Electricity consumption of Bitcoin: a market-based and technical analysis
blog.zorinaq.com
blog.zorinaq.com
Good Econtalk on the subject: http://www.econtalk.org/archives/2017/02/jim_epstein_on.html
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.
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.
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 :)
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.
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.
> 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).
That applies equally to gold coins as bitcoins.
I suspect bitcoin is, in its current form, incapable of replacing a major currency, because if it become a dominant currency then someone would beg, borrow, and steal just enough bitcoin to buy just enough compute power to get half of the bitcoin computer pool, from there using their new power to double-spend their way to getting even more computer power (while blocking other transactions that might try to out-bid them), and ultimately using that power to rewrite the consensus reality of the blockchain to say they now own as much as they want to say they own.
Even if the bitcoin wiki is correct to expect no rational miner will attempt this, there are plenty of irrational actors when enough money is dangled in front of them, even when it is only a mirage (citation: every lottery).
No. What will happen is as the miners with the highest mining costs drop out of the network, the difficulty target will decrease and decrease... until people stop dropping out of the network.
"people make their own and the price collapses"
No, again the difficulty target would adjust to regulate the rate of coin rewards.
Factor in those costs and suddenly bitcoin is bargain, energy-wise.
The real issues lie elsewhere.
Quite the contrary, the fact Bitcoin has been successful & growing for 8 years in spite of using so much energy is proof it is a non-problem. Energy per tx is rapidly decreasing (http://blog.zorinaq.com/bitcoin-mining-is-not-wasteful/) so it will only become more and more competitive from now on.
By this blog post's estimate, Bitcoin currently consumes about 500 MW of power. As others have estimated, Bitcoin processes about 3 transactions per second.
The world currently consumes about 2.38 TW of power.
If Bitcoin were a commonly-used currency -- if, for example, a billion people in the developed world each made an average of one Bitcoin transaction per day -- then Bitcoin would have to run 4,000 times faster than it currently does, consuming 2 TW of power, which is most of the power in the world.
Is the transaction rate increasing? Two years ago people said it was 7 transactions per second. Now it's 3 per second. It may be that people were making unchecked exaggerations two years ago. But this doesn't look like any sort of increase. If the transaction rate is "quadrupling every 2 years"... why didn't it quadruple over 2 years?
An article entitled "Bitcoin Mining is Not Wasteful" on a Bitcoin blog kind of tells you what conclusion it's going to come to. For people who aren't personally invested in Bitcoin, of course Bitcoin mining is wasteful. It is literally made of wasted computation. The fact that it benefits an economy of Bitcoin speculators is of no interest.
It never was 7 tps. 7 is the theoretical maximum (assumes the tx had only 1 input.) In practice Bitcoin never achieves this because the average tx has multiple inputs.
"...tells you what conclusion it's going to come to"
You have to examine the presented facts, not the messenger. This blog is mine, and I think I present decent evidence that it's not wasteful. You have to look at the whole picture, ie. the Bitcoin economy lead to $1+ billion invested in 729+ companies, etc... Investing x megawatt in a system that produces investments and jobs is hardly a "waste".
Wow, you mean Bitcoin fans were prone to exaggeration and unrealistic claims two years ago? I wonder if they still are.
Speaking of which, this graph you're showing me definitely has not quadrupled over the last two years. What went wrong?
> Investing x megawatt in a system that produces investments and jobs is hardly a "waste".
It is if the jobs never produce any actual value. Moving money around is not a good in itself. In fact a lot of Bitcoin companies have moved money in ways that are distinctly bad. Would you be celebrating MtGox as part of the Bitcoin economy if they still existed?
Of course whoever is currently holding the money is happy with it. Doesn't mean it's not a waste. People have profited from waste for as long as civilization has existed.
(edited out an ad hominem, sorry)
No one ever claimed it actually processed 7 tps.
"Speaking of which, this graph you're showing me definitely has not quadrupled over the last two years."
It quadrupled from 65k in Oct 2014 to 260k today. It's 2 years 5 months. Close enough. "2 years" was an approximation (perhaps I should edit my post to make it clear).
"It is if the jobs never produce any actual value"
Well I think they provide value. But it would be tedious & complex to argue about this on HN by reviewing the list of employees at 729+ companies...
Firstly MW = 10^6 and TW = 10^12 so you're off by 1,000. Secondly, your analysis doesn't factor indirect costs of centralised systems of currency (security features, printing, physical delivery, etc.).
In the second part of your reply, you do the same thing.
Let's be clear. (500 x 10^6) W x 4000 ~= 2 x 10^12 W. I will now factor in your fantasy that everyone stops using centralized currency: (500 x 10^6) W x (4000 - epsilon) ~= 2 x 10^12 W.
Fermi problems require being confident in how to multiply large numbers, and disregarding non-multiplicative factors that are much smaller.
[1] It's the future, so neither bitcoin nor internet are capitalized.
https://www.cryptocoinsnews.com/declining-profitability-for-...
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."
Transaction fees will take over mined bitcoins once there is non left to mine.
100 gallons of gasoline also creates a ton of CO2 for context.
To give an example of just how big: Los Angeles metro imports power from Washington and Oregon via a HVDC line.
Not necessarily. More renewables being used usually means more investments in renewable power are made.
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...
Otherwise it doesn't make sense. You cannot steal electricity forever.
Realistically the proportion of miners who steal power is likely very small, as in one or two percentage points.