CorruptUser wrote:But why make it difficult to mine and process transactions? I mean, you could make it easy to mine and complete a transaction, and just give people satoshis instead of bitcoin.
It takes time for blocks to propagate through the network. The closer they are together the more orphaned blocks you get (orphaned blocks are blocks that are valid but someone else beat the miner to a valid block sometimes you even get a short chain that is orphaned the rule is that the longest valid chain wins). Orphaned blocks cost electricity but accomplish nothing since they are discarded. Not raising the difficulty wouldn't reduce power consumption. People would just mine quicker and once you are talking about blocks every second, there will be an insane amount of wasted effort on orphan blocks. This is assuming that blocks aren't being generated so fast that the network can't even resolve which chain is the longest and orphan all the others.
CorruptUser wrote:I'm not sure I understand. The network has computers "vote" on whether or not a transaction occurs, or something, but that shouldn't require enough computers running to power a moderately sized country.
It makes transactions pretty close to immutable. If I have 2/3 of the processing power and want to remove a transaction from 24 hours ago, I have to do 24 hours worth of work to get back to the current state but I only have 2/3 of the power so it takes me 36 hours. In that time the rest of the network has done 36 * 1/3 = 12 hours more work. This continues until it takes 72 hours to roll back that transaction and in that time you have thrown away a massive amount of potential earnings. This is just to remove a transaction from 24 hours. You can't just all agree to use less resources because one person can cheat and hijack the system. Anonymous trust-less transactions are not a trivial problem.
As for the power usage, it is not as bad as it is made out to be. Due to the low data transmission requirements of mining it can locate almost anywhere in the world. A lot of mining centers locate places with excess power production that is currently just being wasted because that is where you can get electricity real cheap (this is one reason a lot of it is in China). In some cases they even help pay for green energy. Off the top of my head there is a very large operation by a hydro plant in China that generates a lot more power than is needed with no grid connection and Hydro Quebec is currently in negotiations with a large mining operation.
CorruptUser wrote:Alternatively, you don't transact bitcoin, you put them all in a vault and transact the right to a bitcoin, let's call them brights, so you can buy and sell those brights without ever having to pay transaction fees. I can then lend out those brights to someone who then deposits in other vault, or perhaps my vault. Maybe only let me lend out 80% of the brights in my vault. Oh, I'll pay depositers a smidgen for the right to loan out brights. Thus, I just invented the bank.
Okay. Now send a bright to someone on the other side of the world in a verifiable manner that requires no trust between parties and takes less than half an hour. By the way, I might want this transaction to be less than a cent so please don't let the fees get too high. The less than a cent trick isn't there yet but the rest is and tech which may well be able to accommodate less than 1 cent transaction is currently being developed on top of bitcoin. As an added bonus this tech could make it take only seconds.