Is mining an antieconomical process?

Question

I will (probably) oversimply things, but I see it like that:

1. Gold linked currencies: someone stores in vaults the value of the circulating money (1) and that "real wealth" is safe to be eventually put again on the market and used for something useful (build microchips, drugs, or something else)

2. Fiat-currency: someone "prints" money for free (or almost).

3. Bitcoin: issuing currency costs as much electricity and equipment as the value of the issued BTC (2). Those resources are lost forever.

(1) or a fraction of it

(2) it is an approximation, since the cost of issuing BTC can be more or less than the value of issued coins, but it will not be far from it. If it is very profitable more people will mine, making difficulty increase, if it is hardly or not profitable people will stop mining making difficulty decrease.

Is it correct? Does it mean that bitcoin has burnt some billions of dollar worth of resources?

Did someone address this economical and ethical problem?

Answer 1

Is it correct? Does it mean that bitcoin has burnt some billions of dollar worth of resources?

Yes, though I don't think the amount is in the billions yet. Likely hundreds of millions of dollars have gone into electricity and ASICs just to keep the Bitcoin network secure.

Did someone address this economical and ethical problem?

Bitcoins are currently worth about $300 each. The average issue cost of a Bitcoin currently in circulation is much less than this. Over time, the block reward decreases. So if Bitcoin is successful over the long term, the issue cost of the average Bitcoin will likely be a small fraction of its value.

Let's not forget that Bitcoin creates value by providing for easy, quick payments around the world. Each Bitcoin can provide this value any number of times and only has to be issued once.

Answer 2

So first of all, 'anti-economical' is not a proper word and doesn't have a clear definition.

But I'll try to answer the question:

1) It is true that in a perfect market for mining, the cost of mining should be equal to the mining revenues generated. But think of it: For most of bitcoin's history they weren't worth very much so even if at the time people spent as much on mining as the bitcoins were worth this would have been a small amount. Most of the current value of bitcoins came through the price increase. Overall, this means that only a fraction of the value of bitcoin's were actually spent on mining.

2) I think it's wrong to say that those resources were 'lost forever' as they served to verify transactions and maintain the bitcoin network. This is an extremely valuable service. It would be more adequate to compare the costs of mining to the costs of maintaining the bank's payment processing infrastructure. So it only makes sense to say "resources spent on mining are lost forever" if you applied the same to a significant portion of bank's expenses.

3) In the medium to long-term miners will make most and then all of their revenues not from mining new coins but from transaction fees. So we would expect that the total cost of mining will end up being equal to the transaction fees. This means that transaction fees or how much people value making bitcoin transactions will drive miner's revenues and thus how much they invest in mining hardware and electricity which in turn will drive the difficulty. That seems like a pretty efficient system to me.

Answer 3

Does it mean that bitcoin has burnt some billions of dollar worth of resources?

Because gold is sitting in a vault, does that mean that some billions of dollars worth of resources were not spent to get it there? The gold may have been reformed a hundred times and been involved in dozens of wars. Any form of money should be worthy of costs to obtain it. That which is given without cost is a trick to extract a cost later. It is not unethical to have or want, but to take which has not been earned by just means.