks which fundamentally are trustful, centralized and/or permissioned. Because that's the only way to scale. You can back those L2 networks with anything. Gold. Shoes. Dollars. GME shares if you ask Bittrex in any non-US market. There aren't even any guarantees these un-audited, un-accountable, un-regulated exchanges aren't selling more bitcoins than exist the way you oversell seats on a plane. Should be fine unless there's a run.
If all you want is a one-way message for net settlement between banks, I recommend you investigate SWIFT and ACATS.
The system doesn't do what it says on the sticker. The only reason anyone cares is number go up. And number only goes up if you go through the kind of crazy mental gymnastics Nic did.
[edit: ACH is dead, long live RTP [1], and guess what, RTP doesn't use one Argentina of electricity either somehow]
[edit: My argument isn't about scaling, it's about Wh per transaction, which Nic is strictly, totally and completely wrong about; let's stay on topic]
> The reality is that if you scaled up the bitcoin system linearly so it provided as much transaction capacity as Visa... it would require a number of times more power than the entire world produces
Scaling Bitcoin's tps does not increase its energy usage. The tps and energy usage vary independently of each other. Bitcoin does not require any more energy usage to handle more tps than Visa. In fact, if we include off-chain transactions which are settled on-chain it already can.
> The US Army protects the US not the dollar
What is the value of the dollar if the United States ceases to remain a sovereign polity? The dollar is part of the United States.
No, anyone who understands the Bitcoin protocol knows that energy doesn't scale with transactions. Read the paper. You could have your laptop sign a million transactions and it would be secure.
Energy scales with competition to sign transactions. Read the Bitcoin white paper my dude.
It's completely different than the bible because it can be proven by yourself, no faith needed. There is the whitepaper and there is source code. But since you are so cynical as to not believe people, and didn't seem to understand the whitepaper, I'll explain it to you:
Transaction blocks are generated at a fixed rate, no matter how many miners are operating. This is done by adjusting the difficulty of finding a sha256 hash on the data of the transaction block. You simply need to find a hash by adding some random data to the block until you find a hash that ends in 0. The more 0s at the end of the hash, the harder to find.
Generating a sha256 hash is easily done by a laptop computer. But when huge farms of ASICs are finding the hash very quickly, the difficulty goes up to throttle the transaction rate, and many more hashes must be calculated in order to find one that meets the criteria. This is where the energy use comes from - the hash difficulty, not the number of transactions in a block - thus it scales with competition to sign blocks, rather than the number of transactions.
The first paragraph is a fair consideration. The second is a complete stretch. It's not as if America would suddenly stop providing military support to Saudi Arabia if we suddenly switched to bitcoin. An America that historically used Bitcoin would be even more incentivized to "secure" fossil fuel nations.
If the Saudis started selling oil in bitcoin they'd probably lose their military support and/or be overthrown.
It is difficult to justify why the US is providing militarily support to the Saudis without invoking oil and dollars. They are a pretty shady regime and not the sort of people the US wants to be supporting. And the Saudis don't seem to be trading with America as much as China [0, 1].
While the term "petrodollars" makes sense prescriptively, saying that the KSA would be "overthrown" if they started settling transactions in something other than dollars is pure hyperbole. The macrobullshitters that keep throwing around this idea of ongoing US coercion are doing so with absolutely no proof. Sure, there's some soft power things going on, but they settle in USD because USD has been the de-facto currency for world trade (and thus currency reserves) for some time now. IF anything, we see a movement away from USD into a currency basket with a high weighting of USD over the coming decades.
Decisions and strategies worldwide do not make sense if you don't acknowledge that such things happen. That e.g. an oil country moving away from the dollar is something the US would do nasty things to avoid - and the reasons for that fall in the category of "conspiracy theory", but that is the case because no official tale makes sense. You know it is not about the weapons of mass destruction, because these were proven lies, and you know they did not tell these lies to "save the people from a despotic regime" after decades of "we don't care", because there are other examples of despotic regimes (including KSA) the US does not bother or has friendly relationships with.
So, what would you think is the reason the US invaded Iraq?
Do people not seriously think about why the Iraq war happened? Everyone accepts that the WMD rational was disingenuous, so then why?
It just so happened to coincide with Saddam starting to sell oil for Euros, and France and Germany just so happened to oppose the war.. but it's probably nothing to do with oil and dollars.
Gaddafi wanted to sell oil for Gold. In that case Europe and the US were on board with removing him. Why then, when he'd been in power since the 70s?
The Saudis are also well-liked by the US and much of the Western leaders because they buy billions in arms. Nevermind the crucifictions, decapitations, and dismemberments.
Reminds me of one of by favourite Frankie Boyle jokes: "Our government was angry about Khashoggi. We sent the Saudis a strongly worded arms invoice."
The US CIA overthrew the democratically elected government of Mossadegh in Iran and then received backlash for it in the form of the Iranian Revolution [0][1].
The first Gulf War began in 1990, and the Iranian Revolution took place in 1979. The causality may well have taken place in the reverse of what you suggest.
Yep. You'd think if the reason the US restarted their war with Iraq was using Euros as a reserve currency, they might have made a bit more fuss about those pesky Europeans creating the Euro with the explicit goal of being a global reserve currency a few years earlier...
Being the largest reserve currency has more costs to the US than benefits overall and policy has been to try and reduce that exposure for the last decade or so.
Amazingly, due to fracking mostly in west Texas, the US is now a net oil producer. We should really change our Mid-East foreign policy to reflect that fact.
Not all oil is the same. There's a reason that while Canada is massively a net exporter of oil (especially to the United States), boats from the Middle East show up on the regular. Common misconception. [1]
> including the externalities from the extraction of oil, which implicitly backs the dollar
This isn't true. Internationally the thing that backs the dollar is the U.S. economy. People know they can spend dollars to get anything they need. Domestically what drives the dollar is that it's the only way you can pay taxes.
I suppose you could say that oil is used to defend the U.S. economy but that's a stretch.
You can say that about any currency. An 80 year old billionaire still needs someone to care for him, just like an 80 year old pauper. He relies on the hope that his dollars will be accepted, to look after his medical and care needs as well as security and ownership needs.
My understanding is that because people have mortgages in dollar (or other useful money), you can be pretty confident that many people are going to be motivated enough to get some dollar (they have to pay their mortgage with it)
On the other hand, no one is going to be in a difficult situation if they cannot get bitcoin.
Well the whole idea of Bitcoin being a store of value isn't that its price is stable between 2017 and 2018, but its non-inflationary in long run (something which isn't true for the time being, it is inflationary.
However, the idea is that between 1971 (the closing of the gold window), and now, USD and all fiat currencies lost 99% of their value. The same is not true for Bitcoin on a similar time frame (i.e. 30+ years).
The US government is functionally bound to the dollar, and its size is enough to guarantee the continued functioning of the dollar. On the other hand bitcoin is backed by speculators and criminals, hardly a stable foundation for a currency or commodity.
You still need to use oil, but you don't have to use dollars. The support for dollars relies on a lot of things including the government and thus the military, which are big costs and oil consumes. If the dollar didn't rely on the military power of the US, why is the Bretton Woods meeting and the post war monetary policy so important to it's dominance (something practically no one disputes)? Why is it that the US seems to care so much about pricing oil in dollars? You don't need a tinfoil hat (as other comments suggest) to notice the US government has a strong interest in everyone using our currency and that where the gov has a strong interest, it also uses it's guns.
For some reason the Euro does not need all that "grossly oversized military" to be a proper, stable and usable currency. That alone kind of contradicts the entire grossly overstretched argument of this Nic Carter guy.
While I am also skeptical of the parent comment's quotes. The Euro is still backed by a centralized state(s) which does indeed have a monopoly on violence and require huge amounts of resources to maintain legitimacy. Crypto currencies demonstrably do not need these kind of resources. The rest of what people preach about crypto might be Bullshit, in a strict sense, but they are right about the anarchism thing.
All states by definition requires a monopoly on violence and resources to retain legitimacy. The currency is just a freeloader, and the consumption of resources to sustain a cryptocurrency is purely strictly additive.
The European Union has a huge standing army if they were counted as one force? Over 1 million active personnel. The US by comparison has 1.4m and China 2.0m
Actually I would say yes, they are. Once you have a reasonable cash buffer and are out of the danger-zone for random financial ruin most people should invest all excess rather than be paid a pittance for their bank to do it for them.
Yes. Which is why no one invests for the long term by amassing cash alone (fiat money). They invest it in stocks, assets, real estate, and other non-cash holdings.
The common fallacy in Bitcoin circles is that Bitcoin is the only way to keep your money safe from inflation.
In reality, inflation means that your house, your car, your stock investments, and other holdings are also worth more in dollar-denominated amounts. The only thing that becomes less valuable is cash (and fixed return investment vehicles and such).
it'd be a very long journey. the deflationary nature of btc means that people generally don't want to pay in btc, since it would be expected to become more valuable in the future.
if you had 1 amazon share (worth $3286 right now), and $3286 in USD cash, and you wish to buy a $3286 computer, would you rather sell the share to obtain the cash, or transact using your existing USD?
This strikes me as a terrible argument. Yes, Visa is a small part of the whole system. It's also the only part that Bitcoin does anything to replace. Moving numbers from one column to another is trivial. If that were all the banking system needed to do we could run the whole world economy off my laptop with software I wrote in a month.
You can't do "non-final credit transactions" on Bitcoin.
You can't take out a mortgage.
You can't manage investments.
You can't pay for groceries without waiting a half an hour.
You can't buy a $1.25 pack of gum.
Bitcoin is complete and self-contained because it is inextensible and feature-poor. It cannot solve the problems the banking system solves. Its solution is the classic "you didn't need it anyway".
And then Bitcoin fans realize that yes, they did in fact need those things after all. We can watch them reinventing the entire modern banking system before our very eyes. The main differences are that they run everything on the world's worst database, they insist on calling their banks "exchanges", and that they think it's OK to have all their money stolen every so often.
(Bitcoin also lacks the ability to prevent money laundering or to enforce judgments. I'd consider that a bug. Other people might consider it a feature. In either case, it means Bitcoin is solving a much easier problem than normal banks.)
Unless your fiat money is not actually real and is just a made up number by the Fed. Bitcoin may not be useful in the local store, but if it can make fiscal, fair rules that the globe works within - I’ll take that.
The other mad comparison is that Bitcoin is globally distributed. If Argentina was globally distributed it would eat far more energy than Bitcoin.
What this really means is that Bitcoin is out of reach of a nation state attack.
For the local store, there’s always Nano currency.
Fiat only needs to hold its value for as long as it takes you to purchase assets and investments with. At 2% inflation it does. End of story.
Anywhere you drag your thesis out beyond that needs to take into account that you are fighting a straw-man. That's not what currency is for. Currency is a temporary, intentionally lossy (to encourage investment and velocity of money), store of value and medium of exchange. It is not an investment. It is not a long-term store of value.
> What this really means is that Bitcoin is out of reach of a nation state attack.
Right except 70% of the hash power is concentrated in a few mining pools in the PRC. A strongly worded memo from Xi that unless you permit their compromise of the network you'll find a new hobby mining minerals in Xinjiang, and party's over.
> Right except 70% of the hash power is concentrated in a few mining pools in the PRC. A strongly worded memo from Xi that unless you permit their compromise of the network you'll find a new hobby mining minerals in Xinjiang, and party's over.
What attack are you imagining? Chinese miners cooperate to do a double-spend... on who? And how does it help them to destroy international trust in the coin and make their own assets worthless?
They can nuke the currency by executing a 51% attack on anyone. There’s no fundamental value to Bitcoin except faith/trust. Kill the trust kill the chain.
I have been hearing this argument for over a decade now.
In another decade, when this mythical attack on this scale l (as it applies to BTC. Some smaller coins have been attacked, but they are nowhere on the same scale) continues to fail to materialize, are you going to say the same thing?
I just want to know how many decades from now of your position being falsified, that you need to wait for you to change your mind.
Or will you never change you mind? Is you position truly unfalsifiable, no many how many decades go by?
> as it applies to BTC. Some smaller coins have been attacked, but they are nowhere on the same scale
So what I'm hearing is everyone knows it can and does happen at a smaller scale but you just can't bring yourself to believe it could ever happen on a bigger scale. This seems like the creationism vs evolution argument.
I find this particular criticism of the currency pretty weak too for what it's worth as It's got much bigger issues. Like the sheer magnitude of its waste.
However, I do find the argument disqualifying when petitioning to make Bitcoin the "one world currency" when 70% of the hashpower is in a totalitarian ethnostate that can just screw it up at will. Conceptually it amounts to giving up sovereignty of your currency to the PRC.
> but you just can't bring yourself to believe it could ever happen on a bigger scale
What I asked was for what would make your position falsifiable, in terms of time that an attack does not happen. How many decades from now do we need to wait.
My position is falsifiable, on the other hand. If a major attack, on the scale of the whole BTC network gets broken for weeks and weeks on end, then my position is falsified, as I do not think such attacks, on that large of a scale, are going to happen, therefore if one does I would be wrong.
Yours, on the other hand, does not seem to be. It seems like there is no possible timeline, for attacks on that scale failing to materialize, for which you will admit that such attacks are not coming.
I don’t disagree with your assessment though I would say the potential alone is disqualifying. I understand if you don’t. Your positions is quite consistent and compelling.
They sure could, with the remaining 30% of the hash power. Thing is, continuously forking isn't a recipe for a store of value or currency or anything else.
You are right that wouldn't make for a good store of value. But Bitcoin actually does not get attacked "continuously" so that is not an applicable criticism. It is conceivable that such a thing could happen but we can expect it to happen approximately never given the incentives in place.
Don't they? Then what does? I just don't see what the benefit of conducting such an attack would be.
Coinholders would practically not be impacted: they could just take their existing keys and bring them into the hard-forked software and continue like normal. Mining might be disrupted for a short time, but is that so harmful to the enemy to be worth spending millions in electricity?
Alex Gladstein, Chief Strategy Officer of the Human Rights Foundation, someone who spends a lot of time and energy trying to help people in economically repressed circumstances, clearly disagrees with your assessment:
My guess is you have no idea of the underlying dynamics because you haven't done your research before deciding for yourself and stating confidently "can be explained by nothing else than..."
Here are a couple of threads describing the dynamics in play. Feel free to agree or disagree after reading but, contrary to your statement above, these can explain the price increase:
Here's Lyn Alden, regarded by many to be one of the best macroeconomic thinkers working today (who is now very bullish on BTC), playfully echoing the same idea from above:
And, just in case the tone of Lyn Alden's tweet confuses you about the caliber of thinker you're encountering here, this is a recent article of hers with relevance to BTC macroeconomically:
As I started: I believe you have not done your research to understand what you're looking at. This would be an excusable situation 5 years ago, but the BTC space is now teeming with high quality, pre-digested material that you can use to build a foundation of knowledge and understanding.
I believe you'll regret your hubris...sooner rather than later.
I follow a lot of macroeconomic and investment personas on Twitter and in the past 2 years Lyn Alden has been a rising star. But she is still young and fairly new so it will take a while before you see her more often on CNBC.
Culture evolves slowly, often only changing dramatically across generations. Multiple generations in USA (which is a dominantly exported culture globally) have adopted the "drugs"-are-bad idea as a core belief (it's also worth noting that core beliefs tend not to be very nuanced or discerning, as in this case there's very little ability to discern between different types of "drug" substances).
Culture evolution slows further when large institutions (primarily "the state" here) adopt the same beliefs and make them concrete (by being codified in many laws in this case). This particular effect worsens when the core belief is that some thing is bad and can be outlawed/fought because you get droves of self-righteous politicians who want to make a name for themselves piling on against this Bad Thing.
Those processes need to be reversed and unwound to move past the erroneous core belief.
Bad ideas do die, but they almost always survive much longer than they "should" because of a litany of flaws in human nature/culture/information-flow.
PoW is the solution to an important set of interconnected problems, and as long as the network has value, PoW will keep bidding for energy to secure that network.
It's been said, correctly IMHO, there is only Proof-of-Work and obfuscated Proof-of-Work. Rephrased, nothing is cheaper than Proof-of-Work: https://www.truthcoin.info/blog/pow-cheapest/