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.
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.)
- Old type base load power stations run with coal or other fossil, nuclear e.a. 24h/day but only contributing energy a few days a month (high estimate). IMHO they are only running because it's such a great business for the large power supplier conglomerates (otherwise they would have long replaced them with more efficient, quick starting solutions) - rough guess 2-3 are wasting comparable electric energy per day and there are 1000+ of those power stations around the globe.
- 100M+ people having their office computer(s) running at least 8h/5days-week but rarely using them or using computers 10-20 times more powerful than their applications are requiring. Alternative approach - using operating systems that require the latest, high powerful computers just to display some glossy windows, but are solely used for text processing e.a. - rough guess 3-5M of those equal to the amount of energy used for BitCoin production.
with these two examples alone you already have at least 400-500 times the energy used for BitCoin production each day just puffing away into hot air and I'm sure there are plenty more examples available.
We are wasting energy (and depleting limited resources) on a very large scale every day and only because it's such a great business today (not calculated at true cost) seemingly nobody needs to care about tomorrow.
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.
That's always been my frustration with the bitcoin network. It is a perfect zero sum game, so improvements in hashrate and increases in power consumption are not actually productive, just part of an arms race. Whoever consumes more electricity wins, assuming the miner operates in the black by some margin.
Edit: That said, the explosion in the BTC/USD exchange rate has probably thrown that balance way out of whack for the moment.
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..
Part II at 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.
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).
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).
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.
What's backing the Somali shilling? It's not even approved by any governing power in Somalia.
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.
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).
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)
Other cryptocurrencies such as Peercoin and Novacoin use both systems, but will shift to PoS only at some point in the future.
it's an impressive leap from cutting doubloons into 8 pieces
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.
Similar to scientific experimentation; the outcome, regardless of success or failure, is useful in itself.
1. For the majority, there are obviously some people for whom it has been a roaring (financial) success.