Delete comment from: DSHR's Blog
That was a fairly reasonable assessment of the current state of things. I'd like to respond to a few points.
Number go up - It is widely understood that first layer BTC is unsuitable as a global transactional system, and the primary reason to own BTC is long term store of value. In this regard, the actual bar to clear here is not "number go up", but rather, "number not go down over the long term." On that account, so far, so good. Although still very high, volatility has been continually decreasing over time. It is plausible that over the very long term, it can become an asset stable in purchasing power. While not nearly as exciting as an asset that can rise 10000% in a year, a stable asset is still eminently useful. It remains to be seen how much market share it will poach from gold in the long run, as there are still significant tradeoffs between them.
Resilience - Although large mining pools represent a *risk* to Bitcoin, there is no evidence of failure. A 51% attack presents temporary risks to txs, but not to the underlying integrity of balances stored on chain/nodes. The amount of mining power required to reverse txs scales with the amount of time since the tx was made. With 51% attacks being so costly to execute on BTC, it would only be a viable tactic for reversing extremely large txs. For large txs, speed is rarely of the essence, and any attack would be easily mitigated by waiting for more confirmations. The amount of txs for which an attack is viable is very small, evidence of an attack would be very obvious by reduced block time while hashpower is diverted to an alternative chain, and mitigation for those edge cases is simple. It's an attack that's trivially easy to see coming and sidestep it. There is no evidence that a 51% attack on a large BTC tx has ever even been attempted, and the simplest explanation is because it would certainly fail. If it was a viable attack vector we would have already seen attacks, as we have on smaller blockchains.
Energy waste - To this point, if you do not see the long term value in the asset, then *any* amount of energy expenditure is too much. While BTC's energy usage is significant, energy is generally a free market and by that definition, whether the energy usage is "worth it" is simply defined by whether someone is willing to pay for it. If BTC does devalues over time, energy usage will be reduced as miners shut down, and the problem will solve itself. Likewise, if BTC continues to grow in value because people voluntarily choose to purchase it and mine it, it is de facto "worth it" to those who are engaging with the asset. There is no "shortage" of energy - there is a simply a finite amount of energy produced, and it is generally distributed to whomever is willing to pay the most for it. Markets are the most effective way to determine what a society values. The externalities here are associated with energy production, *not* consumption. If the world wants to reduce carbon output by taxation or regulation, it can only be effectively regulated at the supply side, not the demand side. Energy consumption is what separates us from cavemen - the problem humanity needs to solve to flourish is not how to reduce energy consumption, but how to produce energy in a less environmentally harmful way. I remain optimistic that human ingenuity will solve this problem in the long run.
Overall, I agree on the lack of viability for all other cryptos. While blockchains disrupt intermediaries that extract economic rent, they also removes the protective role that intermediary plays. The overall cost of is considerable and simply not worth it for most use cases, and it will not take forever for the world to come to realize that. But it remains to be seen if a digital SoV can replace gold - such an asset does not need to scale in tx capacity, but in mkt cap and liquidity. In that regard, BTC is scaling effectively.
Feb 12, 2022, 1:43:20 PM
Posted to EE380 Talk