I have also written a blog on this:
You want the proof of work to remain difficult for a PoW scheme. We have pretty good assurances that mindless cryptographic hashing is difficult; ASICs accelerate it considerably, but don't lower the Big O complexity of the problem. On the other hand, people keep searching for algorithmically faster ways to simulate protein folding, not just ways to hardware-accelerate existing algorithms. If one group of folders were to discover superior algorithms for searching the potential energy surface, that would be beneficial to science but potentially disastrous for a currency based on protein folding problems. For that matter, the overall incentives might make science worse off if ProteinCoin encouraged superior algorithms to be kept secret, for PoW advantage, instead of publishing advances in the open scientific literature.
Using VISA transactions for fiat currency, BTC uses 5K times more energy per transaction than VISA.
> Of course, VISA runs call centers, offices, and a whole lot else on electricity as well, which isn't counted in this comparison. But those hardly matter due to the extreme difference between the two figures.
I think this absolutely needs to be counted, because it is an operating cost of the entity. With bitcoin, there are no call centers because by design, the transactions are irreversable.
When pitted against the total cost of financial institutions, which all independently hold massive amounts of customer data, which should be considered a liability due to the recent issues with consumer data here in the West. This further increases the operating costs of each institution because they are running servers to house account data.
Imagine a global, catastrophic EMI event. Even a temporary one would cause introduce to these systems (like visa), a higher likelihood of race conditions where accounts will not reconcile, causing a higher cost to converge.
Bitcoin does not necessarily have this problem.
If we are truly worried about the future costs of running financial systems, maybe we should also add liabilities into the mix.
Looks like data was taken from places like: https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ba...
and rest of the numbers were taking into account of how much each note costs to make.
"The Euro publishes sustainability statistics on their currency, and according to latest estimates, 3 billion banknotes printed in 2003 had an equivalent energy impact of 460,000 60W bulbs switched on for a year, which equates to 240 million kWh, or 0.87 million GJ. With circulation now at 15.8 billion notes, this would scale up to 4.6 million GJ (European Central Bank, 2007). To get to a global figure, for the purposes of this report, I will be multiplying this figure by a factor of four (i.e. a proportional share of global M0/M1 money supply). Therefore, we reach a figure of 18.4 million GJ, which would correspond to almost 3.07 million tonnes of CO2 equivalent."
This is just making a bank note, nothing about cost to distribute (guarding money, banking system, credit system).
If we assume energy costs to produce annual supply of new banknotes and coins in entire world is at 1 TWh. You see how insane energy consumption of Bitcoin really is.
And that's comparing an entire money supply of the world to single cryptocurrency.
Banks cannot be part of the equation as the need for banks would not cease if the world would switch to Bitcoin or similar.
I don't think BTC will stay the top crypto if it cannot resolve its current issues (though new ones will come after). Articles like takes stance, whether they know it or not, of this is here to stay for a long time and we need to deal with the ramifications. If that is true, more people are going to work on solving this issue either, or all of, through energy regulation, better hardware, better renewable energy, mass adoption of different coins, or moving to POS (or anything other proof system) instead of POW.
How many cash transactions occur in the world in 1 year? The number must be over 7 trillions assuming average person on this planet makes 1,000 cash transactions per year.
Now, let's divide 1 TWh by 7 trillions, we will get 0.14 Wh per cash transaction which is equivalent of having 60W light bulb switched on for about 8 seconds.
Considering one Bitcoin transaction currently consumes 345 kWh of electricity. That's equivalent of having 60W light bulb switched on for about 8 months.
So yeah, technically you are right. 8 seconds is not zero. But it's hell of a less than 8 months.
One can only assume the energy cost is negligible per transaction compared to bitcoin though, simply because if you scale up the transaction volume of bitcoin to what a real economy would need it's more than we produce.
Whataboutism isn’t going to change that.
Besides, hasn’t the world suffered enough for the sake of grasping ideologues? Does everything need to be seen through these same bland lenses? This is a truly maddening and mad use of a currently limited resource with globally damaging externalities, and it produces nothing except waste heat.
If the average Joe really understood this, and just how modest the real potential of blockchain tech probably is, there would be lynchings.
The cost per transaction would be interesting in real terms.
What's the comparison between:
- Manufacturing physical currency / Manufacturing the hardware to mine coins
- Cost to run POS systems in retail outlets / Cost to run bitcoin network
- Cost to run global fiat exchanges (i.e. wallstreet) / Cost to run global bitcoin network
Obviously you could drill down as far as you wanted. I'd imagine it would be quite difficult to draw up such a detailed comparison though.
If a business accepts any cash at all, the marginal cost of another cash transaction is really low. By your own antidote, your store still saw the value of accepting cash transactions, yeah?
all of these surely have a substantial eco footprint
- money production, for both paper and coin
- armored cars picking up cash and bringing to the bank
- physical locations, banks, check cashing places
Financial transactions are more than just exchanging pieces of paper in person.
Let us assume that 100% of all mining rewards go to electricity (and none to buying mining equipment, paying employees, servers, or networking), and let us further assume the electricity costs $0.01 / KWhr, which is cheaper than one can buy basically anywhere.
From flippening.watch, BTC paid miners $20,797,200 yesterday, for 2,079,720,000 KWHrs. This translates to approximately 87 GW of electricity, 24/7. 87 GW is approximately the output of the 21 Palo Verde nuclear plants in Arizona, which according to the US Energy Information Administration, can output up to 3937 MW. https://www.eia.gov/tools/faqs/faq.php?id=104&t=3
In other words, Bitcoin is a drop in the bucket. Let's put this myth of massive energy usage to rest, and at the cost of being too snarky, and let us ask our journalists to learn basic math.
edit - I made a math mistake, which I have corrected. The overall point, while I was off by several orders of magnitude, however, holds.
edit 2 - I retract the entire comment. It appears the article is true, and that, ironically, I made the same mistake I accused the journalist of. I'm going to leave the comment up for posterity, but I retract it.
Your contention that the Guardian article made an "outrageously large" estimate of bitcoin electricity consumption is contradicted by your own estimate, after you fixed the units-conversion mistake in it.
My calculator and Google (search for "2079720000 kWh per 24 hours to MW") says it's more than 86,000 MW (so ~86 GW).
edit: corrected units from TW to GW, as pointed out by philipkglass
EDIT: This is too perfect. 1053r calls out journalists for making a basic math mistake. In doing so, he makes a basic math mistake. I ask him about it, then get downvoted by HN.
In the hope avoid down voting, in case you don’t know the problem of gold standards are three serious ones. First, it’s deflationary as the gold supply doesn’t change as economic growth occurs. Second, it’s decoupled from economic activity (e.g. you increase the money supply every time you use a credit card and decrease it when you pay off your bill — and that’s only one example). Third, it can suffer inflationary crises (yes, despite being deflationary!) when there’s a big gold strike (as happened with the California, Yukon, and Victorian strikes, among many others).
The argument FOR it is that governments can just print money if they get into trouble and inflate the currency. This usually screws the people doing the inflating as well (see: Venezuela) but can be pretty dreadful (e.g. Weimar). But the problems above are also terrible.
I.e.: they take gold or similar valuables, and give you a contract for it, authenticated by a blockchain.
They can expand this 'money' supply by lending: They create new coins and give them to you _without_ getting your gold right away.
In a sense they lend money they don't have. This is basically how fractional reserves operate; everyone hopes that not everyone tries to get the gold back at the same time. And if you think that sounds dodgy, well that's just how banks started out, before paper money was invented, only without the technology to prevent forgery!
Unlike IOU's and other form's of fiat, some sort of
crypto should be immune to forgery, if implemented properly. It's just a tradable contract, backed by a blockchain.
However, it still depends on trust and/or legal enforcement (hopefully the later) that the gold will be there to paid out on demand. Like any other fractional reserve banking system, enough bad-debts can cripple it, and it is not immune to collapse if there is ever a 'run' on it.
The next trick (once everyone is accustomed to exchanging crypto) is to have everyone accept that instead of getting their gold back (ever), you'll allow people to use the crypto to offset their tax liability.
Voila - money for nothing!
Before we had electronic bank records, banks could print "bank notes" which were as good as money if you trusted the bank. Now that we have electronic records they basically "create" USD by adding a deposit to your account while only having ~10% of that actually stored away in dollars.
If your account was truly in BTC they obviously couldn't just increase your balance, since it's a cryptocurrency and they can't just make something up.
One option would be for banks to have their own tokens, similar to bank notes of old. All banks would accept the tokens of other banks 1:1 and convert them to BTC on demand, but it would allow expansion of the "money supply" like we have now with dollars.
Why not create one big bank that can issue its own tokens that any bank will accept? We can call it a "central bank" or something. And then maybe after many years we can decouple the value of these central tokens from the value of bitcoin, instead allowing the central bank to control the total supply of tokens based on some kind of "monetary policy" to keep prices stable.
Sounds good. The future of crytocurrency is bright indeed!
That said, at the time, I don't think this was really the tradeoff being made. When bitcoin originally came out, proof of work was the only decentralized consensus mechanism available.
Money supply would then be equal to how many miners there are without adding a difficulty, and the amount of bitcoins would go through the roof. Difficulty was clearly added as a solution after this to keep the money supply stable.
Note I didn't say it's necessary to waste electricity to have a stable money supply, only that the reason Bitcoin does is because it keeps it's money supply stable.
Bitcoin could have easily based block rewards on timestamps to keep the supply of money consistent, similar to how the current difficulty is calculated.
All of these provide some form of value to the user. I have yet to see what value bitcoin provides over USD. Okay, so we now have another medium of exchange, so what? Why is that worth the 1000x energy consumption per transaction over payment processors like Visa?
All your examples, by the way, have gotten more and more energy efficient over the last 50 years. Bitcoin is going in the opposite direction for payment processing.
That, however, does not change the fundamental issue - the severe underpricing of emissions-heavy power generation. The externalities that the author is so worried about (in the form of climate change) are not priced into the going rate for electricity. Blaming bitcoin miners is silly - if I pay for my power, I should be able to use it however I see fit. The alternative leads to absurdity, such as a law that states your aircon may be set no lower than 22C in summer, as anything more would be "a waste". I pay for it, I use it, bugger off.
The external social cost of electricity generation needs to be internalised into the private end-cost - a carbon tax or an ETS. Pick one, follow through, and stop blaming rational agents for acting rationally.