
Resources are being utterly and completely wasted on mining bitcoins - rheide
http://www.colorfulwolf.com/blog/2011/05/31/resources-are-being-utterly-and-completely-wasted-on-mining-bitcoins/
======
vladd
Any system of checks and balances will have its price. Look at what we do with
gold: we dig it from a hole in Africa, we transport it in other countries, we
dug holes or build vaults and throw it there. Like Warren Buffett said, it has
no utility, if Martians were to look at the process they would scratch their
heads.

Except for the guarantee of uniqueness. Which is one of the most powerful
invariants against corruption and government-sponsored inflation, goals which
are worth these effort.

~~~
api
Bitcoin is not quantum-hard. When quantum computing reaches a certain
threshold, bitcoin will lose its uniqueness and collapse.

There are post-quantum algorithms that are computable on ordinary computers,
but they're still under research and they'd make Bitcoin's data set
considerably larger.

~~~
bdhe
_Bitcoin is not quantum-hard. When quantum computing reaches a certain
threshold, bitcoin will lose its uniqueness and collapse._

Could you elaborate which aspect of bitcoin has efficient quantum algorithms?
The proof-of-work system requires you to invert hashes and quantum algorithms
only give you a quadratic speed up (brute force takes time O(\sqrt{size of
range}) rather than O(size of range)). Right now there is no quantum attack on
SHA-256 (which is what Bitcoin uses).

 _There are post-quantum algorithms that are computable on ordinary computers,
..._

This sounds interesting, but could you elaborate? What does it mean for a
post-quantum algorithm to be computable on ordinary computers?

~~~
DavidSJ
_Could you elaborate which aspect of bitcoin has efficient quantum
algorithms?_

BitCoin uses public key cryptography for its digital signatures. That in turn
relies on the difficulty of factoring large numbers, for which there are
efficient quantum algorithms.

~~~
caf
Bitcoin actually uses ECDSA for its digital signatures, which relies on the
difficulty of calculating discrete logarithms rather than factoring. However I
believe that there are efficient quantum algorithms for that, too.

------
weavejester
The author misses the point. The security of the Bitcoin network (at least in
terms of double-spending) is tied to the level of work required to generate a
block. If everyone decided to use only 1% of their computing power, they'd use
less electricity, but the Bitcoin network would then be 100 times less secure.

When people talk about "wasting resources", it's an indication they don't
understand how Bitcoin works. One might as well complain about wasting
resources on SSL when you could just send data in plaintext.

~~~
rheide
The trick lies in changing the bitcoin protocol. If the majority of clients
can agree on a way to use less resources, then that's what will be enforced by
the network. If a new bitcoin client enforced a mandatory delay of one hour
and invalidated blocks that were made before that one hour, we would
effectively have added one hour of idle time to the network. This is not a
solution, but it is a demonstration of how the protocol can be altered, as
long as the majority agrees on it.

~~~
gus_massa
The problem is that it is easy to simulate that you are waiting.

    
    
      1) Save current time
      2) "Precalculate" the current block
      3) Wait until the 3601th second
      4) Publish the block that you "calculate" in just 1 second
      5) Profit??

~~~
rheide
If the calculation for the next block requires the (network's validation of
the) current block then you can only always calculate one block ahead.

------
ArchD
Isn't the waste also present even without bitcoin, too? Governments make
complex laws and regulations in different industries. They do 'magic tricks'
to make fiat currency appear and disappear. Banks do complex things to make a
profit that largely do not correspond to creating real value for society.
Competing companies do the same things, duplicating effort, mostly to make a
profit. (e.g. Do we really need so many social gaming companies?) Companies
also do other things that do not create real value (e.g. lobby politicians to
gain political advantage).

A large part of human endeavor is not about increasing value in the world, but
rather increasing value for oneself, possibly with the side-effect of
decreasing value for others. It's just the way we are.

I don't think bitcoin's purpose is to aggravate or ameliorate this pervasive
problem. To me, the point of bitcoin is to shift economic power from the
circles of people who presume to rule the rest of us with complex economic
policies and regulation that ostensibly keep the economy stable and growing.

With or without bitcoin, the 'waste' from competition still going to be there,
and I have no reason to think that the adoption of bitcoin is going to
increase the total amount of 'waste'.

~~~
duairc
> A large part of human endeavor is not about increasing value in the world,
> but rather increasing value for oneself, possibly with the side-effect of
> decreasing value for others. It's just the way we are.

It's not just the way we are, it's the way we are under capitalism.

But I agree that the wastefulness of Bitcoin is nothing compared to the waste
caused by capitalism as a whole.

~~~
billybob
"It's not just the way we are, it's the way we are under capitalism."

What line of reasoning makes you think that humans are naturally unselfish and
are made so only by an external economic system (which is itself created by
humans)?

Judeo-Christian thought says that humans are naturally sinful and selfish.
Evolution says that the fittest survive at the expense of others (though this
may involve cooperation with related creatures). Who says we're all basically
nice?

"But I agree that the wastefulness of Bitcoin is nothing compared to the waste
caused by capitalism as a whole."

What system would you have instead of capitalism? If socialism or the like,
can you give an example of when that has ever worked well? There are many
counter-examples in history, you know. Workers sitting down doing nothing
because the government quota said to only make 250 pairs of shoes today, etc.

~~~
BCM43
> What system would you have instead of capitalism? If socialism or the like,
> can you give an example of when that has ever worked well?

At the risk of getting into a political debate, Spain in the 1930's?

[https://secure.wikimedia.org/wikipedia/en/wiki/Spanish_Revol...](https://secure.wikimedia.org/wikipedia/en/wiki/Spanish_Revolution)

------
perlgeek
> There is a solution to this problem. If someone releases a new Bitcoin
> client (and miners) that run on only 1% of the available processing power,
> and gets more than 50% of the network to adopt this new client, then total
> electricity costs drop would drop hugely

No, because you can't cryptographically enforce that all compatiable clients
use only 1% of their available processing power.

If such a client took over the bitcoin network, somebody would use a patched
version of that client that pretended to use only 1% of the computing power,
but actually used all of it. There's no way the other clients could know, so
the whole spiral would start anew.

~~~
ramchip
Or just use VMs, etc.

------
kiba
My magazine have a two part series that argue the opposite that bitcoin mining
is not wasteful:

1\. [http://bitcoinweekly.com/articles/the-wasted-electricity-
obj...](http://bitcoinweekly.com/articles/the-wasted-electricity-objection-to-
bitcoin-part-i)

2\. [http://bitcoinweekly.com/articles/the-wasted-electricity-
obj...](http://bitcoinweekly.com/articles/the-wasted-electricity-objection-to-
bitcoin-part-ii)

~~~
iwwr
That's actually quite interesting, thank you for posting.

So at a guess, the network is doing now around 7MW of electrical power,
although there is room for a lot of efficiency improvement.

------
DennisP
I was worried about this so I worked out the math. It wasn't as bad as I
expected.

Let's say it's 20 years from now, the total size of the bitcoin economy is $1
trillion, and there are 10 million bitcoins in existence. (We could find the
number of bitcoins exactly, but 10 million makes the math easy and it's within
a factor of 2 of the ultimate limit. There are about 6 million coins right
now.)

$1 trillion / 10 million coins = $100K per coin, so we can expect people to
spend almost that much money to generate a coin.

The rate of coin production is currently 50 per 10 minutes, dropping in half
every four years, giving us 9 coins per hour in 2031.

That's 78K coins per year, at $100K per coin, or $7.8 billion in computer time
and energy spent per year.

Let's say half of that is energy, call it $4 billion, including the energy to
make the dedicated mining computers. At ten cents per kilowatt-hour, we're
talking 40 billion kilowatt-hours per year. Divide by the number of hours in
the year and we get 4.5 gigawatts.

In other words, a $1 trillion bitcoin economy can be run on the output of
roughly five typical nuclear power plants (assuming it's 20 years from now).

If we get to $1 trillion in only 12 years, energy usage will be four times
higher, since coins will be worth about the same but four times as many will
be generated per hour.

If people use custom ASICs to generate coins, they'll be costly but more
energy-efficient, weighting expenditures more heavily on hardware than energy.

People can grant transaction fees to miners to make their transaction go
through faster. If transaction fees become prevalent, resource usage will be
higher, since there will be additional reward for completing blocks. But $7.8
billion is already almost one percent of the bitcoin economy. If the average
bitcoin changes hands once per year with a one percent fee, or ten times per
year with a 0.1 percent fee, we add $10 billion to mining rewards and
approximately double our resource usage.

Edit: $1 trillion is about equal to the amount of U.S. currency in
circulation: <http://en.wikipedia.org/wiki/Money_supply>

~~~
gammarator
I don't know much about economics, but this seems to illustrate why bitcoin
must ultimately fail. Since producing new bitcoins by design becomes
exponentially (!!!) more difficult as time passes, the true cost in resources
(electricity, computing time, etc.) to produce a new coin can only increase.
That resource use can be justified, but only if the value of the bitcoin is
also increasing.

Here's how I see it playing out: eventually it will be too costly for most
people to produce new bitcoins. Since nothing forces one to use bitcoins,
bitcoin holders will cash them out, and the exchange rate will plummet.
Deflationary panic?
[http://en.wikipedia.org/wiki/Deflation#Money_supply_side_def...](http://en.wikipedia.org/wiki/Deflation#Money_supply_side_deflation)

~~~
DennisP
It will always cost about the same to produce a bitcoin as the bitcoin is
worth. If it costs more, people will stop doing it and the difficulty will
drop. If it costs less, people will profit by doing it and the difficulty will
rise as more people join in.

It's already difficult for individuals to produce bitcoins, but people have
solved that by pooling their resources, getting regular rewards of fractional
bitcoins.

~~~
gammarator
That's helpful, thanks. Still, it's only profitable to mine bitcoins at any
computing cost if they can be exchanged for other items of value. If the value
of bitcoins drop and people leave the bitcoin economy, making the last N
bitcoins easier to compute won't make them more valuable.

------
iqster
The way I understand bitcoins might be flawed but would certainly appreciate
clarification ...

My problem with bit coins is that early people who start mining have a greater
advantage than later ones. While that's not the classic definition of a Ponzi
scheme (in the classic definition, payouts at each round are funded by new
participants), it is a feature bitcoin shares with them. If someone started
mining bitcoin when it first started, they have a significant stash created by
now. As people start to assign value to the virtual currency, these people are
getting a significant proportion of value for simply being early adopters.

~~~
cheez
My solution is to expire the BTC to force circulation.

~~~
yrral
If what you're suggesting is that coins can only sit in one address for a
limited amount of time, then that would not do anything because people would
just create new addresses to send the coins to.

~~~
kragen
The standard Silvio Gesell expiring-money scheme doesn't have anything to do
with where the money is at any given time. The way it works is that for the
government to accept a note, it must be up-to-date with stamps, one stamp for
every month since it was issued. The stamps (traditionally, bought from the
government) cost 10% of the value of the note.

Nobody wants to be sitting on a pile of this sort of cash at the end of the
month, because they'll lose 10% of the pile of cash. The intended effect is to
dramatically increase the velocity of the money, so that a small stock of it
can sustain a very large flow.

I don't know enough about this stuff to sensibly evaluate the claims its
proponents make for it.

~~~
nazgulnarsil
this is one of the worst ideas I've ever heard. the amount of wealth that
would be destroyed is beyond all measure.

~~~
kragen
Wealth consists of things like cured diseases, tasty and nourishing meals,
being dry when it rains, and seeing the people you love as often as you want;
and the resources and skills we use to create those other kinds of wealth,
such as antibiotics, bread mold, spices, beans, houses, corrugated steel, iron
ore, blast furnaces, airplanes, kerosene, and CAD software.

Gesell's scheme does not destroy any of those things; it only destroys money.
Money is not wealth. Money is just a way to facilitate cooperative ventures
with people we don't know and trust. With money, I can cooperate with 200
other people to pay for an intercontinental flight, and with the hundreds of
thousands of other people who drilled and refined the kerosene, aluminum, and
other resources needed to keep us in the air.

But the money game has a lot of drawbacks. So it's sensible to experiment with
it and see how we can improve it. Gesell's scheme was one such experiment. It
was reported to be very effective at _creating_ wealth by its proponents when
it was tried.

~~~
nazgulnarsil
it was reported to be beneficial by its proponents. what a surprise. call me
back when you have a control group.

~~~
cheez
You can hardly expect anyone but a proponent to advocate for an idea...

Also, asking for a control group in an artsy fartsy field like economics is
too much. Where is the control group that guides the decisions of the central
banks? There is none! OMG GREAT DEPRESSION!

------
summitpush
I don't think the bitcoin system is in any way designed to benefit the miners.
Its intent is to create a digital currency that has a guarantee of retaining
its rarity in the future. Making mining difficult and inefficient is kind of
the point.

------
JoeAltmaier
The hypothetical solution is flawed: it would take not 50% of miners to adopt
a 1% implementation; it would take 100%, since if only 1 defects, that one
wins all the coins and all the cooperative 'prisoners' lose.

~~~
kragen
Based on my minimal understanding, you need about 0.99% to defect (and
collude!) to win all the coins, not just one miner.

~~~
JoeAltmaier
The defector(s) are using 2 orders of magnitude more CPU time to solve
problems. So they win almost all of the time (all of the coins).

~~~
kragen
There are two mechanisms by which defectors could win coins.

First, they could simply mine more coins. For them to win almost all the (new)
coins this way, they have to do almost all the mining. Say, 80% of it,
although it's really a matter of what you mean by "almost all".

Second, they could collude and subvert transaction audit trails so that the
Bitcoin system transfers ownership of all existing coins to them. For them to
win all the (new and old) coins this way, they only have to do more than 50%
of the mining.

So, if collusion is feasible, the second approach is easier; so let's forget
about the first one for the moment.

The point at which the defectors, each using 2 orders of magnitude more CPU
time, are doing more than 50% of the mining, is when they control more than
about 0.9901% of the network's total raw computing power, because at that
point, the cooperators control only 99.0099% of the network's total raw
computing power, and the cooperators are using only 0.990099% of the network's
total raw computing power to prevent counterfeiting.

If a single defector controls only, say, 0.5% of the network's computing
power, they will get only about a third of the new bitcoins mined, and will
not be able to subvert the network.

Only needing to have 0.99% of the network collude in defection to break the
system is a pretty bad problem, but it's not nearly as bad as any single
person being able to break the system.

------
adrianwaj
Don't the miners provide network services as well? Like how real mines don't
just take from the ground, they also co-exist with civilian infrastructure
built to keep the miners alive and functioning, and in bitcoin's case, the
mining rigs dually enable transactions?

~~~
Tichy
Yes, "mining" is a bit misleading.

------
mike_esspe
The same argument can be applied to gold: resources are being utterly and
completely wasted on securing Fort Knox, let's shutdown it and store all gold
on a lawn without guarding it.

Mining is securing the bitcoin network in the similar sense, as Fort Knox
secures gold.

~~~
lukeschlather
Comparing it to gold doesn't make sense; we've been off the gold standard for
a long time. What it should be compared to is minting coins, printing money,
and banking. (As far as banking goes, I'm not sure bitcoin really solves any
of those security issues.)

------
extension
Here is another amusing example of resources being "wasted" creating money:

[http://www.npr.org/blogs/money/2011/02/15/131934618/the-
isla...](http://www.npr.org/blogs/money/2011/02/15/131934618/the-island-of-
stone-money)

------
icegreentea
Why can't we tie the bitcoin mining process to some sort of useful
calculation? Maybe some variant of folding @home or something? We just need
some problem with a hard to calculate, but easy to verify 'right answer'
right?

~~~
weavejester
More than that. It needs to be a problem that takes a predictable time to
solve, it needs to be a problem that we're unlikely to discover faster
algorithms for, and it needs to be something we can tie to a set of data.

Cryptographic hashes are designed to have these exact properties. If we wanted
to replace this with a "useful" calculation, you'd essentially need to create
a new hashing algorithm that also had some practical use beyond hashing a set
of data.

Given that creating good cryptographic hashing algorithms is hard enough, I
suspect that creating one that is tied to a "useful" result is not feasible.

------
Jabbles
This is just a "prisoner's dilemma". The alternative is that we trust everyone
not to use their full ability to generate blocks. Obviously this would
completely defeat the point of bitcoins.

<http://en.wikipedia.org/wiki/Prisoners_dilemma>

~~~
rheide
Yeah, that's why the only thing I could think of that would 'fix' this, is to
release new miners that use less processing power, and a new client that only
allows input from those miners. Even so, such a thing would be equally as
difficult to introduce as, for example, a rule that would hand out 200BTC
instead of 50BTC.

~~~
StavrosK
As other posters pointed out, someone would cheat and just get a client that
used 100% and we'd be back to square one in a day.

------
richardw
Most of the time graphics cards aren't used for anything remotely as socially
beneficial as contributing to the bitcoin network. Rather than complain about
the waste, find a way to do something _more_ useful with them and set up an
equivalent reward system for people to respond to.

------
pspeter3
What you're proposing is a cartel of users who agree to only use 1% of their
computing power. The Prisoner's Dilemma still applies and thus the incentive
to cheat still remains because using more than 1% can give you a competitive
advantage. By assuming every one will compete as much as they can the
prisoner's dilemma disappears because there is a limit of how many resources a
user can expand. The main issue is whether bit coin is a valid expenditure of
those resources

------
mahrain
So, when we waste our processing power on credits generated on limited supply
by the Bitcoin network, it's a waste, but when we waste our time on acquiring
credits created in limited quantities by the (Central) Banks it's okay.

I guess the issue here is that calculated bitcoins don't contribute anything.
The grid should be used for something useful such as folding proteins or even
SETI for that matter.

~~~
jfoutz
Really? It seems like the computational power thrown at this is way less than
the latest console game.

------
ck2
_There is a solution to this problem. If someone releases a new Bitcoin client
(and miners) that run on only 1% of the available processing power..._

It's fairly easy to throttle a bitcoin client.

But if they mean run slower but do the same amount of work that's not possible
unless someone makes a dedicated chip to do the needed calculation.

------
wccrawford
Excellent article.

I would only add that we're using a LOT of energy to create a fake (read:
virtual) resource. The best part about virtual resources is that they don't
use many real resources, but this one is the opposite.

Granted, it's a 1-time cost, but as the article notes, it could be created
with a much lower 1-time cost.

~~~
joezydeco
How much manpower and energy does it take to make a paper US dollar with
nothing backing it up?

[EDIT] Since I'm getting downvoted, I'll answer my own question: $0.042 every
18 months.

~~~
DennisP
I'm guessing that's the cost of printing a single dollar bill. There are also
hundred-dollar bills, which presumably cost the same.

It'd be pretty interesting to get the total cost of printing, transport, and
storage, and compare to the cost of maintaining a similar amount in bitcoins
(which I calculated here: <http://news.ycombinator.com/item?id=2602667>).

~~~
joezydeco
Yes, that's a single dollar bill note, quickly grabbed from here:

<http://www.enchantedlearning.com/math/money/bills/one/>

I didn't count the $100 because I don't believe they're
printed/circulated/destroyed/reprinted as heavily as the $1. Who knows about
the 5, 10, 20 and 50.

I also don't think this $0.042 covers the labor cost of distributing,
collecting, securely shredding and tracking the movement of all these bills
through the system every 18 months.

~~~
DennisP
I was thinking more along the lines of what the total cost might be. There's
about a trillion dollars worth of cash circulating, but since it's not all
ones we can't just multiply a trillion by $0.042.

In any case, it sounds like the bitcoin cost might be in a similar
neighborhood to paper costs.

------
dennisgorelik
Do you realize that BitCoins is elaborate pyramid scheme that targets computer
geeks?

------
michael_dorfman
Personally, I'm more concerned by the resources that are being utterly and
completely wasted discussing Bitcoin on HN.

Hasn't it been talked to death already? Is there really anything new to say?

~~~
joezydeco
There's a lot to say. I personally think the Bitcoin debate is interesting
because it's making a lot of people question the concept of money - especially
in the current state of the world economy.

It's also a new and interesting intersection of technology, economy, and
personal trust.

~~~
michael_dorfman
All those things are true. But I still am not seeing any points raised in the
discussion here that haven't already been made in any of the countless other
discussions that have already played out here on HN in the past few weeks.

It's not that Bitcoin isn't new and interesting-- it is-- but that there is
nothing new and interesting to say about it today that wasn't said (here)
yesterday.

~~~
palish
I didn't see any Bitcoin discussion yesterday.

To be blunt, you're doing more harm than good by complaining about the
discussion. For every person that cries "dupe", there are ten more who are
grateful for that dupe. Dupes are a good thing.

~~~
michael_dorfman
The top story for most of the day yesterday was about Bitcoin, actually.

And I'm not crying "dupe"-- it's not that people are re-posting an old article
with evergreen content.

Instead, people are having the same conversation over and over again, making
the same points, repeatedly. I don't think _that's_ a good thing.

~~~
palish
If the conversation points are correct, then there's nothing wrong with making
them.

As something like Bitcoin becomes more popular, people will naturally have
questions and concerns. Should they search for the answer before asking?
Maybe, but it doesn't really matter if they don't. People are free to downvote
them for asking. But they don't, and the resulting conversation becomes
interesting for those who haven't seen its variants, such as me.

You've been a member of HN almost as long as I have. Haven't you noticed the
destructive effects meta-discussion has on articles? If so, why are you
perpetuating it?

~~~
michael_dorfman
_You've been a member of HN almost as long as I have. Haven't you noticed the
destructive effects meta-discussion has on articles? If so, why are you
perpetuating it?_

Because I've also noticed the pernicious effect of waves of discussions like
this that never die. Articles about Bitcoin (and other similar topics) come to
dominate the front page for a while, and crowd out other, more interesting
content.

I don't usually involve myself in meta-discussion, but this seemed like such
an egregious example that I felt I ought to speak up.

~~~
joezydeco
I count more Heroku articles on HN today than Bitcoin. I just ignore them. It
all depends on where your sensitivity adjustment is set today, I guess.

------
vrsmn
imagine all that computing power being used to boinc projects. World problems
would be solved

------
rms
Good thing we have so much coal left to burn! o.0

------
pstack
No, you guys. You don't get it. Bitcoins are going to take over the world.
We're ALL going to be part of an economy of Bitcoins, just like we all
universally adopted Swatch Internet Time[1]!

[*1] <http://en.wikipedia.org/wiki/Swatch_Internet_Time>

~~~
clistctrl
The future economy may not (I'm guessing will not) be bitcoin. It will
probably have a few very different ideas built into the core of it. But the
foundation is being laid right now as we discuss the problems of bitcoin.

