
Bitcoin's Enormous Energy Costs May Prove to Be Its Biggest Risk - pdog
https://www.bloomberg.com/news/articles/2017-11-09/bitcoin-s-exorbitant-energy-costs-may-prove-to-be-biggest-risk
======
PKop
"So, this is the next attack vector? Bitcoin is not green? The energy put into
Proof-of-work is what makes the system immutable. People who complain about
bitcoin's energy use, don't seem to grasp what makes the bitcoin Blockchain
immutable. In order to change the Database, you have to go back > and do the
"work" which becomes practically impossible after approx. 10 blocks. You take
that away and you'll make the system Tamper evident, and not Tamper Proof as
it is right now. It's the only secure data base ever invented, and thats
because of the energy used to secure it.

I don't see these people complaining how much energy Las Vegas wastes. Or
Hollywood. What about professional sports? How much energy does going to war
cost? All of these are less important than the only sovereign moneys system in
the history of man-kind. So, please, stop complaining about the energy use, i
left my violin at home."

\- daggerhashimoto

In addition, if Bitcoin disrupts the banking industry and a portion of wall
street, we'd have to subtract their energy consumption.

It's just logically lazy to not consider if the benefits outweigh the costs,
and sound immutable finite hard money out of reach of central authorities
brings with it enormous benefits.

~~~
rothbardrand
Yes. The people who hate bitcoin -- despite all it does for them-- generally
are hating it for political reasons.

They may hate sound money, they may worship at the alter of neo-keynsianism
and think inflation is necessary (how else will you pay for bombing brown
people?)

But they will use the "its anti-environment" claim because that has gotten
traction.

We already have a massive global propaganda campaign spreading leftist views
of the environment.

When bitcoin defeats these people, I will be very happy.

~~~
CJefferson
bitcoin is currently inflationary -- what do you think is paying the miners,
but new bitcoins created out of nothing?

~~~
rtkwe
It's mostly new BTC but there's also ~1-2 BTC per block of transaction fees
now too. Some spikes up to around 4.

[https://www.smartbit.com.au/charts/transaction-fees-per-
bloc...](https://www.smartbit.com.au/charts/transaction-fees-per-block)

------
quantdev
"Even as bitcoin flirts with $8,000, the price required for mining to be
marginally profitable stands at a jaw-dropping $300,000 to $1.5 million by
2022 based on current growth trends and electricity use, according to
Christopher Chapman, an analyst at Citigroup Inc. At that pace, the implied
consumption would match that for the whole of Japan over the long haul."

This Citi analyst either doesn't understand Bitcoin or doesn't understand
economics: because the protocol has difficulty adjustment and because marginal
revenue will always approximate marginal cost, the cost to mine 1 BTC will
always approximate its value.

Therefore, projecting the cost of mining is _equivalent_ to predicting the
price of Bitcoin. If the cost to mine 1 BTC was $1MM USD (and so $1MM/BTC),
that would imply the network value of the Bitcoin ecosystem would be well over
the USD M1 supply (tens of trillions, in fact). Bitcoin would have effectively
replaced fiat in that world and perhaps all the cost it eliminated would be
worth the mining.

In any event, from what he said, I doubt this (equity) analyst understands
that he can't project $1MM BTC mining cost without at least $1MM per BTC
price.

~~~
DSMan195276
It's probably worth noting that the 2022 calculation is probably taking into
account the fact that the amount of BTC gained per block will probably have
halved once or twice by then, which doubles the cost of mining each time. And
eventually the amount of BTC per block will go to zero, meaning miners make
nothing directly off of the block directly.

The network already has a system in place to combat this issue - fees. So it
can technically cost $1MM to mine 1 BTC while the price of BTC is only $8,000,
as long as the transactions provide enough fees to offset the costs. In
practice I think that's pretty unlikely to work out that well, but that is the
intended system either way.

Edit: Reading the article again, it's not clear to me they're actually taking
halving into account in their calculation, and I'm also not extremely
confident they're not confusing bitcoins and blocks. There are no direct
quotes detailing that part of the article, and I wouldn't really expect the
person writing the article to know the difference.

And it also occurred to me that something else to take into account is that
miners themselves are betting on the price of bitcoin going up. So just
because it cost them, say, $200,000 to mine $100,000 worth of bitcoin, if the
price of bitcoin eventually doubles from the point that they mined them then
they would still break even, though not immediately. So it can make some sense
to mine bitcoins at a bit of a loss. I don't think it would make sense to mine
at anywhere near the losses they're describing though.

~~~
baddox
If you expect Bitcoin to increase in value, wouldn’t it be a better idea to
just buy bitcoins rather than buy computers and electricity to mine at a
(current) loss?

I think the only reason such people would prefer mining is if it’s difficult
for them (legally, practically, etc.) to directly buy bitcoins in the area
they live or at the scale they desire to invest.

~~~
DSMan195276
> If you expect Bitcoin to increase in value, wouldn’t it be a better idea to
> just buy bitcoins rather than buy computers and electricity to mine at a
> (current) loss?

Estimating how much it will cost you to mine X Bitcoin is not an easy thing to
do, especially now that each block almost always has at least an extra Bitcoin
worth of fees, with the highest having over 4, meaning the amount of Bitcoin
you get per block can vary by approximately an extra 1/3 and this extra value
is pretty random.

The power to run the hardware is also constant cost, not a one-time cost like
buying a bunch of Bitcoin at market price, so while it's easy to say "Just buy
when it's at X value and turn off your hardware", the miner has no way of
knowing what that value is, and without knowing the future values of Bitcoin
they have no idea if waiting and spending all their current savings on Bitcoin
at a low price will actually net them more then just waiting it out and
continuing to mine the whole time. It's a crapshoot, but the miners presumably
know what they're getting into.

My point was more that it is probably acceptable to risk mining at a bit of a
loss if you're confident the value is going to go up, you already invested in
the hardware anyway, and you think there's a good chance you may make more
then if you had just bought some at what you think will be the lowest price.
That said, my example is probably more extreme then would be acceptable.

~~~
quantdev
It's absolutely easy to do. The fact that it's probabilistic doesn't by
default make it hard, and in fact, over long time frames, it's much easier to
forecasts (expected) costs and profit for BTC miners than in most businesses
(say, e.g., Walmart).

Miners have continuous liabilities in USD and so most only hold Bitcoins as
long as as is necessary by the protocol (100 blocks). Further, expected fees
are easy to estimate over medium-to-long time frames. I basically disagree
with everything you've said here and below.

------
Asdfbla
People are always quick to point out that this is just what it takes to build
a trustless and decentralized currency, which is probably correct, but it's
not clear whether such an extreme level of trustlessness is even necessary (if
you are not a crypto-libertarian on principle).

The benchmark for Bitcoin are normal financial transactions as they exist
today (and work quite well, most of the time). So the question really is: Are
you ready to have humanity spend the additional energy consumption of a
country (or many countries if Bitcoin were to scale up) to run a system that
offers only very limited throughput (relative to established systems) and
hasn't even proven yet that it's even a viable alternative to fiat money from
an economic perspective? Not to mention the scaling issues that come with such
broadcast protocol.

I don't really see the widespread use, at least as envisioned by Bitcoin
proponents. If it's just the decentralized aspect and transparency that you
want, you can relax your trust assumptions and implement something like a
distributed ledger with known identities which doesn't need proof-of-work to
prevent sybil attacks (identities which of course would have to be certified
in some way, unfortunate).

Oh well, it's still a very cool technology, but I hope for the planet's sake
that cryptocurrencies stay in their niche of anonymous transactions for those
who actually need it.

~~~
rothbardrand
You think we should be blocked from donating to wikileaks?

You think venezuelans should be forced to use their local currency?

You think Zimbabwe's people should go thru hyper inflation again? They are
about to, and bitcoin is booming there as an alternative.

Sorry, you seem to think you know better than other people what they should
value and what they should do.

Bitcoin is completely voluntary, you don't like it, don't participate.

It's also not your energy getting spent.

At the risk of sounding like a libertarian: Other people are not your
property.

~~~
UncleMeat
Oh come on. We should be charitable in our discussions. The comment clearly
mentions that there are some useful applications, which cover the censorship
and collapsing government use-cases. The important thing to recognize is that
the large majority of people don't have these use-cases. This means that BTC
becomes a niche system rather than supplanting world banking.

It isn't my energy being spent, but it is CO2 that harms our planet. Until we
have zero-emissions energy I think it is reasonable to criticize systems as
energy-inefficient.

~~~
vorotato
Why are we blaming the individuals who use the energy rather than the
individuals who make the energy dirty in the first place. Place the blame
where autonomy is.

~~~
ben_w
There is plenty of autonomy to blame when someone chooses to use an absurdly
large amount of energy when a trivial amount would solve the same problem.

------
kasperni
By reading through the comments. I don't think people realise how much energy
it actually uses.

One bitcoin transaction already now uses as much energy as your house in 1
week. [https://motherboard.vice.com/en_us/article/ywbbpm/bitcoin-
mi...](https://motherboard.vice.com/en_us/article/ywbbpm/bitcoin-mining-
electricity-consumption-ethereum-energy-climate-change)

I'm sorry but I just fail to see how this can work going forward.

~~~
VMG
Why measure it in energy/transaction? The energy is not used for transactions,
but for securing the ledger. With second-layer scaling solutions you will have
no limit of transactions per block.

~~~
cryptodogemoon
Why bother with a second layer when new blockchain designs improve upon the
designs of Bitcoin? The ledger is "secured" by about 6 mining pools which
might even be controlled by the same people.

Second layer goes completely against Satoshi's primary design in the first
sentence of the white paper - which is removing the need for third parties.
The lightening network design is a siphoning power grab by Blockstream.

After all, if you look at Bitcoin from a technical perspective the services
Bitcoin offers are available in Litecoin, Monoero, etc.

~~~
EthanHeilman
>Why bother with a second layer when new blockchain designs improve upon the
designs of Bitcoin?

We can argue about how to scale layer one, but layer two always provides
scalability benefits that layer one can't provide. So choose your favorite
layer one scaling scheme and then use layer two on top of that.

>Second layer goes completely against Satoshi's primary design in the first
sentence of the white paper - which is removing the need for third parties.

Satoshi in the whitepaper proposed SPV nodes which introduce semi-trusted
third parties for the sake of scalability.

Layer two does not introduce trusted third parties. It, under certain
conditions, is less censorship resistant that layer one, but that is why you
want a scalable layer one as well so that transactions which need censorship
resistance can fall back to layer one. There is no reason to bloat layer one
with transactions that layer two can handle. Layer two helps layer one scale.

>The lightening network design is a siphoning power grab by Blockstream.

Even if this is true, and I very strongly doubt it, that shouldn't influence
your view on the technology. Either it works or it doesn't.

------
LyndsySimon
This doesn't even make sense.

If it isn't profitable to mine, then people won't mine. Difficulty will fall,
which will mean that fewer cycles (and thus, less energy) is needed to find
the next block.

The author literally took the "total cost of all energy in the network" and
divided it by "total number of transactions". That's not how it works. There
is effectively zero incremental cost in terms of energy usage for a
transaction.

~~~
nosuchthing
The point is to measure the system's efficiency and energy usage.

Bitcoin's Proof of Work algorithm using SHA-256 and power hungry ASICs with a
bottle neck on 4-7 transactions per second (average, as latency is in 10
minute intervals) or even in the case of the controversial Bitcoin-Cash with
56 transactions per second; what Bitcoin as a service does with the type of
infrastructure required for the software to run can be analyzed and defined in
terms of cost of operations versus alternative services which offer similar or
identical functionality.

------
adyavanapalli
Just so this isn't forgotten, I think we have to ask _in reference to what
exactly?_ Paper money and its supporting electronic banking systems cost
energy and money too e.g. delivering cash to banks and other institutions,
building and powering banks and ATMs, software costs in building and
maintaining electronic payment systems, etc. I think it would be instructive
to see how the costs compare.

------
wickedlogic
These pieces are starting to get pretty funny.

`If it keeps growing, it'll be so expensive, it can't possibly work.` Also
assumes bitcoin as we know it today is fully immutable, but that isn't the
case, and neither is energy production, or technology used to run the whole
thing.

But you know what gets tricky, rewriting history in bitcoin's blockchain.
`You'd almost have to spin up an alternate time line, and those alternate time
lines are expensive, and use a lot of energy, it cant possibly work.`

The value in the future of bitcoin may be that it has a long and very public
chain... and that alone is probably enough to hold reasonable utility in the
future. Just like silver/gold and other scares things provided utility for
quite a while. Only now of course, if it gets too expensive, another slightly
different public fork will persist (or several of them).

~~~
UncleMeat
Isn't the immutability of BTC one of the major things that proponents point
to? Wasn't this why there was such pushback against increasing block sizes by
just 2x? Why should we assume that a community that is so based in political
rather than technical ideals will just come up with some unnamed technical
solution in the future to improve efficiency?

------
wyldfire
Another perspective (from 2015): "Nothing is Cheaper than Proof of Work" [1]

[1] [http://www.truthcoin.info/blog/pow-
cheapest/](http://www.truthcoin.info/blog/pow-cheapest/)

------
jvanderbot
Well, let's clean up the energy grid and stop blaming consumers?

~~~
ben_w
At the current estimated energy consumption, if everyone on Earth performed an
average of one transaction per month then Bitcoin would use more electricity
than is being generated.

~~~
6nf
That's not how Bitcoin works. The amount of energy used to secure the
blockchain is not proportional to the number of transactions.

~~~
ben_w
It doesn’t matter that it’s not _supposed_ to be proportional, it’s a simple
scaling up from current energy usage and current transaction frequency to the
world population.

All that tells us is that bitcoin _as it currently exists, and as part of the
way it interacts with the real world_ has a flaw — it _doesn’t_ tell us if
that flaw is an oversight in the design or if it’s a gold-rush and/or a price
bubble because humans are being irrational.

------
platinum1
Bram Cohen just announced Chia to address this, using storage and time as the
proof-of-work.

[https://techcrunch.com/2017/11/08/chia-network-
cryptocurrenc...](https://techcrunch.com/2017/11/08/chia-network-
cryptocurrency/)

previous conversation here:
[https://news.ycombinator.com/item?id=15655840](https://news.ycombinator.com/item?id=15655840)

------
kown223
demand and offer, I wander why the elitist hacker rank "liberal" people don't
get it, the difficulty is so high because there is a lot of hash power, the
network would be fine with much less, I think around 15% of the current one.

On the logic of banning stuff for power saving, we should ban video games and
movies.

~~~
rothbardrand
Most of the people on this site are hard left, and not very much into
hacking... there are junior developers and wannabe CEOs with MBAs here. You're
not going to find cypherpunks on hacker news, generally.

So, anything that fits the hard left agenda is promoted, without regard to its
scientific or technical accuracy, even when it's against the startup ethos
that created silicon valley in the first place.

~~~
jacquesm
Please stop your continuous stream of personal attacks and your rants against
the 'left', which besides lowering the general level of discourse is factually
incorrect in many ways.

------
asabjorn
The problem isn't the energy cost, but the fact that the energy cost is going
towards work that has no utilitarian purpose. Ethereum shows a potential way
to fix that, and bitcoin can adopt a similar approach once the core problems
of the approach are solved.

------
vinniejames
These arguments also seem to confuse energy consumption with the resulting
pollution. I’d give it another 10-20 years at most until the majority of
energy is coming from renewable sources, making this a non-issue as far as
Bitcoin is concerned

------
Retric
This seems like a easy way to explain a Bitcoin ban, should any country wish
to do so.

------
VMG
How much energy and toxic waste is generated by gold mining?

------
jacobr
What is the most energy efficient way to get rid of Bitcoins? Does it matter
if I sell them all at once or if I spread it out over more transactions?

------
daggerhashimoto
So, this is the next attack vector? Bitcoin is not green?

The energy put into Proof-of-work is what makes the system immutable. People
who complain about bitcoin's energy use, don't seem to grasp what makes the
bitcoin Blockchain immutable. In order to change the Database, you have to go
back and do the "work" which becomes practically impossible after approx. 10
blocks. You take that away and you'll make the system Tamper evident, and not
Tamper Proof as it is right now. It's the only secure data base ever invented,
and thats because of the energy used to secure it.

I don't see these people complaining how much energy Las Vegas wastes. Or
Hollywood. What about professional sports? How much energy does going to war
cost? All of these are less important than the only sovereign moneys system in
the history of man-kind. So, please, stop complaining about the energy use, i
left my violin at home.

~~~
jvanderbot
Once you tie the benefits of bitcoin to something as tangible as the
"benefits" of a weekend in Vegas, people will back off the application as the
problem.

If grid energy is renewable, bitcoin is not a problem, and actually helps push
increasing energy infrastructure. In the ideal world...

------
endlessjoys
Proof-of-Work is supposed to cost energy and there is no other way, see:
[http://nakamotoinstitute.org/mempool/proof-that-proof-of-
wor...](http://nakamotoinstitute.org/mempool/proof-that-proof-of-work-is-the-
only-solution-to-the-byzantine-generals-problem/)

~~~
contravariant
I'm hesitant to call that a proof, there are various points in the proof that
might not be false, but are certainly non-obvious.

Firstly, it seems to be enough for any alternative consensus to be impossible
to maintain, rather than impossible to produce.

Secondly, to make it practically (economically) impossible to maintain an
alternative consensus should requires Proof-Of-Resources, not Proof-Of-Work.

Thirdly, there's no reason to assume those resources can't be stakes in the
consensus itself.

Finally, if the only way to maintain consensus is by building massive
expensive specialised buildings, then congratulations you've just rediscovered
a bank.

