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I'm interested to hear more about his claims that bitcoin uses more energy than other forms of currency. Can anyone speak to that?

wlesieutre 11y ago
From earlier this year: > A more fundamental worry is that digital-currency mining, like other sorts of mining, has environmental costs: all that number-crunching uses a lot of electricity, and not all of it comes from renewable sources, as it does in Boden. The rapid development of the ASICs chips has made the machines more efficient, but even if all mining worldwide were carried out in modern facilities like Boden’s, the combined electricity consumption would be 1.46 terawatt-hours per year—the consumption of about 135,000 average American homes. http://www.economist.com/news/business/21638124-minting-digital-currency-has-become-big-ruthlessly-competitive-business-magic http://www.economist.com/news/business/21638124-minting-digi... The whole consensus network of Bitcoin is based around burning so much energy/space/infrastructure on hashing that a single actor wouldn't be able to invest a bunch of money and take a controlling majority. I can't speak to how much energy we burn with ACH systems, paper money, etc., but those are much bigger than Bitcoin in terms of usage. If you add up the total energy consumed by every bank and mint in the world, you might get a higher absolute number. In terms of energy used per amount of value transferred, the traditional currencies almost certainly win.
- josu 11y ago
  >The whole consensus network of Bitcoin is based around burning so much energy/space/infrastructure on hashing that a single actor wouldn't be able to invest a bunch of money and take a controlling majority. If you have the time and you don't mind, could you elaborate on that? It just doesn't sound right to me. What is the mechanism that discourages big investments? As far as I can tell, there seem to be some economies of scale, that's why there are mining farms. From the bitcoin wiki "Attacker has a lot of computing power": "Since this attack doesn't permit all that much power over the network, it is expected that no one will attempt it. A profit-seeking person will always gain more by just following the rules, and even someone trying to destroy the system will probably find other attacks more attractive. However, if this attack is successfully executed, it will be difficult or impossible to "untangle" the mess created -- any changes the attacker makes might become permanent." [1] https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...
  - jfoutz 11y ago
    It's not that an attacker can't win that way, the point is to play in the bitcoin world, miners must spend a lot of time doing intentionally inefficient things. They spend a lot of energy calculating the hashes, by default. playing by the rules means doing lots of calculations that get thrown away.
    - josu 11y ago
      Sure, I understand that. My problem is with this statement: >The whole consensus network of Bitcoin is based around burning so much energy/space/infrastructure on hashing that a single actor wouldn't be able to invest a bunch of money and take a controlling majority. I just don't think that's true. The only thing keeping one big player from taking over the network is scale. I really don't think that the "whole consensus network of Bitcoin is based around" what he says it is, since it's not necessary. Yes, there is a proof of stake, but it has nothing to do with "burning so much energy/space/infrastructure on hashing that a single actor wouldn't be able to invest a bunch of money and take a controlling majority". It's just a way to create the right incentives for people to want to mine.
      - jfoutz 11y ago
        Perhaps your point is more subtle than i'm catching on to, but this is right out of the bitcoin paper abstract: "The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers." https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf So, literally the group that burns the most energy/space/infrastructure is correct, as far as the system is concerned. if an attacker can burn more cpu, generate a longer chain, they win.
      - wlesieutre 11y ago
        Maybe my wording is exaggerated. But the huge scale you'd need for a majority attack is the reason it's not viable, and the network is designed to encourage mining to drive that scale up. As the wiki points out, potential gains aren't total control: you get to reverse transactions but can't directly steal coins out of someone else's wallet. With a system of independent agents all trying to game the system to make money, it comes down to a cost/benefit analysis. If Bitcoin weren't designed to have the network scale that it does, the cost of making that attack could be cheap enough for it to be worth doing. But since the mining incentives are made to drive terawatt-hours of energy used in huge datacenters, the attack doesn't make economic sense. That's what I mean by saying the consensus system is built around having a huge network.
pjc50 11y ago
The proof-of-waste system means that, at market equilibrium, the cost of burning electricity to mine one block and get the 25 bitcoin reward should be equal to the cost of buying it on the open market. Currently this works out as about $7 of electricity per transaction. https://blockchain.info/charts/cost-per-transaction https://blockchain.info/charts/cost-per-transaction
- lifeisstillgood 11y ago
  That is per block yes? And each block has upto 01Mb of transactions?
  - eru 11y ago
    People are increasing the transaction limit.
    - pjc50 11y ago
      I hear this is encoutering resistance as it reduces the likelihood of people giving non-trivial fees to miners?
    - bduerst 11y ago
      This has been talked about for over a year now and the miners have made it pretty clear they're not going to adopt it, especially given that these failing "stress tests" generate more profit for them. Even XT adoption is abysmal.
      - aianus 11y ago
        > miners have made it pretty clear they're not going to adopt it Source? Commercial miners make the vast majority of their money on the block reward which has nothing to do with the size of the block. If anything, they'll make more money with less variance with a larger block (since small miners with worse connectivity will have a higher orphan rate). The only people I've seen opposing a block size increase are idealists who are afraid of further centralization of mining power as hobbyist/small miners will have a more difficult time participating (you'll need faster internet and larger hard drives). My money is on a block size increase in the next 1-2 years.
IkmoIkmo 11y ago
Bitcoin uses a proof of work system as a form of security in a decentralised system. At the end of the day, there's a certain cost per block, which approaches the reward for mining that block. Today you can fit hundreds of transactions into one such block, imagine a block like a mail package that holds all the world's transactions of the last 10 minutes or so, which is sent to everyone else who record those transactions, and imagine posting that package has a price. It's technically an incorrect analogy but it's just that, an analogy. But here's the thing, the block is digital and as bandwidth, storage and CPU inevitably scales up, you can eventually fit millions of transactions in that block, making each individual transaction much cheaper (despite the fact block rewards go up, too). And that's been the trend so far, every year transaction costs drop and electricity costs per value of money sent drops. It's quite likely that if bitcoin does become a popularly used worldwide digital ledger that the cost of electricity would be pretty trivial, to register any entry on the ledger (which could represent say 0.0001 bitcoin, but it could also represent a barrel of oil, or a million barrels of oil or a billion dollars, if you wanted to. Once you have a ledger you can write to you can make it represent anything you want really). In short, the claim isn't incorrect today, it uses a lot of energy relative to its utility as a value network, but it's one of those things where the theory on paper, and the current trends in practice, show that the problem will solve itself over time. It reminds me of the endless stream of journalists decades ago who kept saying solar had no future because its embodied energy was more than it could generate, which was a partial truth in the 1980s and one that was rarely mentioned alongside the fact in theory it didn't have to be this way and in practice the trend showed it was getting solved over time. Today payback times of embodied energy went down from 50 years (for panels with a 20 year lifespan) to a fraction of a single year. Funny enough, you can still find people saying these things to this very day, ah well. If you want to know the rough numbers... well money spent on getting x reward will approach x. Assuming 75% of the money miners spend on getting the block reward (the other 25% going to manufacturing or procuring the hardware, management etc etc), and knowing the price of a bitcoin is $240 and every day roughly 3600 coins are mined, then electricity expenditure is about $650k per day worldwide. Worldwide electricity consumption is about $3 billion (very much a back of the envelope calculation) a day at a hypothetical 10c a kwh, for the US alone total energy expenditures exceed a trillion a year. Bitcoin today is relatively wasteful for the utility it provides today that's for certain, but it's looking pretty good for the future, and in the grand scheme of things it's a really tiny operation in absolute terms. What's interesting is that a lot of the bitcoin mining has sought out cheap electricity, e.g. Iceland where renewables are between 99 and 100% of electricity, there's a limited environmental impact to mining there and as prices are so cheap, multiple big miners have set up shop there in the past. Finally it's important to realise that the cost of validating a transaction is pretty much near zero. The electricity waste is in the proof of work, which is hashing and it's just as hard whether you hash 1 or 1 trillion transactions. Further, the amount wasted is based on the block reward which is ridiculously high in the first years of bitcoin because of its distribution system. When the block reward drops, the amount of waste drops, and every day this inches closer to a more market-driven price of a transaction, thereby reward for mining and thereby the cost of waste invested to reap that reward. In short we're seeing, by design, a few years of ridiculously high waste-per-value transmitted to essentially kickstart the bitcoin ecosystem and distribute bitcoins, which drops every year. So again, the waste isn't necessarily tied to a transaction, whether a block has 0 transactions or a million, is no different for hashing and 99% of the reward today is still the block reward (i.e., irrespective of the amount of transactions). So anyone citing a cost per transaction figure is very misleading even though it's not incorrect in some way, because that cost is not marginal but fixed and exists even if there are 0 transactions and is therefore not a 'per transaction' cost. A bit like if you maintain a bridge for $100 a day and 1 person walks on it, doesn't mean the cost of walking on the bridge is $100 per person, it's actually 0 because if you walk 0 or 100 people over the bridge, the fixed cost is always $100 and the marginal cost is always $0. Obviously a bridge has capacity limitations, but bitcoin as a digital ledger has much fewer. The total bandwidth of bitcoin today, no joke, is 1 mb per 10 minutes, or about 1.7 kb per second. We could increase that by orders of magnitude in the coming years and be okay, meaning whatever 'cost per transaction' anyone cites would also drop by orders of magnitude. Anyway I'm rambling but the cost/waste argument always feels a bit disingenuous given a medium to long-term context in which it gets less wasteful every year, and given in the short-term it's pretty minor in absolute terms anyway.
joosters 11y ago
http://www.abc.net.au/news/2015-10-06/quiggin-bitcoins-are-a-waste-of-energy/6827940 http://www.abc.net.au/news/2015-10-06/quiggin-bitcoins-are-a...
Tycho 11y ago
But you can run the calculations anywhere, like a solar powered data centre in the desert, so it's not really a inescapable problem.

wlesieutre 11y ago

From earlier this year: > A more fundamental worry is that digital-currency mining, like other sorts of mining, has environmental costs: all that number-crunching uses a lot of electricity, and not all of it comes from renewable sources, as it does in Boden. The rapid development of the ASICs chips has made the machines more efficient, but even if all mining worldwide were carried out in modern facilities like Boden’s, the combined electricity consumption would be 1.46 terawatt-hours per year—the consumption of about 135,000 average American homes. http://www.economist.com/news/business/21638124-minting-digital-currency-has-become-big-ruthlessly-competitive-business-magic http://www.economist.com/news/business/21638124-minting-digi... The whole consensus network of Bitcoin is based around burning so much energy/space/infrastructure on hashing that a single actor wouldn't be able to invest a bunch of money and take a controlling majority. I can't speak to how much energy we burn with ACH systems, paper money, etc., but those are much bigger than Bitcoin in terms of usage. If you add up the total energy consumed by every bank and mint in the world, you might get a higher absolute number. In terms of energy used per amount of value transferred, the traditional currencies almost certainly win.

josu 11y ago
>The whole consensus network of Bitcoin is based around burning so much energy/space/infrastructure on hashing that a single actor wouldn't be able to invest a bunch of money and take a controlling majority. If you have the time and you don't mind, could you elaborate on that? It just doesn't sound right to me. What is the mechanism that discourages big investments? As far as I can tell, there seem to be some economies of scale, that's why there are mining farms. From the bitcoin wiki "Attacker has a lot of computing power": "Since this attack doesn't permit all that much power over the network, it is expected that no one will attempt it. A profit-seeking person will always gain more by just following the rules, and even someone trying to destroy the system will probably find other attacks more attractive. However, if this attack is successfully executed, it will be difficult or impossible to "untangle" the mess created -- any changes the attacker makes might become permanent." [1] https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...
- jfoutz 11y ago
  It's not that an attacker can't win that way, the point is to play in the bitcoin world, miners must spend a lot of time doing intentionally inefficient things. They spend a lot of energy calculating the hashes, by default. playing by the rules means doing lots of calculations that get thrown away.
  - josu 11y ago
    Sure, I understand that. My problem is with this statement: >The whole consensus network of Bitcoin is based around burning so much energy/space/infrastructure on hashing that a single actor wouldn't be able to invest a bunch of money and take a controlling majority. I just don't think that's true. The only thing keeping one big player from taking over the network is scale. I really don't think that the "whole consensus network of Bitcoin is based around" what he says it is, since it's not necessary. Yes, there is a proof of stake, but it has nothing to do with "burning so much energy/space/infrastructure on hashing that a single actor wouldn't be able to invest a bunch of money and take a controlling majority". It's just a way to create the right incentives for people to want to mine.
    - jfoutz 11y ago
      Perhaps your point is more subtle than i'm catching on to, but this is right out of the bitcoin paper abstract: "The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers." https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf So, literally the group that burns the most energy/space/infrastructure is correct, as far as the system is concerned. if an attacker can burn more cpu, generate a longer chain, they win.
    - wlesieutre 11y ago
      Maybe my wording is exaggerated. But the huge scale you'd need for a majority attack is the reason it's not viable, and the network is designed to encourage mining to drive that scale up. As the wiki points out, potential gains aren't total control: you get to reverse transactions but can't directly steal coins out of someone else's wallet. With a system of independent agents all trying to game the system to make money, it comes down to a cost/benefit analysis. If Bitcoin weren't designed to have the network scale that it does, the cost of making that attack could be cheap enough for it to be worth doing. But since the mining incentives are made to drive terawatt-hours of energy used in huge datacenters, the attack doesn't make economic sense. That's what I mean by saying the consensus system is built around having a huge network.

pjc50 11y ago

The proof-of-waste system means that, at market equilibrium, the cost of burning electricity to mine one block and get the 25 bitcoin reward should be equal to the cost of buying it on the open market. Currently this works out as about $7 of electricity per transaction. https://blockchain.info/charts/cost-per-transaction https://blockchain.info/charts/cost-per-transaction

lifeisstillgood 11y ago
That is per block yes? And each block has upto 01Mb of transactions?
- eru 11y ago
  People are increasing the transaction limit.
  - pjc50 11y ago
    I hear this is encoutering resistance as it reduces the likelihood of people giving non-trivial fees to miners?
  - bduerst 11y ago
    This has been talked about for over a year now and the miners have made it pretty clear they're not going to adopt it, especially given that these failing "stress tests" generate more profit for them. Even XT adoption is abysmal.
    - aianus 11y ago
      > miners have made it pretty clear they're not going to adopt it Source? Commercial miners make the vast majority of their money on the block reward which has nothing to do with the size of the block. If anything, they'll make more money with less variance with a larger block (since small miners with worse connectivity will have a higher orphan rate). The only people I've seen opposing a block size increase are idealists who are afraid of further centralization of mining power as hobbyist/small miners will have a more difficult time participating (you'll need faster internet and larger hard drives). My money is on a block size increase in the next 1-2 years.

IkmoIkmo 11y ago

Bitcoin uses a proof of work system as a form of security in a decentralised system. At the end of the day, there's a certain cost per block, which approaches the reward for mining that block. Today you can fit hundreds of transactions into one such block, imagine a block like a mail package that holds all the world's transactions of the last 10 minutes or so, which is sent to everyone else who record those transactions, and imagine posting that package has a price. It's technically an incorrect analogy but it's just that, an analogy. But here's the thing, the block is digital and as bandwidth, storage and CPU inevitably scales up, you can eventually fit millions of transactions in that block, making each individual transaction much cheaper (despite the fact block rewards go up, too). And that's been the trend so far, every year transaction costs drop and electricity costs per value of money sent drops. It's quite likely that if bitcoin does become a popularly used worldwide digital ledger that the cost of electricity would be pretty trivial, to register any entry on the ledger (which could represent say 0.0001 bitcoin, but it could also represent a barrel of oil, or a million barrels of oil or a billion dollars, if you wanted to. Once you have a ledger you can write to you can make it represent anything you want really). In short, the claim isn't incorrect today, it uses a lot of energy relative to its utility as a value network, but it's one of those things where the theory on paper, and the current trends in practice, show that the problem will solve itself over time. It reminds me of the endless stream of journalists decades ago who kept saying solar had no future because its embodied energy was more than it could generate, which was a partial truth in the 1980s and one that was rarely mentioned alongside the fact in theory it didn't have to be this way and in practice the trend showed it was getting solved over time. Today payback times of embodied energy went down from 50 years (for panels with a 20 year lifespan) to a fraction of a single year. Funny enough, you can still find people saying these things to this very day, ah well. If you want to know the rough numbers... well money spent on getting x reward will approach x. Assuming 75% of the money miners spend on getting the block reward (the other 25% going to manufacturing or procuring the hardware, management etc etc), and knowing the price of a bitcoin is $240 and every day roughly 3600 coins are mined, then electricity expenditure is about $650k per day worldwide. Worldwide electricity consumption is about $3 billion (very much a back of the envelope calculation) a day at a hypothetical 10c a kwh, for the US alone total energy expenditures exceed a trillion a year. Bitcoin today is relatively wasteful for the utility it provides today that's for certain, but it's looking pretty good for the future, and in the grand scheme of things it's a really tiny operation in absolute terms. What's interesting is that a lot of the bitcoin mining has sought out cheap electricity, e.g. Iceland where renewables are between 99 and 100% of electricity, there's a limited environmental impact to mining there and as prices are so cheap, multiple big miners have set up shop there in the past. Finally it's important to realise that the cost of validating a transaction is pretty much near zero. The electricity waste is in the proof of work, which is hashing and it's just as hard whether you hash 1 or 1 trillion transactions. Further, the amount wasted is based on the block reward which is ridiculously high in the first years of bitcoin because of its distribution system. When the block reward drops, the amount of waste drops, and every day this inches closer to a more market-driven price of a transaction, thereby reward for mining and thereby the cost of waste invested to reap that reward. In short we're seeing, by design, a few years of ridiculously high waste-per-value transmitted to essentially kickstart the bitcoin ecosystem and distribute bitcoins, which drops every year. So again, the waste isn't necessarily tied to a transaction, whether a block has 0 transactions or a million, is no different for hashing and 99% of the reward today is still the block reward (i.e., irrespective of the amount of transactions). So anyone citing a cost per transaction figure is very misleading even though it's not incorrect in some way, because that cost is not marginal but fixed and exists even if there are 0 transactions and is therefore not a 'per transaction' cost. A bit like if you maintain a bridge for $100 a day and 1 person walks on it, doesn't mean the cost of walking on the bridge is $100 per person, it's actually 0 because if you walk 0 or 100 people over the bridge, the fixed cost is always $100 and the marginal cost is always $0. Obviously a bridge has capacity limitations, but bitcoin as a digital ledger has much fewer. The total bandwidth of bitcoin today, no joke, is 1 mb per 10 minutes, or about 1.7 kb per second. We could increase that by orders of magnitude in the coming years and be okay, meaning whatever 'cost per transaction' anyone cites would also drop by orders of magnitude. Anyway I'm rambling but the cost/waste argument always feels a bit disingenuous given a medium to long-term context in which it gets less wasteful every year, and given in the short-term it's pretty minor in absolute terms anyway.

joosters 11y ago

http://www.abc.net.au/news/2015-10-06/quiggin-bitcoins-are-a-waste-of-energy/6827940 http://www.abc.net.au/news/2015-10-06/quiggin-bitcoins-are-a...

Tycho 11y ago

But you can run the calculations anywhere, like a solar powered data centre in the desert, so it's not really a inescapable problem.