BitCoin’s Gone Green. BitCoin will be the most…
By: John Pitts
Tags: Bsv, Energy, Ethereum, Information Technology, Bitcoin

BitCoin’s Gone Green

Dedicated to:

Jerry Chan, CPO of TAAL, who’s knowledge of BitCoin Node interworkings is only eclipsed by his modesty (and who contributed a nifty idea of saving a lil’ bit of power via NONCE-reuse as well as better explaining BitCoin Network relay fees)

You’ve seen the complaints and criticisms:

“generating Bitcoin requires a truly staggering amount of energy. The electricity used in a single Bitcoin transaction, for instance, could power a house for a month.” — Adam Jezard, World Economic Forum “it’s impossible for 98 percent of the devices during their lifetime to make the calculation that actually results in a reward. So, the rest are just running pointlessly for a few years, using up energy, and producing heat, and then they will just get trashed because they can’t be repurposed. It’s insane.” — Alex DeVries, Blockchain ‘expert’ “the amount of energy needed to run the Bitcoin network annually has surged to a record-breaking 77.78 terawatt-hours. Roughly the same as the entire electrical consumption of the nation of Chile” — Digiconmist

These statements are both true and false, depending on the property values you assign to two seperate aspects of BitCoin:

Age: Young “baby” BitCoin (2020) is much different from older BitCoin at scale (2030, 2040, beyond), and this article’s purpose is to spend time on the one we talk about less: BitCoin at scale, or old-man BitCoin Fork: The answer on power consumption is different for each fork of bitcoin, which today is mainly comprised of (in order of market cap) btc (“bitCorn”[0]), bch (“abc”), and BitCoin (original protocol, or BSV).

BitCoin will be the most power-efficient computation AND payment network in the world — bar none.

BitCoin is truly an intricately-engineered information commodity, and this article aims to show you just one aspect of this beauty — the part of it’s design which will conserve energy. While explaining BitCoin’s masterful qualities which allow it to save energy, this article will shed a little more light on why today’s highly-speculative “digital gold” punters (regardless of their namebrand popularity) have missed the mark by choosing the wrong bitcoin fork. If you read “3 Wrights don’t make a Wrong” [1] you’ll understand this theme: how so many saavy well-known successful folks can be so wrong for so long.

“The power of BitCoin is a curious thing; make segwit fork weep, make a visionary fork sing. Remove some OP_CODES, kill the fruit of the loin; more than a hash-rate, that’s the power of BitCoin.” — Huey Lewis & the News (Power of Love)

“Doc” is also a nickname Ken Shishido refers to Dr. Craig Wright — a theme we’ve seen before in London. The “flux capacitor” in BitCoin is transaction-verification; the DeLorean’s flaming tire-tracks is just the “PROOF of work”

It’s worth nothing a system which creates the most efficient worldwide computing network — for information, art, and progress — is a gift Satoshi Nakamoto gave us all back in 2009. It’s about time we understand BitCoin’s elegance with respect to conserving valuable energy.

For awhile Americans couldn’t “traverse the plains like a man” (see Aaron Freeman video below), using dirt roads & mountain passes, then railroads added orders of magnitude improvement in transportational efficiency with speed security and tunnelling thru mountains. This historical precedent is much like what the BitCoin Network will do for our current world wide web (WWW) internet network.

Before we talk about how BitCoin saves energy, like railroads saved energy vs the horse-and-buggy wagon trains of Lewis & Clark, it’s best we start by narrowing our focus via process of elimination. First we’ll dismiss “cryptocurrencies” which will NOT save any energy and are inefficient NETWORKS (networks is a distinct sub-topic of technology vs CODE) as they are scaled. In other words, we’ll start with “Fork” first, and then we’ll analyze the only scalable fork of BitCoin to discuss why “Age-ism” has blinded the “bitcoin wastes energy” critics.

Finally, we’ll describe BitCoin’s “Proof-of-Work” in the most clear way possible.

The mission of this article is two-fold:

Show the reader how BitCoin Satoshi Vision will be the most energy-efficient computation network ever. Leave you with unparalleled understanding of “Proof of Work” as it pertains to BitCoin. After reading this article you’ll never think of “PetaHashing”, “Hashpower”, or “POW” the same way again, and if you currently think of btc as bitcoin, you’ll begin to understand why it has no hope of such a vaunted title.

BitCoin SV is a baby, but that doesn’t mean we can’t analyze it’s young knowable traits to predict an accurate fortelling of it’s energy efficiency as an older man. The kid’s future is bright!

btc “POW” [2] is a waste of energy

btc (otherwise known as “bitCorn”[0] — the one breaching $20,000 per bitcoin on “digital gold” dreams) does not have a proof-of-work because ASIC-hashing isn’t work. Work’s definition even mentions what outcome from the energy spent is required… “USEFUL” [1]. Let’s say that again, ASICs hashing, despite the “proof of work” moniker, isn’t work. This is actually the main point of this entire article, but we’ll get to that in finer detail later.

btc still doesn’t play its POW guitar like a man — but BSV does with both big blocks AND scale. Playing amazing guitar is the work, the proof is selling sold-out concert seats.

btc’s mistakes (plural) began way back in 2010 when Satoshi Nakamoto made what ended up being a poor choice of steward when handing over the code repository “keys” of BitCoin to Gavin Andreson. You can sympathize with the man, he was under the wrong impressions that:

Everyone understood his vision His protocol would not be changed.

When the Wright brothers, or Karl Benz, or Thomas Edison revealed their WORKING inventions to the world, they could be taken apart and examined to understand the specific functions each part had in the whole. This is MUCH easier in physical inventions of things like phonographs, moving picture projectors, and even invisible electricty (especially Edison’s DC power). But the most amazing parts of Satoshi’s invention weren’t the code or the cryptology or the math — it was the incentive system, the understanding of networking topography, and most of all the vision for how his system would GROW. Satoshi’s vision was akin to God creating DNA for a species before ever SEEING the adult version of the species! The point here is, sometimes a man is so many steps ahead of the herd in his thinking that he doesn’t realize how hard it is for people to catch up without explaining everything. He explained a little bit for sure, but not enough. So a coders-only mono-culture took over a contraption that required more than just keen coding knowledge. You might be a whiz with internal combustion engines, but that doesn’t mean you know how to fly the airplane it propels — or even understand how the flight controls work!

Gavin, under some not-so-innocent pressure from early bitcoiners with hidden agendas, subsequently was duped into giving copies of repository keys to Gregory Maxwell and other members of “Core” who then quickly rigged bitcoin for the sole purpose of increasing it’s price. This “digital gold” narrative isn’t surprising; rigging an entity for near-term price increase actually happens often in the stock world! It’s why GE and GM are drains on citizen-taxpayers via To-Big-To-Fail (2B2F) bailouts. [2]

Jack Welch and several GM CEOs ran those great brands (ie: GE was Thomas Edison’s baby — a guy in the running for America’s greatest man) into the ground in order to pad their own pockets in the NEAR term, instead of thinking about the long term. Similarly, the $25,000 price of bitcoin is unfortunately a perfect indicator of how bitcoin is being run into the ground, just as AOL’s record-breaking acquisition by giant Time Warner in 2000 was a perfect indicator for why “walled garden” internet protocols would not reign, and the real winner was going to be Tim Berners-Lee’s world-wide-web (WWW) internet protocol born in 1990. Notice the similarity of the timeline as well! Big Wall Street and corporate bigwigs bet on AOL, the wrong horse, and the peak of that mal-investment curve occured just as a still young 10-year-old WWW was about “run the table” on internet protocols.

In 1994, Prodigy, CompuServe, and AOL were a big deal, and AOL emerged the winner of that group of losers by 2000. Then the worldwide web (WWW) took over for good. AOL’s meteoric rise and fall is great historical precedent for the mistakes of btc’s core team who mis-interpreted the 1990 protocol in the same way “Core” misinterpreted Satoshi Nakamoto’s 2009 protocol. Voila! Currently it’s 10 years after the invention of the protocol (2009–2020) and the same thing is about to occur where all the Wall Street and Silicon Valley glitterati are missing the REAL BitCoin TRAIN — AGAIN. Ain’t historical precedent fun?

https://sym.re/Gd9JA2o (read for more fun historical precedent going back even further than AOL+Time Warner)

The “Corn” team removed the functionality of the scripting language (akin to removing the wings from the plane), solidfied the 1 MB block limit, then began taking away signatures (SEGWIT) and setting up virtual money-laundering machines with “Lightning Network”. They created a rocket which could soar, but couldn’t land the people riding it safely.

bitCORN removed the scripting language functionality from bitcoin- similar to removing the wings and landing gear from an airplane. The jet engines can take you up into the heavens, but it’s the downswings when we find out what an asset is REALLY worth.

btc is a one-trick pony, all it does is run ASICs competitions in which Miners fight for the ever-halvening subsidies. 50, 25, 12.5, 6.25. These are the block subsidies which took approximately 12 years to get to the 6.25 point. There’s only three “outs” for btc miners to continue to process transactions profitably as time goes by:

the price of btc must double before or immediately after the next halvening drops the subsidy. A miner with a fixed amount of ASICs miners burning $125,000 of energy a month will be break-even at btc price = $10,000 and block subsidy = 12.5, winning 1 block per month. After the halvening, the miner will have a negative 50% profit margin, as the payout will be 6.25 x $10,000 = $62,500 — not enough to cover his $125,000 energy cost. BUT, if btc’s price doubles to $20,000, the ponzi scheme can continue! btc’s mining fees could make up for 100% of the lost subsidy from the halvening. In our example above, and using 1 MB blocks at about 7 transaction per second (7 txns/sec * 60 sec/min * 10 min = 420 transactions per block), if mining fees were $148 per transaction then btc price could remain at $10,000 & the miner will be fine! This is considered a “feature” of btc — “digital gold” but only for rich people who can afford massive fees! These exhorbitant fees would need to climb again each halvening: $300, $600, $1,200 per transaction as subsidy reduces to 3, 1.5, and lower! The final solution is the most energy efficient: let everyone throw half of their energy-burning ASICs mining rigs in the trash! The puzzle difficulty will adjust, and miners would actually reduce their energy consumption in our example from $125,000 to $62,500 per month to maintain profitability consistency. Who wants to throw their capital into the volcano first?

ASIC miners not only waste energy, but then they are WASTED when disposed; Gordon Moore planned for disposable chips but after 18 months??

The btc core team have embraded 1 and 2 above, as 3 seems a bit silly for anyone investing capital. So lets review the logical outcomes for each of their “solutions”:

Every halvening, btc will need to double in price. $20,000 is good for 6.25 subsidy, then $40,000 at 3.125, $80,000 at 1.50625, $160,000 at 0.753125, $320,000 at 0.35250625, $640,000 at 0.1526…., $1.2mm at 0.075…, $2.4mm at 0.03525…, $4.8mm at 0.0152….. At $4.8mm btc price we’re at $100 trillion (US monetary base is only $5 trillion). Eventually this number gets absurd, and miners will be forced to adopt one of the other choices Forever-doubling per-transaction fees is even more absurd, but this choice is exactly the one btc core team would have you believe. What they’ll allude is that “digital gold” will eventually just become tradable between nations for very large sums, thus these nations will have no problem paying $10,000 and higher per transaction for a simple movement of 200 Bytes which costs a computer a tiny tiny fraction of a penny to transmit and recieve. Remember, less participants, less transactions, and less transactions means an even HIGHER fee is needed! Core-lovers really don’t like to do math or think too far into the future. DIGITAL GOLD NUMBER GO UP SOON! All roads lead to just shutting down unprofitable ASICs mining rigs, when you examine the options above. This would work, and price could stabilize. There’s just ONE big problem with this solution, what happens when btc price takes a swing downward similar to what oil did in March (negative $40 per barrel in West Texas) or gold did from 1980 to 2001 ($800 to $200)?

Oil can run cars and provide heat, and gold can be used as excellent circuits, non-oxidizing artwork, bigger wedding rings, or anti-bacterial paint. What do you do with cheap btc to eat up some supply and make the price stop dropping once a price drop occurs? Please watch this video on this very topic: https://streamanity.com/video/E0IXSKs2hrUK

To evaluate energy conservation in btc is easy tho, all energy goes to ASICs hashing which is solving a puzzle with no value to society. Regardless of how btc solves its halvening problem, it is ALWAYS just burning energy doing a pointless task. Think about ASICs hashing when blocks are stuck at 7 txns/second (~0.5% of average Visa levels) which a single personal computer can handle easily and the mining subsidy is 0.001 bitcoins per block? What is the energy getting the miner at that point? It’s not a “proof of work” for the newly minted coinbase coins, because there just aren’t much of those. The ASICs aren’t processing transactions, because just ONE of them could handle the whole network. The energy is COMPLETELY WASTED no matter how you think about it.

Ethereum cares only about how much shit you have stacked, not how much shit you’re going to compost in the future!

ethereum 2.0’s “POS” will prevent the ether network from scaling

ONE of the flaws in proof-of-stake [POS] cryptocurrencies is its inability to scale. Scale requires investment in networking equipment which can process transactions. No one just DONATES equipment while not getting paid for it proportionally to the transaction expense! VISA and Mastercard both invest billions in processing-machines, to handle all the traffic on their payment network; but, they are paid PER transaction to ensure all runs smoothly. However, this natural incentive for Visa/MC doesn’t exist for the largest block-reward earner on Ethereum, due to the very definition of Proof-of-Stake! The spoils of ethereum’s inflationary coin payouts go to the guy who already owns the most, not the guy who processes the most transactions correctly!

Visa’s NET “property & equiptment” investment is almost $3 billion in 2020; how much will the biggest POS ethereum processor spend on processing equipment?

Consider a hypothetical example involving Visa. Instead of investing in their own network equipment to make sure your Xmas presents arrive securely and on time before the holidays, Visa instead pays TWO third-party suppliers to do transaction processing FOR them. They choose to outsource to EtherFat Processing LLC (EFPL) and NoEtherFastTxn Inc (NEFTI). Instead of Visa paying each based on how fast, cheap and secure a company processes Black Friday transactions, they pay based on which company has more dollars in the bank.

EtherFat has $9.999 billion in the bank, and NEFTI has $1 million in the bank. SELLC is a very responsible forward-looking Node who prepares well for the Xmas transactional rush, so it’s CEO spent $9.999 billion on processing equipment to be able to handle 80,000 transactions per second. Meanwhile, EFP “prepared” for the holiday rush by spending $1 million on some Rasberry Pis which can handle 50 transaction per second. NEFTI will be able to process all the transactions no problem, but EFPL will be hamstrung and begin raising prices on transaction fees not because they aren’t making tons of money, but because they will be incentivized to LOWER the number of transactions on the network so their tiny Raspberry hobby-computers can handle it.

If only the great coder-geniuses of Ethereum figure out how to route ALL transactions above 50/second to NEFTI, Xmas will be fine this year! But that’s now how POS works!

Proof of Stake pays the processor based on what’s in the DOLLAR bank, not in the SERVER bank. So Vitalie Byutes routes all the traffic to the responsible poor node who does all the work, and then routes all the fee-rewards to the rich node who’s loafing on the sideline while counting his ethereum HODL-coins [2]!

One guy has stacked sats; the other guy has stacked transaction processing machines

There’s no real reason to go any further with Ethereum, because even when they were Proof-of-Stake they proved many times over from 2016–2020 that scale was not occuring. In Physics there’s theoretical and experimental, and experimental ALWAYS trumps theoretical. We’ll leave it to the reader (or the comments) to collect all the mishaps in Ethereum’s ignominious history of not being able to scale.

There’s simply not time to go thru the thousands of forks and/or copycats original BitCoin; the main POW and POS cryptocurrencies covered above will be sufficient. The boring part of our article is covered, it’s time to inspect the DNA of original BitCoin — BitCoin Satoshi Vision — to see if it will indeed be the most energy-efficient computer network ever built!?

Satoshi Nakamoto set the BitCoin DNA (protocol), but the organism which is the BitCoin NETWORK builds itself according to input from the surrounding environment. Satoshi knows not exactly what will be built finally, but has a better idea than anyone for what qualities it might have.

A whole season championship won every 10 minutes

Crash and burn. All the stars explode tonight. How’d you get so desperate? How’d you stay alive? Oh, come on be alive again; don’t lay down and die. Oh baby drive away, to Malibu — Hole (Courtney Cobain)

It was the biggest day I’d ever seen; the east coast had its nor’easters with all it’s chop and some rare clean big days after those storms, but California-Pacific waves had a LOT more wieght to them for the same height. A 2 foot high wave in Ocean City, Maryland, Manasquan Jetty, or even way “out east” on Long Island at Ditch Plains wasn’t enough to propel a grown man down the beach on even a 9 foot longboard. But a 2 footer in front of the Surfer Motor Lodge in Pacific Beach, if mishandled, could break your neck in the shallow water if you weren’t aware of the extra UMPHH it had. But this was no 2 foot day, it was “8 to 10” at the surf report. On a point break like Malibu, 8–10 feet is actually handlable. You can get outside by staying way left of the incoming sets, and then later traverse northwards into the drop zone. But Malibu peer is a point break, and I was looking at a beach break with waves everywhere. There was no easy avenue to get out to a safer deeper area beyond the break of the incoming sets — you had to WORK for it. I was still a novice surfer in the fall of 1994, but I was also 23 years old in peak shape. Swimming & crew were my main sports growing up, and I had some experience rowing surf boats in New Jersey, and this made me highly overconfident in the water. I was ignorant.

In surfing, rides are the block rewards, and paddling is your capital investment.

So young, strong and overconfident back then, I didn’t even stop to consider that paddling a 9'10" longboard into 8–10 feet of OCEAN break was a tall task. I just jumped in and aimed straight out. 15 long minutes later, I’d gained about 6 yards. 30 minutes later, I had finally made it out beyond the constant break of whitewater, and only because I wasn’t taking no for an answer. I screamed at the waves, never stopped paddling, and used every trick I’d learned reading old-school surfing books from the 50s and 60s in the local library. Failed duck dives (on a long board? yeah right!), roll-overs, and I even tried the “stand up ride-over” method I noticed Hynson and August used in Endless Summer (at Ins & Outs). I only remember two things from that day.

I almost drowned on the first wave I took. I was exhausted and didn’t respect it, so after finally getting out there, took the first sexy 8 foot wave and was held under longer than ever in my life. I vividly remember giving up trying to get to the surface and breathing in anyway. I sucked in foam luckily, instead of water, which is probably the only reason I didn’t die. After spending another 30 minutes getting back out (yep, so young and ignorant, I didn’t even respect the conditions were far above my abilities) against never-ending set waves, I saw a lull behind me. For about 5 minutes the water between me (outside in the drop zone, exhausted) and the beach was completely placid — you could skip a stone a dozen times without hitting a ripple. What the hell was that I thought?

Hop over this last wall of whitewater, bc behind it is a “lull in the action”, a doldrum which allows old guys to conserve energy.

Over the next several years or so, I noticed this “break in the action” phenomena over and over again, and one day in my late thirties when tired and out of shape, I had no choice but to use my WIT against the ocean to get “outside”. By then I was a decent surfer who’d handled 15–18' California waves (which means like 6 to 10 feet in Hawaii!), with lots of wave-watching experience. So like any experienced surfer, I waxed my board with my eyes open looking for that break while I watched a young 23 year old use muscle and determination to battle countless walls of whitewater. I only smiled wisely, examining youth and ignorance, and then I saw the break in the action. I wasted no time, going into full sprint mode, paddling crisply thru flat water at a nice clip. In 2 minutes I was outside, sitting on my board, a bit winded but not exhausted and sapped. the 23 year old beat me to the drop zone by maybe a few seconds. While he took a quick breather, I was on the first wave. Mind over muscle; experience over a wealth of health.

Wisdom is an asset in surfing. After the learning experience described above, I tended to use probability, topograpy, game-theory, and sociology in the water at Malibu on crowded days. At one point my surfing was almost auto-pilot — I didn’t think I just reacted to every person, wave, and current around me. You’d have to pay me good money to reveal the secrets of how to get a wave at the “Bu” — it took 2 years of constant attention and failure to learn tiny little tricks — in surfing we call it “getting a break wired”. Before I moved back to the east coast from Pacific Palisades California, I could net a wave every 10 or 15 minutes at the Bu with 80 people in the water on a Saturday with Pamela Anderson on the beach watching her teenage son in the water without even cracking the 50th percentile in paddling speed. These are surf allegories to highlight how the age of BitCoin Node Network changes it’s behavior.

Pretty normal day at the ‘Bu. This is the first wave of a set & the smart old guy on the right goes right past this wave AND the next one to get wave #3. Here we see a level of competition similar to BitCoin Nodes fighting for a big block of public transactions!

BitCoin right now is just a baby. It only seems old in 2020 because BitCoin was born in 2009. But realistically BitCoin kinda drowned young in 2011 or so, and was revived from a coma in late 2018 by Calvin & Craig as BitCoin Satoshi Vision. That repair-work is still ongoing as we wait for Chronicle to solidify the protocol once and for all, but we’re about to take the diapers off as Nodes shift from fighting for 6.25 or 3.125 bitcoin block subsidies to 0.2 satoshis per Byte transaction fees. You see, BSV isn’t going to need the price to go up, or fee prices to climb, or turn off servers to save energy. BSV is built on BIG BLOCKS, the bigger they are, the more money the block-producer earns.

The energy cost of competing is paid for by SCALE, and scale makes the physical network bigger by increasing the annual block reward pool. While the halvenings take away the block subsidy, bigger blocks increase the amount of revenues one can win inside 10 minutes, or 1 year. Blocks are the same in number every year, governed to be 10 minutes apart; but, there’s nothing in the protocol which says they can’t get amass more and more transactions which increase the total fees per block. Forget “Moore’s Law”, Gordon Moore’s TRUE genius was realizing that Intel could lower price and sell more chips at small margin but increase the market for chips by making personal computers cheaper! He wielded this little bit of wisdom like a club over his competitors in the early days of CPUs. The 8086 and other early Intel CPUs weren’t the best architecture — the architecture was “good enough” and instead Intel focused on lowering price and winning via SCALE!

BitCoin Nodes are like young surfers now, relying on all muscle and ignorant grit; but, as they gain experience, and overcome a few near-death experiences, they’ll accumulate little “tricks” to exploit. Energy-saving tricks!

ASICs mining is ignorant, it’s just a matter of money and maybe getting a good price on energy costs. Transaction processing is hard, it has complex nuances — customers for data transactions and microtransactions will have specific needs based on their business. Some Node customers need speed, some will need precise time-stamping, and still others will need cheap prices. Depending on what happens with battery technology and renewables innovation, electricity/energy costs may not even remain the dominant concern in Node profitability. Just like the young surfer no matter how strong cannot possibly see all the conservation tricks, the current subsidy-centric bitcoin Nodes cannot see what they will need to win blocks as the contest shifts from a contest of strength to one of guile. What we can bet on with certainty, is that running a contest every 10 minutes ensures that all Node players will use every trick they can conjure to lower energy costs. This is the incentive system Satoshi gave us with his protocol; forget the code or r-puzzles, built-in incentives are the sexiest thing in BitCoin!

What we’ve just shown is not a concrete current evidence why BitCoin will be more energy efficient than say Amazon or Google Cloud; we’ve simply shown that BitCoin’s protocol creates an incentive system which rewards efficiency with power when processing transactions. We’ve more talked about what makes BitCoin energy efficient via it’s DNA, or protocol. It’s centered on big blocks for sure. But what about some BETTER analysis which can show us that wasteful ASICs mining will be a low percentage of cost for Nodes in the future — at scale?

The AGE-ism of BitCoin

Old man take a look at my life; I’m a lot like you were. Give me things that don’t get lost, like a coin that won’t get tossed. I’ve been first and last; look at how the time goes past. — Neil Young, Old Man

Predicting low energy waste via profit margin analysis

Margins will always be low in commodity businesses [see the book Gorilla Game “monsters” not gorillas], so if we assume this is true of BitCoin Nodes, we can make an assumption about what percentage of capital expenditures Nodes will need to spend on processing vs what percentage they’ll need to spend on puzzle solutions (ASICs). Energy-wasting puzzle-hashing should be a VERY low percentage of cost at scale, if BitCoin is to be the most efficient computer network in human history. Let’s do another hypothetical example of two competing nodes.

Atlantis Asics POW (“AAP”) is a BitCoin miner in 2019 with a huge investment in fast ASICs mining rigs. They cut their teeth on 12.5 bitcoin block rewards, while transactions were maybe worth $1 in extra “tip” revenue. Let’s say BSV was trading for about $200 all year in ‘19. AAP made 12.5 bitcoin/block * $200 / bitcoin + 1 MB x 1 sat/Byte = $2,501 per block revenues. AAP was making less than 0.1% of it’s revenues from transactions, and over 99.9% of “coinbase minting” revenues from block subsidies. Thanks Satoshi!

Old Guy Osiris Transactions (“AGOT”) is a BitCoin transaction processor from the future — 2040 — with a huge investment in transaction processing equiptment. Why so much investment in txn processing AGOT? Well, in 2021 Apple started using all their cloud-prowess and server innovations to compete for BSV blocks. So they entered by putting up a huge chunk of cash into transaction equiptment. AGOT reacted by specializing in a certain niche of data transactions, starting in 2021 with SLictionary definition (information) tokens which traded as if on a stock exchange. Other information-on-coin companies copied SLictionary’s exchange model and AGOT ran away with the niche even against Apple who was busy figuring out the new sector by bullying its way around. Crafty AGOT even sold all their ASICs and outsourced that function to others who specialized in it. When AGOT accumulated a lot of private localized (to them, in North America) transactions, they’d simply send their block to an ASICs specialist to get a winning hash and send the whole thing in for a splitting of the revenues. No one could beat AGOT’s cheap secure fast transaction processing in the information-token niche.

Remember Visa spending $3 billion on CURRENCY-TRANSACTION equipment? Google has a net investment of over $80 billion as of 2019 in DATA-TRANSACTIONS equipment & property. Data is still growing faster than payments and is already >25x bigger. BitCoin should look like a similar ratio by 2040.

Home Court Advantage: ASIC-miner, early 2020

The something amazing happened, old AGOT of 2040 travelled back in time to 2020 to compete with young AAP for blocks. How would this go? In early 2020 block subsidies were 12.5 and block sizes were 1 MB which generated an extra dollar of fees. AAP won every block handily, while AGOT got none. AGOT simply didn’t have any hashpower; whereas, that’s all AAP had. AGOT looked around and saw no BSV app companies using data tokens, so there was no business to get; they just powered down their servers and spent zero on energy costs. Whereas AAP had a big power bill, from running hashing-rigs. Even tho AAP easily beat AGOT, in 2020 they found ASICs-mining to be quite competitive and eeked out a 1% profit margin. It looked like this.

Block revenues = $100

ASIC Electricity cost = ($73.99)

ASIC Equipment depreciation =($25)

Transaction processing/verification depreciation & electricity = $0.01

Profit = $1 or 1%

In this contest, AAP eeked out a small profit while AGOT could only minimize losses by turning all their transaction processing equipment off. If BSV had gone up in price, AAP probably would have made the same 1% as many other Nodes would’ve invested in equipment to chase the price. But every dollar was spent on ASICs which perform an expensive but meaningless task. All expense dollars are effectively wasted bc solving meaningless puzzles is not an assset which benefits anyone or anything. THIS example, is why we can claim that even BSV is energy-inefficient today. But this battle was fought on AAP’s “home court advantage” of early 2020. Now we’ll turn the tables!

Home Court Advantage: Transaction-Processor Node, 2040

In 2040 the information-token-exchange business is ginormous, it seems like everyone is doing it. It even eclipses commodity-bitcoin monetary transactions by 30:1 ratio. AGOT has all the right equipment to do this business, but still has no ASICs. AAP, on the other hand, was able to upgrade its ASICs for 2040 to top-of-the-line equipment, to make the contest fair. They spent ALL their money on ASICs chips. So how did it go?

AAP kept winning blocks like crazy! They even won 10 in a row at one point with each win taking only 30 seconds! They were destroying the difficulty algo. Just one problem tho: In 30 seconds the transaction amounts were scant. Why? Well for one thing 30 seconds is only 5% of a normal block time, and secondly no customers were giving AAP any private transactions so AAP was only. getting some generic no-data monetary transactions. So actually their revenues looked more like they were getting 1% of average block rewards in 2040. What about AGOT?

Well, AGOT immediately made low-margin deals with all their old customers to gain back market share they lost when they took a time-warp sabbatical to 2019 to please John Pitts’ wacky time-machine Node experiments. They accumulated PLENTY of “SLA” transaction volumes to build big healthy blocks chock full o’ revenues. There was just one problem, they spent all this money on transaction processing and the corresponding energy costs for such, but couldn’t win blocks to enter their private transactions without ASICs. So what could they do?

Did you ever see the Gonk and Geefle on Sesame Street’s Planet of Snu?

Geefle could reach the nectarines, but his arms don’t bend so he couldn’t eat them. Gonk couldn’t reach the nectarines because he was too short, but he could eat them. They formed a partnership and both ate their fill.

Old AGOT and young AAP did the same. AAP couldn’t generate revenues without transaction processing, because in 2040 block rewards were effectively nothing after 5 more halvenings since 2020. (3, 1.5, 0.75, 0.375.., 0.18…). With BSV at $200 AAP was winning small revenue rewards of about $36. It didn’t matter they won a lot of blocks quickly, as they didn’t have any transactions in the blocks. AGOT couldn’t win ANY blocks, despite amassing what would have been 2 TeraByte blocks (2x10¹² Bytes) at 0.2 sats/Byte => 4x10¹¹ sats => 4,000 bitcoin * $200 => $800,000 blocks! AGOT’s transaction fees were so big, they said “keep the change” on the 0.18… block subsidy worth only about $36. So obviously a Gonk-Geefle deal was worked out between AGOT of 2040 and AAP from 2020. But what were the splits?

AGOT was like Google + Visa, they had $100 billion in processing equipment running just to be able to handle the gargantuan size of the network. They had no choice. If AGOT couldn’t handle every transaction given to them by application partners, their blocks wouldn’t have any transctions and it wouldn’t have been worth it to win them anyway. Processing transactions was were ALL the money was! $800,000 vs $36. Since ALL Node businesses, no matter if they were processing transactions or hashing with ASICs, were low margin, we can imagine that energy use was proportional to each company’s task. AGOT needed tens of billions of dollars of equipment to grab revenues worth $800,000 and AAP needed a few sharp ASICs hasher-rigs to nab those $36 blocks! Ok, so maybe we forgot to add the 0.5% generic transactions to AAP’s total, so maybe $4,036 was their average revenues per block? Either way, the ASICs-hashing just doesn’t win any real money, so why would a large transaction processor spend a lot of money on it?

If you don’t believe the ratios above, just think about it from Satoshi’s standpoint of “signal”. In the early days of BitCoin there were no transacions and no bitcoin price either. Thus no transaction processing expense was needed beyond a standard PC CPU to handle a few transactions per hour. Satoshi set up the system to prevent evil parties from taking over, so he created the hash puzzles to GAURANTEE each Miner had to outlay SOME capital.

SLictionary does the same thing now. Most all of SLictionary revenues come from knoweldge seekers looking up a word for 1 penny fee. So why does SLictionary charge 1 penny to WRITE a definition, aren’t Word$miths doing the platform a favor? Yes and no. The “favor” is returned by SLicionary paying off Word$miths for all future transactions on that definition, but also charging a penny to define a word prevents spamming the database with nonsense and crap. Word$miths are outlaying capital, it’s small, but it’s a signal they won’t be wasteful. Twetch is the same deal — they charge 2¢ per texty Twetch to make sure no one spams their feed with nonsense without losing capital. It’s a costly signal, but in Twetch and SLictionary’s case a profitable one. In BitCoin Craig Wright decided to make the signal meaningless, because if he used something useful then gerrymandering and pandering to the benefactors could gum up the fairness of the contest. So he made it as closely reliant on just money as he could, and money BURNT or wasted. But was Satoshi interested in torching $100 bills?

We’re guessing Satoshi Nakamoto hates burning money as much as we do. So maybe his system AT SCALE tends to SAVE energy rather than waste it?

So if “signal” is important, what’s a bigger signal than willingness to invest $100 billion in processing equipment to compete with the 8 continental Nodes of 2040? Are the ASIC-hashers really important at that point? Sure, they signify a game which must be played, but that game will only be played for common transactions which are time-sensitive. Most transactions in 2040 won’t be so time sensitive. If there ended up being 8 giant Nodes in the world in 2040, that means each Node is winning a block about once every hour-twenty if we assume homogenous size amongst them. Furthermore, if many transactions were buying coffee or goods and needed confirmation by the merchants, would a single confirmation from an honest node, with $100 billion on the line if they cheat, be enough? I certainly wouldn’t want to ruin my reputation as a Node so I’d probably have some deals in place to have access to competing Nodes transactions without actually having revenue upside from them. By the same logic, the peasant USER also wouldn’t want to cheat, or else be thrown off the BitCoin network forever and be an Alduous Huxley-style outcast from society!

Investing the billions in 2040 to even be a competitive Node IS the signal, it’s the risk outlay which ensures honesty! It’s going to be MUCH bigger than outlays for ASICs which don’t really have any great revenue-generating power on their own.

Stressing a point: The higher ASICs costs are in 2040, vs transaction processing costs, then the lower profit margins will be. Since transaction processing will most likely be a commodity game with very low margins, we must conclude that all large Nodes will do anything in their power to reduce energy consumption on ASIC hashing, and CERTAINLY they will all compete on low energy costs for transaction processing.

Thus, wasteful ASICs hashing will be VERY small percentage of overall Node expenditures; AND, Nodes will compete in a championship every 10 minutes based on their power consumption as one of the biggest drags. This is a MUCH harsher competition than AWS, iCloud and Google Drive fight!

FUTURE CONSIDERATIONS for Nodes

It’s always my intent to look forward, and not just dwell on how BitCoin works today. In fact, I’d say if you’re not always thinking of BitCoin at scale, rather than how everything looks today, you’re likely to miss things like how BitCoin Network will be the ultimate data and monetary network with respect to power conservation. It’s here I’d like to go more out on a limb and venture some guesses about what topography & localism, and private transactions will mean to Nodes in the future. This is the part of the article you should be more critical, and challenge my predictions.

Private Transactions:

We already saw these in late 2019, with Mempool making a private “SLA” deal with WeatherSV. BSV went from a default of 1 sat/byte to 0.5 sats/Byte in early 2020 BECAUSE of this deal’s implications. Private transactions require time insensitivity — this was described perfectly to me in Korea, by the way, by Craig himself, in a single sentence. He described perfectly how the fee marketplace would be dynamic, a month or two BEFORE it actually became dynamic thanks to Mempool + WeatherSV! As if we needed any MORE reasons (see 3 Wrights link) to verify CSW = SN. But if you think of private transactions which can confirm in 2 hours or more, there’s a LOT in that box, and those transactions will want to be as cheap as possible. So I’m expecting a LOT of private transaction agreements, and I think we’re already getting a feel for those courtesy of TAAL’s dealings with EHR Data and UNISOT among others. Why won’t private transactions be far bigger than general broadcast-able time-sensitive ones? How many patent filings come down to hours?

Localism considerations:

We’ll talk more about speed and localism in a coming NEED FOR SPEED article. The answer in the back of the book, I’d guess, is Nodes will specialize by geography. Apps in North America will trust a North American Node slightly more than one in China — and vice versa. This won’t likely be as drastic as geographical splits for wallet companies, which to me seem very much like banks (also highly geographic), but there should be some trust element to Nodes choices for apps anyway. Topographically tho, geography should play a much higher role in speed of transactions. If you think about MMORPG games combined with eSports prizes & wagering for instance, latency will become a HUGE issue. But that topic will be shelved until next time. But here’s some fun snippets lately…

TAAL intends to use the acquired blockchain computing devices to support its ongoing operations and power BitcoinSV (BSV) blockchain transaction processing solutions for enterprise clients. TAAL expects to begin operating the devices by Q1 2021, establishing a significant operational footprint for TAAL in North America. The blockchain computing devices will enable TAAL to offer specialized services to enterprises that require large volumes of transactions processed in North America on an ongoing basis on the reliable BitcoinSV blockchain. TAAL believes that BitcoinSV provides the best blockchain network to support such specialized services to enterprises, supporting large transaction volumes due to BSV’s scaling and microtransaction capabilities.

Notice TAAL’s mention of “North America” twice; it alludes to the importance of geography in BitCoin Node transaction processing. In other words, proximity matters — TAAL is expecting to dominate North American transactions by offering private “SLA” [ref #] terms to it’s customers. We don’t know MUCH about what the future holds as far as the BitCoin Network and its members Nodes are concerned, but we DO know that localism will have it’s place. This only makes sense, as localism important to network structure and always has been (are you old enough to remember that AT&T used to CHARGE a higher rate for a long-distance call vs a short-distance call?). There was once a time in the early days of the internet when ISPs (internet service providers) charged per Byte (usage), before one-size-fits-all took over. We will return to per Byte charging again, and when we do localism will matter.

Major worldwide Nodes guess:

Topagraphically, I’d go with 8 in the very long term (beyond even 2040). BitCoin really only needs 3 to work, 1 for a tie breaker and have higher robustness. 8 is derived from splitting the globe into planar sections using each plane (xy, xz, yz). 4 sections in the Northern Hemisphere, and 4 in the South. It won’t work out that way for a long time, but eventually people will fill up both the continents AND the seas (Thiel’s floating cities are much easier concept than living on Mars Elon!) and everyone will need BSV Nodes nearby!

Technical dive into Proof-of-Work:

In the beginning, bitcoind v0.1.0 did it fairly simply. Once a second or so, it would take an in memory map of all the transactions it had received, check any new ones to ensure they met the minimum fee requirement and if so, add them to the block template which was basically an ordered list of valid transactions. It would then calculate a merkle tree from that set of transactions and build a block header to start doing proof of work upon. — Steve “Shadders”, nChain, on BSV “Dynastic” release (1.0.7)

I’ve deliberately, in this article so far, sold short the proof-of-work pertaining to hash-puzzles. It was deliberate for emphasis, to command your attention to TRANSACTION VERIFICATION as the true moneymaking mechanism for BitCoin Nodes. Here is where I clarify.

In reality, the “leading zeroes” hash puzzle is in fact a “Proof of Transaction Processing” directly. How? It has to do with the INPUT to hashing, which includes the block of transactions itself. If you think about this logically, a transaction-processing Node in 2040 won’t be able to make any revenues without including MANY transactions into a block, thus the winning hash-puzzle solution will NEED to include all the transactions (a TeraByte for instance). So what the hash-solution POW represents is the fact that the Node has done all the work of processing the transactions in the network!

THE LEADING-ZERO HASH PUZZLE SOLUTION IS THE PROOF — NOT THE WORK!

A hash-puzzle solution is the PROOF of BitCoin transaction processing — not the WORK

Traditional “proof-of-work” of BitCoin, the hashing-puzzle which is a hash with the proper amount of leading zeroes (based on difficulty-factor), is actually just the cherry on top of a sundae — it’s a proof, not the work.

The cherry acts as PROOF the ice cream parlor proprietor has built an ice cream sundae, because she doesn’t get to drop it on top until AFTER the sundae is built. The WORK is building the sundae itself. The cherry is supposed to be RELATIVELY easy if all the previous work has been done. If a competing Node doesn’t include all the fee-generating transactions in the ingredient-precondition for this “cherry”, it simply won’t make any money!

Cherry = Leading-zeroes hash-puzzle solution which cannot generate revenue unless it includes the verified transaction list inside!

Sundae = A block of verified-good BitCoin transactions — someday a TeraByte or more in size.

“Cloudia” the ice cream parlor proprietor = A BitCoin Transaction Processing Node, like TAALor Mempool or Unbounded Enterprise or MatterCloud.

This understanding of the ORDER of operations for “petahashes” of energy spent on a seemingly mindless task, allows us to see another small energy-saving contribution only BSV will have due to it’s ability to scale:

The nonce which is part of BitCoin hash-puzzle ingredients, is just a goofy random input which allows a Node to make another guess and hope the resulting hash meets the leading-zeroes determined by the difficulty factor. Here’s the thing tho, it only needs to be changed to something different if the block of transactions hasn’t changed since the last guess! Changing it to something different requires a little bit of work by the Node, so it uses electricity, especially if you consider how many puzzle guesses a Node makes per second. If a new transaction comes into the Node for verifying, that alone will change the output hash, so no new nonce will need to be calculated. In other words, every new transaction allows a Node to recieve what the nonce provides FOR FREE! Let’s compare btc to BSV one more time using this knowledge:

PetaHash defined courtesy of: https://sym.re/N8mgTum

bitCORN/”btc” is limited by it’s dictatorial developers to 1 MB “small block” size, and since standard monetary transactions are, say, 200–500 Bytes, this translates directly to about 5–8 transactions per second. For every 100 quadrillion nonces potentially needed, btc could skip generating a new nonce about (8 txns/sec * 60 sec/min * 10 min/block) 4,800 times, whereas…

BSV can skip the change-of-nonce 4 billion times when processing 1 TeraByte blocks!

The more transactions per second BitCoin SV can scale, the more incremental energy it will save!

btc’s “POW” is like amassing the tallest structure in the world using nothing but spire — a worthless tower. BSV is like building the tallest building in the world where every bit of verticality contributes to USEFUL office or living space for people. Is it any surprise that even the large block transactions of BSV contribute its success, while btc’s proof of work is actually a huge negative drain on human ingenuity?

CONCLUSION:

This quote just seems silly now, doesn’t it?

“Bitcoin mining’s energy use is reportedly growing at a rate of 25% per month. At that rate of growth, it will consume as much electricity as the US in 2019, and by 2020 bitcoin mining could be consuming the same amount of electricity every year as is currently used by the entire world.”

The BitCoin Network of Nodes isn’t going to be any “Electric Avenue”, sorry Eddie. BitCoin’s protocol was set from the beginning to make its computation network the most energy efficient in the world at scale. The protocol uses premeditated code thoughtfulness, but most of all profit margin incentive to guarantee it’s light energy footprint as it grows bigger and more useful to humanity.

Craig Wright’s vision on power consumption was likely considered decades ago and we will all benefit in the decades to come.

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If you found this article helpful on your digital-asset outlook, BitCoin understanding or surfing thoughts, please “in lieu of flowers” go look up a word that’s NOT defined in SLictionary (“Lucky you!”) and apply a nice extra Word Bounty amount (see the “blank check” money button on the Lucky you page) to the word.

www.SLictionary.com

OR

Define a word, to best LEARN a word here: (and make money in the future!)

https://www.slictionary.com/createword/@/@/@

BAEmail.me at johnpitts@moneybutton.com

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REFERENCES:

[0] BitCorn

Courtesy of BitCoin SV app www.SLictionary.com

[1] 3 Wrights Don’t Make a Wrong

https://equitydiamonds.medium.com/three-wrights-dont-make-a-wrong-a37ea19ed636

[1] Work

The definition of “Work” courtesy of www.SLictionary.com

[2] HODL

[2] “The Power of Love” (official video) by Huey Lewis & the News