I understand that proof-of-work plus a block chain is one way of creating a trustworthy public ledger of transactions. But holy hell, the cost to society in terms of energy consumption is VERY high per transaction. I participate in conversations online all the time where I implicitly trust that I am seeing the full discussion and that everyone can see my input. Usenet, for example, does this in a decentralized way. Couldn't we just post our transactions to usenet save some resources?
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Processing a transaction costs nothing; it takes the same amount of work to generate an empty block as a full one. All the cost is tied up in generating the block in the first place, and the marginal cost of processing another transaction is either zero or negative (due to transaction fees). The real question is why the network uses more electricity to create each block than the transaction fees pay for, and the answer is that mining a block creates new bitcoin that the miner is paying for. Put simply, transactions don’t use energy, mining does, so energy/transaction is meaningless.– Reid RankinJan 2, 2018 at 5:44
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2 Answers
I participate in conversations online all the time where I implicitly trust that I am seeing the full discussion
Proof-of-work is one part of what allows bitcoin to be trustless, which is a very important property for any decentralized system of value. If transactions were just posted to a forum, then what is to stop a forum admin from editing, censoring, or deleting transactions?
Creating a trustless financial network is not a trivial task, the large amount of energy being spent to secure the network is a testament to the value users see in maintaining and participating in the network.
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I like this answer. I would say that I don't think "the large amount of energy being spent to secure the network is a testament to the value users see in maintaining and participating in the network" since, to my knowledge, the large amount of energy being used is because the USD value of the block reward is huge, and the transaction fee is huge, which increases mining activity and thus energy consumption. The fact that the price and fees are so high is, I think, almost entirely driven by speculation and not because people place value on the bitcoin technology itself. Jan 2, 2018 at 18:37
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"almost entirely driven by speculation and not because people place value on the bitcoin technology itself". I'm not sure how you can make that distinction, even the pure speculator is buying because they believe the tech will be more valuable in the future (hence they believe the tech is worth the current price, and more). Perhaps the speculator does not understand the tech, but I would argue that most people don't understand how their car works, and yet they can still rationally understand that a car is a valuable object.– chytrikJan 3, 2018 at 5:39
Bitcoin’s market cap is about $200 billion. Would you bet $200 billion that you will always be able to see every message ever posted to Usenet, given that the whole world knows the kind of money at stake? Remember that all somebody has to do is delete or delay a message to be able to execute a double-spend attack successfully.
Blockchain technology doesn’t actually have anything to do with money. It just solves the problem of maintaining a decentralized immutable record, and that happens to be the key missing link in practical digital cash systems, which had been extensively studied long before Bitcoin came along.
