How many Bitcoins does it cost to maintain the Bitcoin network?

http://letstalkbitcoin.com/blog/post/how-many-bitcoins-does-it-cost-to-maintain-the-bitcoin-network

by polymathist • 12 years ago

33 21 12 years ago

patio11• 12 years ago

All of them. Literally. All Bitcoins were created via segniorage. However many billion dollars of market cap as it exists today is the present value of payment for past work in securing the future of the blockchain. The market value [+] doesn't come from nowhere - it's a transaction fee paid by later adopters to earlier adopters for the privilege of being able to transact on their blockchain.

If future prospective adoptees believe that fee is too high, well, it can get renegotiated down in a hurry, and will be.

[+] Slight mangling of terms here, since market value is number of coins times last trade price, and that won't correspond to the sum of all dollar-denominated capital inflows into Bitcoin.

zokier• 12 years ago

A more practical question would be how large are the CO2 emissions of maintaining Bitcoin network.

21echoes4• 12 years ago

I've been saying this for over a year now -- BitCoin will not succeed because it simply cannot offer competitive transaction fees. Merchants are upset enough by the ~3% they're paying to VISA or AmEx on every swipe, they're not going to move to a system that costs $30.

icebraining3• 12 years ago

That's not the true cost of accept VISA, since every time there's a chargeback, the merchant is also the one who pays the bill, not only with lost merchandising, time, etc but potentially fees (e.g. Stripe charges $15 per chargeback).

21echoes4• 12 years ago

Sure, but chargeback rates are low enough (somewhere between 0.2% and 0.4% of revenue for online merchants, much much lower for brick-and-mortar) that it's inconsequential when comparing it to flat rate $30. Additionally, 3% is about as high as VISA rates go -- WalMart, McDonalds, and the rest pay lower.

jamoes2• 12 years ago

First off, it's spelled "Bitcoin", not "BitCoin". Spelling it the latter way looks wrong in the same way that "FireFox" or "FaceBook" looks wrong.

Secondly, even if the author is correct about the $30/transaction figure - this is still competitive with bank wires, which currently charge $25 or more (often up to double that for international wire transfers).

Finally, there are many other benefits to bitcoin other than lower transaction fees. They're difficult to confiscate, immune to monetary inflation, and they don't require a trusted third-party.

21echoes4• 12 years ago

but nowhere near competitive with the credit card network, or the money transfer systems in every developed country other than the US (most of which do real-time transfers for less than pennies on the dollar). Even in the US, I guarantee that ACH will die faster than Bitcoin will get cheap

nazgulnarsil• 12 years ago

The guy doesn't grasp the basic premise of PoW schemes. Yes, it costs close to a Bitcoin to make a Bitcoin. That Bitcoin, once created, is a REUSABLE PROOF OF WORK.

api• 12 years ago

The real question is: how much does it really cost to clear a transaction? And how much of that cost is being hidden via being subsidized through a speculative mining frenzy? What happens to real-world TX costs when mining isn't a hot thing anymore?

icebraining3• 12 years ago

The real question is: how much does it really cost to clear a transaction?

Anywhere from a fraction of a cent to millions of dollars. Bitcoin transactions don't have a fixed cost, it depends on how many people are mining. More miners => increased difficult => higher costs.

wmf2• 12 years ago

how much does it really cost to clear a transaction?

One way to look at that is (25 BTC / block) / (# of transactions / block). About 60 mBTC/transaction given https://blockchain.info/charts/n-transactions-per-block

Fortunately the transaction itself does not have to pay for its own processing.

Estragon• 12 years ago

  > if Bitcoin was a cheaper or more efficient transaction method,
  > for-profit organizations such as large payment processors would have
  > forked it long ago and would likely already be using it internally in
  > order to shore up their margins.

This guy is clueless. The whole point of bitcoin is that it appeals to people who want a decentralized medium of exchange. It's basically useless to large payment processors.

mcherm• 12 years ago

I don't think he is clueless, I think he is trying to make a point.

Some people have internalized the message "Bitcoin is good". They then draw inaccurate conclusions from this message. Things like "Bitcoin is anonymous... more so than cash!" (This is not true. Bitcoin is pseudonymous, but transactions are very public and it offers LESS anonymity than cash.)

Some people have drawn the conclusion "Bitcoin is cheap... cheaper than the standard ways that a bank manages their balances." This is also false. Bitcoin actually requires significantly more computation (and thus cost) than simply keeping a single centralized ledger -- exactly why and how is what the article explains.

What Bitcoin DOES have going for it over the centralized ledger is that it does not require trust in any individual participant in the system. Depending on your goals, that may well be valuable enough to be willing to put up with a large multiplier on your transaction costs.

vijayboyapati• 12 years ago

"Let us be quite clear: if Bitcoin was a cheaper or more efficient transaction method, for-profit organizations such as large payment processors would have forked it long ago and would likely already be using it internally in order to shore up their margins."

This is quite a presumptuous lede. Bitcoin itself has only really been around for 5 years, and of that only entered the public consciousness for about 2. Large payments companies are like all large companies; they tend to be slow, bureaucratic and have to deal with internal politics to get anything done. On top of this, Bitcoin solved a long standing problem in computer science that many people believed was not solvable (Satoshi's original post on the cypherpunk list received a lot of skepticism when it was first posted). No large company would have precipitously risked their entire technology stack on something so unproven. Even Gavin Andresen is careful to say Bitcoin is still "in beta". And only now are some large companies starting to accept bitcoin in payment, which is a much weaker step than replacing their internal payment infrastructure. This stuff takes time, and this cycle of optimism and pessimism seems to repeat itself with every revolutionary technology:

T1. New technology X is going to change everything and the world will be amazing!

T2 (only short while after T1). Nothing has changed, the world is still the same, X is a failure.

...

TN: Whoa, we use X a lot now.

kristianp• 12 years ago

Increased centralisation, due to economies of scale for miners, is bad. Peercoin offers a reward for operating a node (provided you have a balance of Peercoins), due to its proof-of stake (POS) hybrid mining scheme. Bitcoin's reward for operating a full node is having access to the network, but you don't have any say in what transactions are confirmed unless you run a miner.

Peercoin seems better from this point of view, because it provides a method to reward decentralisation. Economically, I have no idea. The POS blocks pay you a % of your balance, inflating the currency, but at a much smaller energy usage ( a fraction of one cpu)

How many Bitcoins does it cost to maintain the Bitcoin network?

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