Blockchain-based consensus systems are an energy-waste ratchet
A lot has already been written about different aspects of why most distributed blockchain-based consensus systems are just… bad. And yet we are still able to find new such reasons. At least I think this is a new one. I have not seen it mentioned anywhere so far.
Distributed blockchain-based consensus systems, as they are currently implemented, are an energy-waste ratchet.
I am specifically talking about systems like Bitcoin and Ethereum, and any other system that:
- is distributed;
- lets their users control some kind of “assets” by tying these to their “wallets” until they spend them;
- uses blockchain for consensus.
What’s in a wallet¶
When you have any assets on any such system, they are associated with some form of a wallet. That boils down to a file containing the private key, often password-protected, which needs to be stored somewhere safe. It is also necessary to have that file and the associated password in order to do anything with your assets.
We are, however, human, and as humans we are bad both at remembering passwords, and at keeping digital files safe for long periods of time. Passwords get forgotten. Harddrives fail or are thrown away.
And when that happens, there is no way to retrieve the assets in question. They’re lost, forever.
A wasteful ratchet¶
As time goes by and more people lose access to their wallets, more assets will be irretrievably lost. This is a one-way street, or in other words: a ratchet.
All those assets, now lost (like tears in… rain), nevertheless still took energy (sometimes an insane amount!) to mine or mint. Even if someone considers it worth it to use that energy on mining or minting in the first place, we can probably agree that for assets that get irretrievably lost, that energy has simply been wasted.
Mining capacity doesn’t go away with lost assets, though – and so, that (steadily growing most of the time) mining capacity is used to support transactions in a network with more and more assets that remain forever inaccessible.
Blockchain-based consensus systems inevitably waste energy on creating worthless, lost cryptoassets. With time, the amount of lost cryptoassets can only grow.
To make matters worse, for systems that are supply-limited (like Bitcoin) that also means that at some point the amount of lost cryptoassets will exceed the amount of still accessible ones.