Running Bitcoin uses a small city’s worth of electricity | Hacker News Reader

Running Bitcoin uses a small city’s worth of electricity

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135 pointssizzle174 comments

I'll repost the same comment I made previously on an Etherium thread. I think We're really under appreciating the pandora's box we've opened. Energy is one of the most important items for societal progress. And the fact we've now designed an industry to get rich quick for throwing it away is a societal burden we'll never get rid of.

> Almost all of society functions on energy, some of the largest breakthroughs in society have been on sudden abundance of cheap energy and the machines, vehicles products they can create.

Entire economies can be crippled by rising costs in energy (oil shocks of the 70s) and boom by sudden drops in cost of energy.

So we've created an "industry" where you are essentially paid by comverting energy to waste. Paid to perform extremely intense difficult (ie wasteful) operations to back a useful technology (digital currency).

Assuming it catches on, energy will never be cheap, there will always be a higher floor now due to options for "mining". As we get better at it and it becomes less wasteful, the digital system will simply raise the reward so people are incentivised to once again waste it.

Ignore the short term for the moment, and which ever currency you're backing. We've created a long term societal motivation/reward to harvest every joule produce by the sun and use it to calculate hashes. I'm not talking about the next decade obviously, but we have incentivised that behavior.

If there is anything technologists should understand is that whatever your beautiful perfect technology is, it will instead be used based on whatever has been incentivised.

Regardless of the technology it powers, this is a terrible societal incentive - and one that will be around a lot longer than people are considering.

I think this is incredibly overblown. How much does the existing financial system cost to operate? How much do ATMs, Private financial networks, money security, transportation, staff, legal, etc, etc. Comparing per transaction cost does not even begin to account for the energy costs of the current financial system. Even with the escalating cost of mining we are getting a deal compared to the way things are now. Hopefully research will yield significantly better incentive structures than pure proof-of-work, but in the mean time it has proven to be remarkably effective.

> Comparing per transaction cost does not even begin to account for the energy costs of the current financial system

Finance is about 7.3% of U.S. GDP [1]. The U.S. produces about 1,000 gigawatts of energy per year [2]. A first-order estimation thus yields 73 Gigawatts for finance. So about 150 times Bitcoin’s 500 megawatts.

About $700 million of BTC change hands every day [3]. That’s $250 billion a year. U.S. non-cash transaction volume is like $180 trillion a year [4]. So about 720 times the size of the Bitcoin economy.

Bitcoin thus appears about 5 times less efficient than the non-cash status quo. Given finance is less energy intensive than most of the U.S. economy, this is likely a lower-bound estimate.

[1] https://www.selectusa.gov/financial-services-industry-united...

[2] https://en.m.wikipedia.org/wiki/Electricity_sector_of_the_Un...

[3] https://www.quandl.com/data/BCHAIN/ETRVU-Bitcoin-Estimated-T...

[4] https://www.federalreserve.gov/newsevents/press/other/2016-p...

I think the biggest cost to sustaining fiat is the power of the sovereign that backs it up. To a good extend, you have to also account for the military that secures the borders as that which also supports the currency.

> the biggest cost to sustaining fiat is the power of the sovereign that backs it up

That government and military also safeguards a lot of the economy any financial system, traditional or crypto currency, needs to drive it. In any case, sovereign-less free banking happened [1]. It was replaced for reasons of efficiency.

[1] https://en.m.wikipedia.org/wiki/Free_banking

That will be true for cryptocurrencies too. What special loyalty does some thing like bitcoin command?

The day bitcoin has its top 1% people(By many a definition they are already there) you will need a military to force it on the people, else they can start their own currency turning the value of existing cryptocurrencies to 0.

Sure, but this doesn't account for how Bitcoin or digital currency actually scales. There isn't any reason that the same proof-of-work couldn't secure an order of magnitude more transaction volume. That kind of throws this analysis into question.

We talk about scalability in software where you can support 10x the value or transactions easily.

Bitcoin et al will easily support 10x the value and transactions and make the "but it is 5 times less efficient" argument moot.

Cars were also less efficient than horses at first. Maybe cars were a huge waste of energy and should have stuck with animal power.

You simply cannot justify that first order approximation. There is no reason so believe that the financial industry takes power in proportion to it's relative size of GDP. In fact I would expect the financial industry to require a higher proportion of power to keep servers/ATMs/staff computers running.

this seems... unlikely, given that (eg) factories exist.

Bitcoin's power use is proportional to its worth however.

If bitcoin has 300 trillion worth of transactoins, that means being able to mount a 51% attack on the network has a value in the trillions..

Therefore, if you're using less than trillions of dollars of energy to secure it, someone will mount an attack.

The more valuable the bitcoin network is, the more incentive there is to attack it and the more energy must be wasted.

> How much does the existing financial system cost to operate? How much do ATMs, Private financial networks, money security, transportation, staff, legal, etc, etc. Comparing per transaction cost does not even begin to account for the energy costs of the current financial system.

The current financial system does things besides verify transactions.

- Need to get a loan, a line of credit, or just a safe third party to hold your bitcoin so that you're not carrying around your life savings in your pocket? Banks.

- Want to buy cats with your bitcoin but your cat dealer only accepts bitcoin cash? Exchanges.

- Want to do any kind of business in commodities? Now you've got derivatives, and you'll definitely want lawyers.

- Want to make any kind of investment? Now you've got everything.

The actual transferring of money only makes up a tiny fraction of the services in our financial system, and none of the rest of the stuff goes away just because you changed the type of money.

But the point is those energy uses are incidental, as opposed to a cleverly-designed race of burn being intrinsic to mining, right?

I can see the argument that "waste" is the wrong word, since it is producing value, but it's worth putting thought into.

We as a race are really good at only considering the downsides of something once we've deployed it at irreversible scale

>We as a race are really good at only considering the downsides of something once we've deployed it at irreversible scale

That's a little pessimistic, I think. Some problems simply do not become apparent and are difficult to anticipate prior to a certain minimal scale. This IMO isn't an issue with humans in general, our resources are limited in the design phase. There is only so much we can anticipate-and how often do you hear about large scale successes with the same magnitude of emotionally loaded reporting that you get with large scale disasters?

The fact that mining requires energy is not any different from literally any other action human beings perform to transact value. Bitcoin is just much closer to a pure exchange of information (which is all that value transfer really is) and so it's easier I think to stop and say "look at all those computers wasting energy doing nothing!" Since you typically see other "necessary" uses of power in non BTC transactions.

Not to mention the various solutions that could substantially improve BTC efficiency in the way of both hardware and software (e.g. asics). The fact that the BTC network is energy intensive is not as big of a hit against BTC overall as people seem to be making it out to be.

Not to mention that everyone is screaming about the energy use without considering both cost and benefit.

Not to sound like a free market idealist here, but don't market forces keep this in check?

In general, miners won't mine unless there is a financial incentive to do so. as Bitcoin matures, that financial incentive maps closely to an overall demand for a store of value (plus the nifty features of crypto).

I would see your point more clearly if miners really were wasting energy–using energy to calculate hashes that weren't financially valuable–but I don't see that happening right now.

> I would see your point more clearly if miners really were wasting energy–using energy to calculate hashes that weren't financially valuable–but I don't see that happening right now.

For every river you pollute I'll print another $10 bill and hand it to you. Clearly this isn't wasteful because it's financially valuable. /s

This logic doesn't hold up to reason.

> We've created a long term societal motivation/reward to harvest every joule produce by the sun and use it to calculate hashes

The blockchain doesn't have the economics to incentivize limitless energy consumption. The upper bound is exactly how much people are willing to pay for the bitcoin you mine.

Correct. This is the same reason why Proof-of-Stake (PoS) cannot work as people hope. Due to fundamental economics, people will always spend according to the value of the new currency issued by mining. Switching to PoS just means they will spend in some other way in order to get those new coins.

This also means that as the Bitcoin mining reward diminishes, the money "wasted" on energy is going to decrease, unless the transaction fees rise enough to match what the reward was paying. In that case, because people are willing to pay those fees, it seems quite logical that the cost of the mining is providing a value equal to its cost. Otherwise, people would not be paying those fees.

I really don't know if the Bitcoin experiment is going to work but a lot of criticisms of it are based on some really poor logic.

That is not true.

The upper bound is the combination of how much people will pay you for the bitcoins they mine, how much people value being able to transact (transaction fees), and the value of existing held bitcoin.

Since mining is what prevents attackers from stealing bitcoin,the total value of all bitcoin in existence actually has a bearing in this.

If no one were transacting and no coins were rewarded for mining, people would still mine just so that their existing coins remain secure.

Something like bitcoin may actually result in lower overall energy costs by providing a guaranteed base level of income for new power generation.

Building a new plant is much less risky if there is guaranteed off-peak demand. New plants also tend to me more environmentally friendly.

If Bitcoin reaches a 2 trillion market cap, it will require less than 1% additional world energy output.

Is less than 1% additional energy usage worth a 2 trillion cap? Well, I'm sure people can find a way to argue that it's not, but the point is that bitcoin isn't this enormous threat to energy usage that people try to argue it is.

Market cap is a bad metric. A better one would be transactions.

According to https://digiconomist.net/bitcoin-energy-consumption bitcoin is on track to consume 19 TWh this year. That puts it at .1% of the global power consumption already

NASDAQ does 10 million trades a day, roughly. So if bitcoin scales to just handle NASDAQ alone it would consume ~850 TWh/year, which is 3.5% of the total world's electricity generation (to say nothing of Visa's 150 million transactions a day)

The reason bitcoin isn't currently an enormous threat is because it's basically barely used by comparison. 300,000 trades/day is a tiny number in the world of financial transactions.

But that is not how Bitcoin will scale. Rather, transactions will go off-chain.

Edit: mining effort is dominated by difficulty anyway, not throughput.

If Bitcoin reaches a 2 trillion market cap, it will require less than 1% additional world energy output.

The key question raised in the parent comment, which your own riposte artfully dodges, is once again - who stands to benefit from this N% increase in global energy usage?

Not the poster but, I assume the beneficiaries are the users of the bitcoin network by the added security from the increases hash-rate/ energy consumption.

Those who hold Bitcoin. If you own 2% of all bitcoin in existence, and BTC reaches 2 trillion, you'll have $40B.

As far as a justification goes, I think that if BTC reaches 2 trillion, it will have gone mainstream. Meaning either existing transactions should become easier, or people find it a good store of value.

This isn't just theoretical. The marijuana industry faces immense hurdles dealing with the traditional financial system, because marijuana is technically still illegal at the federal level. This makes it a nightmare to do any of the normal banking operations we take for granted. Bitcoin sidesteps this problem while also letting you be legal: As long as you declare your taxes properly, Uncle Sam probably won't come knocking.

That's just one example of an industry that benefits. There are many more.

Humanity spends about $6 Trillion on energy annually, so 1% is no small figure [1]. Is a proper crypto-currency worth $60BN in maintenance costs per year? No idea, but it's likely to be more expensive than the alternative of traditional fiat currency. For reference, the federal reserve produces about $70BN in interest fees for taxpayers each year [2].

[1] https://en.wikipedia.org/wiki/World_energy_consumption [2] https://www.thedailybeast.com/the-insanely-profitable-federa...

What did you base this 1% estimate on? And also, why 2 trillion, and not more - considering that the total value of the currencies used in the World, by a quick google, is around 80 trillion USD?

I think an issue competing for top problem relating to these cryptocurrencies is that for security to exist the mining capability must be distributed. In order to protect against this, every nation or person who has interest would need to or should increase their capability in order to try to prevent a takeover.

> harvest every joule produce by the sun and use it to calculate hashes.

Paperclipping - https://wiki.lesswrong.com/wiki/Paperclip_maximizer

I don't think this is a real concern. How much electricity is used by movie theaters, arcades, and other entertainment? How much energy is used by mining for gold and silver?

> So we've created an "industry" where you are essentially paid by comverting energy to waste. Paid to perform extremely intense difficult (ie wasteful) operations to back a useful technology (digital currency).

https://hackernoon.com/bitcoin-doesnt-waste-electricity-6496...

Not taking side on the issue but this article sort of misses the point. The first half of it is focused on demonstrating that unlike packaged goods, producing electricity does not result in packages needing to be put in the trash which is a fact nobody ever challenged to the best of my knowledge. I never even heard of this interpretation of the waste criticism. But the author goes on and opens the Webster's dictionary at the "Wasteful" page to continue his argument.

The other half is an augmentation of the line that the electricity used for mining is actually used by the mining computer, and very little of it evaporates as heat. Moreover heat inefficiencies are not intended by miners. As a result mining is as legitimate as any other business activity and mining bitcoins should not be considered a waste of energy. While in this case an opponent may possibly exist, I am left unconvinced by this demonstration.

The real discussion is that as of today, the raw materials required to produce electricity are in limited supply and in decreasing amount. Provided this limited supply and this decreasing amount, a structural increase on the demand will result in a pressure on price which may have a negative impact on society and the economy. An other concern is that as of today, efforts are made to decrease energy consumption because energy production has a negative impact on environment with the current state of the art technologies. The waste discussion comes from the fact that the energy footprint of the bitcoin network may seem unnecessary to some since alternatives exist to transfer value.

The author fails to consider the issue from the other side of the table and does not even know who or what he argues against. He misunderstands what the opposing view is. Throughout the article a lot of energy is spent defending positions that nobody ever challenged and this for sure is a waste.

>This is very different to electricity, because physical resources are consumed that the consumer did not ask for or need

This entire article is glossing over the fact that the vast majority of electricity produced is from converting a physical resource into the electricity being wasted. Excessive wasteful packaging is stupid, and so is using excessive amounts of power to make Dunning-Krugerrands.

You could certainly place your miners near energy sources such as hydro, solar, or geothermal, but that doesn't change the fact that Bitcoin mining is, by definition, a measure of wasted electricity.

From the article: "Whatever use you choose to put the electricity you pay for to, if you are satisfied, then the electricity has not been wasted."

That is far too selfish of a view for the author to take. Electricity is a finite resource; only so much of it can be generated and available at a given time.

Selfish or not, it appears that it's going to happen. We're on course for that, anyway.

> Entire economies can be crippled by rising costs in energy (oil shocks of the 70s) and boom by sudden drops in cost of energy.

The important thing to know is that the current administration considers energy a top priority [1] so we are well poised to continue building blockchain infrastructure.

[1] https://www.whitehouse.gov/america-first-energy

People on HN being pro-Trump's energy plan so they can get rich off of Bitcoin. That's really surprising and really sad.

Boiling the ocean for a bit more personal wealth for the top 5% of income earners that make up the userbase of this site is ... a lot.

The most striking statistic was that bitcoin is 5000 times more energy intensive than a VISA transaction.

Maybe my naive interpretation of what VISA actually does is showing here, but I don't see how it's a valid comparison. Bitcoin doesn't simply replace credit card transactions, it replaces an entire banking system. Who confirms VISA transactions? How can you send and receive transactions through VISA? What about all the facilities that are supporting that transaction?

I think it's easier to trace the cost of a bitcoin transaction, which bears the entire cost succinctly, compared to an institution like VISA, which has its tentacles in a ton of energy costing faculties.

VISA is a credit agency. As in, they confirm the money is paid, nobody else. There's no other transaction that happens as part of paying with VISA other than the monthly bill.

But it should be glaringly obvious that Bitcoin is by far the most expensive way to do financial transactions. That shouldn't even be contentious. It's literally built on the idea of doing computationally-expensive busywork.

Whether or not that busywork is a waste of power or a necessary cost then depends on your social beliefs, but it's definitely going to be vastly more power-expensive than any of the existing systems.

> There's no other transaction that happens as part of paying with VISA other than the monthly bill.

I respectfully disagree. There are many many transactions that happen behind the scenes when you're paying with a Visa card. All transactions go through a merchant bank before ever being sent to Visa, and they may even go through a second third party. Additionally there's a number of times in which clearing and settlement occurs, both on the merchant side and on the "monthly bill" part that you discounted as irrelevant.

This all takes energy, the POS takes energy, the banks all require energy to process transactions, it takes energy to send out statements, to pay your bill. I have no clue if this entire process takes more energy than Bitcoin or not, but I can guarantee the cost of doing a transaction through Visa isn't glaringly obvious.

The number calculated for VISA's power/transaction was arrived at by taking the entire power consumption of VISA's data-centers and dividing by the number of transactions.

Far from a perfect number and you're correct it won't cover payment processors, but it's also picking up non-trivial amounts of other stuff since those data centers don't do exclusively payment processing.

But either way you wouldn't count the POS. The POS is still there consuming the same amount of power if you pay with BTC, VISA, or cash.

Another problem with those numbers is that its a two sided transaction, and Visa data centers only account for one side of the transaction. It also doesn't account for any clearing houses external to Visa.

Even excluding mining cost, Bitcoin does a lot of work per transaction. Every full node gets an update for every transaction.

The bitcoin network leverages electricity/computing costs as a way to ensure competitive decentralized security.

It's driving electrical/computational consumption efficiency but its definitely a catch-22 as with most technology.

Bitcoin isn't a payment processor. It can't handle the tiniest fraction of Visa's transaction volume natively.

Of course you can work around this by having third party payment processors that sit between customers and the raw blockchain. But because Visa already does much of that, you need to include the cost of those as well, in order to get an apples-to-apples comparison.

>Of course you can work around this by having third party payment processors that sit between customers and the raw blockchain.

There are decentralized solutions that don't involve trusted 3rd party payment processors. Payment channels and the lightning network will allow many transactions to happen between users that eventually and safely get settled onto the blockchain as only a few transactions containing the net transfer. These systems are decentralized without relying on trusted 3rd party payment processors, and the users are safe from counterparty risk like they are with normal transactions. (I know another reply mentioned Lightning. I just wanted to do more explanation and emphasis on parts.)

That's true.

However the transaction throughput doesn't depend on the hashrate. The network could for example handle 10x or 100x the number of transaction with the same hashrate as today.

Right, don't think of Bitcoin as digital dollars. Bitcoin is more like digital gold. Use it to hedge the digital markets, but don't use it to buy coffee. Granted, some coffee shops will take your "digital gold" as they would take a sliver of actual gold, but logistically it doesn't make sense.

It can't handle the tiniest fraction of Visa's transaction volume natively.

Not actually true. See the Lightning proposal.

1. It's not Bitcoin, it's a sidechain utilizing Bitcoin

2. It's not certain it can work in a decentralized way

It's bitcoin. It uses bitcoin, it's powered by bitcoin, it's bitcoin. The sidechain distinction isn't a helpful one if people end up using it by default.

Yes, it's uncertain it will work, but the point is that it's not inherently obvious that bitcoin can't accommodate Visa's transaction volume. The above comment made it seem like that's a given.

It uses Bitcoin but it is not Bitcoin. It has different security considerations, usage and it's fundamentally different. That it settles to Bitcoin does not make it become Bitcoin. Beef isn't a cow even though it uses (parts of) a cow.

The second part I agree with. According to Satoshi:

> Bitcoin can scale larger than the Visa Network

It's not obvious that this is false.

> 1. It's not Bitcoin, it's a sidechain utilizing Bitcoin

I think you're mixing lightning up with something else; lightning is not a sidechain[0]. In lightning, at every step participants create standard Bitcoin transactions that can be finalized and settled at any time by just publicly broadcasting them on the Bitcoin network. The participants hold off on broadcasting the transactions until they're done with the payment channel so that they save on transaction fees (and avoid bloating the blockchain). They're immune to counterparty risk like normal transactions are, and it doesn't rely on any central or trusted authorities.

[0] https://bitcoinmagazine.com/articles/greg-maxwell-lightning-...

Maybe sidechain isn't the best term but I don't know a better one.

You're saying it yourself, it creates standard Bitcoin transactions (not lightning transactions). They hold off on broadcasting them, but that may mean if they both go offline they loose their state. It's using Bitcoin as a settlement layer but it's still not interchangeable with Bitcoin.

It still has not been shown that LN can even work in a decentralized fashion.

It uses Bitcoin and it may even become the default way to transact and be better in any way. But it doesn't matter, Lightning is not, and will never be, Bitcoin.

How can this distinction not be clear?

>You're saying it yourself, it creates standard Bitcoin transactions (not lightning transactions). They hold off on broadcasting them, but that may mean if they both go offline they loose their state.

Yeah, the guarantees aren't exactly the same. Personally I expect that the risks will be for the most part smoothed over by things like lightning software that automatically syncs the state of payment channels between all of your devices for redundancy.

>It's using Bitcoin as a settlement layer but it's still not interchangeable with Bitcoin.

When a payment channel is settled by any of the participants, it's normal Bitcoin that comes out.

>It uses Bitcoin and it may even become the default way to transact and be better in any way. But it doesn't matter, Lightning is not, and will never be, Bitcoin.

I really think that's splitting hairs. If it becomes the standard way to send Bitcoin around, such that nearly everyone talking about making or receiving payments in Bitcoin is using Lightning, and if it does end up working very well in practice with many transactions per second, then I think it's more than fair to argue against statements like "Bitcoin can't scale up to VISA volume". Are you insisting on always explicitly referring to them as a combination ("Bitcoin/Lightning")? Kind of reminds me of the losing battle fought by some to correct all references to Linux as "GNU/Linux"...

But to open a channel you do have to have a transaction on the blockchain with a smart contract right? So there's now two transactions for every channel opened which means unless channels are reused for multiple transactions between two parties there's no net benefit right?

Right, the benefit comes from reusing opened payment channels. A key thing to know is that payment channels can be used transitively: if Alice and Bob have an open channel, and Bob and Charlie also have an open channel, then Alice can send a payment through the connections to Charlie without any risk of Bob stealing the money. If many people keep open connections to a couple people each, then it becomes ridiculously likely that a path could be found through already-open payment channels between any two participants.

But also each channel has to have the total amount being sent precommited in the initial channel opening so in your example if Alice want's to send Charlie 1 BTC the balance in both the A-B and B-C channels has to be at least 1 BTC. Which kind of demands some pretty central clearing hubs in the lightning network that will need a large amount of BTC locked into these channels.

5000x the energy and provides a maximum throughout of 7 transactions-per-second, so you’re right. They’re completely different leagues.

Yeah, Visa is useful.

That doesn’t include the cost of visa actually processing the transaction though. It’s including governance, maintenance, arbitration, etc. Bitcoin does much more than just move cash from a to b.

A lot of the energy that powers Bitcoin would otherwise go unused though, e.g. energy from very remote hydroelectric dams in Siberia, China, and Canada.

The real question is what the hell VISA is doing that one of their transactions requires even a tiny fraction of the work that goes into the mass hashing of Bitcoin.

VISA has to maintain its data centers. They're working on becoming more energy efficient, but it's a long and involved process. [0] On top of that, there's also the energy required to run the PoS terminals, I'm not sure if that was factored into the equation though because that burden is shifted to vendors.

[0] http://www.businesswire.com/news/home/20170725006524/en/

Does a Bitcoin PoS terminal require less energy or are they about the same?

That's not "the real question" at all, and to frame it as such smacks of whataboutism.

High-availability data centers use power. We understand this. They also have meaningful outputs that Bitcoin struggles to demonstrate on its own.

I hate wasteful software. A city’s worth of energy and a max throughout of 7 transactions per second[1]. When everybody’s done trying to get rich quick we can talk about improvements.

1. https://bitcoin.stackexchange.com/questions/53620/what-is-th...

The mistake is thinking that the energy used from mining is a direct result from the number of transactions being processed.

The reality is that the two are not coupled together. Larger block sizes are obviously possible as demonstrated by bitcoin cash (and by anyone with common sense who hasn't been taken in the censorship on /r/bitcoin). More transaction throughput doesn't affect how much hash power is needed, therefore the main limiting factor is mostly just how many transactions are actually being made.

One of Bitcoin's biggest obstacles to widespread adoption is the utility problem -- how can Bitcoin transition to being a transactional currency.

The problem is a dual one; on the one hand, if you can denominate your supply chain in Bitcoin, then that removes much volatility, because you no longer care about the cost of Bitcoin. But that requires that all of the components of your supply chain are also denominated in Bitcoin. And on the other hand, what is the "appropriate" value for Bitcoin? Is it too expensive right now, or alarmingly cheap? This relates to volatility as well; the uncertainty in how to price the asset is real.

The power/Bitcoin correspondence is a way to take a crack at both of these problems. The price of Bitcoin and the price of energy are fundamentally related, once capital costs of Bitcoin mining equipment is removed from the equation. An energy provider can safely denominate their provided energy in Bitcoin because they know that they can use any unpurchased capacity to mine Bitcoin directly.

Once we start to see Bitcoin appearing on commodity exchanges, which should be soonish, I think it's likely that power companies (which are already notoriously active in the securities market) will find that they can hedge against price fluctuations with Bitcoin futures; basically leveraging that correspondence. We might be a long way off from them directly billing in Bitcoin, but it would not surprise me to see correlations between energy futures and Bitcoin futures once there's a more liquid market for the latter.

Thinking of the bitcoin network "wasting" money as a "feature" (rather than incidentally) to process transactions is not quite the right way to think about it. From a bird's-eye-view the current baking/financial system of transactions (banks+visa+federal reserve, mints, FINCEN, etc.) all are part of what makes it difficult to cheat with money like USD. Rather than use this huge network of organizations to make it difficult to cheat, bitcoin uses proof-of-work. Replacing all those big, expensive organizations is, well, expensive! I believe bitcoin (or technologies like it) have the potential to be more efficient at this than the current system; bitcoin just makes more explicit the cost of making it expensive to cheat.

Isn't an Energy-Free-Bitcoin or Cryptocurrency having your lunch and eating it too? If you are going to have a cryptocurrency that consumes little energy (or energy consumption doesn't scale with transactional value), how do you secure the network?

One Way is through Proof of Stake, which Ethereum will likely be moving towards in the future.

https://en.wikipedia.org/wiki/Proof-of-stake

Isn't that equivalent to "centralization"? Instead of "spending energy" for mining; you spend "credibility" or "holding cash".

Well, it's no closer to centralization than proof of work is. If one, or more than one party working together control >50% of the staked coins you are left with the same result as one party controlling 50% of the hashing power.

I think the assumption is that the more Ethereum you hold, the more incentive you have to keep Ethereum valuable and thus not attack the currency or its transactions.

It depends on whether you consider distributed consensus to be fundamental to cyber coins or not.

For instance, a cyber coin could publish a hash of their block chain in the New York Times everyday. A sound implementation would secure the chain up to that point.

But who is it that picks the hash to publish into the NYT? You're putting that picker in control of the whole network; it's not decentralized at all.

If you're going to have a trusted authority involved, then having a globally-synchronized blockchain is unnecessary. Users could just check with the trusted authority about whether a transaction is valid (not a double-spend), or even just have the trusted authority maintain balances for them.

They would publish a hash of a public ledger.

The central authority would still choose what ended up in the ledger but they would not be able to rewrite history because of the publicized hashes locking it into place.

I meant to sketch out a centralized way of finalizing a public ledger, so yeah, it isn't decentralized.

Sounds like a secure foundation for the global economy. /s

The closest possibility would be proof of stake[0] instead of the current system of proof of work.

I'm massively simplifying the idea, but proof of stake delivers new coins (either at predetermined intervals or all at once during the ICO) out in a pseudo-random way with some weight factors. Its almost like buying lottery tickets. https://en.wikipedia.org/wiki/Proof-of-stake

How much energy does it take to run the US Mint and the US banking industry?

Energy used to run the mint is incidental, so lower energy usage can be an attainable target if it's prioritized. The energy wasted from Bitcoin, on the other hand, is a feature and cannot be reduced without reducing Bitcoin's core functionality.

But in Bitcoin's case it's the same, even the article mentions that "doing today’s calculations would “consume way more power than is generated on the entire planet” if it were done using the CPUs available when Bitcoin launched in 2009.". Energy used when mining Bitcoin could also be considered incidental, the goal is to calculate hashes.

No it wouldn't because increasing energy efficiency of the bitcoin miners just means that the difficulty will rise until you're back to the same power consumption. The power consumption depends on the block reward and transaction fees.

>Energy used when mining Bitcoin could also be considered incidental, the goal is to calculate hashes.

The goal isn't to calculate hashes. That is the incidental part. The goal is to have a randomly chosen node create one block every X seconds.

The more interesting question is how much per transaction.

A single "token" (paper currency) can change hands thousands of times without a single electron expended, beyond the initial mining (physical minting)

I agree. These out of context questions really bother me, as I have no frame of reference to relate the quantity to to know if it's excessive or not. It just seems like a pure ply for attention. Here are some questions that would make for a better answer:

How much energy do household TV's use?

How much energy does the sports industry use?

How much energy does it take to run our traffic system?

How much energy does the gold mining industry use?

How much energy does it take to run the US Stock Exchange?

At least the article should put up a fair power comparison...

And for all the question there is the same, simple answer - which 'deadmetheny provided in a sibling comment. In all those examples, energy use is incidental. It's an upkeep you want to reduce, and there's money to be made reducing it. In Bitcoin, however, wasting energy is a feature, an integral part of the system.

Anyone finds it silly/irresponsible to trade non-renewable resources for virtual ones?

Wouldn't rendering 3D movies fall under that category?

You don't make billion movies. You probably make billion transactions though; when these are energy-demanding, you are burning precious resources for very little value. If all of humanity switched to bitcoin, imagine we spent 50% of energy production to run mining and blockchain verification. It's a nice proof of concept, we need something different though to survive.

That's not how bitcoin works. The mining power being spent now is not tied to the number of transactions. The price is what is dictating all the mining that is currently being done. More transaction throughput requires almost nothing more from the miners than they are doing now.

This is known and well understood. Bitcoin's implementation consumes lots of energy.

There have been however lots of developments in the blockchain space, especially as it refers to different proof systems and algorithms. The alt-coins in general, though mostly badly viewed due to the often poor and sleazy behaviours, are a playing ground for exactly this kind of problem.

I won't give specific names because I'm not an advocate for any one in particular, but there are several other coins and implementations that try to do away with the energy consumption and improve scaling. Some have even gotten to the point of eliminating mining and transaction fees altogether (yup, zero fees: transfer value anywhere in the world, instantly, and pay absolutely nothing for doing so).

A quick google search should point you in the right direction if it sounds interesting.

> Some have even gotten to the point of eliminating mining and transaction fees altogether

But it's not clear if they even work.

iota

Putting the "trust" back in "trustless" using drm'd hardware, is antithetical to bitcoin's design.

Energy of a small city is still not big enough to protect from a government takeover. Also what matters more is the cost of the mining equipment (which is more than 1.5 years of electricity if the equipment is refreshed every 1.5 years).

Anyways if Intel can make North Korea trust its hardware, I might take a look at their project.

The alternatives proposed in the article are also known as Proof of Luck and Proof of Time. Both require a trusted execution environment, which is what Intel's SGX enabled processors provide.

Perhaps Intel can find new blockchain applications for their technology, but it is unlikely to be adopted by a digital currency.

Could Bitcoin just halve the difficulty and half the reward for mining a block at the same time? Wouldn't that effectively double the throughput of the system? I'm guessing there's some negative consequences to this I don't understand.

Then we’d get blocks twice as quickly, but the transaction capacity of each block is not related to the difficulty or reward, it’s an artificial constraint. You could, say, have blocks 8x as large and increase capcity 8x without affecting the difficulty directly. (Some argue there are other ramifications to this, of course.)

Right, so speeding up blocks is roughly equivalent to increasing the block size, which is what the whole BCH vs. BTC split was over, correct? So I guess the arguments against it would be the same? And if I understand correctly the core argument is that it would make it harder for anyone to verify the entire block chain. Is there any real argument against it beyond that?

«But estimates by independent researchers suggest it’s around 500 megawatts»

My work is starting to pay off. This author appears to have used estimates coming from my research: 470-540 MW as of 26 February 2017.¹ Sometimes people stumble upon and blindly trust the flawed estimate published by digiconomist of ~2000 MW.²

¹http://blog.zorinaq.com/bitcoin-electricity-consumption/

²http://blog.zorinaq.com/serious-faults-in-beci/

I absolutely love your blog and have used it many times to show that Bitcoin is much less wasteful than people think it is, mostly due to obsolete miners no longer being used.

The data and graphs are very well presented.

Thank you! I did put a lot of effort into it, eg. my energy estimate research represents 30-40 hours of work.

All of the comments in here that are saying something like,

> "well at Bitcoin's current throughput it consumes X, and $large_financial_institution does Y, Bitcoin's equivalent energy usage would be Z"

have a fundamental misunderstanding of Bitcoin's mining. The current difficulty to a produce a block is the same, regardless of the transaction throughput of the system. The Merkle root of the block's transactions goes into the block header, and that is hashed over and over. Empty blocks or huge blocks would require approximately the same energy in mining effort.

At the same time there was an article here some time ago showing that bitcoin uses as much energy in a year as a coal mine uses in a day. Everything is relative.

The objections in the comments around this are somewhat funny. There is more than a small city's worth of electricity in whole system waste alone. It is like complaining that you didn't eat all of your bell pepper, when behind you is a whole dumpster full of individually wrapped bell pepper sandwiches being thrown away because a pending sell-by-date or a marketing material change.

Dear author: Compare Bitcoin mining vs. the entire infrastructure that powers Visa and you'll be so ashamed of yourself for writing this.

if bitcoin were used anywhere near visa was, it would be mining + the infrastructure. How else would you spend them at walmart? They'd need a POS for example.

I'm not saying POW is perfect. I'm just pointing out how idiotic it is to just make this type of statement.

Also, Bitcoin is not trying to beat Visa. BitTorrent disrupted the entire entertainment industry without being as fast as regular download.

do people understand electronic payment transactions?

most payment specifications were written when every single byte in a message was important. A lot was done to keep message (and data storage) size as small as possible because that was just common sense.

you may think that there are a lot of coin transactions but that's just peanuts compared to the vast vast amount of normal payment transactions.

Isn't that what really backs that currency ? The more you spend value to make it, the more valuable it becomes. Just look at the relative values of BTC and other altcoins that require less energy to mine. IMO there's nothing to worry about it, it's just the natural order of things, you cannot find gold in every house backyard.

No, you have the causality backwards: the high value of BTC is what incentivizes large investments of electricity and servers. The value of a currency depends only on supply and demand. BTC has the highest demand among cryptocurrencies mainly due to network effects.

You could say it's much worst to dig gold out of the ground. (even accounting for the percentage for industrial use)

But at least gold isn't designed to make you waste as much energy as you can to secure its value. Instead, Bitcoin (and every other proof of work cryptocurrency) is based exactly on this principle.

Precisely. Bitcoin is, by design, a Red Queen's race -- miners are incentivised to spend more energy on mining, but the total reward available to miners is fixed.

"Well, in our country," said Alice, still panting a little, "you'd generally get to somewhere else—if you run very fast for a long time, as we've been doing."

"A slow sort of country!" said the Queen. "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"

That's the common response to the energy question, but Expedia doesn't take gold. They do take Visa, and they do take Bitcoin, so let's compare those.

Could you clarify how you are making the comparison?

I understand you are talking about the energy cost and other environmental impacts of gold mining, I just don't see how you are determining the present day value of the utility that each thing provides to humanity.

We haven't used a gold-backed currency since the end of Bretton Woods in 1972.

Date nits: The US dollar stopped being based on gold in 1971 when conversions from the dollar to gold were stopped by Nixon. The formal repeal of Bretton Woods then occurred in 1976, and the rest of the industrialized world transitioned to fiat-based currencies around that time as well.

I used to worry about this. Now I realise that my worry came from a scarcity mindset.

There is no reason at all to believe that electricity production will always be difficult or expensive. These problems will be solved.

Not sure if I like where this is going. https://software.intel.com/en-us/sgx sounds like drm for code.

My best hope is that there will be some kind of OPEC cartel that agrees to limit production. The members could have unused reserves of mining hardware that ramps up when somebody violates the agreement.

> "My best hope is that there will be some kind of OPEC cartel that agrees to limit production."

Those limits were baked into the design from the start. In the current design there are only 21 million Bitcoins that can be mined, and we're approximately 80% of the way to that target.

http://www.bitcoinblockhalf.com/

Also, Bitcoin is designed to be harder to come by as time goes on. The number of new coins issued diminishes over time. See the Supply Growth section here:

https://en.wikipedia.org/wiki/Bitcoin

"12.5 bitcoins per block (approximately every ten minutes) until mid 2020, and then afterwards 6.25 bitcoins per block for 4 years until next halving. This halving continues until 2110–40, when 21 million bitcoins will have been issued."

There will come a time when Bitcoin mining is no longer profitable. If the scaling problems with the transactions are solved in time, we may see more people trading in Satoshis (fractions of a Bitcoin). The scaling problems are pretty hard to solve though, it's probably going to take a hard fork to make Bitcoin a true alternative to traditional government-backed currencies.

I am aware of this, what I meant was a limit on hashrate

Hashrate is also limited by design:

https://en.bitcoin.it/wiki/Difficulty#What_network_hash_rate...

Each miner has an incentive to outcompete other miners. A mining cartel can agree to keep difficulty and hashrate low. It is also comparable to a truce in a military conflict.

> "A mining cartel can agree to keep difficulty and hashrate low."

Won't work. If a mining cartel agrees to keep difficulty and hashrate low, they're just making it easier for those outside the cartel to mine more Bitcoin.

With unused mining hardware reserves they could smash outsiders by ramping up the hashrate.

Cartels usually don't last forever, but they can last for a while. In the case of bitcoin, it could reduce total energy consumption.

In one comment you're suggesting a cartel should keep the hashing rate low, in another comment you're suggesting the same cartel should increase the hashing rate to keep out the competition. What are you really proposing? Keeping it low until any form of competition shows up? That competition is always likely to be a factor for as long as Bitcoin mining is popular.

> Keeping it low until any form of competition shows up?

Exactly. This is similar to how price dumping works: https://en.wikipedia.org/wiki/Dumping_(pricing_policy)

You're not listening. I'm suggesting it'll never work for Bitcoin as the available competition is ever present. A cartel gains nothing by mining at a slower rate.

Bitcoin Cash's "emergency difficulty adjustment" has seen a variation on this (miner's hold production, let the difficulty drop to a highly profitable level, and then turn the miners back on). It requires a high level of centralization however.

They didn't 'hold production' they mined the other chain.

The Bitcoin protocol contains an incrementally diminishing mining reward that prevents endless expansion of mining long term

Running USD uses a small planet's worth of hydrocarbons

I think this will solve itself over time. As the block reward gets smaller, miners will afford less and less wasted electricity.

Unless bitcoin doubles in price every 4 years, the frequency of reward halvings. Then cost of electricity used in mining will remain constant.

I don't think it's going to double forever. Transaction fees will eventually outpace the actual block reward and level things out, but even with that it's going to be a much smaller amount per block.

Yeah...

Weird thought... (I do not know if thi already exists, as I dont care about crytocurrency - only because I dont have the cycles, currently)

What if there was a crytocoin that was just a centrally mined 'thing' - and the value of the coin was what others were willing to bid on the next coin vs volume of those willing....

Isnt that literally how gold currently works?

So rather than consume billions of watts on bitcoin - just make digital gold?

But what do you do with the payment?

With bitcoin, pay for the computers and the electric bill. With gold, pay for the machinery and the miners. It "has" to go somewhere though.

The point of Bitcoin is to be p2p cash. A centrally mined thing is... centralized digital cash. We already have central digital cash.

No need to bid.

Just give X amount of coins to every person and newborn for free.

Whuffie?

More like Universal Basic Income

Compared to the environmental damage and pollution caused by the mulitary, it will surely be much smaller. Also motor racing is another huge waster of resources, with no real benefit to the population.

My novice armchair estimate is that something like ZCash is broadly much less efficient than Bitcoin. Of course, no measure can go beyond a loose estimate.

I don't think it makes any sense to try to compare the efficiency of different proof of work systems.

Now you could compare the work that goes into synchronizing the blockchain between all nodes, but I'd expect that has a near-negligible environmental impact compared to all of the miners. (Individual Zcash transactions are a bigger file size than individual Bitcoin transactions if I remember right.)

OK I'm confused. Thank you though!

That is exactly the point of proof of work. Criticizing Bitcoin for this, is like criticizing DNA Evidence for being hard to fake.

There are real costs to bitcoin, the electricity being burnt in China is killing hundreds of people.

Burstcoin!

So...way, way, way less energy than mining for gold?

Isn't the energy consumption the whole point?

Mining for gold has become orders of magnitude more efficient over time. Bit coin will become orders of magnitude less efficient by design...

is not bitcoin consuming energy's is people's greed, china or whatever can ban mining same of US can ban industrial mining, bitcoin won't be affected a bit, I would be happy to be able to mine it on my laptop.

bitcoin is the This Is Fine dog pouring petrol around the room saying "I wish I started pouring earlier"

They hate us for our freedoms

burn the world to make a buck

Pyramid schemes are expensive, no shit.

We can tackle problems in parallel. Cultural issues are not a blocking problem.

I'm guessing many of the miners are located in regions like Washington State or Quebec with low cost relatively-green hydroelectric power and the power use doesn't correspond to the environmental impact of an average small city (except obviously one located where the miners are).

Most of the miners are in China, which runs a lot of coal and gas

Actually lots of mining is done in China using cheap electricity that comes from a glut of hydro-electric power created by government infrastructure spending.

But that electricity is cheaply available. We could stop bitcoin's use of electricity overnight, if electricity began to cost more than the expected return on investment. And this will inevitably happen anyway, since bitcoins only get harder to mine over time. This is a temporary problem.

Honestly it seems more like "bitcoin is a way to launder stolen electricity" rather than "oh noes, if people keep mining, eventually they'll have a huge impact on global energy consumption"

I'm not sure I understand the issue. I'm betting that the amount of energy used to power online games for Play Station Online is orders of magnitude worse than for bitcoin with arguably less benifit to society. What am I missing?

Exactly, this is a non-issue at best.

How much power is drawn by the "ever-expanding" racks of servers powering other stores of value? How many servers are running in the banking and financial industries just to enable non pseudonymous transactions of value?

This article is sensationalist nonsense. I would argue it is a positive point that a globally tradeable cryptocurrency with billions in market cap only requires the energy of a "small city."

> a globally tradeable cryptocurrency with billions in market cap only requires the energy of a "small city."

It only sounds good because we haven't really considered the scale here, so let's scale that up a bit.

What if even 1% of non cash financial transactions in the US were handled with BTC? For 2015, that would have worked out to about $1.8T.

How big would BTC need to be to handle that? Well, it looks like last year it's estimated to have done a little over $100B, so it'd have to scale somewhere around 15-20x to even cover 1% of one country's transactions...

[1] https://www.federalreserve.gov/newsevents/press/other/2016-p...

[2]https://blockchain.info/charts/estimated-transaction-volume?...

You may have a point, except you haven't mentioned how many city's worth of power non-btc transactions currently require, not to mention the additional inneficiency of hundreds of thousands of staff which could possibly be reduced in number because of the distributed ledger.

I really don't think things are as clear cut as the article implies, but I dont have numbers for the amount of energy consumed by modern electronic value transaction and storage.

Edit: also, "city's worth" as a measure of electricity, as in the article, is a terrible choice because it immediately biases the reader and does not convey much useful information. My GPU maxes at 300W; the article provides no way of conversion. Never mind that a small city may be a suburb using one hundredth of the power used by a small city center full of servers and a handful of skyscrapers.

> you haven't mentioned how many city's worth of power non-btc transactions currently require

No, I didn't but the article did, and it's cited elsewhere on HN - Visa for example uses 1/7000th of the energy per transaction...

AFAIK Bitcoin mining difficulty adjusts depending on how much processing power is on the network, not how many transactions are being processed.

Correct and certainly not related to the value of those transactions as GP implied.

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