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Bitcoin: What worries me about it?

March 31st, 2013

I am in favor of Bitcoin for various reasons related to freedom and economy(some gut feelings). But I have realized that there is one thing very wrong about Bitcoin.

All most all other currencies in the world we use are based on some guarantee of the value by some central bank. So for creating say $1000 all they need is a paper and little complex system to make it difficult for others to copy it. So real energy consumed in the process of making $1000 will be may be say $5 (that is max). Ofcourse when we talk about coins the cost may be much more. Some times it may reach the actual cost of metal in it. Let us consider that only 1% of coins are in circulation.  So that is not significant.

But what does it cost to create 1000 Bitcoins? Bitcoins are created using electricity. So they consume last amounts of electric power to produce Bitcoins. And this energy is consumed in the process. It is lost, no one can recover anything from it. So for society, net result of creating Bitcoins is always -ve. As the price of Bitcoins are increased now from $1 some years back to $90 now, more and more people will start converting real power into some numbers.

I have not done any statistics on this but rough estimates is more than 10% of the value is already consumed.

As a person who does not much like waste of natural resources, I do not like this. The people who created it should have found some other way to limit the availability of them.

I may be wrong in lot of assumptions I made above. I have not found anyone talking about this issue. What do you think?