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I could be wrong about this, but I don't know if the energy requirements have anything to do with the price (I.e. demand) for the coin, does it? I was under the impression that the problems that you have to solve get predictably more difficult, and they're more of a function of time than price.

But yes, with your point overall I agree, like in 10 years or something it doesn't seem workable without major changes. Wasn't that what lightening or side chains were supposed to do?

Any way, also, I don't own any crypto and I'm definitely not defending it. Feel free to correct me too if I'm mistaken, anyone.

Isn't the difficulty tied to the hash rate?

The difficulty does readjust based on the hashrate; but the hashrate is driven by the cost/benefit analysis of hardware and electricity vs. block rewards, meaning as the asset price goes up, more miners are incentivized to join the network.

I guess if the price of BTC goes up, then it makes it more "worth it" to throw more energy at mounting a double-spend attack, and therefore the energy needed to protect the network against such an attack also goes up?

It's much simpler than that. If the price of BTC goes up, it's worth spending more on electricity to mine it.

If 1 coin costs $50,000, and you already own the rig, it's worth spending $49,999 on electricity to mine the next coin and you will make a profit. If you're rig can't do that, you're better off just turning it off.

Sure, but if the BTC prices rise enough then it is in every transaction recipient's benefit that the network is mining even if there aren't any new coins minted, to avoid a "51% attack" / double spend attack.

> I guess if the price of BTC goes up, then it makes it more "worth it" to throw more energy at mounting a double-spend attack

Close, but not correct. As the price of BTC goes up, so does the expected reward for mining any given block, making it profitable to spend more electricity in pursuit of the rewards. This results in a net increase in electricity usage as everyone spends more in an attempt to capture the rising value of mining a block successfully.

In practice each miner is incentivized to spend an equal amount in electricity per block (at local rates) as the expected reward per block will net them. This results in a 51% attack being inordinately expensive, which was the point of the original design.

That's one way of looking at it. Another consideration for each miner is to look for cheaper and more abundant energy sources. Despite what the born-again eco-warriors have to say about consumption and the environment, Bitcoin can actually be an incentive for safe energy sources.

> Another consideration for each miner is to look for cheaper and more abundant energy sources

And thereby offsetting other inelastic demand for electricity, forcing them to count on non-renewables instead.

Bitcoin might be renewable if every single miner pinky swears to turn their rigs off the moment renewables stop over-producing, but come on, nobody believes that'll happen.

> Despite what the born-again eco-warriors have to say about consumption and the environment, Bitcoin can actually be an incentive for safe energy sources.

Interesting you've got to put an ad hominem in there about people who care about the environment. Probably not a good sign for the second half of this sentence, and it makes me wonder if you're representing other's positions in good faith.

Also, oops: https://e360.yale.edu/digest/bitcoin-miners-resurrect-fossil...

Sure, bitcoin miners will use cheap renewables if they're available. They'll also happily use whatever the hell is available too given the opportunity, since they need to use so much of the stuff. They're particularly notorious for driving up electricity rates locally as they turn previously abundant renewable hydro energy into a over-subscribed resource, requiring towns to import electricity from, yes, fossil fuel plants.

You have it a bit backwards: the energy demand has to do with the price of the coin. You can look at mining calculators to see what the relationship is between kWh and coins today, and some have historical charts. This relationship is baked in to the "difficulty" of the mining function and the block reward - higher difficulty means more hashes per block which means more watts per coin. In turn, your power company charges you per kWh, and in an efficient market, you are going to expand operations until your marginal cost (the cost of power) is equal to marginal profit (profit from selling the coins you mine). Generally, bitcoin mining has been done in such a way that if you have access to power at 5-10c per kWh, you can mine profitably (not including the cost of a mining rig).

As the block reward goes down (and it is dropping), the rewards of mining also drop, so you have a reasonable argument that the power use is transitory until the block reward goes to 0. However, it looks like this may end up being made up with transaction fees because the transaction throughput of bitcoin is also really low.

Lightning and other solutions are supposed to fix the transaction throughput, but they have limitations.

Ah ok, I just looked it up on Wikipedia and understand why I was confused and where the corrections are coming from as well.

> Every 2,016 blocks (approximately 14 days given roughly 10 minutes per block), nodes deterministically adjust the difficulty target based on the recent rate of block generation, with the aim of keeping the average time between new blocks at ten minutes.

So the changes are made at somewhat predictable paces, in this case roughly every 14 minutes, but the difficulty is adjusted based on demand. In other words, it's a little of both. Demand though will definitely affect the difficulty of the problems, but the demand is only updated every 2,016 blocks.

> but the difficulty is adjusted based on demand

Only indirectly. More precisely the difficulty is based on supply of hashing power. If more people hash, the blocks will be minted faster and the difficulty will be adjusted higher at the next re-adjustment. It doesn't really matter if those blocks are actually full or empty, and in fact the system would continue to work if most of the blocks were empty and the trading happened off the chain in exchanges.

I say indirectly because the amount of hashing power on the chain at any given moment is driven by the expected reward per block minted. Nobody wants to run thirsty machines if the cost of electricity exceeds the expected rewards for successfully minting a block. So the number of machines online and is directly proportional to the value of bitcoin, which is driven by consumer demand.

Why would a bitcoin miner sell his mined BTC for less than the power costs?

To pay down rising borrowing costs?

how? I mined and got $10 in mining rewards. I owe $12 in electricity. what money do I have left over to pay down anything?

If the energy demand is less than the mining reward, you can profitably mine it.

Why is this not a possibility:

3. It continues to be used very little/nothing in the legitimate financial system while being used for blackmail, drug trade, crypto trade etc. Price $1000.

> The amount of electricity needed to protect the network is directly tied to the price of BTC

This is not how proof of work functions. Hash rate and price are not directly related, they are somewhat correlated because when the price goes up it becomes more profitable to mine. Bitcoin doesn't need more hash rate for the price to go up - the price is the independent variable and the hash rate is the dependent variable.

Truth. Parent comment is deeply misinformed. BTC already has more than enough hash rate, and it is entirely independent of price.

That does not make sense.

The whole point of proof of work is that it is proof that someone has spent the value in electricity validating a block.

As the price of bitcoin rises, naturally more and more miners will beef up their rigs (that is, spend more money in infrastructure and electricity) to mine BTC, because the rewards and fees are worth more. Note if they didn't do this, anyone could easily have a "free money" arbitrage play, and basic economics says that discrepancy in prices (i.e. the value of a BTC on the market and the cost to mine one) must be arbitraged away.

Think of it this way, if hash rate is independent of price, why does it take the electricity output of Argentina to run the network? It certainly didn't take that much years ago. The reason being that as BTC becomes more valuable there is more reward and thus more competition for miners to mine. As that happens, the hash rate will rise as more power is added to the network.

Not directly related but not "somewhat" correlated either, it's deeply correlated exactly due to profitability, a point you actually mention but somehow don't consider a deep correlation.

Mining profitability is subject to conditions besides the price of a Bitcoin, for example: energy prices, block reward changes, regulation, hardware availability and pricing, etc.

It's really not as simple as hash rate = price. It's more so that they are correlated in direction of change.

I think it's functionally impossible for Bitcoin to hit literal zero. It could someday run on a network of ten hipster tech-history enthusiasts, worth micro-pennies like DOGE in the early days, but it still wouldn't hit zero.

I agree that Proof of Work has a severe scaling problem; which is why I expect Proof of Stake to outcompete PoW (a token with lower transaction costs being inherently more desirable as a store of value). AFAICT PoS scales linearly: as the market cap goes up, the opportunity cost of locking tokens, and the mining rewards, both go up proportionally. It'll be interesting to see if BTC maxi culture sees the writing on the wall, or sticks to their guns to the bitter end; even if they're right that it's a better security model (I'm doubtful), it wouldn't be the first time that "good enough" won the market.

I suppose the biggest reason that we'll never see PoW vanish completely, even if carbon-taxed or outlawed by most states, is the massive capital outlay in ASIC mining hardware, which literally has no other use. There'll always be a desire to recoup that investment, and an incentive to foster "true believers" to maintain demand.

I think the bigger issue is that Bitcoin has nothing backing it. It's value (and in turn, volatility) is driven by popular demand for the "asset", so even if there is some insane moonshot scenario where we do adopt it into the financial system, there's a very real chance that the price will collapse with little or no chance for recourse. That's the biggest issue, and it's one that's inherent to Bitcoin's nature as a decentralized currency. You'll hear diamond-hands Redditors complain about how Bitcoin "shouldn't be a fiat" and other such yarns of fiction, but the truth is that it doesn't have any desirable qualities that a centralized currency does. There is no bail-out, if Bitcoin fails then no sane person is going to let the global economy fail with it.

Simply put, there's just no path forwards where Bitcoin retains it's value long-term. Other crypto is harder to grok (often intentionally so), but I suspect they'll meet a similar fate once the media attention blows over.

It's backed by mathematics instead of a country. That doesn't make it better or worse, just different, and diversity is generally what people want in their portfolio.

It's not backed by mathematics any more than gold is backed by chemistry.

Uh, gold _is_ backed by chemistry. If gold were to change nearly any of its chemical properties, it would instantly lose its value. It is stable, generally non-reactive, non-toxic, lustrous, and of generally low abundance - all properties derived directly from its chemistry.

That is actually one of the strongest arguments, to my mind, for why some variant of a cryptocurrency will survive as a store of value. Gold kind of "organically" found its way into value almost precisely because it is backed by the physical laws of nature. Cryptocurrencies went up a level to be backed by the laws of mathematics.

Sure and cash is backed by a special linen-cotton blend of paper.

Gold's value comes from being a Schelling point, not from any particular chemical properties - other than, like, not killing you or exploding.

Bitcoin is also a Schelling point.

So, quite a lot then?

Making gold has always been the holy grail of chemistry. It's only valuable because chemistry says you can't make it easily.

Couldn't you say that about basically anything? That it will eventually be really big or go away?

Seems to me like bitcoin could keep seesawing on the fringes of relevance for a while. And people still buy tulips and beanie babies, albeit not anywhere near the prices at their height.

But that's because tulips and beanie babies have inherent value.

Tulips are pretty flowers.

Beanie babies are cute toys that you can play with.

Bitcoin is a purely virtual financial instrument. It has no purpose other than to be worth money.

It created an entire industry of ransomware!

> 2. The world decides it will be a major part of the financial system, and it goes to 500k or 1 million.

Where does this belief come from?

Dollars are also a major part of the financial system, at yet each dollar is only worth $1.

The supply of Dollars is not limited to 21 million.

You're missing a few pieces. The amount of electricity needed to protect the network is directly tied to the value of the block reward.

This depends on the value of bitcoin, true, but also the amount users are paying in fees and the reward era we are in (see https://en.bitcoin.it/wiki/Controlled_supply).

The way the system works is a block reward is paid every 10 minutes, currently 6.25 bitcoin worth about US$220k. This money then gets spend on mining costs, mostly electricity and mining hardware. The reward drops in half every 4 years so in 16 years it'll be 1/16 as much in bitcoin terms and if at that point bitcoin is around $500k the money spent on mining will be around the same as now.

> The amount of electricity needed to protect the network is directly tied to the price of BTC.

Why? I keep seeing this claim and it makes no sense to me.

I assume because the higher the price the greater the incentive for one entity to take over 51% of the network and start stealing transactions.

If the price of bitcoin rose to $1 million, but the price to mine one and associated transaction fees stayed at, say, just $20k in electricity costs, don't you think lots of other miners would beef up their rigs to mine bitcoin now? After all, that's like $980k in free money!

Of course, they would beef up their rigs (spending commensurately more in electricity), and the required hash difficulty would go up to keep the mining speed at a block per 10 minutes.

Another way to think of it, is why do you think the electricity requirements of Bitcoin are now the output of Argentina? Years ago they were a teeny fraction of that. As Bitcoin became more valuable, the competition for mining increased, so the hash difficulty adjusted to ensure the new block rate matched the higher wattage miners were willing to put in to increase their hash rates.

That's a big assumption. Same assumption made in the study which provides the 0.5% world energy consumption figure that everyone is citing. No actual evidence that it is true is provided. The same study shows minimum consumption estimates which are much more reasonable.

I'm not assuming anything.

There is a guaranteed deep correlation between BTC price and amount of electricity needed to run the BTC network. That is the way proof of work is designed to function. I.e the whole way it protects against a 51% attack. There is simply no getting around this.

There is a relationship between mining difficulty and energy consumption. What I don't see is the correlation between price and mining difficulty. By this logic, mining activity should be way down right now.

I've read this explanation that i find explicit:

""" If 1 coin costs $50,000, and you already own the rig, it's worth spending $49,999 on electricity to mine the next coin and you will make a profit. If you're rig can't do that, you're better off just turning it off. """

Note that this is how it worked for bitcoin startup five years ago once the first specialized bitcoin rigs came into being. When the price of electricity where they operated became too high, some startup shut out or just changed their operations to create value around BTC(email/photograph ID/validation on the blockchain or other stuff like that)

What makes you assume that only 0 and >500k USD are possible outcomes? Why not 5k or 50k? Why can it not sustain as a niche asset in your book?

> anything in between is just a probability calculation of whether it will end up at one end or the other.

There is some strong assumption you’re leaving out here.

3. both 2, then 1