A failure to understand proof of work is a failure to understand #Bitcoin.

A thread. 🧵👇
Decentralized systems, by definition, do not have a single source of truth.

Satoshi's breakthrough was to build a system that allows all participants to zero in on the same truth independently. Proof of work is what allows this to happen.
The point of proof of work is to create an irrefutable history. If two histories compete, the one with the most work embedded in it wins.

The chain with the most work is the truth, by definition. This is what we call Nakamoto consensus.
Why does this work?

In short: because work requires energy. You can't cheat it. You can't argue with it. You can't lie about it. The proof that you did the work is self-evident in the outcome of the work.
In Bitcoin, work is computation. Not any kind of computation, but computation that has no shortcut: guessing. There is no shortcut because there is no progress. Every guess stands on its own.
The beautiful thing is that the work itself is embedded in the solution. The data speaks for itself. The map is the territory. There is no external source of truth required. The work is implicit in the data due to the probabilistic nature of guessing.
Other mechanisms, such as proof of stake, don't have this property. You can never be sure that what you are looking at is actually the truth since there is no external cost to create an alternative truth.
Computation is the only bridge between the realm of information to the physical realm. When dealing with information, all we have is information and the transformation of information: computation.

Computation requires energy. Energy is the bridge. Energy is real.
Remove this bridge to the physical world and you will stay in fantasy land: you can't tell what actually happened. You will have to trust others to tell you what happened. You can't verify it yourself. You have to rely on trust.
Proof of stake has plenty of other problems, such as fair validator selection (who decides?), naturally centralizing effects (more stake = more reward = more stake), and having no natural resistance to timestamp manipulation attacks, for example.
Proof of work solves these exact problems. It decentralizes the selection process, creates physical proof of what happened, has real externalized costs, and decentralizes time.

The question of whether proof of work is wasteful or not can't be asked without understanding the problem it solves. Understanding the problem properly will lead you to the conclusion that there is no other way to solve it in a trustless manner.
Thus, the question becomes: how useful is trustless digital sound money? Is it worth the energy expenditure?
For fridges, cars, smartphones, and a myriad of other things, society answers this question in the affirmative.

For Bitcoin, those who understand the societal benefits of sound and censorship-resistant money answer in the affirmative.
To summarize: proof of work is not only useful but absolutely essential. Trustless digital money can't work without it. You always need an anchor to the physical realm. Without this anchor, a truthful history that is self-evident is impossible. Energy is the only anchor we have.
Proof of work = trust physics to determine what happened.

Proof of stake = trust humans to determine what happened.
Addendum: I have a lot of sympathy for everyone who thinks that Bitcoin is wasteful. I thought so too, and I had to shift my perspective. Like most people, I didn't know anything about (sound) money.

Addendum, part two: The problem of agreeing on a common time in an adversarial decentralized system can't be solved precisely, not even in theory. Proof of work is a practical, probabilistic solution to this intractable problem.

Addendum, part three: I wrote "trustless" for brevity. There is no such thing. It is always about the minimization of trust.

Addendum, part four: It should go without saying that energy expenditure doesn't equal carbon footprint and that both are decoupled from transaction throughput.

See this thread by @LynAldenContact:

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More from @dergigi

12 May
The only bitcoins that use any energy are the ones that are being transacted right now.
My mind is blown.
If everyone just hodls like @Tesla does the energy usage of the Bitcoin network will drop to zero.
Read 4 tweets
12 May
Ledgers require time, and time requires heat.
It is no accident that the 2nd law of thermodynamics is the only equation of fundamental physics that knows any difference between past and future.
Because of this, I am convinced that proof-of-work is the only way to introduce time into the timeless digital realm.

Everything else relies on external factors and is bound to collapse once these external factors provide false inputs.
Read 6 tweets
6 May
#Bitcoin works in a very peculiar way. Our everyday experience doesn't map onto it nicely. Which is one of the reasons why I believe that trying to shoehorn it into concepts we are familiar with is a fool's errand. 🧵👇
First of all: public keys, private keys, addresses - even the software it self - it's all just numbers, which is to say information. Outlawing information gets very weird very quickly.

Second of all: on a technical level, every bitcoin transaction is a smelting process. Multiple inputs go in, multiple inputs go out. You can only connect inputs to outputs *heuristically*, never definitely.
Read 12 tweets
30 Apr
Dear @MikhailaAleksis,
It was a pleasure meeting you in cyberspace today to talk #Bitcoin. For your convenience, I have collected some follow-up resources below. I am sharing them publicly so others might benefit from this list as well.

Gradually, Then Suddenly series by @parkeralewis

Read 12 tweets
14 Mar
I predict 3 prevailing FUD narratives going forward. In order of intensity:

1) Energy FUD
2) Inequality FUD
3) Bitcoiner FUD
Re 1:

a) Bitcoin uses too much energy.
b) Bitcoin uses the wrong kind of energy.
c) Bitcoin does "useless" computations, it should rather fold proteins or solve cancer.
d) Bitcoin is bad for the environment regardless of energy use or source; waste of time and precious metals.
Re 2:

a) It is unfair that early adopters get rich.
b) It is unfair that rich people can buy a lot of bitcoin.
c) There has to be a better way to do fair distribution.
d) Poor people will never be able to afford bitcoin.
Read 4 tweets
14 Jan
1/ Everyone knows that time is money. In the digital realm, however, money is also intricately related to time. It has to be.

2/ Among other things, money solves a coordination problem. Trading a single good against others solves the combinatorial explosion of a barter economy. It is a scalability solution that allows coordination across large groups of people.
3/ The two basic forms of money are ledgers (made of information) and physical tokens (made of atoms). Physical tokens keep track of themselves. Ledgers need someone who is in charge.
Read 13 tweets

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