I stand corrected. I didn’t know crypto appropriated the word for its own unique purpose. But there still remains the issue of the utility of the “work” that represents this stored value. Perhaps it is my techno naïveté, but this argument sounds a tad circular.
In terms of utility of the work required, I understand how it might seem a bit confusing. A real-world analogy might help. If you had a bunch of cash, you may want to store it in a safe deposit box at the bank. Although you would consider that method of storage extremely secure, you wouldn't actually think about the engineers of the bank building, the contractor and sub-contractors involved, and you definitely wouldn't think about the laborers that dug the bank foundation or the company that actually constructed the vault. But they were all essential to provide you with a safe and reliable storage facility. Likewise, you may not think that solving puzzles with a computer are meaningful, but in the context of DIGITAL money, that's exactly the kind of digital work required to safely and securely store digital currency. Remember, when we talk about Bitcoin we're talking about money that's not physical, but digital. So instead of a physical bank to store store physical money, we need a digital bank to store digital money, and that's what the blockchain does. So to summarize, Bitcoin miners are doing hard and laborious digital work for the purpose of building and maintaining a secure digital bank (blockchain) to store your digital money (Bitcoin). I hope this helps .
Informative, thanks. But when I stored valuables into my safe deposit box at the bank, the effort to build that physical facility did not factor into my calculation of the value stored in the box. Sure, I pay an annual fee, which is taxed, but neither one is a reflection of the other. My assets in the box are quite independent of the value of the work that went into building that safe, and vice versa. So the analogy does not quite fit. But I will concede that I am out of my depth in the techno space of crypto. And just as I stayed out of the deep end of the pool before I learned to swim, so I will avoid those markets that I cannot fully comprehend. Chalk it up to my timidity.
I do think though that for the newbies reading, it helps for a little bit of nuance with regards to what is means to securely store bitcoin vs. what it costs to protect the network. Once you have your private key, and if that private key was generated in an appropriate way, and if whatever bitcoin you own is sent to an address that was generated from this private key, then this bitcoin is secure without the network needing to do any calculations. The security comes from the cryptography and the fact that it would be impossible to provide the digital signature needed to move this bitcoin. When it comes to moving bitcoin, this is where the network security comes in. We don't want just anyone being able to add to the blockchain without showing sufficient work. Even if lets say that they had to do very little calculations in order to create a valid block (perhaps from the early days or perhaps from being very lucky by guessing the correct nonce), it still doesn't affect the security of anyone's bitcoin at any address. Creating a new block of course also creates new bitcoin, and hence why doing so is very valuable and energy intensive, but if for some reason the network hashrate crashes for some time to a fraction of the current hashrate, nobody's bitcoin is in jeopardy. All that happens is that less energy is necessary to mine a new block and suggest new transactions to the blockchain, but each of those transactions still need to meet the consensus rules which means that anyone wanting to move bitcoin would require the private key. And the network itself adjusts to this new hashrate to ensure that new blocks are created about every 10 minutes. If you don't have the private key, you can't move the bitcoin, and if you want to start guessing private keys for any bitcoin that exists at any address, this is extremely energy and time intensive, to the tune of hundreds of thousands of years depending on how much compute power you are willing to throw at this. So attempting to steal any bitcoin at an address will essentially be impossible if you can't get access to the private key. All the energy goes into creating new blocks which processes transactions, where the digital signature proves that the owner of that bitcoin has the private key. This part has to be sufficiently decentralized in order to maintain free and open access to the network, and for transactions to be processed "democratically", so it is this process that we talk about when we describe network security. If we want to use a gold analogy, it could be something like this. You might have gold hidden somewhere, and only you know where it is. No matter what is happening out in the world, nobody is going to get your gold. But in order to use your gold, you have to move it. The Brinks truck, that handles all the gold transporting, charges a hefty bill to do so, so this would be like protecting the bitcoin network. Having gold though is only good if you can use it of course, and by using it, it means you have to move it from one place to another because for this transaction, you expect to get something else in return. (ie. you exchange your gold for a house) But if for whatever reason the Brinks trucks don't run one day, your gold is still safe, you just can't move it for the time being. Similarly, we need to insure that the bitcoin network will be processing transactions in a fair way, and because the network is already so huge, the only players in this field have to expend a shit ton of energy and computer hardware in order to do this. The only way to circumvent the ability to exchange bitcoins in this free and open way would be for a bad player to compete with all the honest players to process these transactions and essentially block out all the transactions they don't like. But nobody by themselves have access to this energy and infrastructure, and hence, the network is secure, and even if for some time the network becomes less decentralized as we would like, the bitcoins you own are still secure, you just might not be able to move them temporarily.
But we don't do that. We deposit it into bank accounts, where it becomes digital ether. Physical cash becomes digital offal, thanks to MMM, Modern Money Mechanics. Look up MMM.
Some countries allow private entities to create new money! https://www.perplexity.ai/search/do-banks-lending-money-create-Qdm1aAcqSW.lTs7v2b8Ynw And the government might not even know about all of it! https://www.perplexity.ai/search/does-the-u-s-government-know-a-udcqh1l8TqSMAwMPZ12LXw So, is money a ledger? Spoiler: Shield your eyes! https://www.perplexity.ai/search/is-money-a-ledger-nBkRXe4WSeOQyWeCkJK81w
As Saifedean puts it "bitcoin is the gunpowder of money, everyone will adopt it or be destroyed by it" Blackrock is already putting it in some of their funds without giving the investors a choice Pension funds are adopting bitcoin, States like Pennsylvania are planning to put it in their treasury, the US Federal govt may put bitcoin in a strategic reserve, if Lutnick becomes Treasury, bitcoin may be put it in the Fed or Treasury reserve Goldman Sachs and Blackrock have already added bitcoin for their treasury asset Microsoft may add bitcoin to their treasury, what happens when AAPL adds it? Is Berkshire going to sell all their AAPL holdings? When MSTR becomes part of QQQ and S&P 500 all the passive retirement investing will be buying bitcoin whether they know it or want it or like it RIA's are already sending letters to their clients they will be allocated to bitcoin unless they explicitly opt out All the naysayers will have to move out of their state, or quit their job if it's invested into funds or the customers who don't like bitcoin will have to move their wealth out of Blackrock, or maybe they have to fire their RIA's Good luck to ET naysayers bitcoin is the best money in the history of the world. it does not need backing, just like gold, it is money without liabilities, bitcoin is the one that will back everything, hence a treasury reserve asset