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Bitcoin

Foreign Policy magazine: 'Bitcoin Failed in El Salvador.' Is the Answer More Bitcoin? (foreignpolicy.com) 100

Posted by EditorDavid from the bitcoin-bets dept.
"Bitcoin mining is a process of competitively wasting electricity to guess a winning number every 10 minutes or so," writes author David Gerard in Foreign Policy magazine.

And he's got an equally negative take on Salvadoran President Nayib Bukele's experiment in making Bitcoin an official national currency alongside the U.S. dollar. "When a con artist's grift starts to fall apart, he knows to move onto the next one fast..." More than 91 percent of Salvadorans want dollars, not bitcoins. The official Chivo payment system was unreliable at launch in September — the kiss of death for a new system. Users joined for the $30 signup bonus, spent it or cashed it out, then didn't use Chivo again. The system completely failed to check new users' photos, relying solely on their national identity card number and date of birth; massive identity fraud to steal signup bonuses ensued. Bitcoin's ridiculously volatile price was appreciated only by aspiring day traders. Large street protests against compulsory Bitcoin implementation continued through October. The government stopped promoting Chivo on radio, TV, and social media. Chivo buses and vans were seen with plastic taped over the company's logo.

Bukele's financial problems remain. El Salvador can't print its own dollars, so Bukele urgently needs to fund his heavy deficit spending. The International Monetary Fund has not lent the country the $1 billion Bukele asked for, and has indicated its strong concerns about the Bitcoin scheme... At the Latin American Bitcoin and Blockchain Conference on Nov. 20, Bukele came onstage to an animation of beaming down from a flying saucer and outlined his plans for Bitcoin City: a new charter city to be built from scratch, centered on bitcoin mining — and powered by a volcano. Bitcoin City would be paid for with the issuance of $1 billion in "volcano bonds," starting in mid-2022.

The 10-year volcano bonds would pay 6.5 percent annual interest. $500 million of the bond revenue would be used to buy bitcoins... Holding $100,000 in volcano bonds for five years would qualify investors for Salvadoran citizenship... Holders of El Salvador's existing sovereign debt were unimpressed. The volcano bonds would be a strictly worse investment than buying the country's existing bonds and hedging them with bitcoins. The existing bonds dropped from 75 cents on the dollar to a record low of 63.4 cents after the volcano bond announcement...

[T]he volcano bonds are Bukele's way to get Bitcoin holders' money into the Salvadoran economy and count it as dollars. Bukele will brazen all of this out as long as he can, periodically throwing new plans on the table as a distraction. If he can maintain power, then the Bitcoin users will discover that he's taken their money. If he can't maintain power, then his successor will have no love for his failed Bitcoin schemes. Either scenario ends with a lot of disappointed Bitcoin users — because a national economy really can't run on a volatile and manipulated speculative commodity that's unusable as a currency.

Both the Bitcoin users and Bukele seem to think the other is a sucker who they'll take for everything they've got. It's possible that both will lose.
The article also points out that with El Salvador's high electricity rates, one of their power plant recently spent $4,672 in electricity to mine $269 in bitcoin.
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Foreign Policy magazine: 'Bitcoin Failed in El Salvador.' Is the Answer More Bitcoin? More

Foreign Policy magazine: 'Bitcoin Failed in El Salvador.' Is the Answer More Bitcoin?

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  • Is the Answer More Bitcoin? (Score:4, Funny)

    by fahrbot-bot ( 874524 ) on Saturday December 11, 2021 @05:41PM (#62070471)

    They could try switching to Bytecoin ...

    • I use my crypto miner to heat my workshop in the winter. It's basically an electric heater that generates cash on the side.

      • So what you're saying is you're wasting money on an inefficient heating system?

        • So what you're saying is you're wasting money on an inefficient heating system?

          Not at all; electric heating is quite common in many parts of the world. The only difference in my setup is that the heater helps to maintain a global financial system as a byproduct.

          Of course, the environmental cost is based more on the source of electricity, not the sink. In USA, an electric car is predominantly coal+natural gas powered. https://www.epa.gov/energy/abo... [epa.gov]

          • Of course it is. Even as a biproduct it's a woefully inefficient heating system. Resistive heating is literally the worst possible use of electricity to generate heat, and no kiddo, you're not maintaining anything other than a global delusion masked as a co-ordinated effort to battle what was once our species' effort to actually reduce our environmental impact. Bitcoin isn't a financial system in any way shape or form.

            • Even as a biproduct it's a woefully inefficient heating system.

              Electric resistive heating approaches 99% efficiency, compared to other home solutions like natural gas heating that tend to be closer to 60-80% efficient. Not as good as a heat pump but certainly not impractical, especially if the electricity is generated from renewable sources. https://www.energy.gov/energys... [energy.gov]

        • Re: (Score:2)

          by slazzy ( 864185 )
          Electric heating is 100% efficient. Where I live we use hydro electric power so it's very low carbon impact as well (basically the cement to build the plant 100 years ago released carbon dioxide). Would you rather we use oil furnace? Gas? Wood? It's -40 C in the winter and we need something for heat.

          • Electric heating is 100% efficient.

            Yeah. That's horribly inefficient. Good electrical heating systems these days can get upwards of 600% efficiency. Shitty systems that are only 100% efficient are well on the way to being outlawed along with oil fired heaters as the worse possible way to heat a house/room.

            Where I live we use hydro electric power so it's very low carbon impact as well

            Where do you live? Care to wager you don't use 100% hydropower and thus are making a claim knowing full well your inefficient practices prevent the shutdown of other polluting plants which do exist.

            Would you rather we use oil furnace? Gas? Wood? It's -40 C in the winter and we need something for heat.

            Oil? No. Gas or bio-pellets? Absolutely (I

            • 600% efficiency is pretty good. I was wondering what could do that, and decided to do a little research while watching 22 men run into each other on TV. I found it stated that a heat pump could do 300% and was more expensive, which makes sense as it looks like it takes twice as much gear as a normal vapor-compression AC.

              Alas, the game is over, the last man is stretchered off the field, and I must resume my regularly scheduled life. So I must ask: what devices or conditions reach 600%?

    • I heard that consumes even 8 times more power.

  • Horrible. (Score:4, Insightful)

    by Gravis Zero ( 934156 ) on Saturday December 11, 2021 @05:45PM (#62070483)

    one of their power plant recently spent $4,672 in electricity to mine $269 in bitcoin.

    Literally polluting for profit. It has no function other than pollution. It doesn't power a device, charge a car, heat a home or anything else, it's the worst outcome possible.

    • Re: (Score:2)

      by hey! ( 33014 )

      Literally polluting for profit.

      Not really different from any other source of pollution, then.

    • one of their power plant recently spent $4,672 in electricity to mine $269 in bitcoin.

      Literally polluting for profit. It has no function other than pollution. It doesn't power a device, charge a car, heat a home or anything else, it's the worst outcome possible.

      Well it does heat lots of places... which I would guess then leads to increased air conditioning for those places use given El Salvador isn't a particularly cold country.

    • one of their power plant recently spent $4,672 in electricity to mine $269 in bitcoin.

      Literally polluting for profit. It has no function other than pollution. It doesn't power a device, charge a car, heat a home or anything else, it's the worst outcome possible.

      Doesn't look like they're making much of a profit with a $4,403 loss.

      • Doesn't look like they're making much of a profit with a $4,403 loss.

        They are making a profit if someone else is paying the power bill though!

    • Iâ(TM)m not sure how they managed it, if you mine on even a relatively old GPU, you easily outstrip even moderate consumer energy prices.

      My home is provided with cheap and zero emissions (pre-purchase nuke and natural hydro) at 4c/kWh, but large consumers can get that down to 2c/kWh and that includes the service and distribution costs, doing it adjacent to the power plant costs less than 1c/kWh.

      So burning $4000 at the source and getting $200, you have to be mining on a Core2Duo or something like that,

    • Re: (Score:3, Insightful)

      by Anonymous Coward

      Mining bitcoin is only profitable if you can create mining hardware yourself from scratch using the latest chip technology. There are only a couple places in the world that can do this. Anybody else will never see a profit from mining BTC.

      You can't buy bitcoin mining hardware that someone else created and make a profit. It's impossible because the creators of the hardware will extract what profit they can before passing it on, selling just before it becomes unprofitable and you're left with a lump.

      Maybe you

      • I don't see how anyone but ASIC miners, and ones that buy the large machines that not just are power hungry, but need a ton of cooling can even compete in the BTC mining market. Instead, if one is wanting BTC, perhaps the best bet is to find some altcoin, mine a pile of it, then trade it in for BTC.

        Or, perhaps maybe find something less ecologically wasteful to invest in, preferably stuff that shortens supply chains.

  • The answer is always more Bitcoin (Score:4, Insightful)

    by rsilvergun ( 571051 ) on Saturday December 11, 2021 @06:17PM (#62070573)
    In any good scam the answer is always more of the scam until the scam blows up. And as long as you're not caught holding the bag it's all good and it wasn't a scam.

    • You use this word "scam", and I don't think it means what you think it means.

      I have yet to hear one person explain what it is that was promised and how that promise has harmed its users. Bitcoin lets me hold a certain amount of a thing. I can transfer a specific amount of that thing to someone else. (Specifically, someone who possesses a private key, which is not that different a concept than possessing a physical wallet.) This is all I asked for, and all I ever wanted.

  • Of course it's "wasting electricity" for a Foreign Policy writer. Their reason for being is to support the Petrodollar-backed Globalist agenda.

    The article is also replete with technical and economic errors but what surprises me most is the tone.

    They should be warning each other that these nerds are spending electricity to solve the Byzantine General's Problem to try to implement distributed trust and make central banking obsolete.

    Unless it's a mole who is trying to lull them into a false sense of complacenc

    • Of course it's "wasting electricity" for a Foreign Policy writer. Their reason for being is to support the Petrodollar-backed Globalist agenda.

      The article is also replete with technical and economic errors but what surprises me most is the tone.

      They should be warning each other that these nerds are spending electricity to solve the Byzantine General's Problem to try to implement distributed trust and make central banking obsolete.

      Unless it's a mole who is trying to lull them into a false sense of complacency. In which case, carry on.

      Quick question.
      Are birds real?

  • Means more bitcoin!

  • Bitcoin is expensive (Score:5, Informative)

    by quonset ( 4839537 ) on Saturday December 11, 2021 @06:45PM (#62070669)

    When it comes to wasteful energy usage. For the cost of mining one Bitcoin you can do roughly 2 billion Visa card transactions [marketwatch.com]. Or, put another way, power the average U.S. home for 61 days.

    • Basically the cost of a bitcoin is approximately the cost of electricity to mine it.

    • When it comes to wasteful energy usage.

      Why does anyone care if someone else is wasting energy? Oh, right, because producing energy produces CO2, CO2 causes global warming, and global warming is bad. How do we know this? Because the UN IPCC told us so. The IPCC told us about the problem, but they also told us what is the solution. We can produce energy without producing CO2. Do that and nobody cares if someone else is wasting energy. What is the solution? Again, the IPCC told us.
      https://news.un.org/en/story/2... [un.org]
      https://www.world-nuclear-n [world-nuclear-news.org]

      • USA isn't going to nuclear, and China pushed their "neutral" year to 2060. Bitcoin makes a half ton of carbon pollution per transaction, like say tapping "buy" on an app to buy coffee.

        Bitcoin now half of a percent of global energy consumption and rising. It's a problem now, time to nip that gambling token in the bud.

        • USA isn't going to nuclear

          Then that must leave one of two outcomes. First possibility is we solved global warming without nuclear power. In that case we must be well on our way to solving the problem with so much new wind and solar generating capacity built in the USA. The second possibility is the USA didn't solve the problem of global warming. Given the report from the IPCC you can likely guess which of the two outcomes I believe more likely. There is a third option, the USA will be building more nuclear power plants. There'

      • Why does anyone care if someone else is wasting energy?

        Because of supply and demand. It means that extra useless demand rises the price for everybody else.

    • Either check your math or explain how a US home uses $13 of electricity in 61 days.

    • This is misleading, and a fabrication. One bitcoin transaction is indeed more expensive than a Visa transaction, but only $1.51. That powers the average US home for 8-9 hours.

      Your post is a fabrication because your pick of 1.00 bitcoins is completely arbitrary, and has nothing to do with transactions. Mining is not related to transactions in the manner you suggest, and eventually, mining will not produce any bitcoin at all. What do you say then, mining one Bitcoin costs an "infinite" number of Visa card tra

    • But factor in what it takes to employ all the peopled that support those 2 billion Visa card transactions.
  • Communism didn't work? Try MORE Communism. Tax cuts didn't work? Try MORE tax cuts. Bitcoin doesn't work? Try MORE Bitcoins.

    • Since you mention tax cuts, this article came out recently (https://redstate.com/heartlandinstitute/2021/12/08/an-inconvenient-truth-irs-data-prove-tax-cuts-and-jobs-act-was-boon-for-middle-and-working-classes-not-so-much-for-the-wealthy-n488368):

      As Justin Haskins, editorial director at The Heartland Institute, documents in a new Policy Brief titled “Measuring The Effects Of The Republicans’ Tax Cuts And Jobs Act On Personal Income Taxes,” “According to data from the U.S. Internal

      • Try a less biased source next time.

        Tax cuts are sold on their ability to create jobs. They don't. It's as simple as that. And wages also don't grow.

        You're not even addressing the claims made by tax cuts proponents. Of course tax cuts means people will pay less taxes. That's not the stated goal of the tax cuts, which is to create jobs and increase wages. They don't and they still don't.
        • Well, the source is the IRS. The analyst may be biased, but you have access to the same data, so feel free to show us any actual problems with the findings.

      • Tax cut advantages were slanted towards the plebes during the first years, and provided modest gains. This was necessary to help sell the idea to the heartland. The really huge cuts for the rich are scheduled, by law, to increase greatly over the next five years or so.

  • ...somewhere in El Salvador tells you everything you need to know about the infeasibility of Bitcoin as an everyday payments system.

  • If these can get a reliable, baseload geothermal power plant built, this would be a significant national asset - so long as you did't waste the output on crypto mining. Make some cars, power new housing developments, anything else.

    • Sadly, the entire concept is batshit bananas. Bukele wants to sell BTC-backed (???) bonds to the tune of $5bn, at half El Salvador's national debt interest rate.

      All of this to build an entire city and a power plant near a volcano. It's almost like a bad Bond villain scheme.

  • Is to let the free market decide what currencies will succeed and fail, not the state.
  • I thought they used the Lightning Network for Bitcoin transactions. If so, it is time to stop complaining about energy usage and do your homework: https://lightning.network/ [lightning.network]

  • So: Do stupid thing - fail - do more? (Score:3)

    by gweihir ( 88907 ) on Sunday December 12, 2021 @08:01AM (#62071909)

    Well, I know about 80% of the human race is not rational when it counts. But being _this_ stupid?

  • The sooner everyone gets that through their heads the better off we'll all be.
    It's just another stupid distraction like these NFTs are lately. Just another way to get people to waste resources.

  • I guess we can start the El Salvador counter at 1 now.

    https://99bitcoins.com/bitcoin... [99bitcoins.com]

  • "Bitcoin mining is a process of competitively wasting electricity to guess a winning number every 10 minutes or so,"

    That's actually a good summary. And fairly precise for an aphorism.

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