Howdy Mr. Musk, proof of work is computer mining, rolling dice in a race to be the first to solve a block and receive a reward. This is how the bitcoin network distributes new tokens fairly. In the beginning, the first bitcoin block awarded 50 tokens and very little energy was used. In these early days, bitcoin was not widely recognized, adopted or valued. Over time, individuals all around the world chose to dedicate some of their time and energy to mining, and the difficulty adjustment automatically made the dice rolling problems harder. You see, the system was designed to adapt this way in order to guarantee a steady rate of new coin issuance. If it didn’t get harder over time, there wouldn’t be a smooth issuance rate and power could concentrate with a few powerful miners in the early days. I suspect the “slow” 10 minute block times also help to keep the network more inclusive to those with slower internet connections, and nodes who keep the blockchain record. perhaps someday your Star Link network will help people to overcome censorship of bitcoin in countries like India! Anyway, every four years the number of newly issued coins is cut in half. So, between difficulty adjustments and reduced block rewards, there is a natural tendency towards increased value in bitcoin due to scarcity. Scarcity is part of what signals value… people die without air, and yet it is free. However, a person who is trying to dive down to see corals and fish will pay good money in order to take some of this “free air” along, to an environment where it is scarce. The same could be said for water, what wouldn’t a man give for a sip of water if he has been without for just a few days?
As a thought experiment, let’s imagine that most of the worlds miners voluntarily stopped mining for the foreseeable future. The difficulty would adjust down and less energy would be used again, just like the old days. The network would be less secure in the sense that it could be attacked by hostile miners seeking to favor specific transactions, but it would use less energy. In this sense, bitcoin itself is not an energy waster, it is actually extremely efficient and the code is not outdated or broken as some people suggest, it is a very lightweight and responsive system that adjusts dynamically based on the value that the system represents at any given time. This is why mining is profitable sometimes, and not others. You may have seen mining rigs for sale or for free on Craigslist at one time, only to be in short order and sold for hundreds over their production cost just a month or two later. Just as some car companies like yours choose to dedicate lots of money to raw materials, employees, machines, and electricity to build, sell, and deliver cars, some mining companies spend lots of money on raw materials and machines that can build fast computers and then spend more money on electricity to run for mining. It’s a free market and interestingly, one mined bitcoin today is worth roughly one of your automobiles. I suspect that this will change in the future, because the number and quality of cars is continually increasing, but the number of bitcoin is fixed at 21 million. It’s pretty interesting that 18.7 million of those coins have already been issued. The other cool thing about bitcoin is that it does not require a garage or parking lot to safely store, no insurance for counter party risk, or yearly maintenance fees like a condo or a gold safe. It hardly requires gas or electricity to use… aside from a small fee to send one time. And, if you choose to use a second layer solution such as Lightning Network, the fees get even smaller. In my own experience, a full on chain send fee is generally much lower than a domestic or international bank wire transfer, and it can be executed 24/7 without permission and for whatever product or service you wish to buy, anywhere in the world or even nearby outer space! I know that you like space, Mr. Musk.
Could another proof of work crypto coin be better than bitcoin in terms of energy use? Don’t the number 6 and 12 coins currently use a lot less energy? Well, both of those coins are actually based on bitcoin, and If they were to become more valuable over time, more energy would probably be spent to mine them as well. Mining for other coins might require less energy today, but that’s because the coins are worth less and the mining competition is lower. As we discussed before, this also means that those coins have a lower defense against 51% attacks. In short, it would cost less to disrupt those networks temporarily using a large number of antagonistic miners who wish to favor their own transactions or try to reverse a payment. However, don’t fret, even if there is a 51% attack on bitcoin or most other coins, the majority of transaction records remain unchanged and the network will eventually correct to what the majority of nodes signal for, and nodes are how you can send and receive your own coins… here’s a tutorial I wrote to setup your own node using an old computer or laptop: [https://www.reddit.com/r/Bitcoin/comments/mz3byz/newbie_tutorial_install_ubuntu_linux_tor_bitcoin/](https://www.reddit.com/r/Bitcoin/comments/mz3byz/newbie_tutorial_install_ubuntu_linux_tor_bitcoin/) wouldn’t it be cool if you allowed Tesla automobile owners or Powerwall owners to mine for bitcoin with excess electricity instead of trying to sell it back to the corrupt grid using net metering (if that’s even allowed where you live) for pennies on the dollar? I suspect that much of your motivation for creating these awesome energy solutions and clean transport are to break away from monopoly power. It’s neat that you can use your own money, time, and equipment to work your way into the market and demonstrate value… vs. having to stake your pre-existing value to grow. I wonder where you’d get that power from anyway? Maybe you’d have to inherit it if you weren’t lucky enough to be there in the beginning.
Okay, so what about proof of stake? Somehow we need to award tokens in a way separate from staking rewards initially, because there isn’t a group of holders yet. This is where initial coin offerings come in, but if you sell the coins, you are presenting a choke point and making yourself into a security. The number 7 coin learned this the hard way recently when they were reluctant to pay the US a bribe and their token was temporarily suspended, oops! You also still need to incentivize people to process transactions, and presumably, the token is worthless on day one… so is it received and valued based on trusting or hoping that it will someday be worthwhile… but it’s not yet, hmm. Is it based on a government that all other governments are supposed to trust or soemthing? Is that “trust” actually based on military strength, as we saw when the US enforced oil being sold exclusively for dollars by middle eastern countries in recent years? Poor Sadam, he just wanted some Euros or Rubles, but he ended up with “WMD’s” instead and got invaded. That seems like a lot of energy and waste… And what happens over time as this new POS crypto sees concentrating ownership where simply holding the token means you get more and more and more. That reminds me of some lawmakers today who can get ahead in the early days or be born into a system and then change the rules or construct a regulatory moat, award monopolies or introduce crippling legislation based on lobbyists. It’s true Mr. Musk, these bad things can indeed happen if votes for the networks future are tied to how many coins are staked… and this is why the founder of the number two crypto has been able to dictate policy and change company direction so many times. Is that really a store of value, or more of a startup tech company that is iterating and searching for a real value proposition? By the way, who is hosting all of those NFT’s? Are they in an open distributed network that’s light enough for almost anyone to join, or being run and hosted primarily on Amazon servers? Oops, there’s another choke point… With proof of work, old coin holders do not get richer as new coins are issued, they actually get diluted for a time, and then remain constant once all have been issued. They have to earn additional coins at today’s value, either by mining (for blocks or transaction fees) or paying an exchange a near equivalent value to what it costs to mine. It is often said that “you get the price that you deserve” when speaking about bitcoin. The smartest, hardest working, most proactive and computer literate members of society got them first. With proof of stake, however holders are initially chosen, they become the source of new coins and are enriched both indirectly by the network’s value increasing and directly through dividends that concentrate their power and dilute those who are not staking.
TLDR: I have observed that people spend more time and energy on valuable things, and bitcoin has value. It’s a system that issues new tokens evenly based on a competition using electricity, instead of nepotism and existing ownership, which concentrates power and can lead to choke points and faulty policy… the likes of which we see everyday in government and other coins. Bitcoin is a great use of energy, because it does not leak value through inflation, it preserves price signals, and allow businesses and individuals to plan long term. But, I suspect you already knew this stuff, right Elon?
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