> "That electricity cost is a lot better for the environment than the standing armies required to secure fiat money."
There are better alternatives to brute-forcing hashes and generating nothing but waste heat in order to mine cryptocurrency. At least those cycles could be put toward something useful, like the Berkeley Open Infrastructure for Network Computing (BOINC). Gridcoin uses proof-of-research in BOINC as the basis for compensation.
Who would decide which BOINC projects work with Bitcoin? What if I made a BOINC project for calculating the number 4 and did it before anyone else noticed it was available? How much bitcoin should that be worth? There have to be ongoing decisions about what BOINC projects are accepted and how much they're worth. Who makes those decisions?
More realistically, what if I privately know a fast algorithm for an obscure type of protein folding, and then I push for a new BOINC project to be accepted that focuses on the specific type of problem? I'll be the only one that can mine it efficiently for a long time. If I calculated my expected profits, I would probably see that it's worth it for me to pay a lot of money to lobby the people in charge of the BOINC-coin decision process to get my project accepted. Unless BOINC-coin only uses a fixed set of projects over all time, or is only worth negligible amounts, then lobbying like this is going to influence what projects it accepts.
Even if BOINC-coin uses a fixed set of projects, then there's a problem of what work units are given out. I imagine many projects work like SETI@Home where some data is given out to users to process. If processing the data is worth money, then it might make sense financially for me to artificially construct datasets that I've already solved, and bribe the SETI@Home administrators to insert my dataset into the worker queue, which I will then quickly "mine" for BOINC-coin.
A BOINC-coin isn't fully decentralized. It requires trusted people to be in control choosing which projects are worth it and to secure the authenticity of the data sets. Bitcoin is about minimizing the need for trust in administrative systems like this.
Even if you solve the above problems, the proof-of-work system needs to be hard to compute but cheap to verify. Many BOINC projects' work units aren't cheap to verify. They just have several users redundantly recalculate the same work units to check that they get the same answers.
If the PoW serves any other purpose than mining bitcoin, it can't be used, since there won't be any opportunity cost in mining on the most recent chain.
> What stops me from attacking that network by mining on my private chain with a double spend?
Nothing stops you mining on a private chain, but since you have a small minority of the compute power, the network doesn't care about your private chain. The same is true in Bitcoin.
> I have no opportunity cost.
You could be mining blocks that generate useful byproducts and currency.
> Nothing stops you mining on a private chain, but since you have a small minority of the compute power, the network doesn't care about your private chain.
Right, this is not an issue for small miners. But if you have a significant part of mining power, it's important that there is a significant opportunity cost mining on the wrong chain. That can only be ensured by using a PoW that is wasteful outside the currency you're mining.
I'm not sure I follow what you mean. I didn't mean that this be used for mining bitcoin, but rather that there are other cryptocurrencies that have useful by-products. Am I misunderstanding your comment?
These other cryptocurrencies are less secure than bitcoin.
For them, the cost of attacking the network by mining on an orphaned chain is lower, because by definition the PoW has a useful by-product.
The more useful the byproduct, the less secure the coin.
Edit: to illustrate, imagine a PoW that computes cures for cancer. Somebody can now mine on whichever block of the chain he wants forever, since he's producing a cancer cure anyway. The incentive of a block reward (within the currency) is not primary. Thus there is diminished incentive for the network to create a linear blockchain, where everybody mines on the most recent block. Without that, you cannot order transactions.
A cure-cancer PoW where each block fixes all of cancer is ridiculous.
A more apt analogy would be that each block would solve a protein folding or active site matching problem for cancer. Then each solution would be public, and useless to mine over again.
Except the miners don't gain value from discovering a protein fit, so they have no incentive to mine the wrong chain.
Even then, as long as the coin value is larger you will have a consensus with the miners to to mine the latest block. Any sidechains will be neglected, which is why this "no value or nothing" attitude doesn't fit a blockchain network.
I understand the arguments that people have against proof of work but unfortunately they are extremely short sighted with respect to the whole system. You could say the same thing about all the infrastructure surrounding gold, but crypto-currencies and gold have serve a very valuable purpose that gets lost in the details: they have many of the properties of ideal money.
Gold isn't as valuable as it is today for any other reason. You can dream about a theoretical currency with a proof of work that accomplishes something but it won't have the same properties of ideal money until it is more widely used, mined and attacked.
Also don't forget that space heaters _actually_ do nothing but generate 'waste heat' and no one seems worried about those.
There are better alternatives to brute-forcing hashes and generating nothing but waste heat in order to mine cryptocurrency. At least those cycles could be put toward something useful, like the Berkeley Open Infrastructure for Network Computing (BOINC). Gridcoin uses proof-of-research in BOINC as the basis for compensation.