How will the miners get paid?

I've always been a big fan of Rick Falkvinge's work.  His attendance at the Prague bitcoin conference in 2011 is part of what made me attend.  And everybody who has thought about the issue knows he is dead right about so-called intellectual property law and how it is a lead weight tied to the leg of humanity, holding us back from progress (scientific, technological, medical, etc.) and prosperity.  What do you think, has Rick's involvement with public coin helped or hurt his work in that fight?   At any rate, I simply had to take some issue with his recent video with the same title as this post.  There are some inaccuracies here.

As to his first point here, he is taking Knuth a bit out of context.  Making sure there is an incentive for folks to confirm transactions isn't an optimization in the algorithmic sense that Knuth meant.  Thinking ahead isn't always bad computer science.  As to the second point, I would say it is very much our problem to solve.  It was Satoshi's problem to solve, and we are all Satoshi (as Rick's channel title suggests), ergo our problem.  As to "not a problem in the first place", well that's what we're here to talk about today.

One inaccurate claim with potentially false implications from this presentation is that the problem of reducing coinbase reward won't be an issue until 2140 when the reward drops below one satoshi.  In fact we were half way to zero reward in 2012.  Then we were another halfway there in 2016 (3/4 of the way there).  As we all know, the coinbase subsidy for the miners drops by half every 210,000 blocks or roughly four years.  This means we are exponentially approaching zero coinbase reward.  The exponential might not seem so severe because of such a long time constant (four years), but exponential it is.

Scenario:  A bus is headed straight for you.

Response:  Don't optimize prematurely!  This won't be an issue until the bus touches your skin.  It's the you in that future time that needs to worry about this, not the current you.

So at what point does this become a problem?  It becomes a problem when the fees are a substantial fraction of the block reward.  This has already occurred, for a short time, when fees went very high.  People fled the network in droves, creating the BCH fork and starting a large ramp-up in the use of other public coins driving down the BTC dominance.

In the near future this will become an issue again.  In 2032 the reward will drop below 1 BTC per block.  At this point we have a few alternate forces at work.  With less reward, there will be less power thrown at the network and the network will be less secure against double spending.  In addition, higher fees which could compensate for the coinbase drop will drive the value of the coin lower (as coin users part with their coin in favor of another offering cheaper transactions), further lowering the value of the coinbase reward.  One likely outcome is that commerce will seek a blockchain with a more stable reward curve, one that provides miners a substantial reward to secure the network so that transaction fees can remain small, with continued security.

Of course this miners reward does need to reduce, otherwise inflation of the money supply will slowly drive down the value of a coin and reduce the use of the coin as a store of value (reduced hodlability).


Is there a money supply curve which avoids these issues?  Which can provide a miner with an early-adopter advantage at any date, can avoid runaway inflation, and maintain network security without oppressive fees?  I claim that there is, and the curve is the logarithmic money supply curve, as demonstrated by the LOG coin.  The money supply is capped at 28 million LOG, the reward is lower at every block, and yet substantial rewards will continue far into the future.

To recap:

Good economics to solve this problem.

Our problem to solve.

A current problem, not one that will show up only in 2140 but one which becomes twice as urgent every four years.


Consider that Rick might be exactly right here, that it doesn't matter what the miners are paid.  There are in fact some coins which simulate late-stage exponential release coins.  The first I was aware of was NXT but there are others now, with a 100% premine and no mining subsidy.  The mining is presumably maintained in this case not by the fees but by the holders of the coin who wish it to still work as a means of exchange, either by a central group who maintains the coin or by individuals who are motivated to see their holdings increase in value through the use of the system.  While one is tempted to argue that such centralization is not optimal due to potential corruption and misuse of these powers, the proof of the pudding will be in seeing how these coins fare in the coming decades.  If it doesn't matter what the miners are paid, then maybe we should pay them nothing right from the start.





Rat Poison

Five years ago in May of 2013 Charlie Munger quipped when asked about bitcoin that "I think it's rat poison".  You might be surprised to hear me say it but we should listen carefully to Charlie Munger et al., and that indeed there are a few ways that bitcoin is rat poison.  So it's been five years, have we poisoned any rats yet?  Well not so many.  It's slow acting rat poison.

You see public coin has no room for counterfeiters.  You can't counterfeit a public coin because the list of all valid coins is public and anyone can check your coin against it quickly and easily.  Counterfeiters, or private money issuers, are in some ways similar to rats living off the grain we have in our kitchen cupboards.  Without doing any useful work they can grow fat and lazy, and such behavior leads to the spread of disease and inefficiency, not to mention malinvestment, ecocide, and stagnation.

By using public coin, we can effectively kill the rats because they will have nothing to eat.  In such a way, bitcoin is indeed rat poison.  Are there some brokers profiting by overselling stocks which they don't really have?  Maybe.  If so, putting securities on public blockchains will poison such people.  Instead of having MyBroker[TM] tell you that you have 5 shares of MyCorp, and MyNewsPaper telling you that there are 10 million shares outstanding, you can now hold 5 share yourself, know which shares they are, and verify how many are outstanding yourself.

So bitcoin poisons the rats who are compromised private money issuers or issuance fraudsters.  Are there any other rats around for bitcoin to poison?

Well yeah.  Plenty.  As public coin continues it's rise towards eventual fiat jubilee there will be many who see this bubble as an opportunity to get rich quick.  The "get rich quick" folks might not be rats of the same caliber as the issuers but this is likely because they don't have the 关系 (they don't know the right other rats).  So instead they will push company coins, pump and dumps, and various other short term schemes which might look good for some short time but eventually leave the rats flat on their backs with their feet in the air.  The gamblers will get zhou tonged, trading on leverage.  Meanwhile the casino operators will get fat and lazy.  Both are victims of rat poison.

While the idea of some rat poison in our financial system is hugely appealing, we shouldn't get carried away with thinking that our extermination might be successful.  What doesn't kill the rats makes them stronger and we can count on graft, fraud, and other idiocy to continue in many forms.  After all it is the rat race.










150 billion funbux

It hardly seems noteworthy I know, you are disappointed already that I might have even noticed that this story had risen in media outlets.  The story is that Jeff Bezos of Amazon has 150 billion dollars worth of stock.  In the linked article Annie Lowry does a good job of giving respects, pointing out that the guy knew well how to navigate the financial waters, and points out various problems with the big picture here such as gross income inequality and consumerism.  However in this post we are going to treat this as a very basic lesson in fiat finances.

One might naively expect that Jeff Bezos made his fortune because Amazon makes money by earning it from sales to customers.  This is a traditional idea of a business, but in fact it isn't correct.  Sure, Amazon makes revenue from customers - and the revenue is greater than the expenditures (profit margin), and this produces earnings.  However the earnings reported by AMZN last year (trailing twelve months) were about $8 per share, which for 490M shares outstanding comes out to a total earnings just shy of $4 billion.

OK four billion funbux is serious earnings no doubt, but the first thing to note here is that there's no way Mr. Bezos made his fortune from the earnings of Amazon.  There just was never any 150 billion in earnings.  The total earnings since the company were founded are far less than 150 billion.  So where did his fortune come from?  In fact the question becomes more pertinent when we realize that the company has never paid a dividend, meaning the the earnings were always spent by the company rather than given to the owners.  We see that in fact Mr. Bezos never got a cent from the earnings of Amazon, at least not directly.

So where did his fortune come from then?  It came from investors.  Investors worried about FOMO and investors who were on the lower side of the interest rate apartheid walls.  Investors who were currency issuers or well connected to them.  It's the currency issuers that matter in the fiat economy, not the customers or the bottom line (unless indirectly because that matters to some investors and issuers).

Other folks have even claimed Bezos is the richest person in history.  Certainly Mansa Musa appears to be a vastly stronger contender for that title.  Mansa Musa was in fact a currency producer (issuer, in this case controlling gold mines), in the golden age.  Currency issuers today can create trillions of dollars with the press of a button.  I'm sure they laugh at the notion that Bezos is the richest.  For the rest of us however, who cares?  It's what you do that matters - not what numbers are written on your bank statement.  Sure, measuring wealth in fiat is insane, but really - measuring wealth in gold or bitcoin still isn't all that much of a useful metric in the long run.








Issuance Malfeasance

What is the problem that cryptocurrencies solve?   ..asks the noted economist and New York Times columnist Paul Krugman [link].

We have addressed this question before in this forum.  The question today is how somebody could be a serious scholar of economics, or even open ones eyes in any populated area of the planet, and somehow not know the problem that cryptocurrencies solve.  This problem is everywhere.  The valuations of stocks, the urban development, the Dubais and the Vegases, the Venezuealas and the Zimbabwes, the Pentagon and the DC Lobbyists, the bicycle sharing overproduction, the Monacos and the Caymans, and the communist party loyalists with suitcases full of house deeds.  London real estate prices.  Bitcoin prices.  Quantitative easing and the deep state.  All related to issuance malfeasance.  How could somebody not know about this problem?  Well they should, so it behooves us to state clearly once again the problem (and the solution).

“The power to make a small piece of paper, not worth one cent, by the inscribing of a few names, to be worth a thousand dollars, was a power too high to be entrusted to the hands of mortal man.” [John C. Calhoun, speech, U.S. Senate, Dec. 29, 1841]

Counterfeiting is unauthorized currency issuance.  But what if you are an authorized currency issuer?  What if somebody then puts a gun to your head and asks for a million fresh dollars which you can easily create with the push of a button?  Who do you need to pay off to maintain your position as issuer?  Who do you issue money to and how often?  What if you could create 5 trillion dollars with the push of a button, what would you do?  It doesn't take more than a rudimentary imagination to understand the answers to these questions.  Creating money without telling the public about it is suspicious don't you think?  We refer to this authorized issuance of currency, in a manner unjust and hidden from parties not privy to the issuance, as issuance malfeasance.

Cryptocurrencies handle the problem of issuance malfeasance by requiring that all issuance events are public - with no exceptions.  Therefore counterfeiting and other issuance malfeasance are simply impossible.  Well, that's not entirely true.  Those public coins which are centralized and have provisions for issuance events (such as e.g. USDT) still have some room for issuance malfeasance.  At least for these curreencies however, the public does know how much was issued and when.

To treat this situation in all generality we are left with three possibilities here concerning Krugman's claim that he doesn't see the problem solved by cryptocurrencies:

1-- There really is no problem of issuance malfeasance, all currency issuers are benevolent authorized players who not only don't create any more then exactly what society needs to be created but also fend off all less benevolent people who might seek that power, with no exceptions.  This of course seems impossible to me but who knows, it could be that I am somehow blind here.  If you think this is what's going on please do comment and let me know.

2-- Krugman understands the problem of issuance malfeasance but is a paid mouthpiece of people who wish to badmouth cryptocurrencies at this juncture for one reason or another, or simply is hiding his knowledge of the problem for his own purposes.  This seems exceedingly unlikely to me for a few reasons.  One is that it doesn't really matter to public opinion all that much what he says.  Another is that cryptocurencies are not a problem for the rich and powerful, even for those who are benefitting from issuance malfeasance.  In fact cryptocurreencies are a boon for these people because they can be obtained via trade for newly issued currency, thus enabling issuers to ensure their personal wealth in perpetuity.  Finally I don't believe the guy is lying to us, he seems like an honest bloke to me and I know some people who know him personally who agree.

3-- This leaves us with the final option, which is some kind of self delusion.  When something surrounds us our whole life, we sometimes don't see it as anything out of the ordinary or worth reporting - especially when doing so might tear down other symbolic structures we might have built up in our attempting to label the world around us.  If currency malfeasance is just the way the world works, then we don't see it as a problem.

What do you think, is issuance malfeasance enabled by the use of fiat currencies a problem worth solving?  Let me know in the comments please.



Why premines are not not ideal for a currency

This post is part of the "stuff we thought was dead obvious" series.  The series includes "How racists are dumb", and "How rapists are despicable morons" and "Shooting yourself can be dangerous" along with the classics "water is wet" and "the Earth is an oblate spheroid".

Five or ten years ago I would not have thought to write this post.  The phrase "premine" was considered somewhat insulting already, because it was assumed that people understood that this practice was suspicious, scammy, and thus unlikely to provide a stable currency.

So what is a premine?  The idea is that some currency is created before the ledger is operational; that some privileged people can get ahold of a substantial amount of coin before the mining even begins.

The practice became more common amongst the lower quality altcoins.  The authors wished to reward themselves monetarily for their work (being amateurs they were just in it for the money) and adding a premine to the code seemed one way to do this.

Then came the arrival of the 100% premine.

The 100% premine. 

If you thought adding a hard-coded premine to the codebase of a coin was scammy, you would be rather shocked at the blatancy of a 100% premine.  In this scheme, not only some but in fact the entire supply of a coin (that's all the coin that ever will be produced) is created in advance and given to the devs or early investor groups.

The first coins I came across that did this were NXT and XRP.  Both simply created the entire supply out of nothing, with no monetary policy afterwards, and then started selling the supply.  Who would buy such a thing?  This was my thought, that nobody would consider it.  However I was wrong.  Hence returning to this post to see where I went wrong.

In fact the 100% premine coins have grown.  33 out of 50 of the top digital currencies listed on are 100% premines.  They are marked with an asterisk for easy identification.  Here are some of the big 100% premine coins:

1-- Ripple [XRP]
2-- EOS [EOS]
3-- Stellar [XLM]
4-- Cardano [ADA]
6-- (etc)

So let's explore why this kind of monetary policy is a bad idea first, and then we can come back and look at some of the justifications people use for such a practice.


One problem with the 100% premine is it forces a centralization of ledger control.  Who secures the ledger in a public coin?  Why, the miners do of course.  And who are the miners?  Well in a 100% premine coin, there are no miners.  This means that there is no financial incentive for any new players to secure the coin, and that it will be secured solely by the bagholders or premine recipients trying to popularize the network.  "The company" secures the network, because these coins are company coins, and here "The company" refers loosely to whoever holds most of the premine, enough to give them incentives to run the software.  These players also have a role to play in exchange markets, but we will return to that.

One possible way for a 100% premine coin to not be ledger-centralized is for miners to be given transaction fees.  This would mean however that transaction fees would need to be substantial, and there aren't a lot of teams trying to push their high-fee coin.  Instead the purveyors of 100% premine coins tend to claim that the transactions will be cheap or free.  The idea here is to get more people to buy into the system, so their premine will be worth more.

Centralization alone is not necessarily a problem, but it is a risk factor to consider.  It means that the operation could be shut down, could go bankrupt, go under, get bulldozed, be attacked.  It is a point of weakness where corruption or legal troubles could cause problems in use of the currency.  It's not ideal for a currency to be thusly centralized wouldn't you agree?

Manipulated Markets

Another problem with the 100% premine is the effect it has on the exchange value of the commodity, namely preventing a natural supply-demand market price discovery system from working.  A mineable asset has a newly issued supply continuously appearing.  This supply forms a counterpart to the demand, enabling a fair price to be discovered.  This is the theory, but in practice markets of all kinds of assets are controlled by large players known as market makers.  You might think that allowing any kind of downward pressure on the price to be a bad thing.  Mining provides such a downward pressure by giving people new coins they could dump on the market.  So you might think mining will drive the value of the coin down.  Isn't this bad?  Well not really; in fact a coin is more usable if it can find a natural price point and this requires a balance of upward and downward pressures.

The 100% premine is basically a carte blanche for the early recipients of the premine to manipulate the market as they see fit.  There are no natural market forces so any participants are completely at the mercy of these market makers.  The point here isn't that mineable assets have natural, clean, uncorrupted markets..  of course they don't!  The point is that there are no market pressures at all to combat such pump-and-dump bubble blowing with a 100% premine coin.

Corrupt Devs

It's pretty clear that the 100% premine is about the designers of the coin grabbing some money.  It's also clear that doing so isn't part of a coin being able to improve on human interactions or to increase our chance of making it to stars or even surviving as life-on-earth.  However lets assume for a second that the consensus algorithm simply wouldn't allow for anything but a 100% premine (hah) and that the developers really are trying to make a product for the good of mankind.

The trouble here is that once there's a ton of money in the bags, even after this assumption of good intention, there's a lot of incentive for certain elements of society to try to get some of the money in the bags.  This leads to an element of "we're just in it for the money" in the people working with the coin, regardless of any initial incentive.

Rationalizing the Premine

Some assets in fact do need to be 100% premined.  Bus tickets.  Stock certificates.  These things aren't intended to be pure exchange commodities (currencies), in fact they come with promises from a central authority of future returns or redemptions.  If your token comes with promises of receiving some dividends, goods, or services, the premine might be just what you are looking for.  However this doesn't appear to be the case for most of the premined assets people are calling cryptocurrencies.

Another justification for a premined scam is that mining is energy intensive.  Well yeah, shared consensus is energy intensive.  Shouldn't we just let the king decide?

A final justification I have seen is that the 100% premine was "fairly distributed", in some auction or token-issuance-period.  While it may be possible for some to be more fairly distributed than others, the notion that a premine is a fair distribution for a currency is very misguided.


If you're a speculator or currency user, stay away from the 100% premine coins.  The price will be unpredictably manipulated and eventually the company controlling the ledger will run into problems effectively killing the coin eventuallly.  It will be very hard to move forward after the initial hype of the premine-holders marketing their way to monetization.

If you're a currency or blockchain developer, pick a monetary policy that doesn't suck right out of the box.  I like logarithmically growing supplies, but hey there are a lot of options.  All of them are better than the 100% premine.








What's the monetary policy?

Lets take a moment to remember that the great advantage to a public coin is that the monetary policy is public.  This means we don't have to take somebody's word for how much currency is being issued and at what rate, but we can verify it ourselves.  The idea is that this can help eliminate monetary supply fraud also known as counterfeiting or inflation or quantitative fleecing.

This stuff being plain as the nose on the face of SirNose, we would expect that every cryptocurrency website and team would highlight the monetary policy of their coin.  After all the value of a coin is only that of people's future willingness to use the coin, and without a reasonable monetary policy - well who is going to want to use this coin in the long term?

And yet despite this, so many teams - with amazing ideas and abilities in blockchain mechanics, privacy, memeology and chumpotronics - don't even give a second thought to the monetary policy of their coin.

"Oh the monetary policy?  It's a 100% premine step function.  Very energy efficient"

It's a take-the-money-and-run policy.  "Check this amazing new money out!  Totally decentralized, bulletproof cryptography, infinitely scaleable, quantum resistant, and it cures cancer.  You can't mine it and I have all of them".

We expect this to be attractive to people ten years from now?

To be fair the step-function monetary policy might be the right one for some applications.  Issuing a stock for example is usually done in this manner.  It makes sense that the company will start with all of them.  A buyer here is not solely looking for value from the future exchangeabilty of the token - they are also expecting a dividend or a buyout.  Bus tickets is another nice example.  The company might issue a fixed number of tickets (no standing).  It makes sense that they start out with all the tickets - after all they are the ones selling them.  Again here we aren't only buying bus tickets hoping that people will want them in the future as exchange tokens.  We actually want the service provided by the company.  We buy the tickets even though we know they will eventually be worthless.


Satoshi's bitcoin has a very interesting monetary policy that captured the imaginations of millions.  Its is a geometric series in which the total new currency issued drops by a factor of two every 210000 blocks.

This geometric series approach was adapted by many other coins (LTC, XMR, BCH, DASH), sometimes shortening the "halfing time" and sometimes adding an additional element of linear inflation (DOGE, ETH?).

Some proof of stake coins have also offered a different monetary policy, one of a fixed percentage growth of the money supply over time.  This is more like what most fiat currency issuers aim for.

To make a long story short, we really should be looking at the monetary policy of our cryptoeffectivo... and we probably should be very hesitant to use company coins.



There can be only one

Hello everyone!  Today's post is mostly about the psychology that might lead one to such a broken conclusion.

The concept that every object has a use value and an exchange value was described and expanded upon by various philosophers like Aristotle, later Adam Smith and Karl Marx, and so many others who seem to have differing viewpoints (from Carl Menger to Joel Kovel).  It's kind of a basic place to start with monetary or economic theory.  So we see quite clearly that every object has an exchange value, and we can also remember that the world contains different classes of objects.

The conclusion should be obvious here, yet somehow, totally in contradiction with these basic facts, one can be tempted to imagine that there's a single real bitcoin or that one currency somehow will triumph over all the others.

"The three enemies of the people are hegemony, monogamy and monotony.”

Terence McKenna

It's not just the theory but direct observations.  There were different kinds of cowrie shells.  There are different kinds of precious metals.  There are different varieties of stamped metals, and of paper currencies, and of digital currencies.  We see with our eyes that there have always been more than one, and there still are more than one.  And yet still our minds take us down a path imagining a monopoly in money.


(XKCD cartoon)

Perhaps it's because we are just annoyed that many types of standards exist; different languages, different units, different football leagues, different climbing difficulty grades, different musical temperaments, and different block chains.  We just want things to be simple, as we are not self confident enough to learn new things.  Perhaps it's because there are so many terrible currencies out there and we don't wish the trouble of wading through them all.

We'll get over this monopoly money nonsense eventually.  Sometime I think Elizabeth Magie chose the name "monopoly" for her Atlantic City board game so that the phrase "monopoly money" would come into common parlance as pretend money.  This is a lovely commentary on how Congress gave the Federal Reserve a monopoly on money printing making the US dollar officially monopoly money.

One other reason is that we like to think in a single primary unit.  Even if we are trading our labor for cannabis or for litecoin or for 人民币 or rent, we might convert in our head to BTC.  Does this mean that for us BTC is the one true coin?  No, it means we have chosen for the context at hand to use this standard as a tool in assigning quantitative value.  Maybe because it is easier for us to convert units when doing calculations, we assume the whole world needs to also simplify.

There's also the nature of having one king or one nation that we may have grown up with, propaganda pushed by the king or national agents, which might affect how we think.  In fact there have always been many kings and many nations, some even active over the same areas.

Perhaps the problem is that we are plagued by our reliance on the simplest of categorizations of the world around us: the dichotomy.  Things are either black or white.  You are with us or against us.  Are you Chinese or not?  Is that alcoholic or not?  Such questions can have important use, but they do not show us the real picture of continuity and variation which the world presents for us.

What do you think?  What reason is there for us to look into the growing tree of a million coins, the continuous forking and cloning, the variety of hash functions and public key systems, and to somehow come up with a statement like the title of this post?





The greatness of a nation

"The greatness of a nation and its moral progress can be judged by the way its [trees] are treated."


-- Mahatma Gandhi

The problem that blockchain solves

Something worth saying is worth repeating.  A quick read through the bitcoin obituaries shows that this is a difficulty in proceeding.  For example we have a piece by Kai Stinchcombe here in which he claims:

There is no single person in existence who had a problem they wanted to solve, discovered that an available blockchain solution was the best way to solve it, and therefore became a blockchain enthusiast.

Well I can prove that there is at least one such person (me) and that in fact most bitcoin enthusiasts match that description.  Don't worry, there are plenty of idiots promoting blockchains for various broken reasoning, myself at times included.  But lets stick to the topic: the problem solved by blockchains.

The problem quite simply is counterfeiting.  To phrase it more scientifically, we can refer to it as private issuance.  As the user of a privately issued currency, you don't know how many new units are being issued.  While you might work and make a million shekels, others might simply create a million shekels from nothing with the push of a button.  We're not talking about who does it or how much here, just that it's possible.

Does that sound like a sound system with no problems to solve?  Or is there perhaps a problem here which at least might be a tiny little bit useful to solve?  We're not just talking about paper money being created (sure that happens) but bank accounts and various digital payment systems (wechat, paypal, alipay, m-pesa, ...).

It's important to stop right here and acknowledge that it's possible.  People just creating money from nothing in private.  Acknowledge that this is in principle possible and that this is a problem at least with some potential to be worthy of our attention.

“It had been justly stated by a British writer that the power to make a small piece of paper, not worth one cent, by the inscribing of a few names, to be worth a thousand dollars, was a power too high to be entrusted to the hands of mortal man.” [John C. Calhoun, speech, U.S. Senate, Dec. 29, 1841]

You see plenty of people have recognized that this is a problem..

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” [Henry Ford]

Plenty of people understand it.

“By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft." [John Maynard Keynes]

Public currency is a solution to this problem and public blockchains are a way to implement a public currency.

The problem (once again here, remember we are repeating ourselves) is monetary supply fraud which has potential to lead to gross malinvestment, inefficiencies, and even in some circumstances the empowering of psychopaths and mental midgets to cause great harm.  A solution to this potentially serious problem is public currency.


How is using a public ledger "a bad vision for the future"?  Anti-fraud is a bad vision for the future?  Bitcoin and blockchain are about limiting any criminal monetary supply fraud which as so many have pointed out, has plagued us for centuries.  When you use a public coin, nobody can create public coins in private and thus defraud the system.

Of course there will be charlatans and fraudsters using coins, this is always the case from gold to cowries to yap stones and LOGs.  The issue we are addressing with our solution is not all kinds of fraud, it's not the institutions of nation-state or capital, practices of taxation or remittance.  It is only about preventing monetary supply fraud.  The solution to that one specific problem is public currency and that is why I became a bitcoin enthusiast.  It could even be an important step on the way forward out of the dark ages towards rational management of resources.



satoshis per joule 2018

Hello everyone!

Ok ok, we'll do the energy analysis again.

Lets start with the Antminer-S9 with a claim on their website of 0.1 J / GHps.  Well they mean to say 0.1 J/s / GH/s which is the same as a .1W / GHps.

What does this get you for your tenth of a joule?  Well let's see.  BTC diff is at about 30 EHps, and that is worth a coinbase of:

total coinbase reward   R = 12.5 / 10 / 60 = .021 BTC/sec (we'll leave fees out for now).

Your piece of this pie for .1 J/s is 1GHps worth:

r = .021 * 1GHps / 30EHps = 7 * 10^-12 BTC / sec

thus 1 J = 7E-11 BTC = 7E-3 sat = 0.007 satoshi per joule

Eneregy cost C = 7 msat/J  (2018)

OK lets check our work from a couple years ago here.

We came up with

E-cost = 13 msat/J (2015)


The cost of Energy has gone down by a factor of two or so.  Another way to look at it is that we are getting less BTC per joule with our miners than we were a couple years ago.


Now let's calculate the cost of a Joule another way.

We'll start with gasoline at 7.5 RMB / L, a popular price to pay in early 2018 I am told.  Arthur Nommensen tells us there are 34 MJ in a liter of automotive gas, which would work out to 150 MJ per gallon which is 25% higher than the figure we used in 2015.  We'll use the old figure anyway for comparison, which is 120MJ/gal or 26 MJ/l.  Keep in mind you might be able to get as much as 25% more joules for your satoshi.

This works out to 26 MJ / 7.5 RMB = 3.5 MJ / RMB  [人民币]

Now all that's left is for us to convert from RMB to BTC.  We can find a figure for this from our wechat trading groups or from :

58000 RMB / BTC  or 0.00058 RMB / sat

This means that our energy cost was

C = 3.5 MJ / RMB * 0.00058 RMB / sat = .002 MJ / sat

C = 2 kJ / sat

C = 2000 J / sat    lets invert this to sat / J

C = 5 E-4 sat / J

C = 0.5 msat / J (2018)

Wow, that's only half a millisat per joule!  You can recall from 2015 that this came out to:

C= 5 millisat / J (2015)

That's a factor of 10 more Joules for your sat.



Well energy is worth about 0.5 msat per joule or 7 msat per joule depending on how you make the trade.  The arbitrage opportunities and volatility here have gone up it appears.  The price of these things is still mostly driven by how many fiat currency units issuers are willing to throw at these assets, so don't bank on these things normalizing any time soon.

Lets look at the arbitrage here just for fun.  Suppose you start with 1 J of energy and use a mine to get 7 msat with it.  You're rich!  Now you can turn around and buy 14 Joules of energy with it!  Rinse and repeat.

Wouldn't it be kinda funny if oil refineries were like, f this, we're not going to bother selling to motorists when we can just power our mine?!

Of course this won't work that well because we've left out the inefficiencies required in converting gasoline Joules to mining rig Joules.  Just for fun we can do one more version of the calculation:


Start with 10 USD cents per kWh, a common low end figure for regulated AC power in much of the world.

0.1 USD/kWh * 1 hr/60 min *  1 min / 60 sec = 2.8 E-5 USD/kWs

= 2.8 E-5 USD/kJ

Use today's exchange rate 9000 USD / BTC to convert ->

= 2.8 E-5 USD/kJ / 9000 USD/BTC  = 3.1 E-9 BTC / kJ

= 0.31 sat / kJ

C = 0.31 msat / J

[Edit - an earlier version of this section contained an error of a factor of 60]



The prices of energy in gasoline and mains power form are remarkably similar.  At current prices and difficulties, minus overhead (including here in overhead the cost of the mining hardware, do your own calculations here please), it looks like paying normal prices for electricity and mining with an antminer will get you a profit.  Notice "at current prices and difficulties", for we also can expect these to change.  Difficulty will go up and/or energy prices (in BTC) will go up.

Lets recap our May 2018 energy calculations:

Earnings per joule with the s9:   7 msat / J

Cost per joule to buy gasoline:   0.5 msat / J

Cost per joule to buy regulated AC power:  0.3 msat / J

Mining still a growth industry.

Have a nice weekend 🙂