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    “ESG” is not defined in the article, it probably means environmental, social and corporate governance.

    “PoW” means proof of work.

    Article authors: please don’t use abbreviations without expanding or explaining them in the text; and please don’t use them in the title (or if you must, please expand them in the first paragraph).

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      Bitfury Group used its political connections to obtain property at below-market rates and now the Republic [of Georgia] has the distinction of having 10% of the country’s energy production siphoned off by Bitfury’s mining operations.

      Kazakhstan is allocating taxpayer funds to build more than a dozen mining farms.

      It sounds like this is influencing public policy in multiple countries. For a project with such anarchic and libertarian ideals, Bitcoin proponents seem quite okay with using public funds and societal infrastructure.

      Any cryptographer should be aghast. This is the most expensive and wasteful cryptanalytic project in the world, and its output doesn’t even prove anything useful about SHA-256. I personally sit awake at night imagining how to break SHA-256 just so that we might be able to destroy the BTC blockchain and buy ourselves a reprieve.

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        For a project with such anarchic and libertarian ideals, Bitcoin proponents seem quite okay with using public funds and societal infrastructure.

        Classic statist logic of “if a libertarian drives to the libertarian convention on public road, then he must be a raging hypocrite” non-argument…

        As long as states lay claim to every single square micro meter of land on planet earth, with men bearing guns ready to shoot, you cannot criticise anarchists or libertarians playing by the rules of states, because they are being coerced.

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          You’re very close: Indeed, we live in a society, and none of us could survive alone, without all of the useful things that we provide for each other.

          You have a false premise. There exists land which is theoretically habitable but which is not settled. The most famous example is Bir Tawil, pinched between Egypt and Sudan, occupied only by nomads. In general, the concept of terra nullius is at least a century old, and there are parts of Antarctica ready for any settlers intrepid enough to try living there.

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            And state and society are always the same, never one without the other, so no conflating the two is required?

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          For a project with such anarchic and libertarian ideals, Bitcoin proponents seem quite okay with using public funds and societal infrastructure.

          I think there’s a distinction that needs to be made between idealistic proponents and Bitcoin proponents who are interested in speculating on the bubble. And I suspect that the speculators vastly outnumber the idealists.

          As someone sympathetic but so far unconvinced by the idealists, I hope the bubble pops soon and we can evaluate their goals.

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            Bitfury Group used its political connections to obtain property at below-market rates and now the Republic [of Georgia] has the distinction of having 10% of the country’s energy production siphoned off by Bitfury’s mining operations.

            On the bright side, this insures against Georgia having a power shortage like Texas recently did. Bitcoin mining will shut down at what, 2x normal electricity prices?

            (Not to say that this makes up for the down sides).

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              Texas’s power demand was 50% higher than its supply (after the natural gas shutdowns). Bitcoin mining isn’t going to hedge against that.

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                Yeah, the hedge against that is to be part of a massive power grid, and to prepare equipment for extreme wether - and Bitcoin doesn’t incentivize that at all. Bitcoin is all about the cheapest average price, not reliability in extreme situations.

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            The problem with this argument is that it is entirely possible to do that with a non-proof-of-work system as well. In fact, a blockchain may not be necessary at all.

            I don’t think anyone would deny that centralized databases are more performant than distributed ones, pretty much across the board. The key tradeoff Bitcoin makes here is trustless immutability. Gold was our previous trustless money, and over the past couple hundred years all credit monies and fiat currencies have massively depreciated against it.

            Centralized ledgers do work, but they cannot provide an ironclad guarantee that the rules of the game will remain fixed into the future. We don’t even know what the supply of dollars will be six months from now. Bitcoin’s supply is predictable decades into the future.

            The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.

            — Satoshi Nakamoto

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              Gold was our previous trustless money, and over the past couple hundred years all credit monies and fiat currencies have massively depreciated against it.

              I recently read Valerie Hansen’s The Silk Road and she makes the point that gold was not the trustless money. It was more accepted than coinage, but you need steady, reliable trading partners to make it useful as currency. The real universal currency in the oasis kingdoms was bolts of cloth.

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                The real universal currency in the oasis kingdoms was bolts of cloth.

                Bolts of what cloth, from which producer, what quality, at what time was it produced?

                Meanwhile a chunk of gold is a chunk of gold.

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                  [Warning: speculation ahead]

                  I’m imagining the bolts to be silk.

                  Gold can be alloyed with base metals in ways that are hard to detect using technology known to the merchants of the Silk Road. Silk can be more easily assayed.

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                    I’m sure the oasis kingdoms would have been convinced by your brilliant analysis.

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                    Nice book, I will have to add that to my list.

                    Certainly, different commodities have served as trustless money at different times. Shells and pelts are two other examples. Gold eventually won out for global trade, but it wasn’t universal until fairly late in history.

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                    You’re falsely equating the space of “not proof-of-work” and “not blockchain” with “centralized.”

                    The claim is that one can achieve similar decentralized feats (depending on the goal) without requiring the planet killing compute power of a proof-of-work blockchain.

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                      Hmm, well it comes up twice. First they claim that FedWire can provide properties such as transaction finality and Sybil resistance. Which is true, it can!

                      This entire kludge is negated in FedWire because all participants are known: it is permissioned.

                      With 25 core nodes FedWire has a degree of replication, but it is definitely not permissionless. Most importantly, it can’t provide the guarantee I highlighted about the rules remaining fixed.

                      Second, near the end of the article they mention proof-of-stake, but it’s a bit of a throwaway line.

                      Through the usage of either permissioned systems (like an RTGS) or a proof-of-stake chain, the energy consumed by PoW chains did not need to take place at all. In fact, PoS chains can provide the same types of utility that PoW chains do, but without the negative environmental externalities.

                      They mention that the “transition to proof-of-stake is beyond the scope of this article” and don’t really dive into how PoS achieves any of these goals.

                      The fatal flaw with proof-of-stake is that 51% attacks are unrecoverable. If one entity ever manages to get more than half the PoS coins, they forever control the rules of the network. PoS networks can be decentralized, but they can never be permissionless. In order to get new coins, you have to buy them from someone who already owns them.

                      In contrast, PoW is both decentralized and permissionless. Anyone can participate in the mining process without a prior investment. 51% attacks can temporarily interrupt a PoW chain, but an attack is ultimately recoverable.

                      So to clarify my position I would add that it’s not just decentralization which is important, but permissionlessness.

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                      Centralized ledgers do work, but they cannot provide an ironclad guarantee that the rules of the game will remain fixed into the future. We don’t even know what the supply of dollars will be six months from now. Bitcoin’s supply is predictable decades into the future.

                      Being able to reinterpret or change the rules is a feature, since it makes it possible to fix mistakes that were made at the inception of the rules. Generally speaking, if you had a traditional contract where a random participant can just set every other participant’s stake on fire, you can probably convince a legal entity that wasn’t the intention and roll back the contract without affecting everyone else using that currency. If the use of the system goes from “currency you can use to buy pizza, drugs, fake IDs, or murder” to “thawing the tundra and flooding my neighborhood so a few really rich guys get even richer” maybe the rules should change, and in a way that doesn’t require the few really rich guys’ consent.

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                      I was glad to see FedWire mentioned because that comparison is a good one — a slower and more secure value transfer network on the bottom (FedWire, Bitcoin) with faster value transfer networks built on top (Visa, Lightning).

                      Then I was disappointed to get to this paragraph:

                      Simply: the Bitcoin blockchain only transfers and secures bitcoins. It does not move actual money like Fedwire does. In point of fact, all ramps into and out of the Bitcoin network necessarily involves connections and hooks into traditional financial infrastructure. Bitcoin is co-dependent on traditional finance, not the other way around. In other words, Fedwire can (and does) live without Bitcoin but Bitcoin intermediaries cannot live without Fedwire or other RTGS systems.

                      By denying that Bitcoin is “actual money,” the author smuggles in a predetermined conclusion.

                      Bitcoin works fine completely standalone. Many people choose to exchange their dollars/euros/etc for Bitcoin and vice-versa, but those on-ramps/off-ramps are not what I would call “load-bearing” aspects of the Bitcoin value proposition. FedWire moves dollars and Bitcoin moves bitcoin. It would be absurd to argue the Euro is not real money because their Target2 network only moves Euros.

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                        The main criterion of a traditional currency is that it can be used to pay dues to society, typically by paying tax in coin to the issuer of the coin. In that sense, Bitcoin isn’t a currency, but a property which is produced from electricity.

                        An interesting corollary is that a custom cryptocurrency running with a DAO might well qualify as a genuine currency, if the DAO were to use that currency to fuel its goals. It’s hard to imagine exactly how this would work, but it should be akin to taxation with fiat currency; the DAO would encourage commerce within its domain, encourage its coins to travel far and wide, and levy seigniorage in order to accrue non-coin wealth.

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                          I wonder if Bitcoin itself meets your criteria for a DAO? The block subsidy (seigniorage) as well as fees (akin to taxation) encourage mining, which fuels the goals of 1. transaction finality, and 2. widespread permissionless coin redistribution.

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                          Bitcoin is not money by principle of “bad money drives out good”. Only suckers spend somthing that appreciates while they hold money that deprecates.

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                          Can we just rename bitcoin to murdercoin already? Here’s Tim May from the 90s, telling us what cryptocurrency will be used for in The Cyphernomicon:

                          begin quote
                          

                          16.10.4. Will I be sad if anonymous methods allow untraceable markets for assassinations? It depends. In many cases, people deserve death–those who have escaped justice, those who have broken solemn commitments, etc. Gun grabbing politicians, for example should be killed out of hand. Anonymous rodent removal services will be a tool of liberty. The BATF agents who murdered Randy Weaver’s wife and son should be shot. If the courts won’t do it, a market for hits will do it.

                          • (Imagine for a moment an “anonymous fund” to collect the money for such a hit. Interesting possibilities.)

                          • “Crypto Star Chambers,” or what might be called “digilantes,” may be formed on-line, and untraceably, to mete out justice to those let off on technicalities. Not altogether a bad thing.

                            end quote

                          Technology is not value neutral, and the values encoded in this one are a love of death and destruction, rather than a love of life and creation.

                          Also note the antidemocratic impulses of the anarcho-capitalist in that quote.

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                            That would be monero, wouldn’t it? Bitcoin is difficult to anonymize

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                              I think bitcoin is easy to use anonymously if you use a laundry.