Climate, technology and chaos Blog

Bit coin is usually put forward as a piece of criminal activity or as a triumph of libertarian economics.

It has two main problems, which reflect neither of these positions..

1) It is amazingly slow. The transaction rate is so slow that it constantly grinds to a halt with high demand. As far as I know, this problem cannot be solved without increasing the intensity of the second problem.

2) It has extraordinary energy consumption. I quote from an article appended below: “A fluctuating bitcoin price, along with increases in computer efficiency, has slowed the cryptocurrency’s energy footprint growth rate to ‘just’ 20 percent per month so far in this year. If that keeps up, bitcoin would consume all the world’s electricity by January 2021.”

Bitcoin is clearly destructive….

The energy usage is a cost of bit coin transactions which has to be paid for so it means that bitcoins should have a constant drain in value. This cost works like the signorage on medieval coins (the charge for turning gold or silver into coins), because bitcoin exchange is the only ‘value’ being produced. This drain on value is probably not a good deal, and probably can only be funded in an apparently non detrimental way as long as new bitcoin users appear, and bid for coins. This makes bitcoin a Ponzi scheme which will eventually collapse, given the limits on transactions, and the eventual limit on new participants compared to old participants.

The problem for non-users is the pollution from energy consumption, which is (if the article is correct) apparently huge. That pollution is a cost that appears to be being socialised or shuffled onto everyone, even if those being enriched hope that they can get rich enough to avoid the problems it generates. It is also possible that taxpayers will end up funding the energy costs, which is also probably not a good idea.

In the long term unless the energy consumption can be reduced (and the slow speed increased) bitcoin does cost too much to maintain.

https://grist.org/article/bitcoins-energy-use-got-studied-and-you-libertarian-nerds-look-even-worse-than-usual/amp/

Tags: complexity, economics, free markets, technology

This entry was posted on June 7, 2018 at 8:49 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.