Bitcoin, Energy, And The Future Of Money(medium.com)
medium.com
Bitcoin, Energy, And The Future Of Money
https://medium.com/armchair-economics/183c2ad47b50
16 comments
Up to a point, yes. But the whole point of money is that it serves as an intermediary for value, so that you don't need to do barter. If a currency is extremely volatile this function is diminished because when you immediately have to get rid of your money to hold some kind of stable value you get closer and closer to a barter system. In the limit where nobody wants to hold money and immediately wants to get rid of it you get a barter system.
For example if bitcoin is so volatile that every time people earn one they immediately want to buy X with it to make sure they hold their value, you might as well skip the bitcoin step and directly use X as a currency, especially since a bitcoin transaction isn't free. X could be stocks, bonds, gold, dollars, etc.
For example if bitcoin is so volatile that every time people earn one they immediately want to buy X with it to make sure they hold their value, you might as well skip the bitcoin step and directly use X as a currency, especially since a bitcoin transaction isn't free. X could be stocks, bonds, gold, dollars, etc.
I agree 100%. One of the goals of a flexible money supply is to reduce the volatility of currency. As your economy grows, so should your money supply. This requires flexibility in money supply and tight analysis of the economy and money supply.
There is a separate argument surrounding currency debt. That is, current policy doesn't strictly regulate the money supply in a way that tracks economic growth. They use debt as a means to "create" growth. I won't pretend that this is some sort of foregone conclusion, but the whole debacle involving Reinhart and Rogoff and their Excel error dealt a serious blow to those who object to the theory that debt drives growth. Again, I'm not saying the case is closed, but right now, the debt-driven-growth folks are winning the debate.
When you fix your currency to a commodity or other non-controllable factor, you give up control of your money supply, which causes volatility of its own.
There is a separate argument surrounding currency debt. That is, current policy doesn't strictly regulate the money supply in a way that tracks economic growth. They use debt as a means to "create" growth. I won't pretend that this is some sort of foregone conclusion, but the whole debacle involving Reinhart and Rogoff and their Excel error dealt a serious blow to those who object to the theory that debt drives growth. Again, I'm not saying the case is closed, but right now, the debt-driven-growth folks are winning the debate.
When you fix your currency to a commodity or other non-controllable factor, you give up control of your money supply, which causes volatility of its own.
Real world assets are not immune to fluctuations in value either. The idea that gold or some other physical asset has a fixed intrinsic value is an unfounded opinion.
As an example, in the 17th century, the Netherlands experienced a large bubble in the value of... tulips.
As an example, in the 17th century, the Netherlands experienced a large bubble in the value of... tulips.
The interesting thing about using energy as a currency is that its inflation naturally tracks the real world: if everyone has double the currency (and it's backed by real energy), then people are richer in purely material terms as well, in much the way that we're richer on average than people were in 1950.
A major issue is that we don't have anything that's usefully dense in energy content to use as money (except nuclear fuels, I suppose, but I have a hard time seeing them in circulation with the current fear of nuclear power...).
A major issue is that we don't have anything that's usefully dense in energy content to use as money (except nuclear fuels, I suppose, but I have a hard time seeing them in circulation with the current fear of nuclear power...).
Energy inflation doesn't naturally track the real world at all. You're not richer in real terms for travelling on a thirsty old MD-80 than a new A320neo using little more than half the fuel, and the US is not better off in real terms than 1980, when per capita energy use was higher than it is now. A Google search or Kindle download is not materially less beneficial than a drive to the library/bookstore.
In fact, for a developed country like the US the anticipated trend in energy use is in the opposite direction to the anticipated trend in real GDP. http://www.eia.gov/forecasts/aeo/MT_energydemand.cfm
An energy-based theory of value is more wrong than the labour theory was in the time of Smith and Marx, and similarly it's increasingly wrong. This forum is full of people who create economic value with computer technology that decreases the demands on physical infrastructure.
In fact, for a developed country like the US the anticipated trend in energy use is in the opposite direction to the anticipated trend in real GDP. http://www.eia.gov/forecasts/aeo/MT_energydemand.cfm
An energy-based theory of value is more wrong than the labour theory was in the time of Smith and Marx, and similarly it's increasingly wrong. This forum is full of people who create economic value with computer technology that decreases the demands on physical infrastructure.
> An energy-based theory of value
Hm. I certainly wasn't suggesting that anything be pegged to the kJ, or whatever.
I do think that someone with twice the available energy is, to a first approximation, twice as well off, and that reducing the amount of energy it takes to do whatever you want to do also makes you better off, since both of these make you able to do more of the things you want to do (or have more of the things you want to have).
It's true that there is an enormous amount of things we can do now that fall below a cost floor such that we can have however much we want, but in general I'm far more concerned with lowering costs and increasing options than with figuring out what the "value" of something is. Is a Kindle download as "valuable" as a physical book? I'm not sure that that has any objective answer. Is the cost of production lower (either in pounds or dollars or energy)? Enormously so. And that makes us all richer in comparison.
Hm. I certainly wasn't suggesting that anything be pegged to the kJ, or whatever.
I do think that someone with twice the available energy is, to a first approximation, twice as well off, and that reducing the amount of energy it takes to do whatever you want to do also makes you better off, since both of these make you able to do more of the things you want to do (or have more of the things you want to have).
It's true that there is an enormous amount of things we can do now that fall below a cost floor such that we can have however much we want, but in general I'm far more concerned with lowering costs and increasing options than with figuring out what the "value" of something is. Is a Kindle download as "valuable" as a physical book? I'm not sure that that has any objective answer. Is the cost of production lower (either in pounds or dollars or energy)? Enormously so. And that makes us all richer in comparison.
This whole discussion centers around the concept of energy backed money, which is just commodity backed money. You said that "its [energy] inflation naturally tracks the real world". Notahacker is pointing out that it doesn't.
So if we're not pegging money to a kJ (or whatever), then we're no longer talking about energy backed money.
> I do think that someone with twice the available energy is, to a first approximation, twice as well off, and that reducing the amount of energy it takes to do whatever you want to do also makes you better off, since both of these make you able to do more of the things you want to do (or have more of the things you want to have).
Yes, but we're talking about currency here. I get what you're saying: that the increases in efficiency reduce the "value" of your energy holdings, but it also increases the amount you can accomplish with the same energy. That is not a zero sum in a broader economic sense though, because the cost of different goods vary disproportionately with the cost of energy.
Once again, you're stuck with a currency with a supply that fluctuates out of sync with other major economic factors. You'd be better off backing your currency with an index of commodities from multiple sectors, but then you're making currencies in to something they don't need to be. As I said in my original post, if you want to buy assets of a specific kind, go buy them!
Currency is a form of short term accounting, and that's a good thing. Long term, you want currency at work in the form of exchange buying and selling things. You really only want people holding as much currency as they need to operate a means of production. Stagnant currency is stagnant means. It's the very definition of an economic slow down.
> It's true that there is an enormous amount of things we can do now that fall below a cost floor such that we can have however much we want, but in general I'm far more concerned with lowering costs and increasing options than with figuring out what the "value" of something is. Is a Kindle download as "valuable" as a physical book? I'm not sure that that has any objective answer. Is the cost of production lower (either in pounds or dollars or energy)? Enormously so. And that makes us all richer in comparison.
That is efficiency. It's a significant driver of economies. Everyone wants that. What's unclear is how a move from the USD to something commodity backed would benefit efficiency.
So if we're not pegging money to a kJ (or whatever), then we're no longer talking about energy backed money.
> I do think that someone with twice the available energy is, to a first approximation, twice as well off, and that reducing the amount of energy it takes to do whatever you want to do also makes you better off, since both of these make you able to do more of the things you want to do (or have more of the things you want to have).
Yes, but we're talking about currency here. I get what you're saying: that the increases in efficiency reduce the "value" of your energy holdings, but it also increases the amount you can accomplish with the same energy. That is not a zero sum in a broader economic sense though, because the cost of different goods vary disproportionately with the cost of energy.
Once again, you're stuck with a currency with a supply that fluctuates out of sync with other major economic factors. You'd be better off backing your currency with an index of commodities from multiple sectors, but then you're making currencies in to something they don't need to be. As I said in my original post, if you want to buy assets of a specific kind, go buy them!
Currency is a form of short term accounting, and that's a good thing. Long term, you want currency at work in the form of exchange buying and selling things. You really only want people holding as much currency as they need to operate a means of production. Stagnant currency is stagnant means. It's the very definition of an economic slow down.
> It's true that there is an enormous amount of things we can do now that fall below a cost floor such that we can have however much we want, but in general I'm far more concerned with lowering costs and increasing options than with figuring out what the "value" of something is. Is a Kindle download as "valuable" as a physical book? I'm not sure that that has any objective answer. Is the cost of production lower (either in pounds or dollars or energy)? Enormously so. And that makes us all richer in comparison.
That is efficiency. It's a significant driver of economies. Everyone wants that. What's unclear is how a move from the USD to something commodity backed would benefit efficiency.
I'm not sure how I'm being so unclear.
> So if we're not pegging money to a kJ (or whatever), then we're no longer talking about energy backed money.
You appear to be talking about pegging the USD to a given amount of energy. I think that's a bad idea, for the same reason as pegging the USD to a certain amount of gold was when the US didn't have enough gold to actually redeem it. Using energy as money is not about a fixed exchange rate from some non-energy system. I guess the problem here is that "based" and "backed" are being used interchangeably, and they aren't the same thing.
Instead, I think it would be an interesting experiment to price everything else in energy.
> I get what you're saying: that the increases in efficiency reduce the "value" of your energy holdings
Well, increase the "value". Efficiency increases are personally deflationary if we're using energy as a currency, but without the macro effect of reducing the monetary supply or velocity, I would think.
> So if we're not pegging money to a kJ (or whatever), then we're no longer talking about energy backed money.
You appear to be talking about pegging the USD to a given amount of energy. I think that's a bad idea, for the same reason as pegging the USD to a certain amount of gold was when the US didn't have enough gold to actually redeem it. Using energy as money is not about a fixed exchange rate from some non-energy system. I guess the problem here is that "based" and "backed" are being used interchangeably, and they aren't the same thing.
Instead, I think it would be an interesting experiment to price everything else in energy.
> I get what you're saying: that the increases in efficiency reduce the "value" of your energy holdings
Well, increase the "value". Efficiency increases are personally deflationary if we're using energy as a currency, but without the macro effect of reducing the monetary supply or velocity, I would think.
The amount currency "required" by an economy correlates to the size of the economy. The available energy commodities are not guaranteed to track the size of an economy. That's why we see fluctuations in the cost of energy.
> A major issue is that we don't have anything that's usefully dense in energy content to use as money.
I don't really understand this comment. If you're going to design a commodity backed currency, the energy density of the commodity is irrelevant. You don't have to swap uranium bars at the store in order to use an energy commodity as currency. You issue contracts representing your ownership of a specific amount of the commodity in a warehouse somewhere.
Sound familiar? Commodity backed currency is not new. Swapping out the commodity just ties you to another system of supply & demand.
> A major issue is that we don't have anything that's usefully dense in energy content to use as money.
I don't really understand this comment. If you're going to design a commodity backed currency, the energy density of the commodity is irrelevant. You don't have to swap uranium bars at the store in order to use an energy commodity as currency. You issue contracts representing your ownership of a specific amount of the commodity in a warehouse somewhere.
Sound familiar? Commodity backed currency is not new. Swapping out the commodity just ties you to another system of supply & demand.
Having a piece of paper that says you owe me 6 trillion kJ is fine until it turns out you can't pay up. Ultimately, someone has to have the actual backing commodity. This is no problem with USD, since it's all just numbers anyway. It's less of a problem for gold than for energy, since 1 400oz bar is worth over half a million USD. Half a million USD in barrels of oil is more than 5000 barrels. Ideally you'd want something that was easy to store to base your economy on. :)
The point of cryptocurrencies is not to "back" the currency with cryptography (or energy) as an intrinsic value, it is to prevent double-spending for a decentralized currency. Cryptocomputations and the energy they consume have nothing to do with value, they're just an enabler of this decentralisation.
The goal to "prevent double-spending" is just a means to fix the money supply. You still have the problem that the value of your money will fluctuate, and the then you end up back at the problem of deflation. If you want the "value" of your currency to remain static, then the amount of currency in circulation must correlate to the size of your economy. New value is created all the time through increased productivity, increased population, and the creation of new markets. If your money supply remains fixed to any of the factors I've listed, you have a deflationary currency.
The "prevention of double-spending" is a means, not an end. You have to ask yourself why you don't want "double-spending".
The "prevention of double-spending" is a means, not an end. You have to ask yourself why you don't want "double-spending".
> If your money supply remains fixed to any of the factors I've listed, you have a deflationary currency.
This seems sensible on it's face, but you're ignoring the effect that speculators have on the market. If consensus is that a commodity will increase 10% year over year then investors will pile on, driving up the price until the expected return is 0%.
When the expected return is 0% (like it is for buying a bushel of corn on a random Tuesday and selling it a month later) then your currency is no longer deflating.
In other words, expected economic growth will be priced in to Bitcoin.
Of course, when the speculators turn out to be wrong about economic growth, you will see the price move. But it won't be deflationary just because the economy is growing.
This seems sensible on it's face, but you're ignoring the effect that speculators have on the market. If consensus is that a commodity will increase 10% year over year then investors will pile on, driving up the price until the expected return is 0%.
When the expected return is 0% (like it is for buying a bushel of corn on a random Tuesday and selling it a month later) then your currency is no longer deflating.
In other words, expected economic growth will be priced in to Bitcoin.
Of course, when the speculators turn out to be wrong about economic growth, you will see the price move. But it won't be deflationary just because the economy is growing.
> In other words, expected economic growth will be priced in to Bitcoin.
Yeah, that's kind of the point. When economic growth is "priced in to" a currency that is tied to a fixed commodity, it results in value fluctuations of the currency.
Yeah, that's kind of the point. When economic growth is "priced in to" a currency that is tied to a fixed commodity, it results in value fluctuations of the currency.
Unfortunately, the meaning of "double spending" is exceedingly vague for Bitcoin; there is no formal and precise definition. The systems developed by cryptography researchers invoke a central issuer of currency in their security definitions, which is useless for Bitcoin.
How is the meaning of "double spending" vague? It means spending the same units of a crypto-currency more than once. If you can do it, there is a flaw in your crypto-currency.
> The systems developed by cryptography researchers invoke a central issuer of currency in their security definitions, which is useless for Bitcoin.
The first part of that sentence is not completely true, because Bitcoin itself was (presumably) developed by cryptography researchers.
> The systems developed by cryptography researchers invoke a central issuer of currency in their security definitions, which is useless for Bitcoin.
The first part of that sentence is not completely true, because Bitcoin itself was (presumably) developed by cryptography researchers.
"How is the meaning of "double spending" vague? It means spending the same units of a crypto-currency more than once."
First of all, that is not a good definition, since it rules out the possibility of a unit of currency "coming back" to the party that spent it (imagine if I gave you a dollar, and then you were not allowed to give it back to me). It also fails to rule out the possibility of dividing one 1BTC unit into two 0.75BTC units, which is another form of double spending.
There are deeper problems too. You say that if you "can" do it, it is a security problem, but there is no restriction on the attacker's computing power. What if the attacker forges ECDSA signatures? What if the attacker finds SHA256 collisions? What if the attacker computes a longer block chain, which is a polynomial time problem, reversing his transaction and getting the chance to spend the money again?
The reason I said the security notion is vague is that there is no precise definition that Bitcoin actually achieves. If someone can develop one, and if it actually captures a meaningful notion of security, great! So far, no such definition exists.
"The first part of that sentence is not completely true, because Bitcoin itself was (presumably) developed by cryptography researchers."
I seriously doubt that, given that the original Bitcoin paper made absolutely no mention of the decades of previous work on digital cash that preceded it, nor any of the work on secure multiparty computation, nor did the paper give a security definition, nor did the author seem to be bothered by the fact that there is a polynomial-time attack on the system. It reads like a paper written by cryptography amateurs or enthusiasts, the sort of people who make most of the posts in sci.crypt and comp.compression. In a pedantic sense, Bitcoin is the product of research, but if the term "researcher" means anything beyond "human being," I think it is fair to draw the line at being familiar with and building on previous work.
[Edit: Of course, that definition of "researcher" is not quite what we want, since it does not account for people who open entirely new fields. That is a rare edge case, however, and the issue was whether or not Satoshi was a researcher in an already established and well-developed field.]
First of all, that is not a good definition, since it rules out the possibility of a unit of currency "coming back" to the party that spent it (imagine if I gave you a dollar, and then you were not allowed to give it back to me). It also fails to rule out the possibility of dividing one 1BTC unit into two 0.75BTC units, which is another form of double spending.
There are deeper problems too. You say that if you "can" do it, it is a security problem, but there is no restriction on the attacker's computing power. What if the attacker forges ECDSA signatures? What if the attacker finds SHA256 collisions? What if the attacker computes a longer block chain, which is a polynomial time problem, reversing his transaction and getting the chance to spend the money again?
The reason I said the security notion is vague is that there is no precise definition that Bitcoin actually achieves. If someone can develop one, and if it actually captures a meaningful notion of security, great! So far, no such definition exists.
"The first part of that sentence is not completely true, because Bitcoin itself was (presumably) developed by cryptography researchers."
I seriously doubt that, given that the original Bitcoin paper made absolutely no mention of the decades of previous work on digital cash that preceded it, nor any of the work on secure multiparty computation, nor did the paper give a security definition, nor did the author seem to be bothered by the fact that there is a polynomial-time attack on the system. It reads like a paper written by cryptography amateurs or enthusiasts, the sort of people who make most of the posts in sci.crypt and comp.compression. In a pedantic sense, Bitcoin is the product of research, but if the term "researcher" means anything beyond "human being," I think it is fair to draw the line at being familiar with and building on previous work.
[Edit: Of course, that definition of "researcher" is not quite what we want, since it does not account for people who open entirely new fields. That is a rare edge case, however, and the issue was whether or not Satoshi was a researcher in an already established and well-developed field.]
For Bitcoin, double-spending would probably be defined as the same txout being spent in two different confirmed transactions. Perhaps this is so obvious that people consider it not worth explicitly stating.
That is still not precise enough to be used in a rigorous analysis. Can the adversary solve exponential time problems to perform such transactions (and for that matter, exponential in what parameters of the system?)? Can the adversary collude with other parties in the system? How many parties can the adversary collude with? Without these sorts of details, it is very hard to rigorously analyze a system.
"Perhaps this is so obvious that people consider it not worth explicitly stating"
If the security definition is not explicitly stated, it is very hard to analyze whether or not the system is secure. How do we even talk about security without defining our terms? There is a polynomial-time algorithm for "reversing" a Bitcoin transaction and spending your money again that is detailed in the original Bitcoin paper -- does that mean that Bitcoin is insecure (I would say yes, but it seems that most Bitcoin proponents say no)? Without a definition of security, it is hard to say.
There is also the matter of determining whether or not Bitcoin's security meets my needs. As a simple example, consider the ElGamal encryption system. It is secure -- but only against chosen plaintext attacks. If you need a system that is secure against adaptive chosen ciphertext attacks, ElGamal is probably the wrong choice (you need Cramer-Shoup). With Bitcoin, however, there is no clear security definition, so how does one even decide if Bitcoin satisfies their security needs?
"Perhaps this is so obvious that people consider it not worth explicitly stating"
If the security definition is not explicitly stated, it is very hard to analyze whether or not the system is secure. How do we even talk about security without defining our terms? There is a polynomial-time algorithm for "reversing" a Bitcoin transaction and spending your money again that is detailed in the original Bitcoin paper -- does that mean that Bitcoin is insecure (I would say yes, but it seems that most Bitcoin proponents say no)? Without a definition of security, it is hard to say.
There is also the matter of determining whether or not Bitcoin's security meets my needs. As a simple example, consider the ElGamal encryption system. It is secure -- but only against chosen plaintext attacks. If you need a system that is secure against adaptive chosen ciphertext attacks, ElGamal is probably the wrong choice (you need Cramer-Shoup). With Bitcoin, however, there is no clear security definition, so how does one even decide if Bitcoin satisfies their security needs?
> That is still not precise enough to be used in a rigorous analysis.
I think that is a precise definition of "double spend" in bitcoin. Do you agree with that definition?
As for all the other stuff you're talking about re: polynomial algorithms, collusion, etc.... I am just puzzled that you are bringing all that stuff up. It is widely known that bitcoin is resilient to any attempt to double-spend unless there is a coordinated attack by greater than 50% of the total hashing power. And double-spend is the _only_ attack at the distributed algorithm level.
Can you comment on the above paragraph? I mean, were you not aware of the 50% issue, or were you aware of it but have a problem with it? And do you agree that double-spend is the only kind of attack at the algorithmic level?
Of course, there is always DDoSing the peers at the protocol layer, and stuff like that, but I think we can agree that that is not what we are interested in discussing.
And then there is the crypto level, which you bring up by mentioning ElGamal. Bitcoin uses ECDSA, but only for signing; nothing is encrypted. So one can talk about whether ECDSA is breakable, but I'm not losing any sleep over it, personally.
I think that is a precise definition of "double spend" in bitcoin. Do you agree with that definition?
As for all the other stuff you're talking about re: polynomial algorithms, collusion, etc.... I am just puzzled that you are bringing all that stuff up. It is widely known that bitcoin is resilient to any attempt to double-spend unless there is a coordinated attack by greater than 50% of the total hashing power. And double-spend is the _only_ attack at the distributed algorithm level.
Can you comment on the above paragraph? I mean, were you not aware of the 50% issue, or were you aware of it but have a problem with it? And do you agree that double-spend is the only kind of attack at the algorithmic level?
Of course, there is always DDoSing the peers at the protocol layer, and stuff like that, but I think we can agree that that is not what we are interested in discussing.
And then there is the crypto level, which you bring up by mentioning ElGamal. Bitcoin uses ECDSA, but only for signing; nothing is encrypted. So one can talk about whether ECDSA is breakable, but I'm not losing any sleep over it, personally.
"It is widely known that bitcoin is resilient to any attempt to double-spend unless there is a coordinated attack by greater than 50% of the total hashing power"
First of all, it is hard to even analyze "total hashing power." There are far too many slippery details for any formal analysis -- you need to know how the hash function is actually implemented, what sort of hardware, etc.
That being said, how do you know there are no other double spending attacks? Where is the proof of that?
"double-spend is the _only_ attack at the distributed algorithm level."
Prove it.
"then there is the crypto level"
There is no such separation. Bitcoin is not a signature system, nor is it a hash function. The fact that ECDSA and SHA256 are used in Bitcoin does not imply that Bitcoin is secure. All that you can really say is that Bitcoin does not meet its security goals (whatever those are) if ECDSA or SHA256 are not secure.
First of all, it is hard to even analyze "total hashing power." There are far too many slippery details for any formal analysis -- you need to know how the hash function is actually implemented, what sort of hardware, etc.
That being said, how do you know there are no other double spending attacks? Where is the proof of that?
"double-spend is the _only_ attack at the distributed algorithm level."
Prove it.
"then there is the crypto level"
There is no such separation. Bitcoin is not a signature system, nor is it a hash function. The fact that ECDSA and SHA256 are used in Bitcoin does not imply that Bitcoin is secure. All that you can really say is that Bitcoin does not meet its security goals (whatever those are) if ECDSA or SHA256 are not secure.
> First of all, it is hard to even analyze "total hashing power." There are far too many slippery details for any formal analysis -- you need to know how the hash function is actually implemented, what sort of hardware, etc.
I don't understand why you're bringing that up. You don't need any of that. Anyway, the total hashing power is currently 79,854.53 gigahashes per second (where one "hash" is actually a double SHA-256).
> That being said, how do you know there are no other double spending attacks? Where is the proof of that?
Any double spend in a block will be immediately rejected by all nodes. So the only question is, "Which blocks are actually valid blocks, and which blocks are orphans?" Blocks that form part of the longest extant blockchain are considered valid; all others are orphans. So the only question at that point is, "Which is actually the longest extant blockchain?" If you have massive hashing power, you can create an alternate blockchain and release it, allowing double-spends of transactions in all the blocks back to the point that your alternate blockchain forks from what was previously considered to be the longest blockchain. Mathematically, you need > 50% of the total hashing power to do this. The proof of that is in the paper. (Though it's worth acknowledging that there are a lot of details that are _not_ in the paper, and you have to talk to bitcoin devs or read the wiki or the source or the forums to figure them out.)
> Prove it.
Preventing double spends (and spending of money that doesn't exist - semantically also a double spend) is the sole purpose of bitcoin's distributed algorithm. All the rest is just verifying that transactions are signed properly.
> The fact that ECDSA and SHA256 are used in Bitcoin does not imply that Bitcoin is secure.
True, but there are other things that imply that Bitcoin is secure, and my only point here is that the use of ECDSA and SHA256 are nothing to worry about.
There certainly can be and have been security flaws in the code, but they're not related to the actual fundamentals. That's why they've always been easy to fix and why Bitcoin has never been "hacked."
I don't understand why you're bringing that up. You don't need any of that. Anyway, the total hashing power is currently 79,854.53 gigahashes per second (where one "hash" is actually a double SHA-256).
> That being said, how do you know there are no other double spending attacks? Where is the proof of that?
Any double spend in a block will be immediately rejected by all nodes. So the only question is, "Which blocks are actually valid blocks, and which blocks are orphans?" Blocks that form part of the longest extant blockchain are considered valid; all others are orphans. So the only question at that point is, "Which is actually the longest extant blockchain?" If you have massive hashing power, you can create an alternate blockchain and release it, allowing double-spends of transactions in all the blocks back to the point that your alternate blockchain forks from what was previously considered to be the longest blockchain. Mathematically, you need > 50% of the total hashing power to do this. The proof of that is in the paper. (Though it's worth acknowledging that there are a lot of details that are _not_ in the paper, and you have to talk to bitcoin devs or read the wiki or the source or the forums to figure them out.)
> Prove it.
Preventing double spends (and spending of money that doesn't exist - semantically also a double spend) is the sole purpose of bitcoin's distributed algorithm. All the rest is just verifying that transactions are signed properly.
> The fact that ECDSA and SHA256 are used in Bitcoin does not imply that Bitcoin is secure.
True, but there are other things that imply that Bitcoin is secure, and my only point here is that the use of ECDSA and SHA256 are nothing to worry about.
There certainly can be and have been security flaws in the code, but they're not related to the actual fundamentals. That's why they've always been easy to fix and why Bitcoin has never been "hacked."
Here's a thought experiment: what if a random chance of "double spending" was built into the cryptocurrency? Then people would have an incentive to make the money circulate, and you could calibrate it to prevent deflation.
(Obviously, it would be meaningless if people could just move money from wallet to the other.)
(Obviously, it would be meaningless if people could just move money from wallet to the other.)
That's a pretty novel idea, which would probably be appreciated by the (small) community of people who have a problem with the "deflationary" nature of bitcoins and are actually interested in doing bitcoin forks.
If transaction A, drawing from source G, is confirmed six times in blockchain M, the longest blockchain, with length 20, and transaction B shows up, also drawing from source G, but confirmed in blockchain fork N, and N becomes longer then M, then that is a double spend.
Edit: changed one to six.
Edit: changed one to six.
OK, but Bitcoin allows that to happen; in the original Bitcoin paper, a polynomial time algorithm for doing exactly what you described is presented. Even if we accept that definition of double spending, it is not clear how that is useful for formalizing Bitcoin's security. How can you rule out someone computing a longer block chain, when doing so involves simply duplicating the work done by the rest of the parties in the system? What actually stops someone from doing this?
In other words, under your definition, what does it mean to be secure against double spending?
In other words, under your definition, what does it mean to be secure against double spending?
> How can you rule out someone computing a longer block chain, when doing so involves simply duplicating the work done by the rest of the parties in the system? What actually stops someone from doing this?
I responded to another comment from you elsewhere, and I hate to confuse things by having one conversation in two places, but this is a really good question, and there is a straightforward answer.
To make a longer blockchain, you have to have enough computing power to "catch up" to all the other people mining bitcoins, and then mine faster than they are. So, you have to have > 50% of the total hashing power.
If you look into the mining "business," I think you will become convinced that only a nation-state or maybe Google could perform this kind of attack right now, and once ASIC mining technology is widely diffused, even that would be difficult.
The "6 confirmations" thing the grandparent said is kind of arbitrary, but that is the number of blocks that bitcoin devs widely agree is enough to wait before you can be "effectively certain" that your transaction is in the longest block chain, and always will be. So that's how long you wait before handing over the keys when somebody purchases your mega-yacht with bitcoin.
By "kind of arbitrary" I mean, in the context grandparent used it. If you do the math (as is given somewhere near the end of the bitcoin white paper), that is where you start approaching a 0% chance of the transaction not ending up in the longest chain.
I responded to another comment from you elsewhere, and I hate to confuse things by having one conversation in two places, but this is a really good question, and there is a straightforward answer.
To make a longer blockchain, you have to have enough computing power to "catch up" to all the other people mining bitcoins, and then mine faster than they are. So, you have to have > 50% of the total hashing power.
If you look into the mining "business," I think you will become convinced that only a nation-state or maybe Google could perform this kind of attack right now, and once ASIC mining technology is widely diffused, even that would be difficult.
The "6 confirmations" thing the grandparent said is kind of arbitrary, but that is the number of blocks that bitcoin devs widely agree is enough to wait before you can be "effectively certain" that your transaction is in the longest block chain, and always will be. So that's how long you wait before handing over the keys when somebody purchases your mega-yacht with bitcoin.
By "kind of arbitrary" I mean, in the context grandparent used it. If you do the math (as is given somewhere near the end of the bitcoin white paper), that is where you start approaching a 0% chance of the transaction not ending up in the longest chain.
> Whether you back your money with energy, cryptography, flowers, or seashells, you can never control all the other factors, and thus your currency will fluctate.
Indeed! And before long, people will want to lend and borrow BTC once usage expands beyond the current early-adopter "hard money" crowd. That's just human nature and is OK on a small scale. But then BTC IOUs may start to circulate. Then some new-fangled "BTC Goldman-Madoff" figures out ingenious ways to "make your BTC work for you, let us do the IOU magic of fractional reserves for you. Just don't all attempt to cash in your chips at the same time, which you won't given the incredible growth in IOU 'returns' (not hard BTC but hey, by now one is as good as the other in the minds of most) we can deliver for a few decades".
Bam, here we go again?
Indeed! And before long, people will want to lend and borrow BTC once usage expands beyond the current early-adopter "hard money" crowd. That's just human nature and is OK on a small scale. But then BTC IOUs may start to circulate. Then some new-fangled "BTC Goldman-Madoff" figures out ingenious ways to "make your BTC work for you, let us do the IOU magic of fractional reserves for you. Just don't all attempt to cash in your chips at the same time, which you won't given the incredible growth in IOU 'returns' (not hard BTC but hey, by now one is as good as the other in the minds of most) we can deliver for a few decades".
Bam, here we go again?
Energy based system of currency create a system that is very good at tracking GDP by design. Also it is self adjustable and it creates natural currency sink.
The fed has only half the toolsets nowadays - it can create and pump liquidity, but cannot extract excess amount and cannot direct where the liquidity will go.
The fed has only half the toolsets nowadays - it can create and pump liquidity, but cannot extract excess amount and cannot direct where the liquidity will go.
This is a profoundly bad idea, and will likely never happen. The OP makes the assertion that quality of life is directly proportional to energy usage, so creating more energy is the primary way to grow an economy.
While this is true to a limited extend, do we really /want/ it to be true? Using energy as the measurement of an economy's size would naturally lead to economies across the globe investing in raw energy output, rather than other equally (or more) important areas of technological progress like making future infrastructure more energy-efficient. This wouldn't be so bad if it weren't for the fact that the sources of energy we most commonly turn to today, fossil fuels, are inherently limited and have huge negative externalities. We need to come up with a standard that convinces markets to grow the standard of living in a way that doesn't require increasing the energy supply. If we don't, we risk exacerbating the global environmental and resource crises.
While this is true to a limited extend, do we really /want/ it to be true? Using energy as the measurement of an economy's size would naturally lead to economies across the globe investing in raw energy output, rather than other equally (or more) important areas of technological progress like making future infrastructure more energy-efficient. This wouldn't be so bad if it weren't for the fact that the sources of energy we most commonly turn to today, fossil fuels, are inherently limited and have huge negative externalities. We need to come up with a standard that convinces markets to grow the standard of living in a way that doesn't require increasing the energy supply. If we don't, we risk exacerbating the global environmental and resource crises.
"Using energy as the measurement of an economy's size would naturally lead to economies across the globe investing in raw energy output, rather than other equally (or more) important areas of technological progress like making future infrastructure more energy-efficient."
The first part is probably true, but surely if your currency is based on energy, you will probably spend a hell of a lot of effort on squeezing the most out of each dollar/joule?
The first part is probably true, but surely if your currency is based on energy, you will probably spend a hell of a lot of effort on squeezing the most out of each dollar/joule?
Why? If you want to measure energy, measure energy. The point of currency is something else.
Currency/money is a data-structure for a kind of cooperation algorithm. That is the way to understand it in an informational world. Note that money is not really about being a 'medium of exchange', a 'unit of account', 'store of value' -- those are tautological ways to look at it, they are its particular forms of activity, the real purpose is cooperation (more) generally.
The radical thought is that we do not really want currencies. We want something more information-rich -- something made for our current information tech, rather than originated from cowry shells or whatever. Hardly anyone is thinking in this way though, disappointingly. Yet it is myopia: if you look around non-currency systems are beginning to evolve. What is reputation, or 'karma', are they currency? Not really. What are things like Flattr and Kickstarter, are they markets? Not really.
Start deliberately thinking beyond currency.
Currency/money is a data-structure for a kind of cooperation algorithm. That is the way to understand it in an informational world. Note that money is not really about being a 'medium of exchange', a 'unit of account', 'store of value' -- those are tautological ways to look at it, they are its particular forms of activity, the real purpose is cooperation (more) generally.
The radical thought is that we do not really want currencies. We want something more information-rich -- something made for our current information tech, rather than originated from cowry shells or whatever. Hardly anyone is thinking in this way though, disappointingly. Yet it is myopia: if you look around non-currency systems are beginning to evolve. What is reputation, or 'karma', are they currency? Not really. What are things like Flattr and Kickstarter, are they markets? Not really.
Start deliberately thinking beyond currency.
I was thinking the other day about Bitcoin using proof of work (which uses energy), which makes it an energy proxy. It therefore seems to make little sense that one would pay for energy to be used with energy that has been used. Or is time arbitrage of energy something really useful?
I don't think I'd call Bitcoin an energy proxy, since the energy is used up. A currency that can be redeemed for energy is something different.
It makes sense to me, since in principle the amount of currency in circulation could naturally adjust to the size of the economy. To make that work maybe you'd need demurrage, to prevent utilities from printing up kilowatt vouchers for production in the distant future.
Since a watt is a watt, you could have as many issuers as energy producers, without worrying about exchange rates, though limitations of the electric grid might force them to be somewhat local.
It makes sense to me, since in principle the amount of currency in circulation could naturally adjust to the size of the economy. To make that work maybe you'd need demurrage, to prevent utilities from printing up kilowatt vouchers for production in the distant future.
Since a watt is a watt, you could have as many issuers as energy producers, without worrying about exchange rates, though limitations of the electric grid might force them to be somewhat local.
The relationship between bitcoin and energy is not an equality. The energy cost of mining should approximately match the available reward, but that is because miners are adjusting their activity.
You wouldn't purchase my heating bills from me...
You wouldn't purchase my heating bills from me...
The relationship between bitcoin and energy is not an equality.
Exactly, technology improvements can and do change the energy used.
Exactly, technology improvements can and do change the energy used.
Bitcoin has adaptable difficulty and it will always be very close to the most efficient way to mine them. The only way to decrease total energy is to crash the price of bitcoins or cartel. In both cases the system is already screwed anyway.
The proof-of-work system helps to secure the blockchain against a centralized attack, so I don't think of it as an energy proxy. More like paying security guards, or like paying for the extra hardware/electricity required to support SSL.
The very premise that the value of a "fuel" is in its energy content alone is wrong. We'd be quick to lower the value of a "dirty Joule" (eg coal) compared to a "clean Joule" (hydrogen). Also, some fuels are inherently much cheaper to extract than others (coal is so cheap, and hydrogen so expensive). These costs of extraction also change over time -- ten years ago some applications naturally called for liquid fossil fuels (heating oil, diesel, gasoline), but after the fracking revolution a new operation starting today would better and more cheaply use natural gas. Natural gas will continue to be cheaper for some industrial applications in some areas until deployed fuel-using industrial capital equipment and vehicles using natural gas increases to take advantage of the cheaper energy.
Other factors that affect the pricing of a "Joule": convenience of application (I can't burn coal in my car, I pay a premium for gasoline; gasoline won't get me to the moon, I pay a premium for rocket fuel); ease of refining the mined resource into finished product form; ease of transporting fuels from source to "refinery" to distribution to end user; we'll pay a premium for fuels with a reliable steady supply; outside risks, e.g., political unrest in the Middle East increasing production costs and risk.
The "joule" measure for the value of a fuel is flawed. We already have a great measure for the value of a fuel, it is the US$.
Also, as many point out, the energy required to create a bitcoin has little bearing on its value. Energy costs help determine the mining effort and technology put toward mining bitcoin, but the value of a BTC will fluctuate depending on other factors. The total energy required to manufacture, transport components of, and assemble a house, along with the "inherent" value of those materials, is less than the US$-denominated utility of that house. If I shock a turd with the same energy used to build the house, it doesn't have any value approaching that of the house unless I'm Andy Warhol.
Other factors that affect the pricing of a "Joule": convenience of application (I can't burn coal in my car, I pay a premium for gasoline; gasoline won't get me to the moon, I pay a premium for rocket fuel); ease of refining the mined resource into finished product form; ease of transporting fuels from source to "refinery" to distribution to end user; we'll pay a premium for fuels with a reliable steady supply; outside risks, e.g., political unrest in the Middle East increasing production costs and risk.
The "joule" measure for the value of a fuel is flawed. We already have a great measure for the value of a fuel, it is the US$.
Also, as many point out, the energy required to create a bitcoin has little bearing on its value. Energy costs help determine the mining effort and technology put toward mining bitcoin, but the value of a BTC will fluctuate depending on other factors. The total energy required to manufacture, transport components of, and assemble a house, along with the "inherent" value of those materials, is less than the US$-denominated utility of that house. If I shock a turd with the same energy used to build the house, it doesn't have any value approaching that of the house unless I'm Andy Warhol.
those factors would be covered by the "utility" aspect.
"The energy supply defines how much productive work can be done, while the efficiency with which we use energy defines how much utility can be created from that energy supply (widgets per kilowatt-hour)."
the $ is driven by more factors such as FX, inflation, interest rates and therefore not a clean measure of energy value.
possibly the purest current value of energy today would be in energies futures markets?
"The energy supply defines how much productive work can be done, while the efficiency with which we use energy defines how much utility can be created from that energy supply (widgets per kilowatt-hour)."
the $ is driven by more factors such as FX, inflation, interest rates and therefore not a clean measure of energy value.
possibly the purest current value of energy today would be in energies futures markets?
Can you clarify what that digets per kilowatt-hour means? If I own 1 million Joules, then how is efficiency specified? Since 1 million Joules in oil has a different worth/value than 1 million Joules in hydrogen, I don't understand how one can trade Joules. The point of currency should be interchangeability.
If people don't actually own money as joules, but money as "widgets" or "joules of oil"+"joules of hydrogen".., then you can just abstract away the energy stuff.
I'm not impressed by the energy as currency concept. Money should reflect all resources, including energy, human labour etc. Binding currency to something (like gold) doesn't seem to be useful.
If people don't actually own money as joules, but money as "widgets" or "joules of oil"+"joules of hydrogen".., then you can just abstract away the energy stuff.
I'm not impressed by the energy as currency concept. Money should reflect all resources, including energy, human labour etc. Binding currency to something (like gold) doesn't seem to be useful.
Why this is ridiculous and in need of some very basic economics lessons:
1. Hopefully the words "Monetary Policy" and "Fiscal Policy" ring a bell. The ability to control market fluctuations, let alone wield some level of political power as a government, lies heavily within a government's ability to utilize its money supply. Not all regulation/rule is evil - what would a programming language be without regulation/rules? Additionally, the great depression was more than proof at the need for some level of market regulation (John Keynes).
2. Basing money on a fixed supply, IE FUCKING ENERGY (since it can't be created or destroyed), would imply that there is a fixed amount of wealth. That's called Mercantilism and it was disbanded by Adam Smith... and 1000s of other economists/governments/times/etc
3. Bitcoin and friends decrease the transaction costs of money exchange (government regulation, forex, taxes). Money creates liquidity for the value you've created, and Bitcoin and friends makes that value more liquid -in certain ways- but it does not replace money.
4. Stability. Knowing that there is an entity that will back their currency, filled with fail safes, etc. encourages proliferation of that currency. It's why most investments (forex wies) are done in US dollars. Thing such as bitcoin, do not have that type of security. (FDIC anyone?)
5. Decentralization of currency often leads to destabilization of currency. If anyone can make it (and yes, it is far more likely someone will create a bitcoin instead of forging a US dollar), then the value in and of itself will drop.
6. "But WallStreet and all the finance people are up in a yipyap about it!" That's because it's an investment - many people play the forex (foreign exchange market) because there is much profit to be made from arbitrating currencies.
7. Inflation is needed - Milton Friedman has this at about 4% or so a year to keep up (check on that). Why? Try playing monopoly with 4 players with the set of cash they give you. Then try it with 10. There's not enough money to represent the players, therefore you need more. Inflation isn't always bad.
1. Hopefully the words "Monetary Policy" and "Fiscal Policy" ring a bell. The ability to control market fluctuations, let alone wield some level of political power as a government, lies heavily within a government's ability to utilize its money supply. Not all regulation/rule is evil - what would a programming language be without regulation/rules? Additionally, the great depression was more than proof at the need for some level of market regulation (John Keynes).
2. Basing money on a fixed supply, IE FUCKING ENERGY (since it can't be created or destroyed), would imply that there is a fixed amount of wealth. That's called Mercantilism and it was disbanded by Adam Smith... and 1000s of other economists/governments/times/etc
3. Bitcoin and friends decrease the transaction costs of money exchange (government regulation, forex, taxes). Money creates liquidity for the value you've created, and Bitcoin and friends makes that value more liquid -in certain ways- but it does not replace money.
4. Stability. Knowing that there is an entity that will back their currency, filled with fail safes, etc. encourages proliferation of that currency. It's why most investments (forex wies) are done in US dollars. Thing such as bitcoin, do not have that type of security. (FDIC anyone?)
5. Decentralization of currency often leads to destabilization of currency. If anyone can make it (and yes, it is far more likely someone will create a bitcoin instead of forging a US dollar), then the value in and of itself will drop.
6. "But WallStreet and all the finance people are up in a yipyap about it!" That's because it's an investment - many people play the forex (foreign exchange market) because there is much profit to be made from arbitrating currencies.
7. Inflation is needed - Milton Friedman has this at about 4% or so a year to keep up (check on that). Why? Try playing monopoly with 4 players with the set of cash they give you. Then try it with 10. There's not enough money to represent the players, therefore you need more. Inflation isn't always bad.
The people in charge of monetary policy completely missed the looming 2007 crash. Steve Keen's recent book details why, argues that it was speculative debt that fueled both the Great Depression and our recent troubles, and offers some solutions.
The fact that energy is fundamentally conserved has little to do with the amount of energy available to the economy in usable form.
There's nothing about bitcoin or energy-backed currency that would prevent someone from insuring it.
Hayek published a book in 1977 arguing that a decentralized system of competitive currencies would lead to natural price stability without centralized intervention.
The fact that energy is fundamentally conserved has little to do with the amount of energy available to the economy in usable form.
There's nothing about bitcoin or energy-backed currency that would prevent someone from insuring it.
Hayek published a book in 1977 arguing that a decentralized system of competitive currencies would lead to natural price stability without centralized intervention.
Since you advocate inflation, is it okay to distribute new money among everyone proportionally to their balances? If so, isn't it equivalent to mere change in denomination? (By the way, all bitcoins are divisible to 2000 trillion units.)
Price rigidity means the costs of goods does not adapt immediately to fluctuations in money supply (e.g. employment & rent contracts take time to be renegotiated, price changes take time to ripple through the supply chain, etc.), so it's not equivalent.
So, if our economy were to be immediately influenced by inflation efforts (say wages and costs automatically tracked it to the day)... then what?
Though that's kind of crazy, it's far from a possibility. And, given the increasingly-global nature of business, anything like online sales could easily track this to the minute by watching exchange rates. It's definitely not there yet, but it almost seems inevitable given time.
Though that's kind of crazy, it's far from a possibility. And, given the increasingly-global nature of business, anything like online sales could easily track this to the minute by watching exchange rates. It's definitely not there yet, but it almost seems inevitable given time.
I'm trying to imagine the inflation that would result from reliable fusion technology. That said, currency that is destroyed as the backing energy is consumed is an interesting concept.
There'd be no use in printing vouchers for more energy than people have a use for. If more abundant energy means usage expands, that means the size of the economy is expanding, and the currency would simply be adjusting to fit. You only have inflation if the currency expands faster than the economy does.
We'd see incredible inflation during years with low energy output. Oil companies would be the gold miners, and thus would get total control over monetary policy.
A similar idea I came up with a while back was to back a currency by carbon sequestered from the atmosphere. Anyone who absorbs atmospheric carbon in an auditable way would get vouchers denominated in tons CO2, and anyone who emits would submit those vouchers or pay a fee. Practically, the "emitters" would just be primary sources (coal mines, oil wells) who would pass the costs to the rest of us.
Fees paid could be distributed to citizens, making the whole thing work just like Hansen's fee-and-dividend, but adding an incentive to absorb carbon when it's more efficient to do that than to avoid emissions.
Fees paid could be distributed to citizens, making the whole thing work just like Hansen's fee-and-dividend, but adding an incentive to absorb carbon when it's more efficient to do that than to avoid emissions.
This doesn't consider rarity and usefulness. Oil is a lot more useful than hydrogen. As oil becomes rare it will be worth more though it still has the same amount of energy (specific gravity).
True, though oil won't become rare for the foreseeable future (e.g. next 100 years) unless it is made so by force (i.e. government regulation).
The US has insanely massive oil reserves given the new fracking technology.
The US has insanely massive oil reserves given the new fracking technology.
But it won't be energy source then and will just be source for plastic/organic molecules.
Whats the point, if you want to have your wealth in energy you can do so any time, energy is a currency by itself you can trade it, exchange it hold it etc.
What difference does it make whether that piece of paper you use to buy bread is at the time of exchange backed by government that holds and taxes the economy producing energy ( and more ) or whether it's backed by some particular asset? ( or backed by nothing except false hopes of few amateur speculators like bitcoin )
I'm sure if you read my previous comments, it's obvious I'm not an economist, but here goes:
All money has only the intrinsic value of your labor. That's it. Gold, Silver, U.S. Dollars, wooden coffee tokens, they all represent a claim on human labor. There is effectively an infinite supply of gold on earth(unfortunately most is believed to be in the molten core and no one is able to process it of seawater yet), the only reason it's reasonably valuable by itself is the labor input required to harvest it.
At some point, maybe robots will fix themselves and human labor will no longer be required, in which case the whole basis for a money system is going to disappear. However, that hasn't happened, and doesn't look to happen in the near future.
People should keep this in mind when thinking about money. Fluctuations in value in a currency leads to the arbitrage of labor. Currency itself has no value, it only represents value. Backing it with energy or some other resource, still simply links it to how much labor that energy source requires.
So far, there has been no perfect currency, and I doubt there ever will be. Bitcoin may solve some problems, but it doesn't solve all of them, and it's not clear it solves more problems than many other solutions. While some people may get rich from the arbitrage, not everyone can sit around trading 1's and 0's. Someone has to do the labor.
I'll reference Adam Smith again, who's theory was that Late Stage Capitalism would end in the destruction of the Capitalist State when the profits of finance were so high in proportion to the profits of labor, labor ceased. Right now the trading of bitcoins is much more profitable than selling stuff for bitcoins, so bitcoin has pretty much skipped the labor input part and gone straight to finance, so I still don't think it's addressed the main problem with currency, which is that people still think of currency as the value, not the labor it represents.
All money has only the intrinsic value of your labor. That's it. Gold, Silver, U.S. Dollars, wooden coffee tokens, they all represent a claim on human labor. There is effectively an infinite supply of gold on earth(unfortunately most is believed to be in the molten core and no one is able to process it of seawater yet), the only reason it's reasonably valuable by itself is the labor input required to harvest it.
At some point, maybe robots will fix themselves and human labor will no longer be required, in which case the whole basis for a money system is going to disappear. However, that hasn't happened, and doesn't look to happen in the near future.
People should keep this in mind when thinking about money. Fluctuations in value in a currency leads to the arbitrage of labor. Currency itself has no value, it only represents value. Backing it with energy or some other resource, still simply links it to how much labor that energy source requires.
So far, there has been no perfect currency, and I doubt there ever will be. Bitcoin may solve some problems, but it doesn't solve all of them, and it's not clear it solves more problems than many other solutions. While some people may get rich from the arbitrage, not everyone can sit around trading 1's and 0's. Someone has to do the labor.
I'll reference Adam Smith again, who's theory was that Late Stage Capitalism would end in the destruction of the Capitalist State when the profits of finance were so high in proportion to the profits of labor, labor ceased. Right now the trading of bitcoins is much more profitable than selling stuff for bitcoins, so bitcoin has pretty much skipped the labor input part and gone straight to finance, so I still don't think it's addressed the main problem with currency, which is that people still think of currency as the value, not the labor it represents.
This was my argument with a friend the other day, that a bitcoin is worth the amount of energy needed to create it.
The other point was that it is not important for a currency to be a long term store of value. It's only needed to facilitate transactions.
The other point was that it is not important for a currency to be a long term store of value. It's only needed to facilitate transactions.
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we have an energy backed currency, its called the (petro)dollar.
That is just a count of US dollars used in currency transactions.
This reminds me of kilowatt cards[1].
[1] http://www.kilowattcards.com/
[1] http://www.kilowattcards.com/
It appears that kilowatt cards are priced at "$3.50 or less", which removes the actual advantage of using energy as money. If they were really good for delivery of energy, this would incentivize people to move energy from places it's now cheap to places it's expensive. By removing the possibility for arbitrage they've destroyed most of the point.
Why disable pinch zoom for iOS devices?
The desire for currency to have "intrinsic value" appears to be driven by the fear of a sudden collapse of currencies that exist only as a system of accounting (like the US dollar). Or the desire to have a store of value that never suffers deflation or inflation. We all want that, but most of us acknowledge that it is no more possible than a utopia.
You can't freeze the economic system. Whether you back your money with energy, cryptography, flowers, or seashells, you can never control all the other factors, and thus your currency will fluctate.