I understand that the incredibly thermodynamic inefficiency I was complaining about is in fact very deliberate, and bitcoin might be said to waste as much energy as possible, as a security feature! Now I really don’t know what to think – because exactly what I was complaining about gives the system its diabolical effectiveness. I think my earlier analogy with deliberately burning wheat and trading photographs of the ruined crops is very apt. We are all ceremonially burning computer cycles as an investment of resources in a “trust pool”. The irreversibility of the process – the fact that we are burning our computational wheat crop just to crank out unusually numerically small hashes – is definitely perverse, and deliberately so. The entirely stupid amount of resources wasted minting bitcoins makes it nigh-impossible that anyone would choose to be EVEN STUPIDER as to waste the amount of resources necessary to outcompute you.
The problem is, if you look at the competition in the world of digital currencies – online casino currencies, mmorpg currencies, and the like – they often have much larger economies than bitcoin, with much less security, verifiability, and certainly much lower thermodynamic burden! The market, in the form of consumers, does not seem to demand a massive investment of random numbers to be willing to trade in a currency. I understand of course that the competition is generally centralized and that the thermodynamics of bitcoin are designed as a substitute for central authority – but I personally would regard a “large enough” network of nodes signing a transaction history using standard public key cryptography to be secure enough to use without demanding to see photographs of 500 billion bushels of burnt wheat as proof of the network’s seriousness.
I see three additional replies written while I was typing this, so I’ll try to refocus:
I understand the system, and appreciate its strengths. I am actually happy to participate in the bitcoin economy, sending coins around as tips for forum posts and the like is enjoyable as a “game” and the cost of entry is currently pretty low. My personal concern is not over botnets taking over with forged currency, but with botnets taking over the issuance of genuine coins. That is why I think the “security through wasting energy” concept is flawed – not because it isn’t secure, but because it has the potential to create incentives for harmful behaviors, which in turn diminishes the likelihood of building social trust in the currency.
It’s the same situation as gold and gold mining. The marginal cost of gold mining tends to stay near the price of gold. Gold mining is a waste, but that waste is far less than the utility of having gold available as a medium of exchange.
I think the case will be the same for Bitcoin. The utility of the exchanges made possible by Bitcoin will far exceed the cost of electricity used. Therefore, nothaving Bitcoin would be the net waste.
Quote from: gridecon on August 06, 2010, 16:48:00
As an overall point, I also do not agree with the idea that the very high computational burden of coin generation is in fact a necessity of the current system. As I understand it, currency creation is fundamentally metered by TIME – and if that is the fundamental controlling variable, what is the need for everyone to “roll as many dice as posible” within that given time period? The “chain of proof” for coin ownership and transactions doesn’t depend on the method for spawning coins.
Each node’s influence on the network is proportional to its CPU power. The only way to show the network how much CPU power you have is to actually use it.
If there’s something else each person has a finite amount of that we could count for one-person-one-vote, I can’t think of it. IP addresses… much easier to get lots of them than CPUs.
I suppose it might be possible to measure CPU power at certain times. For instance, if the CPU power challenge was only run for an average of 1 minute every 10 minutes. You could still prove your total power at given times without running it all the time. I’m not sure how that could be implemented though. There’s no way for a node that wasn’t present at the time to know that a past chain was actually generated in a duty cycle with 9 minute breaks, not back to back.
Proof-of-work has the nice property that it can be relayed through untrusted middlemen. We don’t have to worry about a chain of custody of communication. It doesn’t matter who tells you a longest chain, the proof-of-work speaks for itself.
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