"distributed group of participants to take it upon themselves to temporarily and physically enforce"
Do you think I should risk my life to enforce your property rights? I have two kids and I want to watch them grow up, I can't die because someone with a gun claimed ownership of a stranger's house.
Without an organized government of some kind, society does not scale beyond about 200 people. We just cannot keep track of relationships and trust and whatnot beyond that. I live in metropolitan area with a population of 25 million people; a distributed group of vigilantes enforcing property rights is not even remotely workable here, and this is not even the largest city in the world. My in-laws live in a suburban area with a lower population density -- their town has a population around 20 thousand, and that disorganized group is not going to work there either.
> Do you think I should risk my life to enforce your property rights?
I have no expectations of you personally if you wanted to protect my property rights (if i had claims on such and had a tx posted for someone to secure such), but I cannot control if an address controlled by a multisig of psuedoanons sends a tx to a contract where they provide proof that something has been secured according the rules of decentralized AMM market settlement contract and they get their payout. I cannot also control whether people make leveraged side bets on that happening or not, and I cannot control if those making leveraged side bets try to collude with the multisig that submitted the a tx for settlement.
> I live in metropolitan area with a population of 25 million people; a distributed group of vigilantes enforcing property rights is not even remotely workable here, and this is not even the largest city in the world. My in-laws live in a suburban area with a lower population density -- their town has a population around 20 thousand, and that disorganized group is not going to work there either.
I'm pretty sure that if they pay is high enough for the people that controls the multisig, and they have the skills and resources to execute, they can get where they need to be, and be gone when its finished, while accepting some risk that who they are up against may be prepared for it.
The people in charge of enforcement would become a de facto government. What distinguishes a government from any other organization is the monopoly on violence (more precisely, the monopoly on deciding when and how violent measures can be employed), and enforcing property rights sometimes requires violence (e.g. if someone refuses to leave your home, eventually the police will have to physically remove them against their will).
Blockchains do nothing at all to help anything about this situation. You could use a blockchain to manage ownership, but it would be far more efficient to use a central database of some kind that is held by whatever organization is responsible for enforcing property rights. In the end you are not going to care how your ownership is managed, you are only going to care that, if someone tries to violate your rights, the police will come and protect you. You need to trust that the enforcement will actually be applied, but what difference does it make if you use a blockchain?
In a decentralized society, there may be multiple organizations deciding on when and how violent measures can be employed — and they could be as small as one person. If each organization thinks a different person is the owner of a property, that would be very unstable. However, if they all agree that a certain blockchain implementation of deeds is what decides ownership, then they can co-exist more peacefully. Not saying there aren't other hurdles, but that is certainly one of the big ones.
That does require that most of the society agrees on some set of principles, but that's true of a centralized government too: most of the society has to agree they are legitimate. Going back to the decentralized society, everyone would agree that the blockchain determines ownership and currency. So, an organization that accept those is viewed as legitimate, one that doesn't is illegitimate. In that scenario, illegitimate organizations would be less stable than legitimate ones.
So, the existence of a system that allows people to all agree in things like currency and ownership without giving that power to one specific organization is a step forward into making decentralized societies possible. Is it sufficient? Most likely not.
It is indeed not. I'm not claiming that all problems are solved and that decentralized governments are easy or even possible. Just that blockchains solves some of the problems in that area.
> In a decentralized society, there may be multiple organizations deciding on when and how violent measures can be employed [...] a system that allows people to all agree in things like currency and ownership without giving that power to one specific organization
What, did you read Snow Crash as u- in stead of dystopian? What's to say they'll all agree?!?
The important point is what happens when two of those organisations disagree. What happens when I have Mr Chen's Robot Dog Republic saying I own a property -- because they have the blockchain to prove it -- and evicting you on my behalf, while you have the Cosa Nostra Pizza Delivery Co. saying you own it -- because they have the blockchain to prove that -- and evicting me on your behalf?
Civil war, that's what happens.
Decentralising stuff that everyone needs to agree on sucks.
You cannot get your hacked bitcoins back even if you are the government with police and army. Lots of things that government does can be replaced with a smart contract. Hey, you can even have direct democracy - vote with your citizen token for a change in a smart contract and voala the law changed and immediately enforced.
It could be the norm. It all depends on how the society is organized. If there is a system of law and a court and you prove someone stole something from you, the government will coerce that person to give you back or pay some sort of fine. For instance, even if the system says you own those bitcoins, a court can rule that you give it back to the person you hacked and also pay for the costs of the case. The same goes for smart contracts. A court may rule that the contract is invalid and require one of the parties to pay the other, regardless of the smart contract. So, that technology doesn't, in and on itself, revolutionize any of that. However, it could be made into law that a court cannot revert a smart contract or that the contents of a digital wallet belongs to whoever has it, regardless of how it was obtained.
I am skeptical of the claim that real estate generally appreciates over time, at least in real terms (inflation-adjusted). Yes that has been the trend for a long time and especially in popular areas, but there is no reason to think the trend will continue.
Current residential home prices in the US are far above their 100 year inflation adjusted trend. A few standard deviations above IIRC, and far above where they were in real terms at peak of the 2000s housing bubble. That's not adjusted for interest rates though, which explains some of the deviation.
So homes have appreciated strongly in real terms in the last decade, but it's likely they will revert to the mean from here (whether it be quick or more drawn out).
However you're correct that historically homes mostly follow inflation, and aren't appreciating in real terms. It's only in the modern era where that trend has changed, probably due to more investor involvement and Fed trying to stimulate growth aggressively.
But it's important to note, even if a home appreciates only at the rate of inflation, usually the buyer only puts 20% down, so from their perspective they are earning 5x the rate of inflation in equity.
Pretty lucky to those that lived in 10% interest rate times that were able to buy all sorts of property cheap and refinance at low rates later.
Its important to realise that homes now != homes of the past.
Modern homes are typically an improved product, better features, and also better environmental facilities. Thus they should be increasing beyond inflation.
The problem is that people need houses to live in now. I can’t suddenly not need a house to live in simply because I feel very strongly that the trend of real estate appreciation won’t continue forever.
People sometimes take out a home equity loan, which is kind of like going in reverse with mortgage payments -- you are going more in debt, using the equity in you built up with previous mortgage payments. If the value of your home increases you have access to a bigger line of credit.
A common use for such a loan is to pay for renovations, which can further increase the value of a property. Another typical use is "home grown leverage" i.e. using a home equity loan to pay for some investment, which is commonly done with rental properties (often to make the down payment on another mortgage; the hope being that you can collect enough in rent to have money left over after making monthly loan payments). For a truly US-only use-case, people sometimes wind up having to use a home equity loan to cover medical bills after a major emergency or accident, though I think this was more common before the Affordable Care Act and will probably become even less common with surprise billing being mostly eliminated.
Yes. Fannie and Freddie sell those loans to investors, they don't hold them. They just insure them against defaults. But prepayments are still investors' problems as far as I'm aware.
The Gses bundle up the mortgages and sell mortgage backed securities to investors. The prepayment risk flows through to those investors. As an extreme example, some securities they separately sell the principle payments and the interest payments. So if you bought the interest payments on a bunch of mortgages you stop getting paid as people prepay.
The folks who bought the principle payments are very happy to get paid early.
Your citation is full of errors and fallacies. More efficient mining rigs is basically irrelevant, because Bitcoin miners have no incentive to reduce energy consumption while computing the same number of hashes; it is to compute more hashes using the same amount of energy. So as long as you know the lowest possible energy-per-hash of all available mining hardware you can compute a lower bound on Bitcoin's energy utilization.
Then comes the claim that we do not have data on the energy consumed by mainstream finance, but in some cases we do and it really drives home the point about Bitcoin. Visa emitted over 1000 times less carbon in 2020 than Bitcoin, and processes over 1000 times more transactions per second (7 for Bitcoin versus 1700 for Visa). So Visa is at least a million times more energy efficient than Bitcoin as a transaction processing system.
Then the "pushback" claiming that it's really OK because Bitcoin mining can be switched on when energy is abundant, which could, maybe, possibly, subsidize the cost of renewables. Except there are alternatives that also could be switched on only when there is an energy surplus -- beginning with any energy-storage technology, of which there are many at different stages of development. Every joule devoted to Bitcoin is a joule not charging an electric car, and every dollar spent on Bitcoin is a dollar not spent developing better storage. There are also industrial processes that could be selectively turned on during periods of abundant energy, like electric arc furnaces widely used in steel mills (the ability to turn the furnace on and off as needed is one of the big advantages of electric arc furnaces over blast furnaces).
The outright denial that there even is a problem to solve is a classic example of people becoming religious about a technology. Fortunately better responses have been offered from the blockchain crowd, like pointing to PoS as a technical solution to the problem.
Except that we do not have an alternative to jet airplanes that moves hundreds of times more passengers while emitting less carbon. We do have such an alternative to Bitcoin, in fact it predates Bitcoin by decades and is far more popular: Visa. Visa's total carbon emissions in 2020 for its data centers and offices (their ESG report also discusses emissions from employee commuting and business travel) is a whopping 14 thousand metric tons, over 1000 less than Bitcoin. That carbon was emitted as Visa processed 1700 transactions per second compared to only 7 transactions per second for Bitcoin.
In other words, as an electronic payments system, Visa is roughly one million times less polluting than Bitcoin.
So until NFTs are using a system at least as energy-efficient as Visa, I'll continue to worry...
Regarding cryptocurrency and solar power, the argument has some gaping holes in it. The premise is that solar (and wind) does not have the constant generation rate that fossil fuels or nuclear plants provide, so by having miners going online when there is an energy surplus (and thus it is cheaper) can help pay for solar installations (which must be over-built to supply energy off-peak).
The most obvious problem with this line of reasoning is that miners make more money when they are constantly mining than when they only mine opportunistically. This has already been demonstrated in the real world, with miners generally clustering around energy that is cheap and always available. We have seen miners keep gas-burning plants that would have shut down online, bringing already shut-down coal plants back online, and clustering in countries and regions where coal/nuclear/etc. energy is cheap and abundant (China, a few former Soviet republics, etc.).
Moreover, anything that consumes power and that does not need to run round the clock would have the same effect on solar deployment. Why not create a smart washing machine that waits for energy prices to fall before starting a load? Why not a steel mill? A basic flaw in the argument is the assumption that there is no better use of energy than Bitcoin mining or that Bitcoin is unique in its "flexible" energy needs. Neither assumption is true. There are alternatives with the same "flexibility" that have a clearer benefit for humanity, like direct conversion of atmospheric CO2 and water into gasoline (still a research topic, but prototype facilities are being tested at small scales right now) or any other energy storage technology (which in theory could be operated separately from generation).
Finally, a basic economic point: energy spent on cryptocurrency mining is energy not available for anything else. Even if all Bitcoin mining was exclusively powered by solar, wind, and hydro power, Bitcoin would still be slowing the progress on phasing out fossil fuels by consuming so much energy. Electric cars need to be charged whether or not Bitcoin mining occurs, and if renewable sources are all being sunk into Bitcoin then cars will be charged using non-renewable sources.
I know you asked for the other side, but sometimes there is no other side and this is one of those times. The idea that Bitcoin is actually good for the environment because it could, possibly, subsidize solar production is just a desperate attempt to work around the criticism that Bitcoin wastes energy. Yet that criticism of Bitcoin is very easy to demonstrate: divide the number of transactions processed in one second by the power consumption of Bitcoin, and compare the same estimate for Visa or whatever. Even if the estimated power consumption of Bitcoin is off by a factor of 100 you would still be better off with Visa, since Bitcoin processes 7 transactions per second while Visa processes about 1700 (and Visa's annual reports on the topic always show much lower power consumption figures than even the most generous estimates for Bitcoin -- several orders of magnitude lower).
I'll give credit where it is due: people who reflexively shout "PoS" when these criticisms are raised are at least acknowledging that PoW is a problem that needs to be addressed. That is the only actual counterpoint to the complaints about energy consumption, a technical improvement that is ready for deployment (and is already partially used by Ethereum, with a full switch supposedly coming soon).
You raise some good points and you ultimately might be right, but from my perspective, you're recycling lazy arguments without much backing.
I live in New York state (USA) and we have restrictive policies about how much solar we can build and push back into the grid. In some cases, even doing an investigation to see if an area can support pushing a significant amount of solar back onto the grid can cost upwards of $10k (so I've heard). This steers solar production to only provide solar to the facility that it sits next to and disincentivizes pushing solar back onto the grid.
Let's say I wanted to build a solar system, at dirt cheap costs, that could meet 3x the energy needs of my house. What do I do with the excess that can't be pushed back into the grid? You're absolutely right, I could smelt aluminium, scrub C02, or open a "smart" laundry mat, but all those require a large up front capital expenditure.
Put another way, let's say you're producing an excess of cheap energy as an individual, so maybe 100kWh per day. What technology can you install that's cheap to set up, can use the energy in a linear fashion (can scale up) and be profitable? There's other benefits, like transportability and relatively sporadic use, that might come into play as well. I would genuinely like to know what other technology could fill this niche. Cryptocurrency is one and it seems well suited.
In terms of sporadic energy availability, I've heard this argument in a video that Elon Musk did as well and I'm not sure I believe it. If the energy availability is consistent enough, say in a block of 6-10 hours in a day, then I could imagine that could provide enough stability to mine intra-day. Regardless, battery technology is coming down in price and it wouldn't be hard to install a battery system to give consistent power by increasing the solar installation cost by a factor two to three times.
In terms of your basic economic point about Bitcoin using energy that isn't available for anything else, that's like saying energy invested in supporting the networking infrastructure can't be used for anything else. The energy invested in the system is so that the system can be used as intended. If you don't believe Bitcoin/cryptocurrency has any value, then just say that.
In terms of the Visa/scaling/energy/transaction limit, yes, Bitcoin can't use "layer 1" as the payment processor at scale, but maybe providing "layer 2" solutions, like Lightning or something similar can work out. This is what places like El Salvador are using and is why people are invested in Lightning development.
Again, you might ultimately be right, but my plea is for better discussion on this topic here. Especially for the "bitcoin mining needs consistent energy availability", I haven't seen any good resources to really refute or bolster this claim.
It is easy to forget that the Fed was already tightening monetary policy over a period of years prior to the COVID crash, and only loosened policy in response to the economic impact of COVID. The Fed has historically not been shy about triggering corrections, crashes, and recessions if that is what it takes to achieve their targets, and I am not sure why anyone would think they will behave any differently this time around. Certainly the bond markets have reacted in a way that suggests that participants there take the Fed at their word that interest rate hikes are coming over the next 12 months.
Do you think I should risk my life to enforce your property rights? I have two kids and I want to watch them grow up, I can't die because someone with a gun claimed ownership of a stranger's house.
Without an organized government of some kind, society does not scale beyond about 200 people. We just cannot keep track of relationships and trust and whatnot beyond that. I live in metropolitan area with a population of 25 million people; a distributed group of vigilantes enforcing property rights is not even remotely workable here, and this is not even the largest city in the world. My in-laws live in a suburban area with a lower population density -- their town has a population around 20 thousand, and that disorganized group is not going to work there either.