
Electricity consumption of Bitcoin: a market-based and technical analysis - zdw
http://blog.zorinaq.com/bitcoin-electricity-consumption/
======
tbihl
A growing trend is to mine Bitcoin in Venezuela, where the electricity is
hugely subsidized, mining can pay better than something like being a doctor,
and you can get food sent in from Miami (since your income is in a widely
accepted currency.)

Good Econtalk on the subject:
[http://www.econtalk.org/archives/2017/02/jim_epstein_on.html](http://www.econtalk.org/archives/2017/02/jim_epstein_on.html)

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nhaehnle
In other words, the Bitcoin network consumes about 5-6 orders of magnitude
more electricity than would be required to maintain a similarly-sized ledger
using more traditional database techniques.

Yes, the feature set is a bit different, but it's difficult to see how Bitcoin
can remain competitive in the long run. I guess it can help push down
overheads elsewhere in the financial system, so at least that's a good thing.
And it's always been a good educational experience.

~~~
runeks
The point of Bitcoin is to consume as much electricity, roughly, as a block is
worth. Consuming this electricity, and using it to calculate a proof of the
consumed electricity, means that the blockchain becomes immutable: no one can
change the past, because it would require re-doing the proof-of-work.

So, out of this -- seemingly meaningless -- activity of burning off energy,
arises the trustless property of the Bitcoin blockchain: with digital
currencies that use proof-of-stake, or an SQL backend, every participant could
-- theoretically -- have mutually agreed on assigning themselves 100x as many
currency units, right before you enter and buy $1000 worth. There's no way to
prove that this didn't happen, as it takes little effort to change history.
This is unacceptable for a digital currency, hence the need for proof-of-work,
and Bitcoin.

~~~
nhaehnle
It's easy to change history with a plain SQL backend. But in any approach that
stores the ledger in anything that boils down to a publicly distributed Merkle
DAG, changing history or other manipulation like generating assets from
nothing is impossible to do in secret.

The only potential issue is double-spending, or to be more precise,
invalidating a transaction after the fact by pretending that a different,
conflicting one, came first. This problem could be solved much more cheaply
than in Bitcoin by using signatures by a trusted (e.g. elected) well-known
council.

The only problem with that approach is how to bootstrap the value of such an
alternative currency. Bitcoin somehow achieved that by appealing to a mixture
of cypherpunk and libertarian ideology, and from there it developed to the
current status which is an entirely circular origin to the value. I don't know
what the alternatives for bootstrapping are. Fiat currencies can bootstrap via
taxation, but that's not really an option here. Perhaps something like getting
Valve to use such a system for their card trading :)

~~~
runeks
> The only problem with that approach is how to bootstrap the value of such an
> alternative currency

The problem of "bootstrapping the value" of a centralized, digital currency is
that no one wants it, because of the reason I mentioned (too easy to change
history). Working hard in order to earn an entry in some database, that can be
deleted in a second, makes little sense for people.

Bitcoin had no bootstrapping problem because it can be used tustlessly
(deleting past transactions is simply not possible), while your solution is
just another type of credit. Why would I ever, voluntarily, start using your
credit as money? It makes no sense from my perspective; hence the
"bootstrapping problem".

In short: reducing the energy consumption of Bitcoin while reducing security
is easy (use credit). It's keeping the trustless property while reducing
energy usage that's the challenge.

~~~
nhaehnle
I'm not sure what you mean by _centralized, digital currency_ , but it's
probably not what I was talking about, which involves a _publicly distributed
Merkle DAG_.

Also, it's disingenious to pretend that Bitcoin had no bootstrapping problem.
Bitcoin existed for a long time without significant value, and it seems stunts
like spending what would now be millions of dollars for pizza were necessary
pieces of solving the bootstrapping puzzle.

~~~
runeks
I'm referring to your solution to the double-spend problem, which is the
problem Bitcoin solves in a trustless manner.

> This problem could be solved much more cheaply than in Bitcoin by using
> signatures by a trusted (e.g. elected) well-known council.

This is a centralized solution, where a group of -- albeit elected --
officials have complete control over the history of all balances. I'm arguing
that no one is interested in such a system. No one wants democratic money,
when it comes down it, is what I'm arguing. They want trustless money.

I'm also arguing that Bitcoin has monetary value in and of itself -- because
it has use value -- and that its dollar price is a symptom of that, not the
other way around. Even with zero dollars bidding on bitcoins, Bitcoin can be
used for spam prevention -- out of which it was derived in the first place
(Hashcash).

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canadian_voter
In the future bitcoin[1] mining is banned on inhabited planets and instead
done on Dyson spheres.

[1] It's the future, so neither bitcoin nor internet are capitalized.

~~~
vivekd
if this happens, bitcoin would become valueless. The value of bitcoin comes
from the fact that you can't just pump them out, the energy requirements
required to solve the calculations required for mining are one of the limits
to bitcoin production. Free energy like feasible solar or dyson spears would
just be a license to print free digital currency making it worthless.

~~~
aakilfernandes
The network recalculates payoffs based on the hashrate. If electricity becomes
cheaper, hashrate goes up, and the payoff per hash goes down.

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n00b101
I think a rough estimate of the cost of 500MWh/year is $500 million per year.
That doesn't include cooling, hardware, real-estate, staff and other operating
expenses. I guess the majority of this cost is ultimately paid for by
speculators who buy Bitcoins off of the miners.

~~~
hollerith
$500 million per year is roughly what I get, too, but 500MWh/year is very
different from 500MW, which is what I think you meant to write since the OP
expresses its conclusion in MW.

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danblick
If you accept that (1) there are economies of scale in Bitcoin mining and (2)
miners are rational and will only mine when it is profitable, then doesn't
this suggest that large amounts of mining power should become concentrated in
the hands of just a few major miners? Doesn't that seriously undermine
Bitcoin's validity?

~~~
danblick
This article seems to support my suggestion.

[https://www.cryptocoinsnews.com/declining-profitability-
for-...](https://www.cryptocoinsnews.com/declining-profitability-for-new-
miners-threatens-bitcoin-decentralization/)

Quoting the conclusion of the referenced paper:

"Each future halving of the Bitcoin block reward will narrow the range of
profitable entry for new Bitcoin miners considerably. The stronger relative
position of incumbents compared to that of new entrants supports further
consolidation of Bitcoin mining. Consequently, the distributed Bitcoin ledger,
the blockchain, may become more vulnerable to attack, and its trustless nature
may ultimately even be destroyed."

~~~
globuous
" Once a predetermined number of coins have entered circulation, the incentive
can transition entirely to transaction fees and be completely inflation free"
\- btc whitepaper

Transaction fees will take over mined bitcoins once there is non left to mine.

~~~
danblick
Okay but that does not solve the problem I am concerned about. That doesn't
ensure a _diverse_ mining pool. Already it doesn't make sense for me to mine
Bitcoin (I don't have access to these ASICs). I think that economic forces
will tend to concentrate mining power and that's a problem.

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peter303
At one ton of CO2 per megawatt hour, we could be looking at 2 million tons CO2
a year.
[https://www.eia.gov/tools/faqs/faq.cfm?id=74&t=11](https://www.eia.gov/tools/faqs/faq.cfm?id=74&t=11)

100 gallons of gasoline also creates a ton of CO2 for context.

~~~
npongratz
> 100 gallons of gasoline also creates a ton of CO2 for context.

I thought I understood the Law of Conservation of Mass, but I guess I do not.
If 100 gallons of gasoline has a mass of ~283.49 kg [0], how is a ton of
carbon dioxide created from this?

[0] Maybe I'm wrong to use the first site that came up, but I used
[http://www.aqua-calc.com/calculate/volume-to-
weight/substanc...](http://www.aqua-calc.com/calculate/volume-to-
weight/substance/gasoline)

~~~
schwabacher
Carbon atoms from the gasoline each combine with two oxygen atoms from the air
to produce a carbon dioxide molecule, meaning the bulk of the mass of the
resulting co2 actually comes from the atmosphere.

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linsen
They make the assumption that unprofitable hardware has been retired. But this
assumes that the person profiting from the mining is also paying for the
electricity.

~~~
foepys
> But this assumes that the person profiting from the mining is also paying
> for the electricity.

Otherwise it doesn't make sense. You cannot steal electricity forever.

~~~
empath75
You can hack into new aws accounts forever.

~~~
mrb
AWS is highly inefficient to mine Bitcoins. A 4-GPU EC2 instance will mine
less than $0.50 per year(!)

Realistically the proportion of miners who steal power is likely very small,
as in one or two percentage points.

