
Bitcoin Mining Uses $15 Million's Worth Of Electricity Every Day? - peter123
http://www.forbes.com/sites/timworstall/2013/12/03/fascinating-number-bitcoin-mining-uses-15-millions-worth-of-electricity-every-day/
======
tlb
Previously debunked: the actual number is 1 or 2 orders of magnitude lower.
[https://news.ycombinator.com/item?id=6829860](https://news.ycombinator.com/item?id=6829860)

~~~
zaius
I was curious so here's my napkin calculations:

Assume a block erupter is the base level to get into mining now. The network
hash rate right now is 6,751,767.65 GH/s. Let's round to 6,600,000GH/s. Block
erupters are 330MH/s and take 2.5w. The network would need 20m of them. That
would be 50MW, or 1,200MWh / day. PG&E charges me $0.15 per kWh. So running
the network would be $180,000 / day.

Yeah there's a lot of assumptions in there, but that's nowhere near $15m.

~~~
wildgift
Isn't that still very expensive?

~~~
tlb
The natural equilibrium is where it costs a little less than $1 to make $1
worth of bitcoin. The system isn't quite at equilibrium now because of price
uncertainty and the lag time to order new mining equipment, but the invisible
hand is working on it.

~~~
cperciva
Keep in mind that the equilibrium is where the _total cost_ to make $1 of
bitcoin is $1 -- not where the _electricity cost_ is $1. The relative weight
of electricity vs. amortized hardware cost will vary, of course.

~~~
rahimnathwani
If you're doing accounting (backward-looking financial reporting) you should
look at amortised cost. If, on the other hand, you're making a decision about
whether or not to mine, then you care only about marginal (cash) costs.

If you already paid for your hardware (or already committed to paying for it),
then there's zero additional cost, unless (i) there are significant
maintenance costs or, more likely (ii) you could recoup some of the cash by
selling the equipment if you stop mining. I'm ignoring time value of money,
and also the drop in the resale value of the equipment. (Deliberately avoiding
the work 'depreciation' here as the accounting meaning the every day meaning
confuse the issue.)

------
johnsoft
It would be interesting to compare this figure to Western Union's electricity
usage from their network infrastructure and all their brick-and-mortar
locations, and see which of the two supports more transaction volume per kWh
expended.

------
jadeddrag
If this $15M figure were true (and it probably isn't), at today's going rate
of about $1K USD/BTC, miners as a whole are losing $11.4 Million in electrical
costs. (assuming 25 BTC are paid out every 10 minutes, and ignoring miners
fees. The value of all new mined coins is only 3600 BTC per day, worth about
$3.6 Million USD.)

~~~
greyfade
That $15M figure is wildly speculative, and assumes an average wattage per
gigahash that's more in line with the state of mining as much as 2 years ago,
when GPUs dominated mining.

ASIC units (like my 14.5GH/s from two BFL units which pull less than 50W
together) are far more efficient than the quoted 650W per gigahash, by up to
two orders of magnitude, which would push the average for the whole network
far below break-even.

~~~
im3w1l
KNC units are pretty close to 1W per gigahash.

------
Buge
I don't know why blockchain.info keeps that statistic up even though it's
obviously very wrong.

------
curiouslurker
At least it is just electricity. Nothing like the ten's of thousands of lives
that were lost in the initial gold (and silver) mining rushes in South
America.

~~~
drcross
Or 12 year old's who work 60 hours a week in a mine to gather Coltan with a
pickaxe in the Congo.
[http://bloodinthemobile.org](http://bloodinthemobile.org)

------
rwinn
On [http://realtimebitcoin.info](http://realtimebitcoin.info) i'm assuming
that running 19mh/s is consuming 1 joule. That number is a few months old now
and reading on the bitcoin wiki i see that the average is probably closer to
120mhash/j. Updating it now...

[https://en.bitcoin.it/wiki/Mining_hardware_comparison](https://en.bitcoin.it/wiki/Mining_hardware_comparison)

------
guiambros
_" Electricity consumption is estimated based on power consumption of 650
Watts per gigahash..."_

My BFL Jalapeño does 7.6 GH with ~70W, plus a couple more for the RaspberryPi.
That's _two_ orders of magnitude lower than these reported figures, and
massive scale ASICs are even more power efficient.

Seems nobody does investigative reporting anymore. In fact, not even "common-
sense-math reporting..

------
Blitz2012
May I take this opportunity to introduce you to a paper that me & my colleague
from UCL have recently published.

Part II at [http://arxiv.org/abs/1310.7935](http://arxiv.org/abs/1310.7935) \-
"The Unreasonable Fundamental Incertitudes Behind Bitcoin Mining"

We have tried to address the same issue of the excessive electricity bills
associated with Bitcoin mining. What we have outlined in our paper are ways to
optimise the underlying SHA256 hashing algorithm so as to mine Bitcoins faster
& in a more efficient manner. We have managed to achieve a 38% improvement
against traditional mining techniques.You can imagine the impact as it could
now potentially allow miners to save millions on electricity bills.

------
jadeddrag
Betteridge's Law seems to apply here.
[http://en.wikipedia.org/wiki/Betteridge's_law_of_headlines](http://en.wikipedia.org/wiki/Betteridge's_law_of_headlines)

------
alexkus
Bitcoin mining could use any amount of electricity given that the block
difficulty adjusts to the prevailing hashrate.

If more people pile in to mining then the difficulty increases and total $$$
spent on electricity will increase. Conversely if mining hashrate declines
then difficulty is decreased to compensate.

I'm not sure how the difficulty adjustment would cope with a severe and abrupt
change in mining hashrate (take it to the extreme and imagine the hashrate
drops to 1/1000th of what it is now, there are going to be a lot of
unconfirmed transactions out there).

~~~
DanBC
Is more or less electricity being used now that the serious mining is done by
ASICs / fpgas and not GPU clusters?

~~~
alexkus
Interesting question.

For the same hashrate then less electricity is going to be used given that
ASIC mining is far more efficient that GPU mining.

But the overall hashrate is still on an ever upward trend.

I guess it depends on how many people have quit CPU and GPU mining altogether,
or whether there are still lots of forgotten machines still burning away
contributing very little (in comparison).

------
tlrobinson
The cost of electricity used by miners should _never_ exceed the miners'
revenue (assuming most miners only mine when it's profitable to do so), which
is currently fixed at approximately 3600 bitcoins per day, or $3.6M at the
present cost of $1000 per bitcoin. Factor in the all the expensive ASICs
miners have to purchase and it's likely a lot less than that.

------
ecnahc515
It costs money to make any other currency as well, and process the
transactions, right? So why is it such a big deal?

------
adrianwaj
But the miners are also enabling and protecting the bitcoin network so that
transactions can take place.

As such, how much does it cost to run the US military everyday to back up the
US dollar? Then comparing the value of actual commercial transactions that
take place, I wonder what is more efficient? I haven't done the math.

~~~
thaumasiotes
Why would the military be needed to back the US dollar? What's backing the
Hong Kong dollar, the Canadian dollar, or the Brazilian real?

~~~
adrianwaj
Their armies and alliances. Would be interesting if altcoin networks engaged
in attacks on each other, haha.

~~~
thaumasiotes
Your argument (or the sense I can make of it) works on the assumption that in
the absence of an army any country will be automatically conquered and the
money repudiated. That assumption is undermined by the growth of trade, but is
not totally unwarranted.

What's backing the Somali shilling? It's not even approved by any governing
power in Somalia.

~~~
adrianwaj
If I buy Somali shillings (S), and I make a forex transaction, then the other
party has my $ and I have their S. However, I can really only spend those S in
Somalia, but, I still don't want to buy more S than what it costs for some
other country (including my own) to invade it and make those S worthless by
replacing or nullifying that currency in that country. (in fact with
cryptocurrency, such an exercise is not unfeasible) So the bigger the army or
more alliances it has, the more expensive it is to invade, and the more S I
can buy, knowing it is protected, and, the more it can appreciate in relation
to other currencies. Likewise a country's army should grow in relation to its
economy so it becomes slightly uneconomical to invade (unless the country is a
belligerent one.)

It's not a pretty thought exercise, but theoretically, large holders of a
cryptocurrency can devalue it by flooding the market with them. That makes
them targets for people or groups that might want to do that, and targets for
other groups who want to protect them for those groups. (however in that
respect, flooding may be counterproductive if it helps with the spread and
awareness of a currency, in fact if I wanted to ensure the success of a crypto
- I'd do that - get them to as many people as efficiently as possible...
reverse-hoarding, rather than think solely about appreciation for my own
benefit) It's not just about stealing crypto, it's about debasing one, so
people choose another altcoin that is more reliable or appreciative (well
that's the intention anyway.) A good film plot. Likewise if I am a large
Bitcoin holder, and also a large Litecoin holder, I might want to dump, or
constantly flood Litecoin, so that Bitcoin looks like a better currency for
hoarding, or accepting.

Also, if one crypto network can attack another one, then it'd look bad if it
did (really bad), but at least I know it can win such battles. As a thought
exercise, this may be one reason why Litecoin may end up China centric - it
has an army to back it up (if the online battle was from another country-
centric crypto) - and lots of Chinese holders that want to see it appreciate
and used.

~~~
thaumasiotes
I don't understand your first paragraph. Could you provide a more specific or
particularized answer to "what's backing the Somali shilling"?

As a side point, the shilling appreciating in relation to other currencies
would have to be driven by those other currencies depreciating against the
world, or by printing press productivity falling dramatically; there is no
authority behind the shilling, and they are printed by anyone who wants to
print their own, so their value in trade is generally the cost of printing
them (quite low).

~~~
adrianwaj
I have no idea about Somalia and their money-printing operations. I also have
no desire to purchase anything from that country, or visit it. I certainly
wouldn't want to buy their currency as an investment if it can be printed by
anyone, or some army can come in and make those notes illegal, or the country
has no economic development to make the demand for those notes increase over
time. So what's backing that currency is a number of things, with "backing"
being a synonym for "making it valuable or useful in the long term to buy
things from and in Somalia." Having a country be physically protected from
invasion being a large factor in that equation. Also, not only an army, but
more importantly a naval force that can protect trade routes from pirates
(doesn't Somalia have its own fleet of pirate ships?? lol.)

The other thing to evaluate in a currency is the amount of it held by foreign
countries. If all of a sudden China were to dump its US dollars, I'm sure the
value would go down (but what would they buy instead?) Yet at the same time,
China has an interest seeing the US survive and/or thrive to a certain extent
so those dollars remain valuable and/or useful.

In fact, it seems the Chinese are going crazy about Bitcoins and Litecoins and
it makes more sense for many to hold them than US dollars.. possibly because
it allows them to make their funds available offshore and also pay bills
locally.

As a side note, I've heard the Chinese have official printing plates for US
dollars... another indicator about how important ubiquity is, in contrast to
artificial scarcity to back a currency. If there's a lesson to be learnt about
bitcoin, I think it's that artifical scarcity can also alienate a lot of
people (even if it motivates bitcoin holders) and drive up the value of other
crypto currencies, and if it was distributed more evenly from the outset, if
today's reality would be any different. So my prediction is that there'll be a
number of competing and complimentaty crypto currencies emerging supported by
groups that were early adopters (or buyers) of them. If I were a fortune 100
company, it might make more sense to buy up say Litecoins on the cheap now,
and then take payments in them later. (a bit off-topic, but useful to think
about).. why give a free-ride to bitcoin holders? (unless the top execs are
holding them.. or more likely, they'll be buying Litecoins now, esp Chinese
ones)

------
bernatfp
This is one of the reasons why Proof of Stake was proposed as a more efficient
alternative to Proof of Work while keeping the incentive for miners to keep
their rigs validating transactions.

Other cryptocurrencies such as Peercoin and Novacoin use both systems, but
will shift to PoS only at some point in the future.

------
lifeisstillgood
What is important is that a society has reached a level of sophistication
where discussions about relative costs of handling different money can and are
possible

it's an impressive leap from cutting doubloons into 8 pieces

------
wildgift
How does the cost of ASIC mining compare to the cost of fiat currency? What
about compared to the quantitative easing?

------
bmatthews60
Does anyone consider bitcoin to be a waste of thousands of people's time and
effort?

~~~
logn
Bitcoin might fail but it's not a waste. It's inspired a whole wave of
alternate crypto-currencies and gotten the public excited in general for them.
And wallet and exchange service and a general ecosystem of services have
sprung up that could (and do) support any virtual currency. That's all value
that can't be lost at this point.

As far as wasting people's time and effort, my hunch is that most people are
devoting their hobby time to this and in the process learned a little bit
about economics and computer hardware. That time would have probably been
spent on computer gaming or aimless web surfing anyhow.

