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Comment by hwillis | Hacker News Reader

> The switch to PoS is a non-issue from my perspective: a centralized system changed from using method A to method B, I don't understand why I should care.

Because every bitcoin transaction costs $60 in electricity. That is a monumentally stupid amount to pay. It's $125 per kB.

Proof of stake incentivizes capital directly. Proof of work incentivizes capital via the ability to find prime numbers, which limits you to people who are willing to spend $1000s to millions of dollars to do it efficiently. Limiting the validators like that drives up costs massively.

> Bitcoin mining is increasingly being used to prevent methane emissions in stranded gas reserves. Having an economic incentive to not flare or emit methane but instead using it for generating bitcoin allows Bitcoin mining to become net carbon negative.

No, it is not. Projects like that may be branded with bitcoin, but bitcoin miners are buying the same electricity as everyone else. The rising cost of electricity is causing new sources of power to be exploited.

Instead of being used for something useful, that electricity is being turned into waste heat.

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«Because every bitcoin transaction costs $60 in electricity.»

A common misconception. Only a fraction (about 1% at the moment) of Bitcoin's electricity consumption is derived from transactions, because transaction fees account for only about 1% of miners revenues. The average transaction fee is about $1 at the moment, so a transaction "costs" only $1 in electricity because it provides $1 of extra revenue to miners who can subsequently spend it on opex (electricity).

I haven't computed it, but you need to take into account the energy it takes to mine a block and the number of transactions in that block.

The transaction fee is irrelevant, as the fees being paid were mined in the past and already "paid for" with electicity.

In the end, transactions drive the chain forward. You don't need (a lot of?) them to continue mining, but they are the only "useful" part of the blockchain.

I have no idea if bitcoin operates at max capacity, but I think it does. If so, I think it's perfectly fair to attach mining energy use to transactions.

«I haven't computed it, but you need to take into account the energy it takes to mine a block»

No, because the energy consumption is the same regardless if a block contains zero or a thousand transactions. Therefore it is misleading to attribute mining energy as the "cost" of transactions. And Bitcoin doesn't operate at max capacity: its lightning network is very under-used at the moment.

As to the transaction fee, it is relevant: even though it was already "paid for", it is being redistributed to miners again, therefore drives energy consumption further up than if it was not being redistributed.

Also worth considering: Proof of Transfer consensus mechanisms like Stacks allow entire networks to run in paralleled with Bitcoin by piggybacking on Bitcoin's consensus mechanism. That's a whole big pile of transactions happening that go entirely unaccounted for by folks who just count the number of transactions in a block.

Looking at the Stacks block explorer, there’s very little activity on it.

It is intellectually dishonest to use marginal cost here and not average cost.

A transactions costs $60, in the sense that all transactions together over some period, say N, cost $60*N over that period.

That is invisible to the user insofar as it is financed through an increase in money supply [1] which accrues to the miners at the expense of all other BTC holders.

[1] Increase in money supply is sometimes, particularly by Austrian economists and crypto acolytes, identified with inflation. The irony...

It would be intellectually dishonest, if the foundations of your reasoning were sound.

The increase in the money supply, aka block subsidy, is a value transfer from BTC holders to miners compensating them for enforcing the consensus rules of the ledger. Very similar to if you were paying fees to a mega secure vault company, though no vault company can provide decentralised value storage; value storage without any single point of failure. Considering the unprecedented level of security on offer, the value for money is astonishing.

The miners job is to construct a block. They're paid via a special transaction called a coinbase (a large American exchange named their company after this special transaction), which they can make payable to whomever they wish. They take incoming transactions and may include a certain number of those; the limit is 4 million weight units, as opposed to a certain number of kB as is commonly believed. Each transaction they include will usually include in addition to fixed recipients, a special "spend to anyone" transaction output, this is to encourage a miner to include your transaction preferentially as they can make this portion payable to themselves. They may attempt to include multiple transactions spending the same funds to different recipients, or to insert a coinbase transaction wherein they have made payable to themselves any number of bitcoin, or include more than 4 million weight units worth of transactions, or make some other attempt to break the rules of consensus that any block they published will be tested against by thousands of other computers who will then choose to store locally the new block as the new strongest valid chain tip, or disregard. Before publishing the transaction though, the miner must also solve the double spending problem, by providing proof of work. They do this by going back to that block they're constructing, and firstly putting a random number in the nonce field of the header. Then, they pass the blocks bits into a sha256 hash function, take the resulting hash and hash it again with the sha256 function. The result must meet the current block height difficulty, for example to just happen to start with 18 leading zeroes. If it doesn't, the nonce is incremented in the header and the block is hashed again. Without an appropriately difficult proof, first of all you wouldn't know which valid block had come first, and so would have double spend problems where after receiving payment, the block containing your payment was dropped and replaced with another, or outside of bitcoin, anyone can for example send you a transaction receipt via e-mail stating you have been paid, on its own it's worthless though, you will have to rely on PayPal or a bank to ultimately tell you if you have received a payment, and PayPal or bank payments are reversible in a way Bitcoin transactions are not so even then, you don't have the same degree of certainty (furthermore your funds are not in your custody, instead you have lent your money to the bank; they owe you it). I hope this clears up the difference between these different fees and what they are in payment for, please DYOR next time before speaking on a subject as though you have some knowledge of it, much of the confusion around Bitcoin results from people who have not studied it wanting to sound knowledgeable.

I don't know much about cryptocurrency, but I'm not sure I understand how your response relates to the question of whether, on average, bitcoin transactions use about $60 worth of electricity.

Thanks for this summary of the basics of mining (that most people here are familiar with). None of it presents a challenge to my two arguments:

1. BTC holders pay a fee of around 1.7% p.a. of their holdings (until the next halving) to miners (through an increase in money supply),

2. which amounts to around $60 per transaction currently. (Higher if BTCUSD rises or the number of transactions falls; lower if BTCUSD falls or the number of transaction increases, which it cannot much because BTC operates not too far from the limit.)

> please DYOR next time before speaking on a subject as though you have some knowledge of it,

Ah, the old "you just don't understand crypto" chestnut...

The time taken to refute bs is much greater than the time it takes to generate bs. Your argument is at best mistaken and at worst intentionally misleading. My summary of mining is better than most you will find online and, only lacking in mention that the previous blocks hash is also included in each new proposed block to ensure each builds upon the chain tip. Even if I hadn't studied the source code and game theory myself, I think I trust the technical analysis of the Steve Wozniak's of the world over yours. A simple way to see through this argument that transactions cost $60 would be to say, that being the case, why can I currently pay $1-2 for a transaction. And if no transactions occur, why would miners still be able to continue creating blocks? I think it's very likely you simply dislike Bitcoin and want to mislead people about it, for personal reasons.

$60 (or, more currently, ~$83) is the block reward, at the current price, divided by the average number of transactions per block. It does not even include the added incentives from fees.

Yes, and the block reward can be claimed without any transactions in the block.

On BTC this never happens, on other chains it's quite common, since no one uses them.

That $60 in electricity 'per transaction' is simply not correct, the value of the block reward doesn't come from transactions. The transaction fee does.

The value you try to compute is currently exactly $79, including fees (which are about $1). If the number of transactions were to double (or halve) tomorrow, that value would halve (or double). You are just dividing fixed ongoing rewards by a variable metric unrelated to the rewards (transactions). You are propagating a misconception that somehow this represents the cost of a transaction.

Funny thing is that traditional finance (say a credit card transaction) definitely beats BTC both on average cost and on marginal cost.

> Because every bitcoin transaction costs $60 in electricity. That is a monumentally stupid amount to pay. It's $125 per kB.

Its incredibly fallacious to measure the cost of electricity per transaction on Bitcoin. Blocks can be completely full or utterly empty and still use the amount of power. You're also missing the point of the power consumption. Its not used to move capital from one person to another, its used to secure the network from attacks and preserve its integrity. Measuring the cost of electricity per transaction is like measuring the amount of energy bank vaults and the US army use per dollar transaction. Stats like the one you quoted don't take into account the number of Lightning network transactions happening off-chain but is secured by a past on-chain transaction.

> No, it is not. Projects like that may be branded with bitcoin, but bitcoin miners are buying the same electricity as everyone else. The rising cost of electricity is causing new sources of power to be exploited.

> Instead of being used for something useful, that electricity is being turned into waste heat.

One, value and usefulness is subjective. Because something is "useless" for someone like you doesn't mean its useless to others. I, and many people around the world, find Bitcoin to be incredibly useful and worth the electricity. Secondly, if oil and gas companies could profitably monetize flared methane, they would have already. They don't because trapping and transporting the methane would lose them money. Its an industry standard to simply release or burn the methane instead. So Bitcoin IS useful in that respect.

> Blocks can be completely full or utterly empty and still use the amount of power.

It has been steady around 1500 tx/block for years.

> You're also missing the point of the power consumption. Its not used to move capital from one person to another, its used to secure the network from attacks and preserve its integrity.

I'm not. That's a completely insane amount of money to pay for that service. It's totally unnecessary.

> Stats like the one you quoted don't take into account the number of Lightning network transactions happening off-chain but is secured by a past on-chain transaction.

They don't have to. All those techniques are equally applicable to POW, but POW doesn't spend $18 million daily on electricity to do it.

> Secondly, if oil and gas companies could profitably monetize flared methane, they would have already.

Oil and gas companies sell oil and gas, not electricity. Bitcoin miners are not running methane gas turbines. Electricity companies are.

>>It has been steady around 1500 tx/block for years.

>>That's a completely insane amount of money to pay for that service. It's totally unnecessary.

You cant know exactly how many transactions are processed per bitcoin block. The introduction of the lightning network and other 2nd layers mean any one of the ~1500txs per block could in reality be a batch of a 1,000,000 or more transactions being settled. There could easily be 15,000,000,000,000,000 txs per block, think about what that does to any $/tx calculation.

Bitcoin is cheaper than visa because it is designed to process infinite transactions for a fixed security cost.

Bitcoin is cheaper than visa because you have zero consumer protections.

https://www.statista.com/statistics/881541/bitcoin-energy-co...

The energy is not used to handle the transactions, the energy is used to secure the network.

> Instead of being used for something useful

Bitcoin uses less energy than YouTube. Wether you think having a decentralized, global monetary system that gives everyone an opportunity to own sound money that the government cannot take away is more or less useful than YouTube is of course something everyone is entitled to have an opinion on.

It might be that you are correct, it is too early to tell, but you are no the final judge of what is useful in the world or not, so this quote is just your personal opinion and nothing more.

> Bitcoin uses less energy than YouTube

I believe this is totally wrong - I think Bitcoin uses significantly more than YouTube. Where did you get your numbers?

The 2020 Google Environmental Report [1] lists the total energy consumption of all Google/Alphabet data centers as ~12.2 TWh/year in 2019 and growing at about 2 TWh/year. (See page 32.) So in 2022 the approximate usage for all Google/Alphabet properties, not just YouTube, would be about 18.2 TWh.

Meanwhile, Statista estimates Bitcoin as consuming about 177 TWh/year [2].

So this means Bitcoin consumes about 10x as much as not just YouTube but all Google/Alphabet data centers combined!

There are some urban legends about YouTube using much more energy than it does; some of those urban legends are refuted here: [3]

[1] https://www.gstatic.com/gumdrop/sustainability/google-2020-e... [2] https://www.statista.com/statistics/881472/worldwide-bitcoin... [3] https://www.iea.org/commentaries/the-carbon-footprint-of-str...

Whether Bitcoin uses less energy today than YouTube is immaterial. (As is whether Bitcoin counts as "sound money", which I'll leave to the side.) What's important is the energy use per transaction, the total of which -- if scaled up to match what's handled by traditional banking -- would be absolutely staggering.

My lifestyle of keeping my high-end PC running all the time, cranking the AC down to 68, turning all the lights on, and so on, would of course use less energy than YouTube. But if everyone behaved as I do it'd be a bad thing (don't tell Kant).

"If scaled up" presumes incorrectly that the costs are somehow linearly bound to the number of transactions, they are not, so that whole line of reasoning is flawed.

Incorrect assumption: miners use energy regardless of the number of transactions going through.

Let's add up the carbon footprint of the traditional financial ecosystem, in whole. I think once all the externalities are factored in (including things like minting and handling physical cash and coin), doing it all on a computer makes more sense even if POW is energy intensive.

Converting energy into economic value is the opposite of waste. That is what mining does.

> I think once all the externalities are factored in, doing it all on a computer makes more sense even if POW is energy intensive.

No, it's not even close. Bitcoin currently uses as much electricity as 31 million US residents. One transaction uses more than two months of average residential usage.

> (including things like minting and handling physical cash and coin)

Why would you include that? Do you think people won't want to carry money? Do you think bitcoin makes cards, POS processors, and cash obsolete? Do physical wallets not take energy to make and run?

Regardless, the amount of energy used to make and use physical money is very small:

1. coins are irrelevant; the most expensive coins are cents, which cost about a cent to make. The total amount of coins made is much smaller than the amount of paper dollars made, so the value of energy used is small compared to the total cash made.

2. The US spends 1 billion annually to mint currency. Bitcoin spends 6.5 billion USD on electricity directly.

Transactions do not have an energy cost unto themselves, blocks do. If the entire world were to stop sending Bitcoin transactions for one hour, it would make almost no difference in the power consumption of the world's miners. Roughly 7 to 10 empty blocks would be produced. The mining process provides network security all on its own, transactions or no transactions.

>Why would you include that?

Because I said "all externalities". Bitcoin competes with the traditional financial system, including all the people and infrastructure involved in cash handling. That includes not just minting, but distributing it, collecting it, counting it, securing it, and so forth. And that is a cost borne not just by the United States federal government, but every government with physical currency and every bank on the planet. The idea that doing all this with physical objects is less power consuming than doing it with data is ridiculous.

If you want to make an honest apples to apples comparison, you include everything. Mining power usage is the single largest driver of bitcoin energy footprint granted, but it has a lot less other stuff attached.

> The mining process provides network security all on its own, transactions or no transactions.

It seems to me that if nobody transacted, nobody would be able to sell Bitcoin, mining rewards would be rendered worthless, and mining would stop.

Sure, you can't point at any given transaction and blame any particular emissions on it, but surely it's reasonable to amortize it and assign a fraction of the emissions during each block to each transaction, considering that Bitcoin has no value without them.

No, because there is no relation between transaction volume and block production times, and this is a protocol level constraint. The network aims to produce a constant number of blocks per hour, which happens no matter how many transactions are available to be included in that block.

Here's an example: If, say, the maximum block size was doubled so they could hold twice as many transactions, this would cut your energy usage figure in half, but actual energy consumption by miners would barely change at all. Similarly, if the maximum block size was halved, your figure would double, but the energy consumed would not. If there were no such thing as a maximum block size, your value then scales linearly with the amount of transactions that can be crammed into 10-ish minutes of time.

I dunno, isn't that like saying "if planes were all half-empty, the carbon emissions of the plane would barely change, so you can't blame the carbon emissions on any of the passengers"? Yes, the "marginal carbon emissions" of a single transaction is ~0, much like the marginal carbon emission of taking an empty seat on an airplane is ~0, but by this logic nobody on the plane is responsible for any carbon emissions, which is obviously silly, so in lieu of any better accounting method, you just amortize the carbon emission of the plane across the passengers.

If the block size was reduced to, say, one transaction, then the economic value of the Bitcoin network would surely drop, mining rewards would be worth less, miners would quit, and the electricity use would fall. It's the economic value of the transactions that end up rewarding miners; I can't see how people transacting on the chain aren't partly responsible for the miners' emissions.

I can't think of any obviously better way to assign a number to that than just amortizing it across the number of transactions. It's a meaningful number that explains something about how much usefulness the network produces per unit of electricity. Doubling that by doubling the block size (or, halving it by halving the block size) would be a meaningful change!

>But by this logic nobody on the plane is responsible for any carbon emissions

That is strictly true. This is why the concept of a personal carbon footprint (something dreamed up by a British Petroleum marketing team) is inherently inane.

>Doubling that by doubling the block size (or, halving it by halving the block size) would be a meaningful change!

How and why? It would change your metric, but it wouldn't make the network consume one single watt less or more power. Its efficiency is unchanged.

A machine that spits out one widget per watt is less efficient than a machine that spits out 10 widgets per watt. Even if there is exactly one widget machine in the world, it is always turned on and always draws the same amount of energy, one type of machine would produce more widgets than the other. That machine is more efficient. It is more useful for the same energy input. It's a totally reasonable metric to compare widget-producing machines by!

If the bitcoin network is a transaction-producing machine, the more energy it takes to produce the same number of transactions, the less efficient it is. All else being equal, spending more money and energy for the same result is worse than spending less money and energy.

You're telling us that since mining costs don't vary with the number of transactions processed, they don't count. Production costs that don't depend on the level of output are called fixed costs. [1] They're still costs. Pretending that a cost doesn't exist doesn't make it cease to exist.

[1] https://en.wikipedia.org/wiki/Fixed_cost

And I'm telling you that the production cost is tied up in blocks, not transactions. This is not up for debate, it is intrinsic to how bitcoin works. If you send a transaction, the only power consumption involved in that act is involved in the transmission of the data and its broadcast to the network.

The monstrous energy usage comes from trying to brute force a single hash. It is entirely decoupled from transaction volume.

You can't send a transaction without mining a block. Therefore all the costs that are incurred mining a block are costs that are incurred sending transactions.

Changing the maximum block size would change the "energy used by a transaction" since block production is a factor of fixed time, not transaction volume, so the comparison is absurd on its face.

But what is the current block size, and what's the plan for changing it?

It's not a comparison. The fact is that the costs of processing bitcoin transactions are predominantly fixed. This tells us that bitcoin doesn't have economies of scale. The average cost of a bitcoin transaction doesn't decrease as the number of transactions increases. This makes bitcoin uncompetitive in relation to pretty much any other transaction processing technology.

And once that block size changes, the energy used per transaction will go down. It's really very simple, stop making it complicated. Blocks are there to hold transactions - that's their whole purpose. The fact that technically you can mine an empty block is an irrelevant detail of the protocol: bitcoin would not keep getting mined if there were no more transactions.

> production cost is tied up in blocks, not transactions

Fixed costs are amortized. The block's footprint is spread across transactions. Arguing otherwise is like someone taking the power bill of a bank to infer the cost per teller-window transaction, and the manager arguing that teller-window transactions don't burn energy, branches do. Yes, sure. But also irrelevant.

And yes, if the branch tripled in size its energy use would reduce the per-teller energy footprint. (Assuming constant transaction volume.) But that's a hypothetical.

>You can still amortize the cost of the block across its transactions

Sure, if you're more interested in talking points then useful metrics. Increasing or decreasing the block size limit would lower or increase the "cost of a transaction" (since blocks are generated on a schedule commensurate with difficulty, which is roughly a function of how many miners there are) without actually changing the amount of power consumed.

What you're doing is basically correlating the world's average temperature versus the number of pirates and declaring that pirates are responsible for global warming. In reality, the two variables are unrelated and not even correlated.

> the block size limit would lower or increase the "cost of a transaction"

Assuming constant transaction volume and other factors related to difficulty. You have a point. But it's far from a panacea for proof of work, and certainly not at the threshold to derail coming taxes and regulation. (Though one might find a way to structure the taxes such that they reward a productive increase in the block size.)

Are you really arguing that the number of blocks and the number of transactions in BitCoin are two variables that are “unrelated and not even correlated“?

Of course they’re related. It’s trivial.

But what do you amortize the fixed cost over? Refugees can use bitcoin to hold money while fleeing dangerous situations. Not being forced to do a transaction is the value in such a case.

> The mining process provides network security all on its own, transactions or no transactions.

The mining process provides a fixed amount of network security. $125,000 per 15000 transactions. The fact that it would still cost that much money even with zero transactions is not a feature. It's not a good thing.

Each individual block is secured. You can't just add more and more transactions to each block without reducing security.

> Bitcoin competes with the traditional financial system, including all the people and infrastructure involved in cash handling.

Right now bitcoin competes with practically nothing. How much pizza is bought with bitcoin vs cash? You're effectively assuming that all those other functions are either irrelevant or that bitcoin can somehow do them for zero cost. Neither is true.

> And that is a cost borne not just by the United States federal government, but every government with physical currency and every bank on the planet.

60% of global federal reserves are in dollars. Dollars are the world's dominant currency. Compared to the massive disparity in energy use, it doesn't matter if even only 10% of global currency is in dollars. Dollars win.

Plus, if you're trying to compare with the places where cash really matters -where they can't use VISA or cell phones to transfer money- then bitcoin is certainly at a huge disadvantage after you have to buy computers for all those people.

> The idea that doing all this with physical objects is less power consuming than doing it with data is ridiculous.

Again, you're not replacing coins with data. You're replacing coins with USB sticks.

But you're right! It IS ridiculous, because it's completely insane how pathetically inefficient bitcoin is.

>The mining process provides a fixed amount of network security. $125,000 per 15000 transactions. The fact that it would still cost that much money even with zero transactions is not a feature. It's not a good thing.

Completely wrong, you cant know exactly how many transactions are processed per bitcoin block. The introduction of the lightning network and other 2nd layers mean any one of the ~1500txs per block could in reality be a batch of a 1,000,000 or more transactions being settled. There could easily be 15,000,000,000,000,000 txs per block, think about what that does to any $/tx calculation.

Bitcoin is cheaper than visa because it is designed to process infinite transactions for a fixed security cost.

Lightning network and other Layer 2 solutions are a joke. Those are only created because the Bitcoin network was intentionally designed to be slow and congested, to make it artificially expensive, and waste ridiculous amounts of electricity in the process. If those things actually worked then someone could make them work with anything else as a settlement layer, even traditional currencies. There is no actual reason for them to use Bitcoin.

So, the reason these systems use something like Bitcoin (or Ethereum, whatever) is because the goal is to build programmatic money, and you can build that on Ethereum and you simply can't directly build that on a "traditional currency" without first writing an adapter (such as some stable coin, as either a centralized regulated entity or as a decentralized protocol) to some decentralized programmatic system that you can then piggy-back on top of as a settlement layer.

The way that then, for example, (and this is really glossing) Lightning works is to provide a number of hypothetical signed Bitcoin transactions that rely on each other in a way where, if someone attempts to screw you over, you can put down one of the other transactions and move to a different state. You make it sound like Bitcoin is purposefully crippled to prevent this kind of performance enhancement, but one of the few and subtle big changes to Bitcoin was to support this!

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

> If the entire world were to stop sending Bitcoin transactions for one hour, it would make almost no difference in the power consumption of the world's miners. Roughly 7 to 10 empty blocks would be produced

Yes, and then the average cost of a transaction would be even higher than the ridiculously high amount it already is.

PoW crypto was using over 1.2 percent of the world's electricity. That's an insane waste irrespective of any kind of comparison to whatever other industries.

> Let's add up the carbon footprint of the traditional financial ecosystem, in whole. I think once all the externalities are factored in (including things like minting and handling physical cash and coin), doing it all on a computer makes more sense even if POW is energy intensive.

Cryptocurrency didn't event the idea of using computer ledgers instead of physical cash and doesn't get to take credit for it. There are dozens of ways to pay by computer that don't involve wasteful PoW.

> Converting energy into economic value is the opposite of waste.

Agreed, but I still don't see the value being produced by the cryptocurrency system. The value (not price, but value) that it delivers compared to traditional visa/mastercard/etc. seems marginal at best (and perhaps even negative once you account for the externalities that cryptocurrency-enabled crime imposes).

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