Electricity consumption of Bitcoin: a market-based and technical analysis

http://blog.zorinaq.com/bitcoin-electricity-consumption/

by zdw • 9 years ago

55 48 9 years ago

blog.zorinaq.com

nhaehnle4• 9 years ago

In other words, the Bitcoin network consumes about 5-6 orders of magnitude more electricity than would be required to maintain a similarly-sized ledger using more traditional database techniques.

Yes, the feature set is a bit different, but it's difficult to see how Bitcoin can remain competitive in the long run. I guess it can help push down overheads elsewhere in the financial system, so at least that's a good thing. And it's always been a good educational experience.

mrb10• 9 years ago

"it's difficult to see how Bitcoin can remain competitive"

Quite the contrary, the fact Bitcoin has been successful & growing for 8 years in spite of using so much energy is proof it is a non-problem. Energy per tx is rapidly decreasing (http://blog.zorinaq.com/bitcoin-mining-is-not-wasteful/) so it will only become more and more competitive from now on.

rspeer4• 9 years ago

Let's hope it doesn't! Here's a Fermi problem to show how horrifying the prospect of Bitcoin succeeding is:

By this blog post's estimate, Bitcoin currently consumes about 500 MW of power. As others have estimated, Bitcoin processes about 3 transactions per second.

The world currently consumes about 2.38 TW of power.

If Bitcoin were a commonly-used currency -- if, for example, a billion people in the developed world each made an average of one Bitcoin transaction per day -- then Bitcoin would have to run 4,000 times faster than it currently does, consuming 2 TW of power, which is most of the power in the world.

runeks3• 9 years ago

The point of Bitcoin is to consume as much electricity, roughly, as a block is worth. Consuming this electricity, and using it to calculate a proof of the consumed electricity, means that the blockchain becomes immutable: no one can change the past, because it would require re-doing the proof-of-work.

So, out of this -- seemingly meaningless -- activity of burning off energy, arises the trustless property of the Bitcoin blockchain: with digital currencies that use proof-of-stake, or an SQL backend, every participant could -- theoretically -- have mutually agreed on assigning themselves 100x as many currency units, right before you enter and buy $1000 worth. There's no way to prove that this didn't happen, as it takes little effort to change history. This is unacceptable for a digital currency, hence the need for proof-of-work, and Bitcoin.

ben_w• 9 years ago

On the one hand, if each coin is worth 1/10th its cost, nobody will mint them. On the other hand, if each coin is worth 10x as much as it cost to make, people make their own and the price collapses.

That applies equally to gold coins as bitcoins.

I suspect bitcoin is, in its current form, incapable of replacing a major currency, because if it become a dominant currency then someone would beg, borrow, and steal just enough bitcoin to buy just enough compute power to get half of the bitcoin computer pool, from there using their new power to double-spend their way to getting even more computer power (while blocking other transactions that might try to out-bid them), and ultimately using that power to rewrite the consensus reality of the blockchain to say they now own as much as they want to say they own.

Even if the bitcoin wiki is correct to expect no rational miner will attempt this, there are plenty of irrational actors when enough money is dangled in front of them, even when it is only a mirage (citation: every lottery).

nhaehnle4• 9 years ago

It's easy to change history with a plain SQL backend. But in any approach that stores the ledger in anything that boils down to a publicly distributed Merkle DAG, changing history or other manipulation like generating assets from nothing is impossible to do in secret.

The only potential issue is double-spending, or to be more precise, invalidating a transaction after the fact by pretending that a different, conflicting one, came first. This problem could be solved much more cheaply than in Bitcoin by using signatures by a trusted (e.g. elected) well-known council.

The only problem with that approach is how to bootstrap the value of such an alternative currency. Bitcoin somehow achieved that by appealing to a mixture of cypherpunk and libertarian ideology, and from there it developed to the current status which is an entirely circular origin to the value. I don't know what the alternatives for bootstrapping are. Fiat currencies can bootstrap via taxation, but that's not really an option here. Perhaps something like getting Valve to use such a system for their card trading :)

ballenf• 9 years ago

Bitcoin is both the ledger and the printing/minting mechanism and the delivery mechanism (armored cars delivering new bills & coins to banks and picking up and destroying old ones).

Factor in those costs and suddenly bitcoin is bargain, energy-wise.

nhaehnle4• 9 years ago

An SQL database with a simple front-end could be all of those things you named, and much more cheaply than Bitcoin.

The real issues lie elsewhere.

linsen• 9 years ago

They make the assumption that unprofitable hardware has been retired. But this assumes that the person profiting from the mining is also paying for the electricity.

foepys• 9 years ago

But this assumes that the person profiting from the mining is also paying for the electricity.

Otherwise it doesn't make sense. You cannot steal electricity forever.

empath75• 9 years ago

You can hack into new aws accounts forever.

peter303• 9 years ago

At one ton of CO2 per megawatt hour, we could be looking at 2 million tons CO2 a year. https://www.eia.gov/tools/faqs/faq.cfm?id=74&t=11

100 gallons of gasoline also creates a ton of CO2 for context.

pmorici• 9 years ago

You are assuming the mining electricity comes predominately from fossil fuels which couldn't be further from reality. In reality the cheapest power is often in areas where hydroelectric is the dominate power source and miners choose their location based on availability of cheap power. Look at Washington State for example. It's a major producer of hydropower, has the cheapest electric rates in the US, and has a large number of Bitcoin mining facilities. Even in China it holds true that many mining facilities are in areas supplied by hydro electric power.

mrb10• 9 years ago

Author here. You are absolutely right. Petroleum- or coal-produced electricity is typically too expensive for miners.

api• 9 years ago

Power grids are big. Using hydro for mining means more fossil fuel must be burned elsewhere to make up for inability to import hydro.

To give an example of just how big: Los Angeles metro imports power from Washington and Oregon via a HVDC line.

npongratz• 9 years ago

100 gallons of gasoline also creates a ton of CO2 for context.

I thought I understood the Law of Conservation of Mass, but I guess I do not. If 100 gallons of gasoline has a mass of ~283.49 kg [0], how is a ton of carbon dioxide created from this?

[0] Maybe I'm wrong to use the first site that came up, but I used http://www.aqua-calc.com/calculate/volume-to-weight/substanc...

DougBTX• 9 years ago

Gasoline mostly contains carbon, the oxygen in carbon dioxide comes from the air, adding to the final mass of carbon dioxide.

schwabacher• 9 years ago

Carbon atoms from the gasoline each combine with two oxygen atoms from the air to produce a carbon dioxide molecule, meaning the bulk of the mass of the resulting co2 actually comes from the atmosphere.

c517402• 9 years ago

When an ~6 lb US gallon of no-ethanol gasoline is burned, it produces ~20 lbs of CO2 and ~8 lbs of H2O. The extra 22 lbs coming from oxygen in the air.

canadian_voter• 9 years ago

In the future bitcoin[1] mining is banned on inhabited planets and instead done on Dyson spheres.

[1] It's the future, so neither bitcoin nor internet are capitalized.

bitxbitxbitcoin2• 9 years ago

I knew I couldn't be the only person with this thought. Solar powered Bitcoin mining will eventually be economically viable :).

vivekd• 9 years ago

if this happens, bitcoin would become valueless. The value of bitcoin comes from the fact that you can't just pump them out, the energy requirements required to solve the calculations required for mining are one of the limits to bitcoin production. Free energy like feasible solar or dyson spears would just be a license to print free digital currency making it worthless.

aakilfernandes• 9 years ago

The network recalculates payoffs based on the hashrate. If electricity becomes cheaper, hashrate goes up, and the payoff per hash goes down.

adrianN• 9 years ago

Dyson spheres are not free to construct and the energy they provide is limited.

n00b101• 9 years ago

I think a rough estimate of the cost of 500MWh/year is $500 million per year. That doesn't include cooling, hardware, real-estate, staff and other operating expenses. I guess the majority of this cost is ultimately paid for by speculators who buy Bitcoins off of the miners.

hollerith• 9 years ago

$500 million per year is roughly what I get, too, but 500MWh/year is very different from 500MW, which is what I think you meant to write since the OP expresses its conclusion in MW.

tbihl• 9 years ago

A growing trend is to mine Bitcoin in Venezuela, where the electricity is hugely subsidized, mining can pay better than something like being a doctor, and you can get food sent in from Miami (since your income is in a widely accepted currency.)

Good Econtalk on the subject: http://www.econtalk.org/archives/2017/02/jim_epstein_on.html

danblick3• 9 years ago

If you accept that (1) there are economies of scale in Bitcoin mining and (2) miners are rational and will only mine when it is profitable, then doesn't this suggest that large amounts of mining power should become concentrated in the hands of just a few major miners? Doesn't that seriously undermine Bitcoin's validity?

danblick3• 9 years ago

This article seems to support my suggestion.

https://www.cryptocoinsnews.com/declining-profitability-for-...

Quoting the conclusion of the referenced paper:

"Each future halving of the Bitcoin block reward will narrow the range of profitable entry for new Bitcoin miners considerably. The stronger relative position of incumbents compared to that of new entrants supports further consolidation of Bitcoin mining. Consequently, the distributed Bitcoin ledger, the blockchain, may become more vulnerable to attack, and its trustless nature may ultimately even be destroyed."

globuous• 9 years ago

" Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free" - btc whitepaper

Transaction fees will take over mined bitcoins once there is non left to mine.

Electricity consumption of Bitcoin: a market-based and technical analysis

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