Hacker News Reader

Comment by SilasX | Hacker News Reader

What about storage of energy in batteries for resale to the grid? That’s very low (or negative) return by comparison? (Also probably not possible everywhere.)

Also, if the claim is correct (about crypto making energy price arbitrage much easier), then a motivated reasoner could argue that it has had the positive effect of eliminating inefficiencies by forcing energy to obey the “law of one price”.

Which, to clarify, doesn’t necessarily make it positive-sum overall, but still needs to be weighed against its energy usage cost to accurately gauge the full effect.

View on HN

Where is the arbitrage? Mining crypto in Kazakhstan with subsidized energy can not do anything to reduce the MWh price in Germany. There is only up and up as energy is irrecoverably burned for crypto.

Even better, the price of crypto is so high that it can be profitably mined even in countries with very high consumer power prices. I want to see you travel to Kazakhstan and tell them that paying 35 cents per kWh now that all the production goes towards crypto has had the positive effect of eliminating inefficiencies - namely the consumption of people living there. You might not make it back alive.

Price doesn't matter, profit does. And mining difficulty automatically adjusts to price so that the profit (also from transaction fees) tends to zero (whether from the top or from the bottom). I've seen the average Opex estimated at 60%, but that was some years ago...

(Also, an expectation of prices being higher than they "should" would mean that one has to consider an incoming crash and the whole operation should probably start getting wound down, so as not to be left holding the bag with now (almost) worthless cryptocurrencies and mining rigs. In that sense, yeah, you're probably better off staying closer to home, which I'll assume to be one of those "high consumer power price" countries.)

>Where is the arbitrage? Mining crypto in Kazakhstan with subsidized energy can not do anything to reduce the MWh price in Germany. There is only up and up as energy is irrecoverably burned for crypto.

I already said in the comment that it is "probably not possible everywhere". But to clarify that hypothetical, the arbitrage would be reselling the energy to whatever energy use-cases exist in Kazakhstan that aren't subsidized (which probably exist since it's unaffordable to subsidize energy everywhere in a country without bound).

Also, really? Is that your standard for the merit of an argument? Whether Kazakhstanis will kill you over it? I explained in detail how the efficiency manifests in another comment [1], and (also) already said it doesn't necessarily cancel the negative effects of crypto.

[1] https://news.ycombinator.com/item?id=29809318

There’s an interesting short term versus long term discussion: if a place has cheap electricity (hydro, geothermal, solar, etc.) for a while it becomes appealing for people to reconfigure around it — electrification for homes & vehicles, building heavy industry or cloud data centers, etc. If someone can deliver shipping containers full of cryptocurrency mining hardware, they can very quickly soak up that extra capacity, maybe even drive prices up a bit, and it has no benefit to the surrounding community other than perhaps a maintenance job.

To make my point more concrete in terms of your example, the benefit would be something like:

Let's say Iceland has some natural advantage in fishing, because of the great fish around there. But, because our world violates the law of one price, it's instead of profitable to smelt aluminum there instead of fishing[2], and the world is deprived of the utility gain from the fish captured and shipped[1].

But then, once the world obeys "one energy price", the smelting doesn't make sense and they go back to fishing (while the imported crypto miners sop up the extra energy).

[1] hopefully with sustainable management

[2] They still fish there, today and in the hypothetical, but probably much less than the optimum.

Those seem fairly separate industries — I don't know how many power-plant operators would switch to fishing. The process I was thinking of would be more like this:

1. A major hydro / geothermal / solar / etc. project goes online providing n GW/day

2. Usage within the region where that power can viably be transmitted is 0.2n so there isn't pressure to elevate prices. Because the power supply is based on the local geography, there isn't a way to bring production closer to the consumers in distant areas (e.g. a solar farm is going to be more productive in Arizon even if you want to power a factory in Portland).

3. Ordinarily, someone who owns, say, an aluminum smelter might consider building a new one in that region to take advantage of the guaranteed green power rather than facing escalating prices based on competition and emissions controls take effect. However, if someone ships a bunch of cryptocurrency miners in to soak up any available power there won't be slack capacity and that's guaranteed to happen because they can ship containers of mining hardware in days whereas building an industrial facility takes years.

Energy storage is not particularly cheap.

And not particularly efficient : if you cannot beat the highest market prices...

And comes with the risk of catastrophic release of that stored energy. Which means that the authorities will be much more interested in getting involved !

And the biggest issue is that if you try to become an energy seller, it becomes much harder to go under the radar as part of the black or grey market ?

Presumably generating blue hydrogen is an obvious way to export free power

Reply on news.ycombinator.com