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Comment by RedBeetDeadpool | Hacker News Reader

Dorsey's giving out some narrative of reducing pollution by making mining more efficient. This has to be him just saying things the media wants to hear, because that simply doesn't work.

The pollution generated by bitcoin is not a factor of mining efficiency, its a factor of its price.

When bitcoin reaches $100,000, its pollution will be roughly equivalent to the pollution created from making $100,000 worth of energy. Obviously this is a rough estimation, but its pretty close. As a miner, if it only costs $80,000 in energy to produce one bitcoin, and you can sell it for $100,000, then you're gonna crank up the heat until you're closer to breaking even. So when 1 bitcoin reaches $1,000,000 it will take roughly $1,000,000 worth of energy to mine, and thereby create the pollution equivalent of $1,000,000 worth of energy.

Kind of makes you wonder if nakamoto saw this as a property of bitcoin, because that is one helluva cost if you think about it.

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This is correct. But every 4 years, there is a halving.

If the price of Bitcoin were to stay the same after each halving, then mining would be half as profitable so the amount of energy used by Bitcoin miners would drop by half.

In 2012, the amount of new bitcoins issued every 10 minutes dropped from 50 bitcoins to 25. In 2016, it dropped from 25 to 12.5. In the most recent May 11, 2020 halving, the reward dropped from 12.5 to 6.25 BTC per block.

In the 2024 halving, the reward will drop from 6.25 BTC per block to 3.125 BTC.

An unsolved problem with Bitcoin is that in 15-20 years, Bitcoin may no longer be profitable to mine. People speculate that fees will increase. If people have already invested in solar panels, windmills, hydro electric, volcanic energy and already bought their Bitcoin miners, they might just leave them all on. Even if it only earns them a few dollars a day, the opportunity cost could very well be zero.

> Even if it only earns them a few dollars a day, the opportunity cost could very well be zero.

You forgot the opportunity cost of the datacenter itself. It would be much more profitable to turn that into a colo or a VPS host with some new hardware.

Regardless, once the bitcoin reward goes low enough Bitcoin will probably become worthless. It's already not usable as a currency, and without the distributed ponzi system ofhanding out blocks to miners, what motive will anyone have to buy it?

If the energy comes from a clean source, what does it matter? I think Dorsey believes that if there were cost effective mining equipment that requires little maintenance and is simple to maintain, you'd be able to use it in places that have abundant cheap and renewable resources. The cheapest forms of power are likely the ones that are going to go to waste anyway. Sure you'll still bid up the price you consume, but that's the point of the difficulty adjustment. The more valuable the network, the more valuable prize for a 51% attack. So you have to rely on market forces to ensure the network remains secure

The opportunity cost means there is effectively no difference. A megawatt hour used to mine from a clean source means that a megawatt hour used for something else doesn't come from a clean energy source. Even if this project is the difference between building additional clean energy capacity or not, the resources for building that capacity have an opportunity cost—something that can't be built that would create value. Mining cryptocurrency doesn't create wealth any more than mining gold or printing money, it creates value in a zero sum manner, by discounting the value of all other currencies by a very tiny amount.

> Resources of building clean energy capacity have an opportunity cost

I don’t understand this point, are you saying a project that stimulates additional clean energy capacity is a net negative somehow? Why?

Yes and very much so. Look at the GPU market: probably crypto has stimulated some GPU additional capacity, but overall crypto has been highly net-negative for non-crypto GPU uses. Imagine if crypto did to the solar market what it has already done to the GPU market.

This isnt true at all, theres tons of stranded energy production sources that are not being used now that would be made viable through mining crypto and transferring that "work" electronically rather than over wire.

Like those old coal power plants being retained or even fired up explicitly for crypto mining?

https://www.wsj.com/articles/bitcoin-miners-are-giving-new-l...

I don't know which world people like Dorsey live in. There is a massive chip shortage (all over the world) and energy shortage (in China and Europe). We don't have enough energy to power homes, and there just aren't enough chips for automobiles. This got to be an absolutely worst time to start manufacturing bitcoin machines, opensource or otherwise.

I'd go one further and say it is the worst time to back any sort of wasteful(as in pow) crypto project, not specifically bitcoin.

> If the energy comes from a clean source, what does it matter?

It matters because we don’t have enough clean energy to go around. Since energy is fungible, this means that turning on a bitcoin mine means that the energy provider has to turn on a fossil fuel plant to meet demand.

Maybe if Dorsey agreed to only run his bitcoin machines when excess renewables were available and could not be stored that would be fine. But that’s tantamount to making him promise to never make a profit overnight or when the wind isn’t blowing. I don’t trust any company to keep that promise.

> I think Dorsey believes that if there were cost effective mining equipment that requires little maintenance and is simple to maintain, you'd be able to use it in places that have abundant cheap and renewable resources.

It’s worth pointing out that e waste is a thing. Mining equipment has an environmental cost even if it’s magically efficient.

Furthermore the design of bitcoin encourages extra consumption. If Dorsey makes a machine that consumes half the energy of its competitors per hash, is he going to consume half the power, or is he going to make 2x as many of them to make double the profit? No need to answer, we already know that bitcoin farms always push to purchase as much hardware as they can in pursuit of greater hashing power.

Oh, and that hardware gets thrown away the moment a slightly better machine gets invented. Unlike server hardware, the value of a bitcoin machine drops precipitously the moment it’s no longer the most efficient. There have been some darkly humorous videos of miners giving away free oranges in china as long as you agree to take an outdated ant miner off their hands.

> Sure you'll still bid up the price you consume, but that's the point of the difficulty adjustment.

Whoops. You undermined your own point here.

> The more valuable the network, the more valuable prize for a 51% attack. So you have to rely on market forces to ensure the network remains secure

Yeah, but why do we want that? Bitcoin has utterly failed as a currency, it’s just turned into a stupid casino for people to bet on because “number go up”. Why as a society do we want to tolerate literal nation states worth of electricity “securing” a network that doesn’t really do anything useful for society?

Jack Dorsey tweets some crypto thing every time he wants attention. That's basically the whole story here.

1. It is still wasted energy 2. This concept fails miserably in the global scale test...

I think in the even longer term, when the price stabilises (ie. we are not in this growth/adoption phase) the transaction volume will dominate.

And that’s because there will be no more Bitcoin to mine and the price will not be going ‘up’ by default, so mining will be chasing fees only. And the fees are related only to transaction volume.

Maybe I’m confused. I thought there is a finite supply of bitcoins. If they stop mining / hit the limit, the supply becomes fixed but the demand may increase. What happens then to the value of the coin?

The price of a coin will go up but it won’t necessarily stimulate more expenditure of ‘mining’ energy because there are no more coins to ‘mine’.

At that point the activity of miners would be better described as ‘transaction processors’ and in this phase, energy expended will be directly correlated with transaction fees.

Yes you could say coin higher value would make the transaction fees ‘worth more’ but this effect will be completely dominated by the volume of the transactions themselves which will be much more variable.

It’s like saying Western Union’s server costs can be affected by the USD/GBP exchange price. Sure, they can be but the far more dominant effect will be transaction volume.

Square has written a memo titled "Bitcoin is Key to an Abundant, Clean Energy Future". What are your thoughts on the piece?

https://squareup.com/us/en/press/bcei-white-paper

I think there are a number of fallacies in this white paper. For one, energy consumed by pow is just spent energy, it does not contribute to societal development. Also, this sort of consumer specific investment disregards society because it disregards where society needs the energy (since society is not the target group). On another hand, this whole paper seems very short sighted and rand-ish. The fact of the matter is that the only effect that scaling PoW more will have is scorching the earth, so why not just invest in tech that actually can make a difference like all the working PoS projects?

> energy consumed by pow is just spent energy, it does not contribute to societal development

Can you explain more about what you mean by this? Would the same apply to a gallon of gas burned in a car for example?

Proof of work is computing. Like any computing, like your home PC or laptop, running an application costs electricity, and perhaps slightly warms its nearby vicinity. A gallon of gas or a battery in a car may have a similar impact. A gallon of gas may have further negative externalities like the destruction of the atmosphere etc.

But a gallon of gas does something useful; it enables someone to be mobile and go about their daily activities.

Bitcoin is fundamentally a casino. It’s only legitimate function is betting on a number that’s not connected with anything else, also known as gambling. The energy we spend there does much less for a society than allowing people to move around and go about their daily lives.

Ah yes, if bitcoin is useless them by definition all the energy is waste. That "if is important. It all comes down to "what is the value of bitcoin".

Not what is the value of bitcoin, what is the use of bitcoin. What function does it fill for a society in order to justify the energy expenditure? Manipulating a dollar value of something is apparently trivial to do, just look at the wild fluctuations in bitcoins price.

So far the resounding answer has been “number go up”. Well, that and crime if we’re being honest.

I'm pretty sure he is trolling... It is evident by now that the energy fueling bitcoin should better be used otherwise.

Just to clarify, not trolling. For those who think Bitcoin has zero value, then by definition all the energy is waste. For those that think Bitcoin has value, then the energy is by definition not waste and it's a question of utility, what is the energy usage of what it's replacing.

I noticed that you've asked a couple folks in this thread on their thoughts around that Square memo, digging a bit more into their thoughts. Wondering if there's something specific you're trying to understand around people's thoughts?

Well, you need to compare the societal impact one BTC tx has vs the societal impact the equivalent energy consumption in mobility (you example) has. If my calculations aren't off, a bitcoin tx is the equivalent of your days mobility assuming a suburban commute in an EV and all externalities (groceries, kids etc) so yeah, investing that energy in being mobile makes more sense than doing btc txs

What is the value of a bitcoin transaction?

In sociological terms? Negligible in relation to a days mobility.

I have to start out by saying there are a lot of creative people looking to make money, and am humbled reading the paper. Its definitely a little on the optimistic side, but its an interesting idea.

> Bitcoin miners are unique energy buyers in that they offer highly flexible and easily interruptible load, provide payout in a globally liquid cryptocurrency, and are completely location agnostic, requiring only an internet connection. These combined qualities constitute an extraordinary asset, an energy buyer of last resort that can be turned on or off at a moment’s notice anywhere in the world.

So for anyone else reading, the premise is to capitalize during times when there is excess energy being generated. So instead of trying to figure out how to store that excess, you can expend it mining bitcoins.

It does make investing in green energy more attractive, since you don't end up throwing away excess energy, which makes the claim "Key to and Abundant, Clean Energy Future" somewhat defensible. But investors will have to consider other things like cost of energy storage and cost of maintaining a competitive mining rig, and who knows, the reality might be that burning up the excess for bitcoin is still not a good trade.

I also don't see increased attractiveness of green energy to investors, mining efficiency, and pollution output of the bitcoin network having strong correlations with each other. Maybe it might help increase the percentage of green energy in the energy sector, which in turn reduces the amount of brown energy being expended mining bitcoin, but, that would be more of a second order effect, and we can only make postulations at that point.

Appreciate your perspective from reading the paper.

Agreed this seems hard to pin down.

For those like me not familiar with the term "brown energy": "energy produced from polluting sources as a contrast to green energy from renewable, non-polluting source"

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