

How many Bitcoins does it cost to maintain the Bitcoin network? - polymathist
http://letstalkbitcoin.com/blog/post/how-many-bitcoins-does-it-cost-to-maintain-the-bitcoin-network

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patio11
All of them. Literally. All Bitcoins were created via segniorage. However many
billion dollars of market cap as it exists today is the present value of
payment for past work in securing the future of the blockchain. The market
value [+] doesn't come from nowhere - it's a transaction fee paid by later
adopters to earlier adopters for the privilege of being able to transact on
their blockchain.

If future prospective adoptees believe that fee is too high, well, it can get
renegotiated down in a hurry, and will be.

[+] Slight mangling of terms here, since market value is number of coins times
last trade price, and that won't correspond to the sum of all dollar-
denominated capital inflows into Bitcoin.

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vijayboyapati
"Let us be quite clear: if Bitcoin was a cheaper or more efficient transaction
method, for-profit organizations such as large payment processors would have
forked it long ago and would likely already be using it internally in order to
shore up their margins."

This is quite a presumptuous lede. Bitcoin itself has only really been around
for 5 years, and of that only entered the public consciousness for about 2.
Large payments companies are like all large companies; they tend to be slow,
bureaucratic and have to deal with internal politics to get anything done. On
top of this, Bitcoin solved a long standing problem in computer science that
many people believed was not solvable (Satoshi's original post on the
cypherpunk list received a lot of skepticism when it was first posted). No
large company would have precipitously risked their entire technology stack on
something so unproven. Even Gavin Andresen is careful to say Bitcoin is still
"in beta". And only now are some large companies starting to accept bitcoin
_in payment_ , which is a much weaker step than replacing their internal
payment infrastructure. This stuff takes _time_ , and this cycle of optimism
and pessimism seems to repeat itself with every revolutionary technology:

T1. New technology X is going to change everything and the world will be
amazing!

T2 (only short while after T1). Nothing has changed, the world is still the
same, X is a failure.

...

TN: Whoa, we use X a lot now.

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Estragon

      > if Bitcoin was a cheaper or more efficient transaction method,
      > for-profit organizations such as large payment processors would have
      > forked it long ago and would likely already be using it internally in
      > order to shore up their margins.
    

This guy is clueless. The whole point of bitcoin is that it appeals to people
who want a decentralized medium of exchange. It's basically useless to large
payment processors.

~~~
mcherm
I don't think he is clueless, I think he is trying to make a point.

Some people have internalized the message "Bitcoin is good". They then draw
inaccurate conclusions from this message. Things like "Bitcoin is anonymous...
more so than cash!" (This is not true. Bitcoin is pseudonymous, but
transactions are very public and it offers LESS anonymity than cash.)

Some people have drawn the conclusion "Bitcoin is cheap... cheaper than the
standard ways that a bank manages their balances." This is also false. Bitcoin
actually requires significantly more computation (and thus cost) than simply
keeping a single centralized ledger -- exactly why and how is what the article
explains.

What Bitcoin DOES have going for it over the centralized ledger is that it
does not require trust in any individual participant in the system. Depending
on your goals, that may well be valuable enough to be willing to put up with a
large multiplier on your transaction costs.

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nazgulnarsil
The guy doesn't grasp the basic premise of PoW schemes. Yes, it costs close to
a Bitcoin to make a Bitcoin. That Bitcoin, once created, is a REUSABLE PROOF
OF WORK.

~~~
api
The real question is: how much does it _really_ cost to clear a transaction?
And how much of that cost is being hidden via being subsidized through a
speculative mining frenzy? What happens to real-world TX costs when mining
isn't a hot thing anymore?

~~~
icebraining
_The real question is: how much does it really cost to clear a transaction?_

Anywhere from a fraction of a cent to millions of dollars. Bitcoin
transactions don't have a fixed cost, it depends on how many people are
mining. More miners => increased difficult => higher costs.

~~~
gfody
There is an intrinsic cost associated with hashing and rehashing the
blockchain to secure the transaction. In terms of cpu time, electricity, etc.

~~~
icebraining
Yes, but if there were no more miners, you could process all transactions on a
single cheap laptop, which probably costs less than $1/day to run.

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21echoes
I've been saying this for over a year now -- BitCoin will not succeed because
it simply cannot offer competitive transaction fees. Merchants are upset
enough by the ~3% they're paying to VISA or AmEx on every swipe, they're not
going to move to a system that costs $30.

~~~
icebraining
That's not the true cost of accept VISA, since every time there's a
chargeback, the merchant is also the one who pays the bill, not only with lost
merchandising, time, etc but potentially fees (e.g. Stripe charges $15 per
chargeback).

~~~
21echoes
Sure, but chargeback rates are low enough (somewhere between 0.2% and 0.4% of
revenue for online merchants, much much lower for brick-and-mortar) that it's
inconsequential when comparing it to flat rate $30. Additionally, 3% is about
as high as VISA rates go -- WalMart, McDonalds, and the rest pay lower.

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kristianp
Increased centralisation, due to economies of scale for miners, is bad.
Peercoin offers a reward for operating a node (provided you have a balance of
Peercoins), due to its proof-of stake (POS) hybrid mining scheme. Bitcoin's
reward for operating a full node is having access to the network, but you
don't have any say in what transactions are confirmed unless you run a miner.

Peercoin seems better from this point of view, because it provides a method to
reward decentralisation. Economically, I have no idea. The POS blocks pay you
a % of your balance, inflating the currency, but at a much smaller energy
usage ( a fraction of one cpu)

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zokier
A more practical question would be how large are the CO2 emissions of
maintaining Bitcoin network.

