[Cryptography] Digital currencies

Benjamin Kreuter brk7bx at virginia.edu
Mon Jun 20 20:02:15 EDT 2016

On Mon, 2016-06-20 at 12:17 -0400, grarpamp wrote:
> On 6/20/16, Phillip Hallam-Baker <phill at hallambaker.com> wrote:
> > 
> > Using as much
> > electricity as the island of Malta does to distribute the ledger is
> > an
> > abomination.
> Far less than all the electricity consumed by the fiat system
> of the US alone...

Ignoring, of course, the massive difference in scale here.  Bitcoin
does not even come close to the total number of transactions that even
a small credit card processor will handle in a given day.

>  gov / fed reserve / bank buildings full of
> offices / datacenters / networks / devices, hvac, payroll,
> healthcare,
> vehicles, maintenance... all the electrons needed to make it go.

What makes you think that Bitcoin is any different in practice?  The
overwhelming majority of Bitcoin users rely on exchanges and treat
Bitcoin as a convenient intermediate system for transacting in their
nation's currency.  Bitcoin exchanges are no different from any modern
financial institution and require all of the same infrastructure and
overhead you mentioned.

> Bitcoin, and any other digital currency, is likely highly efficient
> and becoming optimal implementations of whatever usable
> monetary and other features they provide.

Except that Bitcoin has no particular incentive to reduce energy
consumption.  Miners only reduce their energy consumption in response
to increasing energy prices or decreasing prices of Bitcoin relative to
their nation's currency.  A technology that improves the efficiency of
mining will only result in an increased mining rate.  The only reason
it has not happened immediately with ASICs is that ASICs cannot be
produced quickly enough.

By comparison, most payment processors have every incentive to minimize
their energy consumption.  A technology that improves the efficiency of
processing payments will not result in banks doing more work, it will
result in banks consuming less energy.

Bitcoin's biggest problem is that it is trying to eliminate banks from
the monetary system.  As soon as you allow for a bank that issues
money, you can not only get a wildly more efficient system, but also a
system that has a rigorous and well-defined security model and which
supports anonymous payments, offline payments, and so forth.

-- Ben
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