Fool's Gold 2.0: The siren song of Bitcoin(aarongreenspan.com)
aarongreenspan.com
Fool's Gold 2.0: The siren song of Bitcoin
http://www.aarongreenspan.com/writing/essay.html?id=97
8 comments
> Yet another failure to understand the purpose of mining. The energy is NOT being wasted. In fact, the energy spent mining is the exact thing that makes the Bitcoin network function. The energy is being converted into trust. The more energy that is spent on mining, the more difficult it will be for a well-capitalized entity to perform an attack on the network.
> Aaron Greenspan, repeat after me: Mining energy is not wasted. Mining energy is not wasted. Mining energy is not wasted.
I think you're missing the point here: Aaron is not denying that markets run on trust, and trust takes work (in both the physical sciences sense and the layman sense) to maintain.
What he is saying, as should be clear through his use of the water analogy, is that we should choose currencies for which it is easiest to convert work into trust and usage. Water is off the table, in his analogy, because of the large amount of work required to use it.
In other words: he views BTC as another currency which, compared to systems like the USD/ACH/Credit system, is overly laborious to maintain.
What's nice is that this is a reasonably scientific claim-- it is not out of the question that someone could compare measurements of the energy usages of the two currencies per unit of value and per transaction. To me, it seems clear that the USD, riding on the trust externalities from the already present authority of the US Gov't, is going to be cheaper. But again, it's a totally measurable assertion.
> Aaron Greenspan, repeat after me: Mining energy is not wasted. Mining energy is not wasted. Mining energy is not wasted.
I think you're missing the point here: Aaron is not denying that markets run on trust, and trust takes work (in both the physical sciences sense and the layman sense) to maintain.
What he is saying, as should be clear through his use of the water analogy, is that we should choose currencies for which it is easiest to convert work into trust and usage. Water is off the table, in his analogy, because of the large amount of work required to use it.
In other words: he views BTC as another currency which, compared to systems like the USD/ACH/Credit system, is overly laborious to maintain.
What's nice is that this is a reasonably scientific claim-- it is not out of the question that someone could compare measurements of the energy usages of the two currencies per unit of value and per transaction. To me, it seems clear that the USD, riding on the trust externalities from the already present authority of the US Gov't, is going to be cheaper. But again, it's a totally measurable assertion.
This isn't a judgment on bitcoin, but on your logic:
The fact that some farmers can turn even a small profit on the tulips they're rewarded with demonstrates that the utility they provide has positive market value.
The fact that some farmers can turn even a small profit on the tulips they're rewarded with demonstrates that the utility they provide has positive market value.
I don't want to discourage rational discourse about BTC and whether it has any inherent value, but I think tulips are the Godwin's law of bitcoin. As a debate about bitcoin increases in length, the chance of someone mentioning tulip bulbs approaches 1.
Well, what other measure would you use? The markets did, rather quickly, correct themselves with regards to tulips. There was a brief window of mania, but for the last several hundred years the tulip market seems to have been pretty reasonable.
It's just not possible at this time to know whether Bitcoin provides enough value to succeed in the long term. But to survive in the long term, it has to survive in the short term, and our best measure of short term utility is the market.
Again, if the market crashed far below the mining costs, then I would view that as a demonstration of the lack of Bitcoin's utility. And that very well could happen! But it hasn't yet.
It's just not possible at this time to know whether Bitcoin provides enough value to succeed in the long term. But to survive in the long term, it has to survive in the short term, and our best measure of short term utility is the market.
Again, if the market crashed far below the mining costs, then I would view that as a demonstration of the lack of Bitcoin's utility. And that very well could happen! But it hasn't yet.
Well, what other measure would you use?
There is no other way to calculate whether something is done at an economic loss or profit than by the loss/profit mechanism of the economy.
Again, if the market crashed far below the mining costs, then I would view that as a demonstration of the lack of Bitcoin's utility.
Keywords being "far below". In cases where gold was the unit of money, there would be times where mining gold was economically unprofitable. As a result, more goods started chasing a fixed supply of money, bringing up the price of money making it more profitable to mine gold.
There is no other way to calculate whether something is done at an economic loss or profit than by the loss/profit mechanism of the economy.
Again, if the market crashed far below the mining costs, then I would view that as a demonstration of the lack of Bitcoin's utility.
Keywords being "far below". In cases where gold was the unit of money, there would be times where mining gold was economically unprofitable. As a result, more goods started chasing a fixed supply of money, bringing up the price of money making it more profitable to mine gold.
FYI: price of gold currently is at its mining cost.
And Greenspan would still call it a "bubble"
When he is personally responsible for creating dot-com bubble and the housing bubble. Who would ever listen to this clown anyway?
And Greenspan would still call it a "bubble"
When he is personally responsible for creating dot-com bubble and the housing bubble. Who would ever listen to this clown anyway?
>>The markets did, rather quickly, correct themselves with regards to tulips.
Quickly is subjective... I don't believe several years, according to some historians, is "quickly" considering if you were affected by it.
Also "seems to be pretty reasonable" means it's just your opinion.
You're also very high strung and on the offensive for bitcoin. This is not how you would sell an idea and a huge warning sign of your view being very skewed and not objective when it comes to the matter of bitcoin.
Quickly is subjective... I don't believe several years, according to some historians, is "quickly" considering if you were affected by it.
Also "seems to be pretty reasonable" means it's just your opinion.
You're also very high strung and on the offensive for bitcoin. This is not how you would sell an idea and a huge warning sign of your view being very skewed and not objective when it comes to the matter of bitcoin.
Quickly and pretty reasonable are both subjective, yes. In the context of several hundred years of tulip history, though, I'm happily confident that a 1 year bubble is "quick." You're free to disagree.
Calling me high strung/on the offensive/skewed though is a bit of an argumentum ad hominem and thus irrelevant. My argument would not be affected at all even if I were foaming at the mouth and wearing a sweater woven out of paper wallets.
Calling me high strung/on the offensive/skewed though is a bit of an argumentum ad hominem and thus irrelevant. My argument would not be affected at all even if I were foaming at the mouth and wearing a sweater woven out of paper wallets.
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There are energy efficient ways of securing a block chain. Proof of Stake does not rely on vast energy consumption and in fact is better at securing the network, something one of the newer currencies Peercoin takes advantage of.
Thanks for the Proof of Stake reference, I was not familiar with that system but am reading about it now and it's very interesting. This site [1] seems to indicate a rather unfavorable transaction cost for Bitcoins, around 7%. However, I'm not sure whether their estimation of 650 watts per gigahash* is accurate (that warrants some more research), so I don't know whether to trust that figure or not. If it is accurate, it is not favorable when compared to Visa.
[1] https://blockchain.info/stats
* I assume they meant watts per gigahash/second.
[EDIT] It seems like the recent ASIC miners on the market are vastly more efficient (>100x) than blockchain.info's estimates [2] (which probably include CPU/GPU miners since ASICs are relatively new). Without knowing the makeup of the Bitcoin network (i.e. what portion is CPU/GPU/ASIC etc), though, it seems like any efficiency estimate will be pretty inaccurate.
[2] https://www.kncminer.com/categories/miners
[1] https://blockchain.info/stats
* I assume they meant watts per gigahash/second.
[EDIT] It seems like the recent ASIC miners on the market are vastly more efficient (>100x) than blockchain.info's estimates [2] (which probably include CPU/GPU miners since ASICs are relatively new). Without knowing the makeup of the Bitcoin network (i.e. what portion is CPU/GPU/ASIC etc), though, it seems like any efficiency estimate will be pretty inaccurate.
[2] https://www.kncminer.com/categories/miners
Proof of Burn is another interesting idea.
btc is much like gold, but most ppl here fail to realize that gold as a storage of value makes no logical sense except that a lot of ppl 'believe' in the value of gold. in that sense, gold is a bigger ponzi scheme than btc
personally i believe eventually btc wil crash to smithereens and so will gold prices. but im talking long term, when currencies will be backed by actual work that provides social and economical value
gold as a storage of value makes no logical sense
1) it's relatively rare 2) it's easily minted into objects of consistent mass. 3) because of quantum mechanics, gold has a yellow color. This makes it easy to verify gold content without advanced technology. You take a set of "gold standards", say, 99%, 90%, 80%, 75%, and then make a series of streaks against a black rock (http://en.wikipedia.org/wiki/Touchstone_%28assaying_tool%29). Then you take your sample and make a cross-streak. Then you and your trading partner can agree upon an approximate purity level at which you are willing to make the trade for goods.
currencies will be backed by actual work that provides social and economical value
Who decides what this value is? By hours consumed? Is one hour of sitting on your butt playing a video game worth the same as one hour helping to build a rocket that is destined to try to destroy a (hypothetical) asteroid on a collision course with the planet? How about by "type of work"? Well then, is one hour sitting on your butt playing a video game worth the same as one hour sitting on your butt playing a video game in a playtesting environment?
1) it's relatively rare 2) it's easily minted into objects of consistent mass. 3) because of quantum mechanics, gold has a yellow color. This makes it easy to verify gold content without advanced technology. You take a set of "gold standards", say, 99%, 90%, 80%, 75%, and then make a series of streaks against a black rock (http://en.wikipedia.org/wiki/Touchstone_%28assaying_tool%29). Then you take your sample and make a cross-streak. Then you and your trading partner can agree upon an approximate purity level at which you are willing to make the trade for goods.
currencies will be backed by actual work that provides social and economical value
Who decides what this value is? By hours consumed? Is one hour of sitting on your butt playing a video game worth the same as one hour helping to build a rocket that is destined to try to destroy a (hypothetical) asteroid on a collision course with the planet? How about by "type of work"? Well then, is one hour sitting on your butt playing a video game worth the same as one hour sitting on your butt playing a video game in a playtesting environment?
> but im talking long term, when currencies will be backed by actual work that provides social and economical value
If it were possible, the absolute currency would be 'life time' as in the movie http://en.wikipedia.org/wiki/In_Time. In the absence of that, something equally dear for staying alive in a increasingly moving towards apocalypse world, like may be bottles of oxygen or water ? But even then, the things that are of value may not be easier/handy to barter/trade with. That is when an alternative 'scarce' 'hard to create and requires resource intensive mining' but 'easy to handle' , 'easy to determine purity' type of resource takes the place as a currency. Gold has that property inherently. Not saying that it is the only absolute resource that has it. But it is a time tested resource with those qualities.
If it were possible, the absolute currency would be 'life time' as in the movie http://en.wikipedia.org/wiki/In_Time. In the absence of that, something equally dear for staying alive in a increasingly moving towards apocalypse world, like may be bottles of oxygen or water ? But even then, the things that are of value may not be easier/handy to barter/trade with. That is when an alternative 'scarce' 'hard to create and requires resource intensive mining' but 'easy to handle' , 'easy to determine purity' type of resource takes the place as a currency. Gold has that property inherently. Not saying that it is the only absolute resource that has it. But it is a time tested resource with those qualities.
Nonsense. Gold has non-currency uses so it is, innately, NOT a "fiat" currency. It can be used to make objects of art, and it's essential in many manufacturing processes.
This argument gets repeated again and again, but it doesn't have roots in reality. The market value of gold is far, far in excess of what the demand from industrial, scientific, fashion and jewelry use cases dictate. In fact, these uses exist despite the fact the gold is very expensive. (Perhaps with the exception of the latter two, which are popular because of gold's high market value. But they do not themselves cause it).
If gold and other precious metals did not have their historical use as a currency and the trust of markets (and its suitability as a currency, I suppose), they would be worth at least an order of magnitude less than they are today. And it would be mined a lot less of them.
If gold and other precious metals did not have their historical use as a currency and the trust of markets (and its suitability as a currency, I suppose), they would be worth at least an order of magnitude less than they are today. And it would be mined a lot less of them.
> The market value of gold is far, far in excess of what the demand from industrial, scientific, fashion and jewelry use cases dictate.
You forgot speculation. The reason it's so much more expensive than 10 years ago is because people expect that at a certain point inflation will finally be realized, and prices will be so high that it will be used for scientific, jewelry, and ornamental uses again, at prices even higher than today.
And even forgetting that, we have the fact that people buying gold to save removes it from the market, reducing supply at lower prices, leaving only higher bidders in the market. And you can still get gold tipped RCA cords, despite what you say. So as long as there are any consumption buyers just below the current price, the price is justified.
You forgot speculation. The reason it's so much more expensive than 10 years ago is because people expect that at a certain point inflation will finally be realized, and prices will be so high that it will be used for scientific, jewelry, and ornamental uses again, at prices even higher than today.
And even forgetting that, we have the fact that people buying gold to save removes it from the market, reducing supply at lower prices, leaving only higher bidders in the market. And you can still get gold tipped RCA cords, despite what you say. So as long as there are any consumption buyers just below the current price, the price is justified.
[citation needed]
If we're going to play the "memes for intellectuals" game, I could just as easily make a similar claim on your comment. This is a content-free comment.
The easiest support for my argument would be looking at the list metals with a similar rarity to gold, and noting that gold is more expensive than all but platinum, despite having an annual production which is >15 times higher.
http://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth%...
Now, please provide a citation for your claim "gold's market value is mostly caused by demand from art and manufacturing processes". I claim that this wrong because 34% of all the world's gold is kept in vaults, and an additional 52% is stored in jewelry (of which a significant amount should be considered an investment by its owners due to the high market value).
http://en.wikipedia.org/wiki/Gold_reserve#World_gold_holding...
The easiest support for my argument would be looking at the list metals with a similar rarity to gold, and noting that gold is more expensive than all but platinum, despite having an annual production which is >15 times higher.
http://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth%...
Now, please provide a citation for your claim "gold's market value is mostly caused by demand from art and manufacturing processes". I claim that this wrong because 34% of all the world's gold is kept in vaults, and an additional 52% is stored in jewelry (of which a significant amount should be considered an investment by its owners due to the high market value).
http://en.wikipedia.org/wiki/Gold_reserve#World_gold_holding...
The fact that you are putting words in my mouth ("gold's market value is mostly caused by demand from art and manufacturing processes") is an indication that you are not debating in good faith. Good day. I shall waste no further time or effort on you.
This was a prety clear implication of your initial comment.
so is mud. we dont use it as currency. why? gold has value for us not cuz of its uses, but cuz it is scarce and it is shiny and its an easy metal to work with
Please point me to the nearest store selling items costing in excess of a month's salary made with mud.
Gold has unique chemical, mechanical, and electrical properties - it's not just any old commodity.
Gold has unique chemical, mechanical, and electrical properties - it's not just any old commodity.
Gold has unique properties like every element has. But gold jewellery costs a months salary cuz we believe it is valuable, it is purely psychological. Its cost has Nothing to do with its chemistry or value to society.
Same goes for btc.
Actually it does. One of those unique properties of gold is that it is incredibly non-reactive, which means it doesn't visible age, discolor, or tarnish. The value of that for jewelry should be self-evident. It's excellent ductility and malleability are valuable properties as well.
all the things you are saying are just arguments for making gold a good medium of exchange, which it is no longer used for. not one of your arguments suggests that it is a good storage of value, which it used to be because of its scarcity.
if indians stop paying doweries in gold and arabs stop finding its shininess alluring, the value will plummet. there is nothing intrinsic in gold that makes it valuable
Warren Buffett put it well. "Gold gets dug out of the ground in Africa, or someplace," he said. "Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. Source:http://online.wsj.com/news/articles/SB1000142405274870403270...
Warren Buffett put it well. "Gold gets dug out of the ground in Africa, or someplace," he said. "Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. Source:http://online.wsj.com/news/articles/SB1000142405274870403270...
My understanding is It's built in what happens when it's too expensive to mine by adding transaction fees. Or once there are no more coins to mine. The network still needs to verify, so the person in the transfer offers up coins to get it verified which go to the miners.
It is correct that after 21 million Bitcoins have been mined, other incentives will be required for mining to continue. Transaction fees are the likely choice.
If Bitcoin became a major currency, I think there might be other incentives, too. To speculate: a large government might want to run mining operations to make it more difficult for other governments to collude against them in a 51% attack. Of course if they did this, they'd probably want to pick up transaction fees as well.
If Bitcoin became a major currency, I think there might be other incentives, too. To speculate: a large government might want to run mining operations to make it more difficult for other governments to collude against them in a 51% attack. Of course if they did this, they'd probably want to pick up transaction fees as well.
He's trying to tie the value of bitcoin to the forced syncing process - "bitcoin represents spent electricity." That's just not right. In reality, bitcoin represents agreement by parties to honor debts in its ledger. Bitcoin's backing is the information system, not the resources that go into it. The value is tied to people's faith in the currency and ledger system.
EDIT - other criticisms:
- He criticizes energy waste, but doesn't compare it to the energy use of existing financial systems.
- He points at the risk of owning wallets without recognizing that this should be a diminishing risk as better software develops.
EDIT - other criticisms:
- He criticizes energy waste, but doesn't compare it to the energy use of existing financial systems.
- He points at the risk of owning wallets without recognizing that this should be a diminishing risk as better software develops.
I never actually wrote the phrase you have above in quotes. Regardless, tracking debts and using resources are not mutually exclusive as you suggest.
I wasnt trying to quote directly, but to clarify, Greenspan (you?) wrote:
At its core, Bitcoin is a proxy for another commodity we are all familiar with: electricity
You're right that tracking debts (or, to be more correct per cpervica's comment, tracking balances) and using resources are not mutually exclusive, but I don't think that resource usage is the scarce resource that bitcoin represents, as Greenspan (you?) suggests. I think the scarce resource is a set of values contained in the bitcoin ledger, and the mining needed to change their ownership is (as the second question puts it) an externality.
At its core, Bitcoin is a proxy for another commodity we are all familiar with: electricity
You're right that tracking debts (or, to be more correct per cpervica's comment, tracking balances) and using resources are not mutually exclusive, but I don't think that resource usage is the scarce resource that bitcoin represents, as Greenspan (you?) suggests. I think the scarce resource is a set of values contained in the bitcoin ledger, and the mining needed to change their ownership is (as the second question puts it) an externality.
(I am Aaron.)
I disagree.
I disagree.
debts in its ledger
Except there are no debts, since there are no debtors. The ledger is a registry of ownership, not debts.
Except there are no debts, since there are no debtors. The ledger is a registry of ownership, not debts.
People think that about all kinds of money, but I think economists often prefer to think of it as a good or service owed to you in the future. Any kind of money necessitates this kind of concept of debt.
> Yet this is exactly how Bitcoin works: you are rewarded with new coins once your computer has consumed a certain amount of electricity (measured by the complexity of computing hashes of data, which takes time). Worse yet, the amount of electricity required to be wasted to earn a reward predictably increases, which means that the more Bitcoins one wants, the more one has to waste.
Couldn't the same be said of gold? Mining and extraction are resource (energy) intensive and yield a result (gold) that is less than it's practical intrinsic value (eg. for industrial purposes).
Couldn't the same be said of gold? Mining and extraction are resource (energy) intensive and yield a result (gold) that is less than it's practical intrinsic value (eg. for industrial purposes).
Of course it could. Except there aren't any industrial uses for BitCoin yet :-) Understand that Aaron has a vested interest here (the whole FastCash thing) and so any chance he gets to complain about BitCoin, he does.
Nothing he says in the article is false, except that it is also not "correct." True anything can be used as a marker for value, from notched sticks in Egyptian times, to rocks on an island, to BitCoin. As long as a community exists which agree on their relative value, the marker continues to work as a marker. And the more difficult it is to counterfeit, the better marker it is. So far BitCoin meets that criteria and so it is not 'fools gold.'
He also missed the part where someone cracks your 256 bit key to your wallet and steals all your BitCoin. There is an interesting cryptography problem/question which looks at the cost of mining new BitCoins in comparison to the cost of attempting to guess BitCoin wallet keys.
Nothing he says in the article is false, except that it is also not "correct." True anything can be used as a marker for value, from notched sticks in Egyptian times, to rocks on an island, to BitCoin. As long as a community exists which agree on their relative value, the marker continues to work as a marker. And the more difficult it is to counterfeit, the better marker it is. So far BitCoin meets that criteria and so it is not 'fools gold.'
He also missed the part where someone cracks your 256 bit key to your wallet and steals all your BitCoin. There is an interesting cryptography problem/question which looks at the cost of mining new BitCoins in comparison to the cost of attempting to guess BitCoin wallet keys.
>There is an interesting cryptography problem/question which looks at the cost of mining new BitCoins in comparison to the cost of attempting to guess BitCoin wallet keys.
http://directory.io/1
http://directory.io/1
Except there aren't any industrial uses for BitCoin yet
I like the notion that the intrinsic value of bitcoins are as entries in a global distributed ledger (or even more fundamentally, timestamps in a distributed timestamp server)
A Satoshi is the small unit you can account for in that ledger, so there are actually 2,100,000,000,000,000 of them, making the intrinsic value way less than the extrinsic value, but that's true of gold as well.
I like the notion that the intrinsic value of bitcoins are as entries in a global distributed ledger (or even more fundamentally, timestamps in a distributed timestamp server)
A Satoshi is the small unit you can account for in that ledger, so there are actually 2,100,000,000,000,000 of them, making the intrinsic value way less than the extrinsic value, but that's true of gold as well.
The author is forgetting that the process of mining is not just to receive the block reward, but to support the entire bitcoin network. If there were no miners, no new transactions would get verified and bitcoin would not be secure. So it's wrong, and probably disingenuous for him to state that mining is a waste of electricity.
Yes. Also, "Waste" is a subjective term. Your computer is solving the problem of trust between humans. That's not a waste to me. It's certainly less wasteful than the energy that goes into hosting servers for popular MMORPGs.
As the rest of the essay indicates, the problem of trust is hardly "solved." I'll grant that it's an attempt to solve the problem, but the end result is Ponzi-scheme-level risk of losing everything for a given holder of value in Bitcoin.
No. If you want to mine x gold today, which will cost you y in resources, you do not predictably have to spend 1.5y or 2y tomorrow to get the same x.
This is not true. Like any resource, gold tends to cost more to extract from the earth over time. As deposits diminish, we must look elsewhere and settle for gold ore with fewer parts per million. This requires more expensive technology and newer techniques to be developed. Hence, it predictably will cost more to mine gold in the future than it does today.
Not really, the vast majority of gold being mined goes to some use other than just being a store of value. 2/3 of gold mined goes into Jewelry. About 1/9th of gold mined goes to dentistry. Some of the remainder is put to industrial use.
Says the guy with a potentially competing product (FaceCash) and also happens to be suing Coinbase and CoinLab, among others.
Until recently, I have never seen such extraordinary bias in written work in my life. Almost every time you see someone writing about Bitcoin, they are one-sided to the point of absurdity.
The relentlessly negative articles (like this Aaron Greenspan piece) gives me the impression that the author has a spiteful resentment of those who bought early, and wants to see it crash to $0 so he can be right in the end and tell everyone "I told you so".
On the other hand, many unquestioningly positive writings (which we also see plenty of) are hugely influenced by the fact that the authors invested in Bitcoin and want to see it rise.
The relentlessly negative articles (like this Aaron Greenspan piece) gives me the impression that the author has a spiteful resentment of those who bought early, and wants to see it crash to $0 so he can be right in the end and tell everyone "I told you so".
On the other hand, many unquestioningly positive writings (which we also see plenty of) are hugely influenced by the fact that the authors invested in Bitcoin and want to see it rise.
The author has a huge conflict of interest: FaceCash. Therefore, his opinions are nearly worthless.
People with a conflict of interest are often the best to criticize something, as they have a bigger incentive to do a good and thorough job. Treating them with heightened skepticism is good, but dismissing them out of hand is bogus.
...and often the worst.
Greenspan's criticism of Bitcoin is reminiscent of the same pontification he had about Facebook. It competed with his houseSYSTEM. Later, in an open letter for publicity, he advised Zuckerberg to either keep Facebook a closed network, exclusive only to students and faculty of an educational industry (.edu addresses), or to sell to Yahoo at their bid. That's interesting. Then he hawked CommonRoom. I had a level of disgust over Facebook's cavalier attitude with privacy and security that Greenspan seemed to have shared. Competition? Great. Bring on the competition. Criticism? Yes. Let's hear everything. However, the way it was presented as a whole didn't command credibility.
I stopped reading his criticism of Bitcoin when it was clear he didn't understand Bitcoin. "Processing" might be a more digestible term to him, rather than "mining." There are valid criticisms of Bitcoin. This has been the case for 5 years. So too, there are valid criticisms about anything. Bitcoin was never intended to be everything to everyone. It will likely remain relegated to a subset of people. Knowing the state of security and the virus-prone systems of today, I wouldn't want the average person to use bitcoin beyond light money. It's risky. Beyond this, bitcoin's positives are entirely purposeful to enough people to trump its negatives. Being different and useful is rare. Being both and decentralized is a true marvel. Fool's Gold 2.0? Nothing is fake about bitcoin. Bitcoin never claims to be what you want it to be.
Greenspan's criticism of Bitcoin is reminiscent of the same pontification he had about Facebook. It competed with his houseSYSTEM. Later, in an open letter for publicity, he advised Zuckerberg to either keep Facebook a closed network, exclusive only to students and faculty of an educational industry (.edu addresses), or to sell to Yahoo at their bid. That's interesting. Then he hawked CommonRoom. I had a level of disgust over Facebook's cavalier attitude with privacy and security that Greenspan seemed to have shared. Competition? Great. Bring on the competition. Criticism? Yes. Let's hear everything. However, the way it was presented as a whole didn't command credibility.
I stopped reading his criticism of Bitcoin when it was clear he didn't understand Bitcoin. "Processing" might be a more digestible term to him, rather than "mining." There are valid criticisms of Bitcoin. This has been the case for 5 years. So too, there are valid criticisms about anything. Bitcoin was never intended to be everything to everyone. It will likely remain relegated to a subset of people. Knowing the state of security and the virus-prone systems of today, I wouldn't want the average person to use bitcoin beyond light money. It's risky. Beyond this, bitcoin's positives are entirely purposeful to enough people to trump its negatives. Being different and useful is rare. Being both and decentralized is a true marvel. Fool's Gold 2.0? Nothing is fake about bitcoin. Bitcoin never claims to be what you want it to be.
Except most of what he says is opinion (not necessarily an invalid opinion, but still).
Perhaps not worthless, but his obvious conflict of interest should preferably been disclosed at the beginning of the article, and not in a footnote.
In my mind, this severely damages the author's credibility.
In my mind, this severely damages the author's credibility.
finally, a real ad hominem argument!
wtf is facecash?
It seems that most comments posts are either pro bit-coin or anti bit-coin, but both sides seems to make wrong arguments based on a flawed thinking of mining.
A fixed amount of bit coins are mined (on average) per unit time. Thus, how much work it takes to mine a coin depends solely on the number of miners. Econ 101 theory tells us that the aggregate costs of the miners will equal their aggregate rewards. So, the total cost of mining (hardware, electricity, people's time who work on it) will equal the reward.
That's all that's happening with mining. No for either side to complicate it and make it seem like more is there.
A fixed amount of bit coins are mined (on average) per unit time. Thus, how much work it takes to mine a coin depends solely on the number of miners. Econ 101 theory tells us that the aggregate costs of the miners will equal their aggregate rewards. So, the total cost of mining (hardware, electricity, people's time who work on it) will equal the reward.
That's all that's happening with mining. No for either side to complicate it and make it seem like more is there.
The author seems pretty hung up on the fact that mining consumes electricity, but let's look at the numbers.
Miners consume an estimated 108,619 megawatt hours per day (according to https://blockchain.info/stats). This is actually a very high estimate as most miners have switched to ASICs and are consuming orders of magnitude less power, but let's use it anyway. This would add up to about $16m spent per day on electricity.
In 2011, the United States alone consumed 367 million gallons of gasoline daily (according to http://www.eia.gov/tools/faqs/faq.cfm?id=23&t=10). At an average gas price of $3.576 / gallon (http://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm), this would be $1.3b spent per day on gas.
Pretty much everything on Earth is going to consume power, but I don't think Bitcoin mining consumes enough to worry about.
Miners consume an estimated 108,619 megawatt hours per day (according to https://blockchain.info/stats). This is actually a very high estimate as most miners have switched to ASICs and are consuming orders of magnitude less power, but let's use it anyway. This would add up to about $16m spent per day on electricity.
In 2011, the United States alone consumed 367 million gallons of gasoline daily (according to http://www.eia.gov/tools/faqs/faq.cfm?id=23&t=10). At an average gas price of $3.576 / gallon (http://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm), this would be $1.3b spent per day on gas.
Pretty much everything on Earth is going to consume power, but I don't think Bitcoin mining consumes enough to worry about.
Of course, if Bitcoin was widely adopted, the price would go up, meaning that far more people would mine it and far more energy would be used in mining. The only reason energy consumption from mining is that low right now is because Bitcoin is incredibly niche.
Actually, I agree with him, but it's funny how these articles always pile on when the price is crashing.
man it's because when the price is not crashing its all brainwashy hype. For the record, i talk crap about Bitcoin even when it's on the upswing but you just get downvoted a ton by people who are all siked on investing.
btw, did anybody else get really disappointed after clicking the link and realizing it was Aaron Greenspan not Alan? I would love for legit economic analysts to take a crack at Bitcoin but so far most have dismissed it (I saw some figure like 87% and no I am not going to bother backtracking to find my source sorry). I wish somebody with some real knowledge of world economies/currencies would drop some knowledge but they seem to either
A) Not care (I suspect because even tho BTC is at the forefront of the tech world, it is a trinket to the aged eyes of those who have spent their lives watching the fluctuations of the world economy)
B) Not wish to comment because it's a fun experiment to watch so why ruin your rep by seeming like an old fuddy-duddy when you could just enjoy the view
When I told my father (very successful attorney guy) about the Senate hearing he was like "Of course they're interested in it. If the tech works, why wouldn't they want to use it? But yeah they probably will want to strip it and start over without the dispersements the founders put in". Seems like about the most reasonable off-hand assessment I've heard from a non-techie business type. The gov has no interest in protecting black market holdings and redistributed wealth pulled out of thin air
back to your original point -- yea i think it's tough for negative press to get anyone's attention in the midst of the $$ signs soaring. It's like a NYE celebration for the speculators. it's why I believe that Bitcoin "news" isn't really "news" -- it's just some articles characterizing the current hype with a bit of random theory thrown in.
But I think as Mr. Aaron Greenspan aptly points out, a sound offline (not looking at the $$ signs) theoretical analysis should prove that it's not something worth the interest regardless of how far the price climbs
btw, did anybody else get really disappointed after clicking the link and realizing it was Aaron Greenspan not Alan? I would love for legit economic analysts to take a crack at Bitcoin but so far most have dismissed it (I saw some figure like 87% and no I am not going to bother backtracking to find my source sorry). I wish somebody with some real knowledge of world economies/currencies would drop some knowledge but they seem to either
A) Not care (I suspect because even tho BTC is at the forefront of the tech world, it is a trinket to the aged eyes of those who have spent their lives watching the fluctuations of the world economy)
B) Not wish to comment because it's a fun experiment to watch so why ruin your rep by seeming like an old fuddy-duddy when you could just enjoy the view
When I told my father (very successful attorney guy) about the Senate hearing he was like "Of course they're interested in it. If the tech works, why wouldn't they want to use it? But yeah they probably will want to strip it and start over without the dispersements the founders put in". Seems like about the most reasonable off-hand assessment I've heard from a non-techie business type. The gov has no interest in protecting black market holdings and redistributed wealth pulled out of thin air
back to your original point -- yea i think it's tough for negative press to get anyone's attention in the midst of the $$ signs soaring. It's like a NYE celebration for the speculators. it's why I believe that Bitcoin "news" isn't really "news" -- it's just some articles characterizing the current hype with a bit of random theory thrown in.
But I think as Mr. Aaron Greenspan aptly points out, a sound offline (not looking at the $$ signs) theoretical analysis should prove that it's not something worth the interest regardless of how far the price climbs
By funny, you mean intentional, right? I am fairly sure there are parties trying to upvote and/or post these articles to get BTC price up or down, whatever their need is. Currently, it's clearly "down" so they can buy again.
I actually had no idea that the price was crashing until after I posted it. I've been writing it for a few days. And I have no stake one way or the other.
Aaron Greenspan, repeat after me: Mining energy is not wasted. Mining energy is not wasted. Mining energy is not wasted.
Now, it is an open question as to whether the cost of running the Bitcoin network is worthwhile. However, for the moment, it clearly is. The fact that some miners can turn even a small profit on the Bitcoins they're rewarded with demonstrates that the utility they provide has positive market value.
Of course at some point it may be that it costs substantially more to mine new Bitcoins than they are worth on the market. If this happens soon, Bitcoin will likely fail. If it happens later, it's possible that transaction fees could prop up the network, but that's purely speculative.
Another thing to consider when assessing the energy efficiency of the Bitcoin network is how it compares to the efficiency of existing currencies. Cash has a physical component and must be manufactured. Electronic fiat is backed by huge, complex, and expensive networks. Visa's datacenters are not free. Keep in mind that credit card transactions typically have a transaction cost of 3%, which in some way represents the cost of operating the Visa network. 3% is kind of a staggeringly huge number, and off the cuff I expect that's actually quite a bit higher than the total Bitcoin network cost to volume ratio...