Comment by wz1000 | Hacker News Reader

Comment by wz1000 | Hacker News Reader

> What’s more, bitcoin’s consumption won’t necessarily keep rising as it has. Data centers, for example, have gotten a lot better. Not long ago, the Department of Energy was predicting that their electricity use would double every five years, and Google was getting slammed for consuming enough to power 200,0000 homes. In recent years, though, the centers’ total electricity use has flattened even as their number has kept growing. As it turned out, better cooling and power management technology improved efficiency. Bitcoin miners are no less motivated by profit, so it stands to reason that they will seek to become more efficient and employ the cheapest energy available, which generally means hydroelectric plants and other renewable sources.

This is just flat out wrong and shows the author has no idea what she is talking about. The rate of BTC production is fixed, so "efficiency" has no impact on the dollar cost of electricity it is using.

If a BTC can sell for $X, it is profitable for the network to spend any amount upto $12.5*X every 10 minutes on electricity(ignoring hardware/fixed costs) mining bitcoin.

At $15,000 a BTC, this means it can consume $27,000,000 worth of electricity a day and still remain profitable.

Furthermore, comparing Bitcoin to physical currency is disingenuous even if you completely discount the (gargantuan)scale difference. You would get rid of that energy consumption even if could get everyone to switch to electronic (fiat) money instead of paper currency, and presumably have it be much greener than having them switch to bitcoin.

But just because it's profitable doesn't mean it can't be more profitable right?

If I'm going to set up a mining operation, wouldn't it make financial sense to set it up near a hydroelectric plant where my electric cost is 1/10th of what it is in my home in PA? Any cost reduction is an increase in profit, so there's still motivation to reduce costs, a pretty large one.

As long as there is a non trivial profit margin, more miners will keep entering the game until the the margin shrinks to a small enough figure that nobody else wants to start mining.

Wouldn't that drive the remainder of players to find cheaper and cheaper energy, proving the authors point? Since getting cheaper power means you can hold out that much longer than everyone else since you make that much more profit.

Even if they find cheaper energy, they will still spend $27 million on it a day. They will just consume more electricity.

But consuming more electricity would produce more bitcoin.

The 2 are pretty much linked for each "generation" of miner.

So in order to continue spending $27 million per day at the cheaper electricity rate, they would need to buy more miners, which would produce more bitcoin, which means more profit.

So their whole incentive is based around the price of electricity, and the cheaper they can get it for, the more money they are going to make.

> But consuming more electricity would produce more bitcoin.

No, Bitcoin is produced at a fixed rate. If more power goes into mining, difficulty increases to compensate.

Globally yes, but locally, that's not true at all.

If I have 2x as much hashpower as I did yesterday, i'll get roughly 2x as much bitcoin as a reward (which over time will go down as the global hashrate goes up).

In other words I'll get a larger percentage of global bitcoin production, which is fixed.

You're talking about imperfections in the market. I.e. You having a cheaper source of power than everyone else which allows you to mine the same amount of bitcoins at lower costs and thus higher profits. Thus, some of the $27 million is not used on electricity and becomes profits instead. In reality, how likely is this scenario in which you have a persistent cheaper source of energy which other miners cannot access?

Pretty realistic.

One of the largest US mining operations are said to be located in Seattle where there is dirt cheap hydroelectric. So are many of the Chinese operations.

It's not as mich of a zero sum game as it might seem, it's more of a race to the bottom.

If your competitors are running on cheaper electric, you'd better find some cheaper electric or they are going to increase the difficulty to the point that it's not profitable for you.

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