Hardware & Technical What is Bitcoin?

A Ponzi scheme mostly run by Russian and Chinese "entities" where people assign an imaginary monetary value to made up numbers.

(edit) Funniest thing, even Youtube agrees:

 
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Ponzi schemes require intent to defraud. This does not apply to Bitcoin.

There are a fair number of cryptocurrencies that were built as scams, and a fair number of scams that use BTC as a medium of exchange, but that applies much more readily to any of the top fiat currencies.

Anyway, Bitcoin is the first cryptocurrency and first significant use of blockchain technology. Basically, it's a distributed ledger used to record and secure the transaction of value tokens on a peer-to-peer network. The effort required for this to happen is incentivised by a proof-of-work algorithm that allows miners to compete against each other for a chance at winning, or the a share of, the value tokens unlocked when each block of transactions is processed.

Technical merit wise, BTC is behind the times. It also never came close to living up to it's intended purpose of a decentralized form of cash. Instead, it's become a highly centralized store of value and reserve currency for other crypto assets. It's still around because it was first and is currently most popular, which is a self-propagating situation. It also happens to have a large degree of active development keeping it marginally usable as a medium of exchange and it will be around for the foreseeable future.
 
It's basically a way to make money from burning energy. Trouble is it is very in-efficient at that and requires crazy amounts of CO2 emissions before it is economically viable. I see it as an immoral act of environmental vandalism, when we need it least ;)
It's a medium of exchange. Wealth isn't actually created.

Also, the overwhelming majority of Bitcoin users are not, have never been, and will never be, miners. Mining is relegated to a handful of very large entities and consumer mining ASICs absolutely are a ponzi scheme, with groups like Bitmain having a near monopoly on them, building them cheaply through vertical integration and good economies of scale, mining on them themselves until they fall below a certain profitability threshold, then selling heavily used, nearly outdated parts to 3rd parties to recoup manufacturing costs.

As for the efficiency of mining, that's hard to gauge. Bitcoin is hard to attack precisely because of the massive energy and hardware requirements necessary to do so. The power behind the blockchain is directly related to it's security. There are other means of securing blockchains (look up proof of work vs. proof of stake for the two main paths to this) that can theoretically provide similar security with a much lower energy requirement, but proof of work (mining) still has some unique advantages. If you are talking about energy spent vs. market capitalization, that's more straight forward in it's inefficiency, but also provides a tangible price floor and helps limit volatility.
 
A decentralised anonymous currency for criminals that has been given way too much credibility due to paranoia about central banks after the 2008 financial crash.
 
A (environmentally unethical) risk.
A rather contradictory statement in the context of the ETC attack.

Risk of a 51% attack is inversely proportional to the environmental impact of a blockchain's PoW network.

BTC for example (by far the largest network with far and away the most hardware, infrastructure, and electricity spent on supporting it's PoW algorithm) is immune to these attacks because the cost to own more than half the hashing power on the network is prohibitive, and even if one could afford it, there isn't enough hashing power for rent in the world to stage such an attack. An attacker would need to build/buy one's own hardware, which increases lead time (giving much warning) and costs exponentially.
 
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'Another thing you may not know about Bitcoin: it's killing the planet':

https://www.theguardian.com/commentisfree/2019/jan/17/bitcoin-big-oil-environment-energy

I make Bitcoin, and in a previous life, I covered the oil industry as a journalist. Increasingly, I’m realizing the two worlds are alike. Bitcoin is oil.

And one day, Bitcoin will become big oil, and all who dabble in it will be reborn as enemies of the environmental movement, seen as plunderers of the planet and the bad guys in the fight against climate change – just like oil.

Bitcoin’s environmental footprint will haunt it. Nobody has pointed this out, but it is painfully clear: if we can at all predict an industry’s growth by that of a different one, then oil is Bitcoin’s crystal ball.
Not a lot of detailed info in that article, but it comes from the 'horse's mouth' so might be worth a read for those that do not know the full extent of the negative aspect due to energy demands that any 'bitcoin' requires.
 
Not a lot of detailed info in that article, but it comes from the 'horse's mouth' so might be worth a read for those that do not know the full extent of the negative aspect due to energy demands that any 'bitcoin' requires.
Comparing the environmental impact of the Bitcoin industry to big oil is shaky at best, even if cryptocurrency is eventually the larger market. If proof-of-work remains predominant (a highly uncertain proposition) in mature currencies, mining is self-limiting. In the case of Bitcoin, there is an equilibrium between price and block reward, beyond which mining is no longer profitable. You can pump more oil as demand increases, but you cannot create BTC faster.

For example, by 2021 the BTC block reward will be reduced to 6.25 and the annual rate of BTC increase will have fallen to ~1.8% (89% of all BTC that can exist will have been mined at that point). The market value of ~1.8% of the BTC in existence will thus be the absolute cap on the resources spent on mining during 2021. Even if the BTC market cap is a trillion dollars at that point (which is unlikely), there won't be more than 18 billion spent on mining in that year, because that would all that miners could expect to gross.

The author of the article uses peak oil in his comparison, but omits that peak BTC was, by design, immediately after it was introduced and has been falling since. Every year, the fraction of BTC mined vs. what's been mined decreases. By the time of peak oil, BTC would have to be worth more than the global GDP for there to be dramatically more spent on mining it than their is today. That's not going to happen.

Anyway, if you are using "any 'bitcoin" to mean cryptocurrency, then your assertion is even more false. Proof-of-work is not the only consensus mechanism, and becomes less appealing as a cryptocurrency becomes more established. Alternatives like proof-of-stake, which many cryptos use or will eventually transition to, have negligible energy requirements.

Regardless of the eventual fate of Bitcoin, blockchain tech and cryptocurrencies are here to stay.
 
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Unless they become uneconomical to run. And as the author pointed out, many countries are starting to draw the line in the sand.
Neither blockchain nor cryptocurrency is synonymous with proof-of-work, and even PoW cryptos are self-limiting.

The cost to run a proof-of-stake blockchain is essentially zero. I have a fully staked PIVX masternode running on a netbook that sits in a closet and consumes about 5w peak.

The cost to run a proof-of-work blockchain is always lower than the profit miners can extract over the long run. Drawing a 'line in the sand' on ways to get cheap electricity for mining purposes simply means that some miners that would otherwise be profitable are no longer profitable and they stop mining. This doesn't change anything for a larger PoW blockchain, except for those miners that are now below break-even.
 
My objection to crypto-currencies is 100% due to the associated energy costs (as i have posted articles about a few times). Anyway here are some other aspects to think about in relation to the downsides of the technology:

'Fire (and lots of it): Berkeley researcher on the only way to fix cryptocurrency':

https://arstechnica.com/information-technology/2019/02/researcher-counts-the-reasons-he-wants-cryptocurrency-burned-with-fire/

Nicholas Weaver made no bones about it: he really, really dislikes cryptocurrencies.

Speaking at the Enigma security conference in Burlingame, California, last week, the researcher at UC Berkeley's International Computer Science Institute characterized bitcoin and its many follow-on digital currencies as energy-sucking leeches with no redeeming qualities. Their chief, if not only, function, he said, is to fund ransomware campaigns, online drug bazaars, and other criminal enterprises.

Meanwhile, Weaver said, there's no basis for the promises that cryptocurrencies' decentralized structure and blockchain basis will fundamentally transform commerce or economics. That means the sky-high valuations spawned by those false promises are completely unjustified. He also said investors' irrational exuberance just adds to the unviability of cryptocurrency.

Summarizing a talk titled "Cryptocurrency: Burn it with Fire," Weaver told an audience of security and privacy experts:

"In conclusion, it is a dismal space. Private and permissioned blockchains are an old idea—a good idea—just with a new buzzword on it. The public blockchains are grossly inefficient. The cryptocurrencies don't work to provide anything against drugs and ransoms and stuff like that. Smart contracts are an unmitigated disaster unless you like comedy gold. And the field is just recapitulating 500 years of failures."
I'm sure the other arguments about the relative negatives of crypto-currencies hold some merit, but for me it is still the sheer environmental cost they require that make them a dead end (and short lived) option. It is just exactly the wrong time in relation to the AGW issue to run such an experiment imho. Maybe once we have a global solution to AGW, it can be something we would have a non-damaging technological solution too, but currently it is just pouring fuel on an already out of control fire.
 
My objection to crypto-currencies is 100% due to the associated energy costs (as i have posted articles about a few times). Anyway here are some other aspects to think about in relation to the downsides of the technology:
Hard to take Dan Goodin or Nicholas Weaver seriously when the opening premise of that article is complete nonsense.

It's not hard to look at crypto transactions and show that the overwhelming majority of them have nothing to do with illicit activity. Go ahead, find credible claims of amount of money laundered, used to purchase illicit goods, absconded with through ransomware, or strongly linked with any other illicit use. Now compare those figures to the transaction volumes and market caps of the cryptos used. It's not an insignificant fraction, but it's never been the majority, let alone the predominant use, and the fraction has decreased over time. Weaver's assertion is a blatant lie.

Most of the other points of the article, even where the premise is correct (e.g. centralisation), are backed up by over generalizations, gross hyperbole, and/or moralistic fallacy. It's an 'argument from authority' with very little actually backing it up. He's using his credentials to rubber stamp falsehood.

I'm sure the other arguments about the relative negatives of crypto-currencies hold some merit, but for me it is still the sheer environmental cost they require that make them a dead end (and short lived) option. It is just exactly the wrong time in relation to the AGW issue to run such an experiment imho. Maybe once we have a global solution to AGW, it can be something we would have a non-damaging technological solution too, but currently it is just pouring fuel on an already out of control fire.
Nearly every one of your posts on the topic conflates proof-of-work and mining with cryptocurrency. This is one of those big overgeneralizations that nullifies much of your, and your chosen sources', arguments.

The exchange has gone on like this:

You point out the dangers of mercury, telling people not to eat fish.
I point out that not all fish are high in mercury.
You post an article that shows swordfish and mackerel are high in mercury.
I point out that most fish are not swordfish or mackerel.
You come back with an article showing the dangers of excessive swordfish consumption.
I suggest trying some Alaskan Salmon.
You post an article written by a guy who has never heard of any fish other than swordfish and mackerel, and thinks that eating fish is evil because he's a vegan.
 
The exchange has gone on like this:

You point out the dangers of mercury, telling people not to eat fish.
I point out that not all fish are high in mercury.
You post an article that shows swordfish and mackerel are high in mercury.
I point out that most fish are not swordfish or mackerel.
You come back with an article showing the dangers of excessive swordfish consumption.
I suggest trying some Alaskan Salmon.
You post an article written by a guy who has never heard of any fish other than swordfish and mackerel, and thinks that eating fish is evil because he's a vegan.
Well at least we agree to like fish :)

But on a more serious note, the problem seems to be i link to actual articles on the subjects i bring up about crypto-currencies, which can allow people to do further research on the topic, whereas you just refute those articles because you 'like' crypto-currency.

To put it another way i need to see evidence to counter things like the claims over energy usage to 'mine' etc. Or to put it another way, all those GPU's we were struggling to buy at sane prices for years due to the crypto-currency scam, last i checked they all had a manufacturer TDP and use that amount of electricity to mine stuff.

Sure you can fluff around the edges and split hairs but there is basic simple fact that all those once hard to source GPU's were being used to mine, thus the articles on energy usage and concerns over that etc. Evidence. Please counter that, or explain how during the great GPU drought it was not crypto-currency related (and give links to articles on that).

Just simply stating something as fact because you choose to believe it is not enough imho.

Edit: here is another link on energy usage to run Bitcoin (and what this thread was specifically about (Bitcoin)):

https://www.globalbankingandfinance.com/the-environmental-cost-of-cryptocurrency/
 
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