The amendment is short and explicitly notes that that the following categories do not count as brokers:
(A) validating distributed ledger transactions
(B) selling hardware or software for which the sole function is to permit a person to control private keys which are used for accessing digital assets on a distributed ledger, or
(C) developing digital assets or their cor- responding protocols for use by other persons, provided that such other persons are not cus- tomers of the person developing such assets or protocols.
A proper CO2 tax wouldn't be disruptive to bitcoin, bitcoin only cares that everyone pays the same price for electricity. If the absolute cost of electricity goes up, nothing changes.
The cost of electricity (coupled with the rewards and cost of hardware) changes how profitable mining is. The more profitable the more players. The more players the more transaction throughput. This is exactly why miners have bought powerplants and why they operate in locations with cheap electricity, because it makes it more profitable for them. Bitcoin mining is directly related to the cost of electricity.
That said, not every cryptocurrency is reliant upon brute forcing hashing algorithms to verify.
Right people say that, but here in the real world we usually define some sense of sufficiency. Just adding more "security" by burning up all the worlds coal at some point has no meaningful benefit. This is just a nice narrative. Security is good -> more security is better no matter the externalities is a terrible way of looking at the current situation.
We don't make seatbelts out of titanium 8 inches thick with their own airbags when they're mounted in a go-kart.
When the hash rate dropped what, 75%, off the back of the China exodus literally nothing happened.
tl;dr: Same transaction throughput, same security, just less efficient.
Most coiners conveniently ignore block reward when calculating the cost of a transaction - that's your missing factor. Consider that the only reason you need to secure the blockchain is because it is mutable, if it were immutable it would be sufficient to simply publish it with a known hash. Ergo, 100% of the energy consumption of the Bitcoin network is attributable to transaction processing and therefore can be quantized into and proportionally assigned to transactions.
The value of the block reward is proportional to the price of bitcoin, and this block reward determines the ceiling of the consumption of resources in mining. The floor is determined by prisoners dilemma and so likely approaches the ceiling at the limit.
So yes, the transaction cost does scale with consumption of resources, albeit in a tail-wagging-the-dog kind of way, because the price of the block reward changes with price allowing more resources to be consumed.
Currently the actual cost of a Bitcoin transaction is $2.44 in direct costs + (6.25 * 41000)/2750 = $93 in indirect costs, so right around $95.44 - and that's using I believe the maximum possible transactions per block, the reality is it's more expensive still.
Move over Bank of America, there's a new king in town.
You can do 1+ million lightning network transactions that will settle as 1 transaction on the BTC blockchain, so ~$93/1,000,000? Sounds amazingly cheap for uncensorable transactions.
ESG people are trying to solve something that is already solved. POW is here to stay and will scale tremendously well as we all move to layer 2.
As I mentioned upthread I can't possibly disagree more. PoW is designed specifically not to scale. The higher the price the more it wastes. It's an embarrassingly poor technology.
You completely synthesized $93/1000000 obviously, and as we discussed it would take 75 years to open a channel for everyone alive today and $300,000,000,000.
Sorry, that's not how it works. The network adapts the difficulty to target 1 new block every 10 minutes.
More mining → higher difficulty → higher electricity usage per block.
The transaction costs paid are independent of difficulty or number of miners. Transaction cost depends on the demand. A block has a limited size in bytes. If more people want to send transactions than there is room in the current block, the miner that mines that block will include the transactions that include the highest fee.
When sending a transaction, you can choose that fee. Higher fee → higher chance of being included. Bitcoin clients will usually calculate a reasonable fee for you, based on the demand.
Miners don't set the transaction cost, they can only maximize fee revenue by picking the highest fee transactions at that time in the mempool. So, if it becomes unprofitable or not profitable enough for the taste of the miner, hashrate will go down, which will lead to a difficulty adjustment, which means overall electricity usage per transaction goes down.
The network self-adjusts difficulty so a block is mined roughly every ten minutes. A block has a maximum size of data in it, pretty much the maximum amount of transactions per block. As long as there aren't massive fluctuations to the mining rate, the rate of transactions will remain relatively constant.
As long as there is free space in the blocks, average transaction fees will remain low. If there are a lot of transactions in the mempool waiting to be included in a block, users will need to submit transactions with higher related fees to ensure they get picked to be included in a block soon.
Remember, miners don't necessarily set transaction fees. Users choose what they're willing to pay for their transactions, essentially placing a bid. Miners choose the transactions that maximize the fees per block. Miners always want as full of blocks as possible because there will only be a block roughly every 10 minutes.
ETH PoS mainnet transition is underway and will be completed early 2022. With this holders of ETH will be able to earn fees from transactions, just by running an application on their standard normal computer. The only encouragement you need to move off of POW is profit motive.
Hasn’t PoS been something “in the works” for ETH for something like 6 years now[1]? I don’t think anything guarantees its delivery in early 2022, it all seems like hopeful speculation until they deliver something.
This time it's very different. There are billions of dollars of ETH locked up in the staking contract, and proof of stake has been live and operating on the beacon chain for many months.
it took a long time to work it out, but it is running on the beacon chain and the consensus upgrade spec has now been merged: https://github.com/ethereum/EIPs/pull/3675
Haven't they been saying POS will be "ready soon" for years? Seems like maybe vaporware used for hype?
"The Ethereum proof of stake date has been set for December 1, 2020.
While the proof of stake Ethereum date was originally set for January 2020, this deadline was missed."
So do you think Eth miners will just write off their expensive GPUs and throw them into trash bin? It is rather obvious that they will switch to either fork (less probable) or to next best token (more probable).
There's plenty of PPOS systems that aren't as resource intensive. ETH2 doesn't require POW. Algorand is PPOS and built a contract into the leger to offset carbon emissions for the electric costs, making it carbon neutral or negative.
But the core principle of Proof of Work is wasting energy. If it takes from green sources, that just means those green sources won't be available to push out polluting ones. Combine this with buildup of polluting sources as backups for intermittent ones...
1. There is nothing efficient about wasting that much electricity on securing a ledger that can handle single-digit transactions per second.
2. The needs of central banks don't start wars, the needs of politicians, warhawk nationalists, and the needs of modern industrial economies do. [1] Unless BTC somehow magically gets rid of politicians, nationalism, or of our addiction to oil, that's not going to change.
[1] The US didn't invade Grenada because of the Fed. The USSR didn't invade Afghanistan on behalf of Gosbank. China didn't invade Tibet to fix the balance sheet of the PBC. Vietnam didn't fight a war with its occupiers, and then a civil war, and then a war with Cambodia, and then a war with China, because it was unhappy with the Dong to USD exchange rate. The US participated in that civil war because of domino theory, not because of its departure from the gold standard. The list goes on and on. [2]
[2] Wars aren't fought over currencies, wars are fought over territory, pan-ethnic nationalism, to increase the internal popularity of a warhawk, to maintain a hegemony, to impose one's religion on another, to expel unwanted people from a territory, etc, etc, etc. Bitcoin solves none of these problems.
Layer 1 transactions are not necessarily 1 to 1 transactions. They can be settling millions of transactions in Layer 2 (lightning). It helps to think of layer 1 transactions as a settlement layer.
Wars are used to force citizens to give up their labour for free to the state. In a country with financial mismanagement wars can be used to erase debts.
The US does and will go to war if it feels its dollar/oil hedgemony is threatened. if the dollar demand/circulation outside US falls for any reason, it will cause hyperinflation within the US economy. So they have to constantly threaten/intimidate other countries.
> Wars are used to force citizens to give up their labour for free to the state.
Wet streets don't cause rain, and wars aren't started in order to collect taxes. Wars are started to pursue particular goals, many of which I have listed in my prior post.
> The US does and will go to war if it feels its dollar/oil hedgemony is threatened.
This is an interesting, and oft-repeated theory, that, unfortunately does not survive contact with history. It's not a strong explanation for the majority of the conflicts that the US has been involved in. It is not remotely an explanation for the majority of the conflicts that other countries are involved in.
Which dollar/oil hegemony is Russia trying to maintain in Crimea? China in Tibet? USSR in Afghanistan? Argentina in the Falklands? Sudan in Darfur? Israel in Lebanon? Saudi Arabia in Yemen? ISIS in Syria?
Never mind that BTC doesn't do a thing about the dependency of industrialized sociaties on oil, minerals, fresh water, and other limited material resources.
Thermal efficiency is an absolute - units of energy expended vs work achieved. There is an alternative: proof of stake. Or removing certain constraints on the problem space. A different approach to solving the problem is absolutely an alternative. Visa is an alternative. The extant banking system is an alternative.
You can't say how efficient it is without calculating how layer 2 scaling affects per transaction energy usage. You can do millions of layer 2 transactions that eventually settle as 1 transaction on the main chain.
You can do “layer 2” transactions that settle on ACH or wire transfers, like Venmo or square cash, what’s your point? This is just more shameful greenwashing to pump up bag.
You would have to do literally millions per on chain transaction using bitcoin to match ACH, visa or a proof of stake chain.
This is of course after you consider opening a single LN channel for every human on earth would take 75 years and 300 billion dollars if the chain did nothing else. Like putting in a request for a Soviet phone line. LN has quadratic routing efficiency and is boat anchored to garbage.
>you'll quickly realize that the end result is the little guy paying the actual tax via inflation while the big guy actually enjoys larger profit totals
Yes. If the currently available options intended to fix a particular problem don't actually fix the problem while at the same time make the offending business more powerful while making the little guy less powerful...then yes, doing nothing is clearly a better option in the short term.
>If the currently available options intended to fix a particular problem don't actually fix the problem
Sounds like your expectation is too high. Either something stops climate change in its tracks, or it's not worth doing. Small incremental improvements? Nah, it won't solve the problem so let's not bother.
>doing nothing is clearly a better option in the short term.
In this case, I think you could work around that, as they could implement a high capital gains tax rate for cryptocurrency sales. Then it would only impact people who mine.
Obviously it seems they are going in the exact opposite direction on this, though...
Mining is reportable as ordinary income in the US.
Cryptocurrency earners have to report ordinary income taxes as well as capital gain/loss taxes.
Its not that hard, less than ideal, its also easy to immediately convert to USDC or fiat automatically, or find other deductions to reduce or eliminate the tax burden.
The parent is simply pointing out that all consumption taxes are regressive. A CO2 tax by itself is a tax on the poor, especially the rural poor who have longer commutes and are more dependent on automobile travel.
A CO2 tax is only fair if it's paired with progressive tax breaks in other areas and/or subsidies for transition to renewable energy. An example would be a progressive subsidy for electric vehicle purchases and for upgrades to CO2-heavy (coal) electricity generation infrastructure in poorer areas.
A CO2 tax and rebate is progressive. The poorest people would receive more back in a rebate than they pay. But the biggest CO2 users would pay way more than they receive back.
While I generally like CO2 tax/rebate/cap-and-trade systems: given how inefficient and polluting many low-cost techs are... not sure I can agree with that, particularly on the small scale down to individual people. Individuals have the least agency on decisions like this, since they have next to no purchasing power. Though we are talking about bitcoin, which does raise the technical/money base-level a fair bit.
Wouldn't it be easiest to tax some of the raw materials that go into fuel production, rather than tracking every fuel use? In that case, the CO2 tax will naturally fall equally to everyone, including individual people. The rebate is just there to cancel out the effect of an inherently regressive but technically convenient way of doing things.
That's generally the idea of a flat tax, yeah. Tax everything at point-of-collection/creation (e.g. "you cut down a tree" or "you burned a log") or point-of-import (likely offset for similar taxes collected by the origin country), and there's no need to track anything beyond that point. E.g. re-use or re-selling is (CO2-)tax-free because it doesn't change the net input/output of the whole system.
Which rarely happens in practice, and we're so far from accurately taxing all these processes that it isn't even a dream of a dream. It's mostly tackling big targets, since that's where a ton of the impact-per-dollar-and-per-outrage can be found.
The math on the PoW energy FUD just doesn't check out.
- At current levels, bitcoin uses very roughly 0.1% of global electricity but electricity only represents 25% of fossil fuels emissions so current PoW contribution to global emissions = 0.025%, ie a rounding error. This issue is currently a total red herring. Now let's project into the future.
- bitcoin total addressable market cap if it took over the entire global monetary world (full global monetary premium): ~ 250tn or 300x from here implying a worst case outcome of 7.5% of global emissions, IF this happened TODAY and hashpower linearly tracked price. This is impossible off the bat because building out that infrastructure would take at least a decade. But more importantly it will take a decade or two for price to get there, by which time...
- The block subsidy will have gotten cut by ~ 10 (three halving cycles). Transaction fees might grow of course so let's say 5x lower which gets us back to 1.5% of global emissions.
- Add to that the following:
- 30% of CURRENT electricity production is stranded / wasted. All terminal bitcoin energy usage needs to do is tap into 5% of that to be emissions neutral. And it's heavily skewed towards tapping into that exclusively as that's the cheapest source and PoW is location neutral.
- the proof of work energy mix skews towards not only wasted / stranded but renewable which is trending towards being the cheapest form of energy.
- green power production is on an exponential adoption curve and enough sunlight hits the earth to power humanity for a year. Clean energy is there in amounts dwarfing societal needs, it's just a matter of harnessing it. This doesn't even include geothermal or nuclear.
- At an even higher level, if you got to this point, you would have replaced all the fiat systems in the world thereby:
- eliminating the energy spent on maintaining the fiat system which is easily more than 1.5% of global emissions
- flipping the world into a hard money world that is no longer incentivized to consume at all costs (read misallocate capital) ergo hugely reducing conspicuous consumption / GDP growth at all costs which is arguably the biggest driver of unnecessary emissions
- This final line of thought would have you conclude flipping to PoW would be emissions negative in the long run, but you don't really need to go there though, the energy numbers alone make this at best a chronically misunderstood narrative.
>At current levels, bitcoin uses very roughly 0.1% of global electricity but electricity only represents 25% of fossil fuels emissions so current PoW contribution to global emissions = 0.025%, ie a rounding error.
How does this argument make sense? Let's split up the world's energy consumption into 0.025% emission sized chunks in some arbitrary way we choose. Does nothing then make any difference, since everything is just a rounding error? The question is, does bitcoin provide value for the emissions it generates? For what it's worth, estimates seem to put the current usage at around 0.6% of total worldwide energy consumption.
I see your point but my first bit just meant to highlight the unfair disproportionate energy attention PoW has been getting specifically vs just about any other use case.
I don't personally think you should be making moral judgements about energy use though. Let the market decide what's a good use of energy. If you have a carbon problem, tax / regulate that, PoW won't care. It will adjust through difficulty adjustments.
But if you are worried about PoW boiling the oceans if left unchecked, the numbers should comfort you it's at worst going to tap mostly into wasted energy / mostly renewable and probably not have a noticeable impact even extrapolated to a peak outcome (and probably even be a net positive).
You make a lot of claims here but I don't see anything in your post to back up the numbers. I'm too lazy to go do this research myself so I'm left as a result with defaulting to disbelieving you.
I've been following this topic intensely for years and am very comfortable with these numbers but fair enough. I agree I should reference some official sources which I'll try and dig back up. Happy to discuss any assumption in closer detail though.
> eliminating the energy spent on maintaining the fiat system which is easily more than 1.5% of global emissions
Absolutely. It's impossible to accurately account for, but a significant part of why the US Military Industrial Complex is so over-provisioned is to maintain dollar hegemony. 800 international US military bases, the Iraq war, invasion of Libya, force projection exercises by the navy, etc. Being the world police is expensive (in both dollars and CO2), and we wouldn't need to be if we weren't trying to tenuously maintain our status as world reserve currency.
"the DOD is the world's largest institutional user of petroleum and correspondingly, the single largest institutional producer of greenhouse gases (GHG) in the world. 5 From FY1975 to FY2018, total DOD greenhouse gas emissions were more than 3,685 Million Metric Tons of CO2 equivalent."
Certainly the US military has other goals besides maintaining dollar hegemony, but if the dollar wasn't the world reserve currency there would be less need and funds for maintaining such a bloated amount of power.
[quote]if the dollar wasn't the world reserve currency there would be less need and funds for maintaining such a bloated amount of power[/quote]
Citation needed.
You really think that other countries, and businesses and individuals in these countries store their savings and denominate their contracts in US dollars at gunpoint?
You are being superlative, but I absolutely believe that the reason we have a bigger military than the next ~10 countries combined is that we want to be the dominant superpower. And part of the desire for that dominance is maintaining the USD as the world reserve currency.
Whenever a country tries to move commodity trades away from the dollar (iraq oil, iran oil, libya gold, venezuela oil) coincidentally pretexts for military operations against them start being manufactured.
> And it's heavily skewed towards tapping into that exclusively as that's the cheapest source and PoW is location neutral.
Are there any big miners who are known to be using stranded/wasted energy that would be produced anyway, as opposed to operating stranded plants that would otherwise be shut down or have capacity reduced? I only really follow the publicly traded miners (and with a bearish thesis), and I've seen a lot of miners getting dedicated coal/natural gas capacity but very little in terms of recapturing wasted energy.
And these are (mostly) US-based public companies, so they have the most to gain by projecting an ESG image.
Also note that this crypto tax-reporting provision was slid into a huge bipartisan infrastructure deal. It really never should have been included in this legislation in the first place.
Exempting actors in the crypto space who facillitate crypto usage without ever having custodial control of the funds makes a lot of sense. (Just like envelope manufacturers shouldn't have to register as money transmitters because people sometimes mail cash.) The provision that was slid in was nonsensically bad.
> this crypto tax provision was slid into a huge bipartisan infrastructure deal. It really never should have been included in this legislation in the first place.
Why not? The infrastructure is being paid for in part by this tax. They're fundamentally linked.
I think a lot of people, myself included, would like bills to be hyper focused and ban the use of riders.
There are a few reasons for this. One is that it is easier to keep track from the public perspective. A title should reflect the contents of the bill (in this case it is not obvious that bitcoin regulations are part of infrastructure). This could help reduce confusion and manipulation. It helps with transparency because it reduces the cognitive load (Note we can still talk about a "plan" or "package" that is a group of bills and so many conversations would stay the same).
The second part is that it helps reduce squabbling over nuance. A current bill might be 99% agreeable but that 1% is pretty contentious. If it was more compartmentalized then we could pass 99% of those things and get them in place faster rather than throwing the entire thing in the trash and restructuring (which often links back to the first point). This also reduces some of the toxic nature in politics where sometimes politicians add a component to nuke their own proposals so they can complain about it to their party's constituents.
This can probably be improved upon a lot but I think highlights the frustration with how things are done today and people are looking for systematic changes to fix those problems.
Without riders and earmarks there's no way to get someone to support your bill if they don't like the concept to start with. There's no downside for not supporting a bill, so cutting half of its provisions will still half to vote against. Riders and earmarks allow politicians to secure minor wins that they can sell to their electorate as the reason for supporting a bill.
And most of these things would simply never pass as standalone bills, being too small and local for Congress as a whole, and too expensive or cross-jurisdictional for state governments.
> Without riders and earmarks there's no way to get someone to support your bill if they don't like the concept to start with.
Why is this a problem? I see it as easier to call out politicians in public. Prevent the problems that are essentially: "Despite the 'Puppy and Sunshine' bill actually providing everyone with puppies and sunshine, we can't support it because it also summons the literal anti-christ to destroy the Earth. The puppies and sunshine is simply a trick to summon the anti-christ."
IMO doing so makes the bill far more transparent _to the public_.
> Riders and earmarks allow politicians to secure minor wins that they can sell to their electorate as the reason for supporting a bill.
I do not understand why such a thing could not happen without these nor with packages (as defined above).
> And most of these things would simply never pass as standalone bills
> "Despite the 'Puppy and Sunshine' bill actually providing everyone with puppies and sunshine, we can't support it because it also summons the literal anti-christ to destroy the Earth. The puppies and sunshine is simply a trick to summon the anti-christ."
Was this edgy strawman really useful?
> IMO doing so makes the bill far more transparent _to the public_.
How? The public that are engaged are still almost entirely getting their knowledge through the media, and they won't cover small bills due to lack of journalists, and more importantly, because readers aren't interested in them. I'm not sure who this mythical cohort who want to understand more about e.g. legislation that involves federal spending in Ohio, but can only do so by looking at every single small bill until they find "The Providing Ohio Reinvestment Kickback Bill" on page 23.
> I do not understand why such a thing could not happen without these nor with packages (as defined above).
Because there is only so much time available to get bills passed if nothing else, a bill focussing solely on niche and/or local issues are going to get bumped down the queue at every stage - in committee, getting scored for budgetary implications, getting floor time etc. - and there are two houses to make it worse.
> Do you not see that as a problem?
Well that depends on what it actually was of course.
The US system of government is at every level designed to prevent getting anything done, and so lots of things get lumped onto big bills that are likely to pass. I mean there's even a literal "omnibus bill" FFS. But the alternative is that "$1,000,000 for additional spaces at homeless shelters for transgender youth" isn't ever going to get to the floor, let alone pass in the House and get 60 votes in the Senate.
This isn't actually a (new) tax, it's a surveillance framework intended to support stricter enforcement of existing taxes. So far as that goes it's an added expense (mostly externalized) and not likely to pay for anything. The claim is that there is $28 billion of tax evasion going on which all this extra reporting would supposedly curtail–assuming all else remained equal—which is pure conjecture and not something that should be relied upon as a funding source.
> this provision generates no revenue. It's only about data collection.
I would want to see an independent analysis of this claim.
Increasing reporting requirements can generate revenue. There is a lot of unreported income. Given the culture around crypto, it isn't unreasonable to assume there is more of that going on there than baseline.
If the reporting requirement was implemented, yes it would provide the IRS with more data that could be used to catch tax evaders. However, they should be able to get nearly all of the information they need from the USD-BTC edges (exchanges).
Effectively, I think what would have happened if this was enacted would be that all legitimate mining operations would move out of US, and the IRS still wouldn't get much data, just less tax revenue because those profits are no longer occurring on US soil by US entities.
> (C) developing digital assets or their corresponding protocols for use by other persons, provided that such other persons are not customers of the person developing such assets or protocols.
The last qualifier seems poorly worded and becomes too broad. So (extreme example) a consulting agency developing a value-exchange platform to be run on a private chain in a customer corporate network would not be exempt. Bringing the act of building and selling software (or a SaaS, as long as the service itself doesn't custody user funds) is nonsensical. (B) is also a bit too narrow to address this.
Does this include or exclude DEXes? It sounds like C) could mean that DEXes are not included (which would be good), but I'm not entirely clear on the legal definitions of some of these things.
https://www.finance.senate.gov/imo/media/doc/Wyden%20Lummis%...
The amendment is short and explicitly notes that that the following categories do not count as brokers:
(A) validating distributed ledger transactions
(B) selling hardware or software for which the sole function is to permit a person to control private keys which are used for accessing digital assets on a distributed ledger, or
(C) developing digital assets or their cor- responding protocols for use by other persons, provided that such other persons are not cus- tomers of the person developing such assets or protocols.