Converting energy into economic value is the opposite of waste. That is what mining does.
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.
>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.
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.
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.
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!
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.
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.
The monstrous energy usage comes from trying to brute force a single hash. It is entirely decoupled from transaction volume.
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.
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.
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.)
Of course they’re related. It’s trivial.
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.
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.
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!
Yes, and then the average cost of a transaction would be even higher than the ridiculously high amount it already is.
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).