If you hired an accounting firm to keep track of who had which assets and handled transactions, there is value being created... valuable work being done.
This value probably isn't being generated very efficiently (there's an interesting study to do, actually figure this out and don't rely on somebody's intuition) and the "value" isn't being actually utilized very widely: how much of bitcoin being used doesn't fall into the categories of A) generally morally objectionable B) toy uses fiat -> BTC -> txn -> fiat which didn't need the BTC middleman or C) speculation. [ not much ]
Mining bitcoin would seem to transform a lot of electricity into a little accounting, not free of value, but likely demonstrably of low value.
Keeping a ledger of billions of participants making billions of transactions is a solved problem, and has basically zero cost when amortized over its utility. In 2020 VISA handled 3.5 billion accounts (cards), 140 billion transactions and $11.3 trillion in volume. Total operating expenses were $7.7bn, so just 0.07% of transaction volume.
At current prices, just the block rewards make the Bitcoin network running cost something like $37bn/year.
As a ledger it's strictly inferior in every way. (The ability to take bitcoin 'offline' by holding your private key, or exchanging it on secondary markets, is not a feature of the blockchain itself. These features can exist without a blockchain).
How does a Somali web dev get a Visa to pay for her servers or domain registrations? How will a Syrian restaurant owner accept Mastercard payments from his custumers? How can Wikileaks accept donations?
Ultimately I pay Visa etc. roughly 3% (the retailer "pays" but certainly passes that cost on to me) of all of my card transactions, which is the vast majority of money I spend outside of rent.
I wonder where the 50x difference goes.
> At current prices, just the block rewards make the Bitcoin network running cost something like $37bn/year.
The block rewards are "free", it is hard to come up with a way to account for the cost of something which is invented from thin air.
The better comparison would be how much the electricity and mining hardware per year is used compared to the transaction work done.
Logic would say, though, that the money spent mining and the BTC->USD value of block rewards would be similar (that is the margins on bitcoin mining tend towards zero).
However with the volatile pricing of bitcoin, you would have to generate a BTC->USD value for each block reward and not convert a year's worth of rewards on a particular day's (or minute's) spot price.
It would be the same with Bitcoin. Retailers have no interest in eyeballing the Bitcoin exchange rate and dynamically repricing their goods every 5 minutes. Unless Bitcoin becomes price stable, or the currency in which they pay all their expenses, they'll always be deferring to payment processors.
Bitpay charge 1%, which isn't even that cheap.
> The block rewards are "free", it is hard to come up with a way to account for the cost of something which is invented from thin air.
It's not "free". They spent a fortune in amortized equipment costs and energy to win that reward. The bottom line is the miners need to sell their 12.5 BTC block rewards to cover their real world costs (+profit). So, in a competitive mining environment, the block reward coupled with the market price is a proxy for the minimum cost of running the network. This is one factor in market prices.
Instant settlement doesn't necessarily provide 'value'.
I can arrive at a store entrance, and in 30 seconds be leaving with a new macbook, paid for on my VISA card. I can then pay it off 56 days later without paying any charges or interest.
If i couldn't do this the store would almost certainly make fewer sales.
> Well there is a value, albeit a small one.
> Bitcoin is a ledger.
This is false.
Let's say I am shady business that launders money.
Is bitcoin helping stop my laundering?
No... I just use regular money which can't be tracked so easily...
In essence, bitcoin makes it easier to track money of people who don't mind their money is being tracked or are inept enough to understand their money can be traced.
How does any of that refute the claim that there is value in what bitcoin does or that it is a ledger? (who can deny that bitcoin is a ledger anyway? I'd like to see somebody define a ledger and what bitcoin does and show the contradiction)
I work with accounting systems on daily basis and also have accounting background.
Ledger does not replace need for accountants.
We already have a bunch of software for ledger (that also doesn't require to burn huge amounts of energy).
Banks are ledger and if somebody like a government want to get info from that ledger it has been quite easy recently -- even Swiss banks relented and have been forced to submit information.
Accountants are people who specialize in knowing how to categorize stuff before it is put on a ledger in a way that meets requirements of local law and makes business more easy to conduct.
I don't see any possible way in which bitcoin is making this easier.
I'm not making the claim that bitcoin replaces an accounting firm?
>I don't see any possible way in which bitcoin is making this easier.
Who says it has to be easier or better? It does the work of handling transactions and keeping track of balances.
With bitcoin as a user you only have to pay a very tiny transaction fee in order to keep track of your account value and handle the transfer from one account to another. Is this better? Well you don't have to pay somebody to operate software and as long as you can access the bitcoin network there aren't any impediments to doing transactions.
But the point isn't if bitcoin is better or best or even good, just that is does the thing and doing that thing has value.
People can use ANYTHING to transact. Seashells? Specs of rare metals? Pieces of paper with signatures? Bags of cocoa leaves? Bits in a computer database owned by a trusted party?
Bitcoin does not provide value, it is just one of possible alternative to use to make transacting easier.
Unfortunately, bitcoin also burns energy at a rate of small country which is quite unnecessary but will make every person poorer (if only for making our environment worse).
Yes, and if actually used, those things have value too.
You might want to look into how much our existing banking systems consumes in terms of total energy. It might shock you.
Bitcoin mostly only contends with two costs – energy (computing hashes) and resources (making mining rigs). Meanwhile, traditional banking systems have crazy high energy and resource costs from: building physical banks, vaults, armored cards, paper money, coins, bank clouds, stock market clouds, cheques, payment networks (Visa / MasterCard)... the list goes on. Additionally, classical banking has incredibly high human capital costs – think of all the innumerous people involved in just maintaining a system of trust compared with the near-zero human capital cost of the Bitcoin network.
> You might want to look into how much our existing banking systems consumes in terms of total energy. It might shock you.
Actually working for a bank, I can tell you that banks do a lot more than just keep your money.
If you are not convinced try to move your entire financial life to bitcoin and tell me how you get cash, how you pay for fuel at gas station or pay your taxes.
Does bitcoin have inherently web application for you to log in and manage your account?
Does it have a call center for you to call to block your credit card?
What about a host of other services banks provide you just conveniently omitted?
That's the whole point – most of those things aren't needed for cryptocurrency because cryptocurrency is trustless. You pay for gas in the same currency you get paid in – crypto. There is nobody to call to cancel my credit card because some 3rd party does not control my credit card – I do. Ditto for "managing my account".
If I want to convert ETH to BAT or whatever, I just authenticate (using the same wallet as used above) to a thin wrapper around the network and everything happens on the Ethereum network itself. Meanwhile, if I want to convert USD to GBP, the layers below whatever service I actually use (let's say TransferWise) as the consumer is deeply nested, probably involving somewhere between 5 - 10 different entities.
I think you might be the one struggling with it. Calculating value (and its possible future) is actually my job description (I work on risk systems for one of the largest banks in the world).
If something "provides value" it means it generates net benefit after inclusion of various costs and risks.
If we take "provides value for humanity" it means bitcoin would have to make net benefit for humanity.
But that is not the case. Almost all people have other as convenient ways to transact money. So we only have actually very small minority of people who see the actual benefit.
These are mostly people who use bitcoin not to transact but rather to speculate on it -- they don't benefit on it because it makes transacting easier, it is just a pure game on whether the value of bitcoin is going to go up or down.
Another class of people for whom bitcoin creates value are the ones with access to capital, cheap energy and silicon to play the game of burning money for bitcoin.
Everybody else (ie. almost all people in the world) is left with no benefits and a disadvantage of worsening environment.
The energy must be produced somewhere. Even if the particular MWh for mining was produced from renewable sources, it could have been used to offset some non-renewable MWh, but now is lost to the space. The capacity to produce energy is being wasted.
Even if humanity produces 100% energy from renewable resources we are still long way to repairing our environment and that energy could have been used to maybe sequester some CO2.
"Normal" coin on normal account does not require so much energy to be burned.
shrug I don't think I can quickly convince someone of the utility of having both absolute and relative measures of things, there is a difference, they both have their uses, and restricting yourself to one usage and calling all others absurd isn't particularly helpful
No, but I successfully bought a car with couple of magnetic disturbances on a disk at my bank and another time, with a stack of pieces of paper with fancy signature.
That these things have any value attached to them is only due to people agreeing to it and believing it. Which makes them no different from seashells. While seashells would be a lot less practical in todays world they have been used in the past.
Yes, exactly, and the systems built around that process of signing documents and having settlement through a bank I can guarantee used more energy (human/electricity/resources) than a single Bitcoin transaction would've.
Are you comparing the cost of the entire banking system's existence, to the cost of a single Bitcoin transaction? That seems like a pointless comparison.
Or are you dividing the cost of that banking system by the number of transactions it processes? I.e. comparing 1 transaction to 1 transaction?
On a per-transaction basis traditional banking uses a lot less energy than Bitcoin. Including the cost to run the bank's servers, the air conditioning in their buildings, the Christmas lights their employees put up, and everything.
How can I make such a bold claim? How could I possibly have calculated the energy usage of all those things?
Simple. Bitcoin does about 8.5 TPS which works out to around 268 million transactions per year. Bitcoin uses 0.55% of the world's energy production per cbeci.org.
The ACH network (US direct deposit system) processes around 23 billion transactions per year.
The European SEPA network does about 22 billion.
The UK's BACS accounts for another 8 billion or so.
So just counting those 3, that's 53bn transactions per year, which is 197x what Bitcoin does. If their energy cost per transaction was as bad as Bitcoin's, then that would take 0.55 * 197 = 108.35% of the world's energy production. There literally isn't enough energy in the world for the banks to be as inefficient as Bitcoin. And we're only handling direct bank debit/credits in the US and Europe so far, we haven't even touched on credit card stuff, international wires, anything in Asia, etc.
Bitcoin is a ledger.
If you hired an accounting firm to keep track of who had which assets and handled transactions, there is value being created... valuable work being done.
This value probably isn't being generated very efficiently (there's an interesting study to do, actually figure this out and don't rely on somebody's intuition) and the "value" isn't being actually utilized very widely: how much of bitcoin being used doesn't fall into the categories of A) generally morally objectionable B) toy uses fiat -> BTC -> txn -> fiat which didn't need the BTC middleman or C) speculation. [ not much ]
Mining bitcoin would seem to transform a lot of electricity into a little accounting, not free of value, but likely demonstrably of low value.