Bitcoin's Proof of Work: A $10,000 Hole in the Ground

Bitcoin Critic Peter Schiff Challenges the Logic of Proof of Work

In a recent exchange, Coinbase CEO Brian Armstrong highlighted the challenge of evaluating the growing number of cryptocurrencies, with around 1 million new tokens emerging weekly. Armstrong proposed a shift from an "allow list" to a "block list," relying on customer reviews and automated on-chain data scans to help users navigate the market.

Enter Peter Schiff, a vocal Bitcoin critic and gold advocate, who took issue with Armstrong's comments. Schiff argued that the influx of new tokens is driving up the inflation rate of digital assets, effectively rendering the concept of limited supply moot.

Schiff then turned his attention to Bitcoin's proof-of-work mechanism, the process by which new coins are created and transactions are verified. He likened it to spending $10,000 to dig a hole and then filling it back up, asserting that energy is consumed without creating anything of value.

While Bitcoin enthusiasts often praise the energy-intensive process, Schiff sees it as a flaw. He argues that Bitcoin is not a battery, as it does not store or transform energy into something useful. Instead, he believes that the energy consumed is wasted, as it is not retained or converted into a tangible asset.