Bitcoin needs a reliable way for transactions to work in a single thread (so the block chain doesn't turn into a block tree), and we avoid stuff like double spends. That's proof of work, coupled with a reward (in currency).

To avoid hyper inflation, Bitcoin automatically sets the difficulty so we create one new block every 10 minutes. That limits the number of transactions, but we can remedy that by just making making blocks bigger.

Now the value of a successful block mining is the transactions it represents. Without them, you wouldn't have a means of exchange to begin with. But the reward is a new Bitcoin. And that new Bitcoin by itself does not add any value. It just inflates the currency a little bit, effectively taking value from all other bitcoins. The total value represented by all bitcoins stays the same.

Now we can discuss pros and cons: on the bright side, mining a block enables a bunch of transactions. With a maximum block size of 1MB and 1 block every 10 minutes, we get 7 transactions per second. That's the real value of Bitcoin to humanity: 7 transactions per second, give or take.

As for how much those 7 transactions per second cost, well… there's all the hardware and the resources required to make it, and there's energy. A back of the envelope calculation tells me Bitcoin spent about 8 Gigawatts of power in early 2020, and now it's more like 14. That's 2 Gigajoules per transaction, or about 500KWh.

That's way too much energy for way too little value. Hence my thesis that Bitcoin as a whole is so wasteful that actively participating in it (especially if you're a miner), is unethical.

I'm relatively new to Bitcoin, so any critical feedback would be very much appreciated, especially regarding my explanations for the rationale behind the block chain, and potential security risks posed by large "mining pools."

After doing all my research, the craziest part to me is that the point of all the mining is just to sort transactions. If this is correct, then it seems like there's got to be a cheaper way to do this... maybe ripple's digital currency?

Once someone finds a winning block, they're rewarded with a number of Bitcoin. This subsidies the cost that goes into mining that block. However the reward halves after every 210k blocks, so as the reward goes down, miners will prefer to only include transactions with high fee. Eventually the true cost of mining will reflect in the transaction fee.

And to add to the "it costs 657.6kWh to process a transaction": energy is used to produce a block, which contains an arbitrarily defined number of transactions. Right now, Bitcoin Core limits each block to 1MB, which works out to about 2k transactions per block. If Bitcoin Core were to increase the limit to say 10MB, the energy used to produce a block doesn't change, but the energy used to process a transaction goes down tenfold.

Almost all of their resources would be the same - the vast majority of their electricity bill is spent solving the block hash compute problem, the resources to actually process the transactions and send them are small compared to that.

The basic logic holds, that you cant make money if nobody uses Bitcoin.

I would still be curious whether it's just a matter of price, though. Surely at some point the miners couldn't resist processing the transactions?

Let's say, you have a lot of Bitcoins and your buddy is a bitcoin miner. You craft your transaction such a way that you put all your coins as transaction fee. You send your transaction only to your buddy. Your buddy picks it up and solves the puzzle afterwards. Fees will be converted to brand new coins.

You are correct that in Bitcoin there is less incentive to store old blocks. But in chains crafted to store data for a long time there is.

I am stopping this discussion here because you are too negative (almost aggressive) for my liking.

But it will be an interesting thread to read again in 20 years when all this has played out.

In an ideal world, imagine instead a variant of bitcoin that works like this:

* All miners do their hashing & number crunching for a second or so, then report their peak hashing rates to each other.

* Instead of one of them randomly mining the next block of bitcoin, the next block gets divided out proportionately according to hash rate.

* All miners then agree not to do any more hashing for (say) a minute or so.

* Process repeats.

Ta-da! We have a bitcoin system which uses a fraction of the electricity. If we were back in the days of mining on general purpose computers, then we could even put them to some other use at the same time as mining bitcoins.

Obviously, this has massive flaws. How to trust that everyone doesn't lie about their hash rates? Perhaps this could be solved by keeping the mining but setting the difficulty so that a block would only take a couple of seconds to mine. That way, there's still a numeric problem that requires real CPU work to solve.

Secondly, how to ensure that the systems don't do any more hashing for a fixed time? Perhaps the system could be tied to an unguessable source of randomness that won't be known in advance of the next block mining time. (This is the really tricky bit; you need a source that is trusted by everyone and not predictable or alterable or knowable in advance).