The end of the Bitcoin Monster?

For a few years now, I and others been banging on about the environmental cost of Bitcoin, and similar cryptocurrencies. This cost from the electricity wasted on the pointless calculations used to ‘mine’ Bitcoins, under the ‘proof of work’ protocol used to ensure the validity of entries in the Bitcoin blockchain. The cost is huge, about the same as the energy use of a medium size country.

For almost as long, we’ve been promised an alternative ‘proof of stake’, in which the integrity of the blockchain would be protected by participants putting up some of their cryptocurrency as a ‘stake’ (more details here). But like nuclear fusion, proof of stale always seemed just over the horizon.

Now, it seems, it may be going to happen. Bitcoin’s biggest rival, Ethereum, has been testing a proof-of-stake blockchain for some time, in parallel with its existing proof-of-work chain. On 15 September, it is planned, the two will be merged in an event creatively called The Merge, and future operation will be proof-of-stake.

If this succeeds, the electricity consumption of Ethereum will be reduced by around 99 per cent. That will make it, in the words of Douglas Adams, mostly harmless. That doesn’t change the fact that, like cryptocurrencies in general, Ethereum is also pretty much useless. Its most notable function is as the basis for pricing non-fungible tokens (NFTs), digital certificates asserting ownership of an image (which anyone else can duplicate, but not own). That’s frivolous but no worse than collecting baseball cards or postage stamps (remember them?).

The big payoff from successful proof-of-stake is that it provides a way to kill the Bitcoin monster once and for all. Rather than banning Bitcoin, all that’s necessary is to ban proof-of-work. If Bitcoin made the transition to proof-of-stake, well and good. If not, no problem. Either way, its disastrous drain on world energy would be over.

18 thoughts on “The end of the Bitcoin Monster?

  1. Is the problem the cost per se or the unpriced external part of the cost? Mining gold involves “wasted” labour, capital and energy resources. Lots of other quasi-waste too – gambling, some financial services etc etc. The standard rationale – “people wanna do it” applies to bitcoin and many things. I think Paul Samuelson rejected markets in things that don’t increase the supply of useful goods net (e.g. trading voting rights) but there is always some sort of service delivered.

    Separately: Isn’t a problem with Ethereum tokens that the supply is potentially unconstrained? Bitcoin involves finite supply and increasing extraction costs.

  2. It’s the energy used/wasted by this form of gambling that makes it so undesirable.

    On another level, it panders to the nonsense conspiracy theorists that seem to be clogging up life.

  3. There are still stamp collectors. They are the market for the Ukrainian Post Office’s commemorative series celebrating Patron, the hero explosives sniffer dog: https://pbs.twimg.com/media/FbVHX28WAAEoFOW?format=jpg&name=large. I suspect the urinary tribute to the unexploded Russian shell is poetic license.

    The same post office earlier issued a stamp recalling the memorable greeting of the Snake Island defenders to the Russian warship, not printable here because of Site Policy. They may be working on a stamp for the hero Snake Island cat that survived the following months of Russian occupation. Or maybe not: the feline may have adopted opportunistic collaboration with the invaders, like Mitterand, switching back at the right time.

  4. Contra our host, I think it is far more likely that Bitcoin gradually becomes a reserve currency and countries will compete to mine and own it. The G7 really shot itself in the foot when it froze Russia’s international reserves earlier this year – the result being the slow collapse of the USD as the worlds main reserve currency and an unwinding of the trend towards globalisation. It looks increasingly likely that – at the margin – we are slowly returning to a more commodities based world order and Bitcoin will be part of that.

    This article: The Future Geopolitical Order and Bitcoin: An Initial Assessment gives a good overview of how it could play out. I know it’s in Bitcoin Magazine so no one here is likely to read it, but Bitcoin is only mentioned as an aside so check it out.

    Also contra our host, NFT’s will almost certainly play a large role in our future. It’s not just about jpegs. I am honestly a bit surprised that Prof. Quiggin doesn’t realise this.

  5. No to “The end of the Bitcoin [crypto blockchain] Monster?”

    Maybe energy of Etherium, one of  “Today, there are over 20,000 cryptocurrencies in circulation.”^4.

    ^3. Letter to Congress – “By its very design, blockchain technology is poorly suited for just about every purpose currently touted as a present or potential source of public benefit.”

    ^2. !  “Blockchain could boost global GDP by $1.76 trillion by 2030.” ^2.
    *

    Simplest blockchain problems article I’ve found. They are very serious problems.

    ^1.
    “5 Problems With Blockchain Technology

    By Adam Levy – Updated Jul 1, 2022
    https://www.fool.com/investing/stock-market/market-sectors/financials/blockchain-stocks/problems-with-blockchain/
    *

    And the For team – just about EVERY serious report abstracted and linked here;
    ^2.
    The Ultimate List of Blockchain Statistics (2022)
    Rebekah Carter
    UpdatedJun 12, 2022

    “Blockchain could boost global GDP by $1.76 trillion by 2030.”

    Sources
    Markets and Markets
    StatistaTriple A and Grandview Research
    PwCMarkets and Markets
    Vantage Market Research
    DeloitteBIS Research
    Global Newswire
    GartnerFinances Online

    https://findstack.com/blockchain-statistics/
    *

    ^3. On the Risk side:
    (Blockchain growth seems a ridiculous as proof of stake.)

    – Cryptoverse: Blockchain bridges fall into troubled waters – Reuters 

    ^3.
     “On the Dangers of Cryptocurrencies and the Uselessness of Blockchain
    (CRYPTO-GRAM)

    Thu, 18 Aug 2022

    “Schneier writes: Earlier this month, I and others wrote a letter to Congress, basically saying that cryptocurrencies are an complete and total disaster, and urging them to regulate the space.

    “Nothing in that letter is out of the ordinary, and is in line with what I wrote about blockchain in 2019. In response, Matthew Green has written—not really a rebuttal, but”a general response to some of the more common spurious objections people make to public blockchain systems.”

    In our letter, we write: “By its very design, blockchain technology is poorly suited for just about every purpose currently touted as a present or potential source of public benefit. From its inception, this technology has been a solution in search of a problem and has now latched onto concepts such as financial inclusion and data transparency to justify its existence, despite far better solutions to these issues already in use.  Despite more than thirteen years of development, it has severe limitations and design flaws that preclude almost all applications that deal with public customer data and regulated financial transactions and are not an improvement on existing non-blockchain solutions.”
    https://www.schneier.com/crypto-gram/archives/2022/0715.html#cg8

    – Starbucks NFTs, Reddit
    karma points on the blockchain, Saylor fired, Telegram ICO slight return.David Gerard 
    – Track carbon offsets with blockchain?Rob Slade
    –  Deepfakes Expose Vulnerabilities in Facial Recognition TechnologyPSU

    Via Info on RISKS (comp.risks) via amediadragon

     https://catless.ncl.ac.uk/Risks/33/40#subj6
    *

    ^4
     “Today, there are over 20,000 cryptocurrencies in circulation.”

    Here’s a summary of what you’ll find below:

    Cryptocurrency Statistics (Top Picks)
    How Many Cryptocurrencies Are There In 2022?
    Growth Of Cryptocurrency Over Time
    Crypto Usage Demographics
    Top 20 Cryptos By Market Cap
    How Many Cryptocurrency Exchanges Are There?
    https://explodingtopics.com/blog/number-of-cryptocurrencies

    Enjoy. When and if blockchain is a global standard we may be on a winner. Until then, the crypto blockchain is still going to be a monster.

  6. Well written expose of the absurdity of cryptocurrencies. That puts the final nail in the coffin of this attempt to make a digital currency. We can now get on with looking for less wasteful options.

  7. Bitcoin is criminally expensive tulip bulb. A wealth destroying currency, without the compensation of nice flowers.

  8. Oh yeah, sure Joe Blow. And I bet you’ve got a bridge to sell me too.

    Harry May gets the “Best Aphorism” Prize.

  9. Ikon said “Oh yeah, sure Joe Blow. And I bet you’ve got a bridge to sell me too.”

    Not trying to sell you anything Ikon, Bitcoin sells itself. Even environmentalists are starting to catch on: Bitcoin’s role in reducing Climate Change

    Bitcoin mining is also starting to play a real role in encouraging the roll out of renewables. You should check it out – it’s interesting and optimistic and a real counter to the doom and gloom so prevalent around here and other progressive sites.

    These are not isolated examples either. There has been a distinct change in attitude and even progressives are starting to catch up.

    But hey, if you think the only way to solve the climate crisis is to have authoritarian governments ram down rule after rule and ban everything in sight, well, each to their own I guess. If all you have is a hammer…

  10. Joe Blow said “I am honestly a bit surprised that Prof. Quiggin doesn’t realise this.” And “so no one here is likely to read it”.

    I am surprised Joe Blow, you haven’t realised all of JQ’a writings on crypto dont boil down to one comment specifically about 1 coin and energy use, and decide that is the totality.

    You obviously haven’t bothered to read other JQ posts.

    Happy to be joe blow’n away.

  11. K2 – I think I have read them all and made critical comments on a few. It’s a complicated enough subject that it is really easy to make a bad take on the subject. For instance, Proof of Stake is complete rubbish and will only lead to centralisation which basically reproduces the current system. It’s entirely obvious that the promoters and developers of POS chains are using Environment/ESG FUD to try and discredit Bitcoin so if you ‘like’ the current system then I can see why you would support a move to POS.
    Fortunately, Bitcoin doesn’t care – I for one welcome and expect a real fight over this in the coming years, as people eventually figure it out. Should be fun to watch.

  12. NFTeez sleaze. Global regulations please. The Merge of nefarious with crypto.

    “Tornado Cash, an Ethereum-based mixer [code in the wild with NO kill switch] that has recently been sanctioned, and had its lead developer arrested, was once again at the heart of NFT crime.

    "Elliptic [report link] noted that scammers now have access to tailored malware that can bypass multi-factor authentication, making it easier to target their victims.

    "Crime constitutes a very small proportion of NFT activity, the report concluded. However, it has a “disproportionate impact on the industry’s reputation and undermines the quality of experience of legitimate users.” As such, all stakeholders, including the NFT marketplaces and authorities, must be proactive in their actions to stamp out the scammers."
    https://coingeek.com/elliptic-100m-in-nfts-stolen-via-scams-in-the-past-year/

  13. Crypto cuurently;
    – multiple philisopies and morals,
    – forking into shards and camps,
    – unagreed governance to be trialed and added in and changed continually ,
    – code able to be altered by core developers and if deleterious developers coins get trashed,
    – no overall future end point agreed.
    – Egalitarian – if you are in the pool.
    – Bots or code without kill switches.
    – No balancing mechanisms for people like Musk acting as gravity switches – when holding stable or cool money, when trading a chunk of the market in one trade – hot – more like an earthquake.

    Crypto has all the seeds of its own destruction and in flux so more like volcanology.

    Like a pangea – about a pre oxygenated earth hoping to be a stable goldilocks earth. The contenents of crypto – separate coins and within coin camps – are not in geological, environmental or any other equilibrium.

    The 2nd commenter on this long article below by Noah Smith interviewing the founder of EthereumIn Vatalik Buterin, says they don’t use dollars to speculate on currencies so why would I use crypto without the government and army.

    I’d say crypto crazies will be doing just that, forming their own power blocks and armies to try to fashion the crypto world into their image. And outcomes. Against fiat. And leaving nation states to pick up and clean up.

    Dangerous. Which makes Web3 a problem.

    And still without resolving any underlying eternal human condition, problem and inclusion for and by all.

    What could go wrong?
    *

    “Interview: Vitalik Buterin, creator of EthereumIn which we talk about the big shifts in crypto.

    Noah Smith

    2 Sep 2022

    https://noahpinion.substack.com/p/interview-vitalik-buterin-creator

  14. Joe Blow, you provided us a link to a video claiming “Bitcoin mining is also starting to play a real role in encouraging the roll out of renewables”. LMAO.

    Zero attribution and “39 subscribers” – so who Joe Blow is “beyondtheceiling “? The .com is for sale. Last worspress post 2010 by a ‘serial entrepreneur’!

    Why would anyone watch or believe you?

    And what connection do you have with the crypto world? You know, any conflict of interest to declare?
    *

  15. Hi K2,
    Did you watch it? Or do you only watch what everyone else does? There are hundreds of videos and articles on the topic – if you look beyond The Guardian or Salon.

    I don’t really mind if you don’t believe me or not – it won’t change anything. Also my only connection with the ‘crypto world’ as you put it is that I have studied Bitcoin for 10 years and read pretty well every argument against it – none are convincing to me and at this point people are only repeating themselves. Now only time will tell if it will change the world or end up being a complete joke.

    Ironically, I was fairly skeptical about NFTs until I decided to watch ‘Line Go Up’ which according to ‘crypto’ critics, is a devastating take down of the whole thing. I ended up doing many hours of research of my own and concluded pretty well the opposite of what the documentary argued. It’ll be messy for quite a while yet though, until people get their heads around it. In the meantime I enjoy the howling at the wind of the critics.

  16. For those that agree with JQ that NFT’s are just silly jpegs, suggest you take a look at $GET protocol. This protocol uses NFT’s for ticketing and has grown rapidly enough that they are now selling nearly 200,000 NFT tickets – monthly – to events worldwide. Sadly not much going on in Australia – maybe that is why there is a lot of misunderstanding here about what’s happening:

    GET August ’22 — The impact of V2

    This is just one of hundreds of projects.

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