Bitcoin mint feeding
My buddy Tom explained how to set up a pooled mining account so I thought it would be interesting to share the instructions. You can either store your wallet locally or store it online. Wallets require you to use or download a fairly large blockchain file — about 6GB — so downloading and updating a local wallet may be a non-starter.
There is no preferred wallet type and there are obvious trade-offs to both. Privacy advocates would probably say a local wallet is best. You can download a local wallet here but make sure you keep a copy of your data backed up.
This, without the period, is a direct way to send bitcoins to your wallet. Make a note of your address. In Coinbase, the wallet address found under linked accounts. To mine in a pool you have to work with a group of other miners on available blocks. You can also try guilds like BTC Guild as well as a number of other options.
Pools with fewer users could also have a slower discovery time but pools with many users usually result in smaller payments. However, as one pool owner, Slush, notes:. First, create a pool login. The workers are sub-accounts with their own passwords and are usually identified by [yourlogin]. I have three workers running, currently — one on my iMac and two on my old PC. If, as you say, your concerns are environmental, perhaps you should have considered crytocurrency in relation to its nearest rival, our current economic system.
What effect does mining fossil fuels have on the environment? Cryptocurrency's represent a tangible shift of power away from financial institutions that have led us to the greatest economic disparity the world has seen. As such, fear mongering of change, based on unresearched environmental claims is not needed, waranted, or productive in the consideration of alternative currencies.
So Sam are you saying that if we replaced the Mint, federal reserve, US treasury etc with bitcoin we would no longer need to mine in the real world? Even its greatest enthusiasts must find that a bit of a stretch. Did you mean that crypto urgency removes the need for government to print money? Because I am pretty sure they still have the ability to do it. Sam - While the article does significantly focus on only the environmental impacts of using a lot of electricity to do bitcoin mining calculations it's a short article remember, not a thesis , I think the author's point is very clear - bitcoins have no external value apart from the people who choose to use them, which is getting smaller and smaller now that some major banks such as nab that did accept them do not anymore.
If bitcoins were really that secure then bitcoin miners would trade them for other bitcoins rather than real dollars. Now before you respond with something like 'but bitcoins are meant to empower the people and remove control from governments', I think there is a better chance of worldwide pacifiscm before that happens. Just as fast as bitcoins appeared, without backing by someone or something with significant power e. BTW, I don't work for a bank and I'm not some shareholder with a hidden agenda, but I would be very careful using real money to buy digital currency such as bitcoins because just as the economist said, 'their true economic value [is] zero'.
The Sumerians had clay tokens. Their use other than a medium of exchange was I'm afraid this statement falls in a heap with the oldest known currency in history, which unravels the rest of your argument.
Bitcoin is a delusion? The same statement can be said about all currency. What's the value of my AUD in my bank account? Well, if the servers go down and don't come back up, the value is nothing. Money is a purely imaginary concept invented by humans, with no basis in objective reality. Even precious metals like gold and silver - yes they're shiny and they have other uses. But you can't use a gold COIN for those things. Their value as a currency, is a human delusion. The value of bitcoins is what people are prepared to pay for them.
Currently that's only slightly above their production cost as you might expect. Once the space has been exhausted, you might expect their value to increase, as with the most basic economic law of supply and demand. In the mean time, while the difficulty of generating new coins keeps going up, so does the available compute power per watt applicable to it, so the price may fluctuate.
The mechanism for a collapse of the value of bitcoins is not suggested in this article, let alone well established. This sounds like an article written by a banker who has a vested interest in getting rid of BitCoin, which is effectively a competing bank. Australian banks have started closing all bank accounts that have anything to do with a BitCoin business. But overseas BitCoin is treated variously. Since all money is a virtual concept, it's not impossible that a world currency originates from the concept, or reality, of BitCoin.
Bitcoin generation has the same goal as other currency - to make it difficult to make your own counterfeit money. Where it differs is the practical cap on generation although such a cap also applies to many other forms of money, such as scarcity of precious metals.
Supply of bitcoins are limited to 21 million - value can fluctuate freely. You could extend your argument against all forms of encryption as in many cases your argument of 'no value' is equally justifiable. Perhaps you can use coins as a paper wieght? You suggest that exchanging for gold is useful however: Isn't that just 'its role as a medium of exchange'? Why is gold useful? It's value is largely based around it's use as a medium of exchange.
The US dollar as you suggest is tied to the US government. There is a strong case that bitcoin could outlive any traditional fiat currency. You have ommitted that bitcoin generation is limited, and rewards regularly drop. This practise is self limiting and as more coins are mined the value in mining more will be removed and the mining will stop or stop at the hard limit of 21 million coins.
I'm dissapointed because the main point that bitcoin has cause and continues to cause environment damage is correct, but the arguement presented here comes accross as misrepresenting what bitcoin is.
Environmentalism and patriotism are the last refuges of a scoundrel. I would guess that he has none bitcoin, and feels ha can take a free kick at it. Best to omit meat first, which is obviously the moral and environmental disaster of our time, , and then cry about bitcoin which, unlike corpse-eating, actually does have at least one argument in favour of it. Try selling your collectables and you quickly discover that others are not willing to pay you what you paid for it.
Fortunately, it's unlikely that the digital currency will survive long enough to generate the environmental disaster that would arise if it became a major part of the financial system The digital currency Bitcoin has been seen by many as a source of threats, as potentially facilitating terrorism, money laundering, and drug dealing; undermining taxation systems; and rendering monetary policy unworkable.
How are banks "not working" exactly? Other than charging too much interest and paying too little they seem to be functioning fine. I'm not entirely sure how i would approach Bitcoin for a loan of working capital to run my business. I invest on these platforms.
Bitcoin is a solution looking for a problem that doesn't exist. But hey then again I don't want to buy guns or drugs on the black market either though Have you ever travelled internationally and felt you were getting rorted on the exchange rate?
Have you ever sent money internationally and been horrified with how large a chunk gets taken out by the middlemen? Has anyone, ever, anywhere, had their credit-card number stolen and mis-used on the internet? Bitcoin can help with, or even completely fix, those three problems right there, and there are plenty more things it's good for A very interesting article. I'm not sure what the reasons for some earlier criticisms, these likely have no basis in monetary economics.
While I'd heard of 'mining' Bitcoins I wasn't that familiar with how they worked. So I found this article very illuminating.
I engage in volunteer distributed computing projects like BOINC and Folding Home which use a decent amount of energy, but at least produce a useful outcome in terms of extending existing knowledge. Bitcoin, on the other hand, seems redundant, not to mention, disastrous for the environment. Further, Bitcoin is sowing the seeds of its own destruction with people creating money, reducing their purchasing power.
Ultimately, the usefulness of a currency as a medium of exchange relies on other people's willingness to accept it. Hopefully though, for the sake of the environment, this collective delusion ends soon. Your purchasing power is only diminished if the supply of new coins outstrips demand.
As Nathan says, there is also a supply limit which is inherent in the bitcoin equation, so, that being the case, given there is a finite number of bitcoins, isn't there more of a risk of the price sky rocketing, than them becoming redundant? Trusting financial transactions to some unfathomable process run by unknown people because "corporations" i. It makes perfect sense as a money laundering system, which is why ransomware and online drug dealers use it.
The entire design of bitcoin is to remove control from any person or group of people. It is a completely fathomable process that is publically defined. It is a really interesting idea, I suggest you look into it before spreading your uninformed views. Perfectly fathomable, as is regular banking, if you are prepared to put in the time.
Unfathomable if you intend to point and click, as again is the regular system. My point is not the differences in fathomability and trustworthiness, but the lack thereof. Both require either an amount of detailed investigation, or an amount of trust. What exactly, other than: Some juvenile excitement in going outside "the system". You can also be in control of your own coins at all times, and with relatively little effort, can guarantee their safety to a degree that exceeds any banking system currently known.
Might not seem like a big deal to you, but ask the greeks what they would prefer after having the government dip its hand into their back pocket and take money directly out of their bank accounts.
OK, I can see the back-pocket advantage. What stops the government simply taxing you in a regular currency, forcing you to sell your bitcoin to pay it? In Greece they went to the bank accounts because people were simply not paying the taxes. I see where you're coming from on the lack of fathomability for the average bloke who's never looked into, or cares how money is created.
You're right on the tax thing, governments can take whatever they want, depending on how brutal they are prepared to be. Credit cards were not made with the world wide web in mind. If you don't feel like paying any of banks fees for their services, you can do it yourself. When you work for your money, you should have the choice that your money goes directly to you, not a third party.
The bank didn't do your work, why are they getting your salary? I'm all for banking services if you want them, but you should have the choice. Interesting you didn't respond to the second comment.
Why is Bitcoin the favoured medium of exchange of money launderers and drug dealers? Bitcoin does have legitimate uses but this issue is of concern. Sure one can use fiat currency for money laundering and drug dealing purposes but no-where near as easily as Bitcoin. If I wanted to use bitcoin to buy drugs or guns on the internet, I would first have to acquire bitcoins. I would have to use my registered bank account, to sign up to an exchange and purchase coins.
This transaction of my fiat currency for bitcoins would be recorded on the exchange. Then I would take my bitcoins, which are now associated with my bank account and transfer them to said gun or drug dealer. I don't think its logical or helpful to demonize an entire technological accomplishment because one aspect of it doesn't exceed the current system, especially when almost every other characteristic is far superior.
Did they break up, did other groups get more mining power, or do they still have enough control to theoretically fake any transaction on the blockchain they want?
I think that's the fundamental problem with the bitcoin-is-distributed-therefore-no-central-control argument - large companies are much better at acquiring large chunks of computing power than individuals.
If the problem is too many carbon emissions from coal-fired power plants, then isn't the solution to shut down the coal plants and replace them with a carbon neutral alternative like solar, wind or nuclear?
Professor John appears not to know what he's writing about. Fiat currency also has no value in an age when nations have no compunction in printing more money to shore up sluggish economies. Rule number one in economics is the law of supply and demand - the more currency there is in circulation, the less each unit is worth inflation , which means all currency under central bank control is ultimately worthless. As long as the central banks control the money supply, currency is just a goverment's promise to pay.
And we all know what government promises are worth. The cost of energy required to produce anything is now highly political, which means it is also being centrally manipulated. This pretty much makes the point of this OP moot. Rejecting a non-fiat currency like Bitcoin on the basis that it is environmentally unsustainabile is clearly a red herring.
The writer would of course know this. The question is, why is the good professor trying to obfuscate? It's easier to understand why the establishment fears Bitcoin and others like it don't forget the others, when one looks at the basis of their expertise and reputations. The foundations of established economics expertise are built on the concept of 'national' wealth - e. Adam Smith's 'Wealth of Nations'. These foundations more or less crumble if a trading currency is independent of national collateral.
If these free market, non-fiat currencies succeed, much of the exonomics of nationhood will become irrelevant, and the concept of 'nationhood' and its accompanying taxation rights will have to change. Political and geographical borders will have no economic basis any more. No wonder it frightens the establishment. In a perishing world, nationhood is the principal defence against global tyranny. The smart money is on Bitcoin and the others over the long term.
The danger is not in the energy cost of production but in the social and political cost of decoupling taxation from trade. It's enough to spook even the most committed puppet-statist. Gold and silver only have value because they have limited supply and are popularly perceived as valuable.
Are not Bitcoin just the new gold and silver? This article is a joke, 0 research was done. In the introduction of 'Bitcoin: A Peer-to-Peer Electronic Cash System' by Satoshi Nakamoto guy who created bitcoin , the rationale for bitcoin is stated as 'an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.
He does not see the benefits to bitcoin - a programmable currency that has unlimited potential, if you have listened to Andreas Antonopoulos, or anyone with a working knowledge talk about the possibilities eg. In summation this article reads like it was created by a high school student who has heard a few things about bitcoin, it is ridiculous that the title of professor is next to the authors name because there is nothing scholarly about this article.
Satoshi Nakamoto is a genius! I am positive he has a bank account in a brick and mortar bank with millions and millions of dollars in it thanks to people buying and transacting Bitcoin. Jane, please do some research on what bitcoin actually is, and how it works before making such assumptions.
Satoshi Nakamoto doesn't take any kind of transaction payment; that's not how the network works. As Lachan said above, it's a cryptographic scheme where two people can transfer bitcoin without a trusted third party. Nakamoto would be a 'trusted third party' if he was running transactions. If he made money out of bitcoin, it was entirely due to owning the first several bitcoins back when mining was trivial, then having the value of bitcoin go up when people got in. He's anonymous, incidentally - nobody actually knows who he is.
Your lack of knowledge about Bitcoin is as terrible as your lack of foresight. Please refrain from writing opinion pieces about topics you have not taken the time to qualify yourself to provide an opinion about. You'd hope a professor would possess more intellectual rigour. I kept reading expecting to see a punchline that never came.
This article has to be a new low for the ABC. Surely someone with some standards should have seen it before publication and cringed and hit the delete key. Heh, really enjoying the bitcoin nuts harping on about fiat currency here. Quiggin is correct; the production of new Bitcoins is an environmental disaster, but as the currency has no long term future it's not likely to be a lasting problem.
Yep, I think all the bitcoin users are whipping themselves into a lather about an article written by someone who is clearly more intelligent. If they think that bitcoin won't go the way of other pseudo currencies they deserve to lose their money or bitcoins. I assume they still use the money the rest of us use. It may go, it may stay.
But it will not do either for the reasons presented in the original post. I believe that is the source of the negative comments. Claiming a new system that is in competition with other existing systems is an "environmental disaster" without also presenting a comparative analysis of the competition and a thorough justification of the underlying assumptions is not an argument.
The author assumes that over time the hardware used will continue to use the same amount of electricity as it does today. This is counter to all IT trends for the last 70 years. The author implies that the alternative existing systems don't consume any electricity at any time. For some systems such as geothermal the cost over the life of the power plant is actually significantly less. Politically more difficult, higher initial cost, but cheaper over the lifetime of the power station.
A professor should have known better. Mr Quiggin is way off the mark. The Blockchain and it's token the bitcoin is coming, it's unstoppable. What Mr Quiggin's piece is about is that the financial institutions have recognized its importance as a technology, a killer app, and the banks etc, are desperate to maintain their social and financial relevance and therefore their profitability.
The Blockchain is a Community project, to provide the Market with services that the Market currently doesn't supply. It's relatively 'distributed' and to continue to make a motza of profit the financial sector need to centralize the technology.
They may succeed, but it's more likely they won't, as their centralized principle will have a very expensive time to match the hashing power of the distributed bitcoin network. Give your hashing power to the bitcoin Blockchain, screw the banks. To learn bitcoin and the Blockchain is a useful personal literacy project. It's a kindergarten for learning about encryption and privacy, both skills everyone will need to navigate with over the next decade and onwards. The Blockchain and it's emerging 'ecology' of technologies will replace more than just the "credit " card.
Perhaps the coin's limited supply will be its strength and so worth the initial cost of electricity. Preventing its manipulation and resulting inflationary tendencies may well be a value with the knowledge that it can't be manipulated and rob people of value via the money printing fractional banking system.
I absolutely agree with every single point brought up in this article. When I first heard of the existence of Bitcoin in , I remember trying to think of one single way that such a "currency" could be of any value to humanity in any way. I'm still yet to come up with or be convinced of a single way. It's a shame that there are so many jokers out there who would prefer to increase their own material wealth by burning precious energy, wasting huge quantities of semi-conducting devices that cold be used for serious computing i.
I frankly don't care how much Bitcoin "protects freedom of speech", if you don't feel comfortable with having an online transaction being able to be tracked back to you by the police, perhaps you should reconsider said purchase. The benefit is that its supply is dictated by an algorithm that cannot be manipulated to reduce its value by a government or central bank.
It is also good for making anonymous, instantaneous, cash-like transactions over the internet with low fees. I have found BTC to be a great investment. Have you tried to get into Peer to Peer lending in Australia using Fiat currency? If you could gain access only available to sophisticated investors at the moment I can easily invest fractions of a cent worth of bitcoin over thousands of loans Yes it can be expensive to mine, so you don't, but regardless it's a tiny fraction of the energy used to manage even our currency let alone every currency in the world.
How much energy is used by say Armagaurd to physically transport cash every day? By bank tellers just going to and from work? By all the ATM's and bank servers? Actually printing our currency? I don't like that it uses so much energy but that's simply the nature of the beast and is essential to it being secure. This article is a waist of time - literally! To state my biases - I think bitcoin is a complete waste of time and would never be bothered with it. I did whoever do some research before coming to this conclusion and have a sound knowledge of what a bitcoin is and the system that it works within.
This article is so full of biases, untruths and misconceptions that it would be easier to write a complete factual article from scratch than it would be to correct the error in this one. I commend you on your effort so far to understand the bitcoin payment network, it seems you have done some research into it. I think what you are missing though, is that the energy used by the bitcoin network is not 'wasted' or 'useless'.
The energy consumed is the very thing that gives bitcoin security as a currency. Think about Australian paper currency. But the resulting currency would have no security No, they spend a vast amount of energy and money producing and replacing paper currency, the machines that produce them, the buildings that house them the staff that run them etc.
The energy that the bitcoin network consumes enables the creation of something truly worthwhile: It is one that is not restricted to a few banking institutions, but allows anybody on earth with an internet connection to access it. A really interesting piece John. I can't help but wonder though as at least one person pointed out, what about the coins that have already been mined? Also, once the cost of mining them is more than what they are worth, I understand no new ones will be produced, but wouldn't the older coins still hold some value as a unit of trade, to be dictated by the market pricing?
I'm confused as to why coins already mined would get a zero pricing. That would imply they are worthless - I'd suggest they wouldn't be worthless while people are willing to trade them. Thanks John for an interesting article. I think the fact that costly calculations of no use to anyone, are used in creating bitcoins, may be a bit of a red herring. Is bitcoin any stranger than people accepting the current economic system?
I have often thought that accountants would get better results handing out monopoly money i. How long until this news 'article' is pulled? If only cash were as traceable as Bitcoin, there would be a lot less illegal activity. Every Bitcoin can be traced; transaction by transaction, back to its discovery, it's called a blockchain.
This is what makes it secure and does away with a single 3rd party approver. The other major flaw with this article is it implies that the mining of Bitcoin will go on forever, and ignores all the environmental costs we currently accept in our stride. How much electricity does the current system consume?
Once a Bitcoin is mined, that Bitcoin will only ever consume energy if it's traded. I'd put a Bitcoin or two on the current system being far worse energy consumption wise. I'd also challenge the author to declare they have no conflict of interest in this article All I've heard recently is banks closing ranks around the Bitcoin issue, and now this. I wonder how the weighted average carbon footprint of all of Australia's paper and metal currency compares on a carbon-per-dollar basis to that of bitcoins, especially considering that notes and coins get retired from circulation and replaced periodically.
Whilst the longevity and stability of bitcoins is a valuable discussion to have, linking their viability to their carbon footprint seems a very, very long stretch to me, and the figures quoted for the energy required to mine one don't quite smell right to me either At least if there is an energy cost associated with creating them it does to some degree put a floor under their price though!
I think that the inevitable way forward for currency is the complete removal of physical cash, and I think it is probably only a decade away. Without cash, consumption tax i. I'm sure that there must be significant downsides to going cashless, and I'd be interested to hear what they are, because I cant really see any of significance and it just seems so obvious and inevitable.
I agree with your assessment of the positives. However, here are a few down sides to a cashless society that can be seen by very ordinary person: Errors are onerous to have corrected.
It is difficult even now to change providers, with the accompanying need to advise every other body with who one deals; this would become more so if there were no cash system for small and frequent transactions - again, an invitation to defraud those less able to supervise their financial activities. AND 4 A system where all transactions are mediated through electronic systems is not only an invitation to forgo our privacy, but a guarantee that we do so.
Number 4 is the down side that bothers me most. It is not only about our sense of personal autonomy, but also freedom from being pestered by advertisers. Already I can't buy a book on line without being bombarded by other on-line retailers.
I am so tired of this that I no longer use a credit card or any 'loyalty' cards and pay cash when ever possible. Thanks Connie, you make good points Government payments to the vulnerable are already made electronically - anyone receiving welfare necessarily must have a bank account as far as I understand it.
The problem only exists for the homeless who have fallen outside of the welfare net and rely on begging. This is still clearly a problem, but surely not an insurmountable one. Busking on the other hand would be pretty much dead as a pastime, and that would be a mostly sad thing.
Cash is also vulnerable to theft albeit on a small scale , but more generally with the threat of violence around it. Given that a very significant portion of the economy is already cashless, we would not be introducing new risks we already face them , so much as eliminating existing ones.
As I said in point 2, a significant proportion of our economy is cashless already, so the administrative burden already exists. I would suggest that this administrative burden is inherently scale-able however and in the long run would be more efficient than a mixed currency economy. I agree that this point about privacy is the most significant and structurally unavoidable problem.
Whilst the advertising issue doesn't bother me at all a. You cannot walk m down the street in a city and not be bombarded with advertisements, b.
I quite like getting new reading suggestions from my kindle and am happy to ignore the unsuitable ones! The fascinating question and potential positive trad-off here in my opinion is the effect that a cashless society would have on crime. Crime would, by and large be forced into the crypto currencies, but the entry and exit of AUD from those currencies would still be traceable. Quite a few claims of "lack of research", and "what about cost of paper money", but no one seems to have thought to use Google.
Ten seconds yields the answer: An unintended consequence of the mining craze, as with all endeavours in their pioneering phase, has been a boom in energy-efficient, low-cost, complex processors.
Anyway Professor Quiggan, if bitcoin is indeed a fatally flawed currency, a person in your position can rest easy, right? Surely Gresham's Law will eventually win out, no? I haven't read all the comments so forgive me if I am repeating someone else. Surely the problem here is the burning of fossil fuels for electricity rather than the Bitcoin mining using electricity?
Oops, I just contributed to the end of the world by using electricity to type this comment, eating Perspective would be a nice breath of fresh air. In a word tulips? The only slightly longer version is that bitcoins for all the effort you put into trying to disparage them are inherently as valuable or as worthless as any other fiat currency by agreement between those who exchange it.
Trading in them may well in that case take on an aspect of speculative trading in any other commodity. I would argue that hedge funds raking over derivatives and options are also a damnable waste of resources producing adding nothing worthwhile to wealth creation in any truer sense of the word.
Of course that might just be a prejudice of mine that's showing, but isn't this? It could easily cost less next month if fewer people were trying at the same time. It costs electricity and computing power to secure the network. Not to mention we don't actually need any more to be created. The world could get on just fine with the 15 million or so that are already out there. The new ones are just incentive to get people to contribute power to keep the network secure.
Bitcoin is far more trackable to authorities than cash has it has a record of past transactions called a block chain that logs and displays every Bitcoin transaction in real time, and makes that data available to anyone.
It is not controlled by any government, though it can be taxed. The free market determines its value and not the committee of a central bank or finance minister. Transactions are almost instantaneous and cost free. Mining will stop because the algorithm is limited to 21 million coins. Each coin is divisible by 8 decimal places allowing fractional exchange.
It can operate concurrently with existing fiat money, real currency gold and silver or other crypto-currencies such as Litecoin. It may be the way of the future, in which banking will be greatly reduced in importance as lending will be peer to peer, all transaction public and coins held in an individuals own crypto currency coin wallet.
A currency revolution not less important than the invention of coinage in ancient times. Or a passing fad.
In the meantime no harm in having a few Bitcoins as a hedge. This is an incredibly disingenuous article.
The Professor has basically outed himself as a "flat-earther" of the economic world. There wasn't even any attempt to compare the energy use of other currencies versus bitcoin? What about all the mining for hard currencies? Or the towers and towers of bankers sitting at computers that Bitcoin could completely tear down!? Other currencies are exactly the same, using bank's supercomputers to verify transaction, what's their energy use? Also even the slightest bit of research would have found that bitcoins have become harder to mine deliberately!
Bitcoins have several advantages over fiat currencies - one of the my favorites is that they can't be devalued by central governments!
They have inherent scarcity! Just crazy, I'm ashamed that my Universities' name is also attached to this nonsense. Lots of complaints about "no research" on my part, but none of any attempts to do research by the critics. The Bitcoin network does more than mint money. It processes transactions allowing peers to transact without any censorship.
It does this in a secure and immutable way without any central trusted party. This nuance seems to have eluded you. John, a section of your article reads "Switching even a small part of a typical household's financial transactions to Bitcoins must therefore entail a massive increase in electricity use". This logic is incorrect. The number of transactions in the bitcoin network is not relevant to the amount of power consumed.
Miners expend energy by solving blocks, not individual transactions. A block can contain zero or many transactions. A block is mined approximately every 10 minutes regardless of how many transactions are being created. The core software controls this period automatically by altering the difficulty of the cryptographic puzzle.
As more miners join the network, the difficulty is increased to keep the block solution period at 10 minutes. As miners drop off the network, maybe because they are inefficient or have higher energy costs then the difficulty is reduced. It's not just the cost of one physical note, it's the cost of the whole system that secures, transports, regulates and supports that note and its 'value'. Think how much better off the planet would be if all the bankers were out planting trees instead of sitting in air-conditioned skyscrapers, for example.
You are right, however, that the computer cycles used in bitcoin mining could be put to better use. That is a shame, but I think Satoshi did a pretty good job with other aspects of Bitcoin. Because you don't seem to understand that bitcoin is not just the currency, it's the distribution network as well. That said, your point of energy consumption is already well known which is why there are other cryptocurrencies that use proof-of-stake, delegated proof-of-stake, etc.
Every bank in the world is researching ways which they can leverage blockchain technology to reduce their costs precisely because the current system is so inefficient. I can't speak for others, but I never disputed your core claim. Just the background and supporting evidence was anything but. There are many statements in your piece which are misleading at best. When you say this: It may very well be complex, but that calculation confirms all the previous transactions.
It has tremendous value. If you are going to make a connection between this calculation and the electricity consumed to make it work, then it's only fair to compare that against the global financial system's electricity consumption.
For the benefit of me and the hundreds of others who don't know what a Bitcoin is, could somebody please explain. Bitcoin is a form of electronic cash. It differs from regular cash in that it can be transmitted across the internet. There are many types of electronic cash, but bitcoin is the most widely accepted of them. Please note that credit cards, paypal, bank transfers etc.
You cannot use them unless you have a bank account. Your bitcoin is like the computer record in your bank that says how much money you have in your account, with the following differences: The computer record is in a public ledger, visible to anyone in the world. This ledger is called "the block chain". You can receive bitcoins from, or send them to anyone in the world for a very small fee, and your transaction cannot be blocked by corporations or governments.
Most shops don't accept bitcoin payments yet - they're mainly useful for online purchases. You keep track of your bitcoins with a program called a wallet, that runs on your computer or phone. Your wallet has a number, which identifies your coins in the public ledger.
Without your wallet, you can't spend your coins, so don't lose it! This sensationalist puff piece has no grounding in reality. The Bitcoin network along with the bitcoin tokens has enormous utility that seems to go right over the author's head. The energy used isn't just for creating new bitcoins. The computations and consequently the energy consumed is what secures the network and gives it trust.
This trust is distributed across the network, not relying on any central authority. This is why bitcoin is the people's money. Bitcoin won't go away and the value won't approach zero as the author seems to hope. Wake up, John Quiggin. The world is changing and guess what, technology matters. Have you not learned your lesson?
The internet isn't just for geeks. So here are some back of the envelope calcs to check the author's numbers. The most efficient bitcoin mining machines have a mining speed rated at 0.
This is similar to the author's numbers. It seems pretty emissions intensive - and it will become even more emission-y as the mining rate continues to drop - unless a low-carbon electricity source can be cheaper than coal. The flaw in the argument is that this is only the cost of creating the coin. Among other things, it also includes the cost of distribution, security and auditing.
For the value you have calculated to have meaning you would have to compare it with the cost of either: Or - Mining and refining the materials used, turning those materials into a credit card, assigning and adding value to that credit card, transferring the value from the users bank to a credit card transaction clearing house and from the credit card transaction clearing house to the sellers bank, the systems both IT based and people based used to detect and prevent fraud in all three organisations, The systems used to keep internal and external parties from gaining access to this highly sensitive information, The systems used to monitor the other systems for maintenance purposes.
Once people become a part of these "systems" the cost financially and in CO2 emissions goes up exponentially. Bit coin removes duplication and people from the equation. Yes, you make some good points and of course fiat currency has embedded and ongoing emissions.
Do you have any data to compare? Do the calculations for bitcoin mining actually need to be otherwise purposeless? If these computers were doing something useful as part of mining Then none of this would matter. Or if it has to be otherwise useless, can its creation be limited to electricity markets with proactive carbon prices? Professor, What is the cost to the environment of inflation and government regulation of fiat currency?
Perhaps you should be doing more research into the possible applications for bitcoin. I was initially sceptical about Bitcoin, that is until I did my own research on it. Bitcoin will be the single most transformative technology the world has seen since the internet, like many emerging technologies it takes time for the infrastructure to be built.
I've become a strong believer and supporter of Bitcoin, it is here to stay, it can't go away and is gaining in popularity and acceptance. Australia's big four banks have attempted to stifle bitcoin in Australia, that alone should be reason to check out for yourself why they are so scared about it and the benefits to you of a decentralised currency. Also check out what the Winklevoss Twins the guys who started Facebook with Mark Zuckerberg are saying about Bitcoin - In their own words they "eat sleep and breath Bitcoin".
It is far more than just a currency. It is the future and it's here to stay. Just a thought here from someone who doesn't know much about Bitcoin: All the Bitcoin supporters in this comment section repeatedly mention Bitcoin creation is limited to 21 million Bitcoins.
What is to stop an interested party from purchasing every single Bitcoin created and refusing to trade them, essentially making Bitcoin redundant? You will need to have a lot of money. Current market value is over 5 Billion AUD, and this would increase if someone was buying them up.
You will have to convince all current owners to sell to you. What's to stop someone buying all the gold in the world? Really fundamentally the same thing, the only significant difference there is that more people care about gold and the remaining supply of gold on Earth is substantially larger than the remaining supply of bitcoins. Maybe I'm stupid, but I just don't see how this is could possibly result in significant harm to the environment. This article claims that generating four Bitcoins consumes the same amount of energy that the average US household uses.
Taking that on face value, we need to know how many Bitcoins are being generated in order to see exactly how much energy is being wasted. As there are currently somewhere around 53, Bitcoins being mined each year, that's a worldwide total energy equivalent of 13, average US households.
That's a minuscule amount compared to, for example all the energy consumed by the hundreds of millions of US households. The number will halve next year and continue to halve every fourth year. The article also seems to assume that the amount of energy consumed has some connection to the number of transactions made.
Quiggin does not once mention the word "blockchain. Consider this sentence from Quiggin's article: Fortunately, it's unlikely that the digital currency will survive long enough to generate the environmental disaster that would arise if it became a major part of the financial system. Fortunately, it's unlikely that the blockchain will survive long enough to generate the environmental disaster that would arise if it became a major part of the financial system.
In many cases, arguments for or against "Bitcoin" can be resolved by substituting "blockchain" in the appropriate places. Bitcoins themselves are nothing more than a way to pay anonymous individuals working to maintain a fully distributed, non-centralized network. There is no Bureau to write to, no phone number to call.
It was hypothesized by Satoshi that such payment tokens would have fiat value because they would represent the work that was done to produce a valuable product -- the blockchain. The gold miner Howard in "Treasure of the Sierra Madre" insisted that the value of gold "represents the labor that went into the findin' and the gettin' of it.
And what use is the blockchain? I think primarily it will first be used as a worldwide notary public, first by individuals for their own private records and assurance and possibly as evidence in court. Next, it will be used as a way of absolutely, positively knowing whether or not your database has been hacked into and changed and proving it in public, all for a pittance in cost.
And for that purpose it will be used by millions of individuals and institutions. I suspect that eventually governments will actually require banks to back up their hashed data onto the bitcoin blockchain as an act of public accountability, the way individuals and institutions today have to publish Legal Notices in newspapers.
These uses will have a positive cumulative impact on the environment. It sounds trivial at first, but consider the number of car-trips that will no longer be made to your local Notary Public, and the number of Notary Public ledgers that will no longer be printed.
Once the blockchain is legally certified for this purpose and it almost certainly will be you will be able to just do it yourself at home. As for data backup and security, consider the reduction in fraud, lawsuits, and waste once companies can know for certain that the data. As regards blockchain, I have a genuinely open mind, and some questions.
Can you spell out how you achieve the necessary proof of work for, as you put it, "a pittance"? Are you assuming as I read you that it is the specific Bitcoin blockchain that is going to play this role, or blockchain technology in general? If Bitcoin, this would seem to imply a massive increase in velocity; my reading suggests this would raise a wide range of problems starting with the size of the blockchain.
As regards trips to the notary, this seems to suggest a problem looking for a solution. There are perfectly workable digital signature systems out there - they don't get much use because most people are happy to accept a scanned signature for the purposes for which they used to get a handwritten one.
Professor Quiggin, I can't follow ShroudWriter's argument, but I think he may be objecting to your assumption that it requires energy to create a bitcoin. That is not so. Creation of the bitcoins associated with a block requires only a tiny amount of energy, a fraction of a joule.
The link that you failed to mention is that newly minted bitcoins are only given out in payment for a service. That service is the secure maintenance of the public ledger at the core of the bitcoin system also known as "the blockchain". It is the securing of this ledger against fraud by discovering a checksum that meets specific criteria that consumes energy.
People aren't really "mining" the actual bitcoins to "create" them. That is only a metaphor. Because of this I think it is a mistake to say, as you do, that "the creation of a new Bitcoin requires the performance of a complex calculation that has no value except to show that it has been done. To be fair, this is not equivalent to the cost of printing a dollar bill. It is equivalent to the cost of running the computerised accounting and auditing systems of all of the banks in the world.
Wouldn't it be fair to say that it has value because people WANT to use it for certain things? Furthermore, what about government currencies that people are required to use that people don't want to use? What happens to the value of those currencies? The article totally misses the point. Yes, there is an environmental cost associated with mining bitcoin, but so is the case for almost everything we find useful. The question is, what do we get for our money? In the case of bitcoin, what we are buying is a decentralized, anonymous currency that can be traded globally without government interference.
How can an economics professor not see the value in this? The writing, transmission and display of this article is a true waste of energy. I blame the liberals for raising the retirement age.
Good to see Professor John rightfully slapped down for a very short sighted article. Professor John's comment "all viable currencies are underpinned by the fact that the currency has a use outside its role as a medium of exchange" is just plain wrong with respect to gold. And this doesn't apply to just gold and Bitcoins What is the true economic value of gold?
Will these items also tend to zero or at least a very low number? How is it an economics Professor doesn't understand this? Regarding whether bitcoin has "value" and why: There is a value in being able to provably and irreversibly sending money that cannot be counterfeited over the internet. There's a value in doing this with an open-source, decentralized, peer-to-peer fashion instead of being at the mercy of a confiscatory government.
The blockchain, and its mining mechanism, provide all of these features provable, irreversible, non-counterfeitable, reliable, trustless, decentralized, peer-to-peer. Happy to write a follow-up if you are interested in why exactly this requires mining in the form that bitcoin has. Just so that we understand this correctly: In that case keeping your TV on for the sole purpose of watching TV is a waste of energy or playing videogames on your PC for the sole purpose of playing videogames is a waste of energy.
BTW the value of a Bitcoin is exactly where it's supposed to be, that is it's the market that determines the price. The buyer accepts that the bitcoin algorithm is worth x amount of money. It is no different than banknotes. The intrinsic value of any printed banknote is the same which is the cost of the paper.
Quiggin welcome to the 21st century. Or, as an academic, when confonted with a complicated kind of human behaviour not easily explained in your world view, you might have a closer look to figure out what's going on.
Bitcoin is a triple entry global accounting ledger. Not only are the books balanced, every transaction is notarized through proof of work. Sure a bitcoin is a unit of account in this system and so people assign value to it but it can host any matter of valuable good that can be expressed digitally including equities, real-estate, identity, votes, domains, contracts, you name it. The energy invested in the mining process is the energy invested in the security and verification of this global resource.
It is far from wasteful. This looks like an orchestrated article sponsored by the NSA. The computations keep the network secure and prevent double spending. Bitcoin transaction fees are a lot less than this, and this is partly because the overall cost. Professor Quiggin may be a professor, but he's evidently not very clued up on Bitcoin. His argument is flawed because he hasn't taken into account the following: That would mean, this hypothetical household's monetary supply could be mined in less than 5 minutes by an average mining rig.
Hardly the catastrophic environmental wastage that he is peddling. I know nothing about butcoin, but bought some coin and tried to do a trade in January. Nothing arrived and I presume it is untraceable as it is meant to be. I wonder if trading binary options perhaps we can trade binary options on bitcoin, why not is a simple way of capturing the complexity of the modern business world. It seems to me a hoax, and nonsense, to be trying to make money in this way.
But perhaps we can take "trading binary options" as a proxy for many other problems that are currently hard to solve - e. Maybe trading binary options, like studying something else exotic like philosophy or art, helps us understand the world better.
Presumably if we spend more time on some activity, rather than less, we are hoping that this will "pay off" in some way, e. When greed, lust for power and human fallibility make their way into the Bitcoin world it will end up like every other currency and every other utopian belief system.
It is hard make more of it So are cowrie shells. Bitcoin is still alive! What a foolish argument. Paraphrasing, "Bitcoin should die because it uses a lot of electricity.
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By North America correspondent Stephanie March. In the hillside enclave of Los Feliz in central Los Angeles the playground and classrooms of Immaculate Heart High School are abuzz with chatter about the upcoming royal wedding. Mohamed, a Cairo donkey barber, uses tramadol daily to cope with gruelling work and grinding poverty like an growing number of Egyptians, another example of the opioid crisis that is expanding worldwide.
A chain of block erupters used for bitcoin mining. Comments Add a comment. Alert moderator mike j: Alert moderator John S: Alert moderator David Ferstat: Alert moderator ron n: Alert moderator Old Red: Alert moderator Paul M Covers: Eric Alert moderator worrierqueen: Alert moderator Nick Santamaria: It can also be hacked and stolen as has been shown many times already Alert moderator mark op: Stop spreading misunderstanding Alert moderator Rex: Kindly, Sam Alert moderator worrierqueen: Alert moderator Peter S.: I invest on these platforms Alert moderator Tropicalcat: Alert moderator mark op: Might not seem like a big deal to you, but ask the greeks what they would prefer after having the government dip its hand into their back pocket and take money directly out of their bank accounts Alert moderator Gordon: I don't think its logical or helpful to demonize an entire technological accomplishment because one aspect of it doesn't exceed the current system, especially when almost every other characteristic is far superior Alert moderator James Picone: Alert moderator Mena Reno: I am positive he has a bank account in a brick and mortar bank with millions and millions of dollars in it thanks to people buying and transacting Bitcoin Alert moderator Richard: Alert moderator James Picone: Alert moderator Craig of North Brisbane: Alert moderator Dr Bombay: D Alert moderator notathome: Alert moderator Living Room of Satoshi: Alert moderator mick white: Richard Mullins Alert moderator You what now: Alert moderator Sub Pontem: Alert moderator John Quiggin: Alert moderator Hudson Godfrey: Alert moderator David T: Alert moderator Lee eel: As for data backup and security, consider the reduction in fraud, lawsuits, and waste once companies can know for certain that the data Alert moderator John Quiggin: Alert moderator BTC Vega: Alert moderator fiscally responsible: So ridiculous a waste of time to address his points Alert moderator Homo Sapiens: Alert moderator hec hogan: Alert moderator Add a comment.
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Connect with ABC News. Got a news tip? Editorial Policies Read about our editorial guiding principles and the enforceable standard our journalists follow. The addiction plaguing Egypt's poor By freelance correspondent Walt Curnow Mohamed, a Cairo donkey barber, uses tramadol daily to cope with gruelling work and grinding poverty like an growing number of Egyptians, another example of the opioid crisis that is expanding worldwide.
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