It's the same old narrative: "we must make Bitcoin use less energy"... Those who advocate this idea cannot see that it is a fallacy by definition. It's precisely that inflow of energy that gives Bitcoin its value.
This is a popular fallacy. Please help to correct others’ misconceptions about it, instead of spreading it.
Bitcoin’s value does
not derive from the inflow of energy. This gets causality backwards—and it doesn’t even make any sense.
Bitcoin’s value causes its energy usage, rather than
vice versa. The higher that Bitcoin’s market value is driven by factors that have nothing to do with its energy use, the more that miners are incentivized to spend on energy. This drives up the difficulty—thus closing a feedback loop that tunes Bitcoin’s BFT transaction ordering security, the effect, to follow Bitcoin’s market value, the cause. To the extent that miners thus do contribute back to Bitcoin’s value, it is strictly a second-order effect—not the primary cause.
Higher market value
needs higher security. Higher market value indirectly pays for the higher security that it needs. The system is subtle, and it’s brilliant!
A clear understanding of this is important for rebutting the misinformation and propaganda for POS. There is
no clear analogy between POW miners and POS stakers. On many key points, I can rebut the attempts to pretend that such an analogy exists. This is one:
Miners do not have any sort of economic primacy in Bitcoin’s POW system.Miners are essentially paid employees of the Bitcoin network. Their job is security-critical, so they are paid well; but they are neither the bosses nor the owners of the network, and they do
not create the network’s value as a first-order cause.
By contrast, POS essentially means a network by the whales, of the whales—for little retail moon-chasers to pour in their dollars, for the benefit of the whales.
This was the signal issue of the Fork Wars. Bcashers contradicted what I said; their attempted “flippening” was based on the fallacy that miners have some sort of dominant role on the network, economically and otherwise. Their theory failed. And my theory, set forth above, was proved in practice.
If I were wrong about this, then we would all be using Bcash or S2X as the “real Bitcoin” now.
A related key point:
The security of consensus validation in Bitcoin is independent of miners, for all purposes except for transaction ordering. Miners have a sharply limited function in Bitcoin: BFT agreement on transaction ordering, to prevent double-spend attacks. All other security is provided by the Bitcoin Core node you have running at home on a Raspberry Pi, consuming 10W of electricity at negligible cost.
This is not the case on POS networks.
On POS networks, so-called “validators” with high capital stake have total control of the blockchain.This was just proved in practice a few days ago: The Terra blockchain executed a contentious hardfork in 10 days (!), over massive community opposition. To exercise central authority over an allegedly “decentralized” blockchain, Do Kwon and Terraform Labs needed only the collusion of a relatively small group of large, wealthy DPOS companies. Imagine if Bitmain had that type of power over Bitcoin, and you get the idea of how POS really works!
The amount of energy has to be kept high, and should actually increase, for the price to be able to reach 6 digits and beyond.
Nope. When the price reaches 6 digits—the cause—then miners will spend enough on electricity to secure the transaction ordering on a network holding
trillions of dollars worth of value—the effect.
It is indeed a “closed-loop” system, as you say; but the loop runs in the direction opposite to what you suggest.