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The size off this endeavour is starting to consume more effort than is sustainable, not only for most peoples wallets, but also for the planet generally. This
by droffel 11y ago
The size off this endeavour is starting to consume more effort than is sustainable, not only for most peoples wallets, but also for the planet generally.
This is a common misconception, and only really is a "problem" in the initial distribution phase of the currency. Economically, all other things being equal, the cost of electricity spent on mining will approximately equal the mining reward.
The mining reward is approximately equal to (Fees + 50/(2^(floor(Years/4)))), where Years is the number of years since the network's inception. As time passes and the block reward drops off, the security of the network (equivalently, the amount of energy spent on mining) will approach the transaction fees paid for the use of the network.
- Retric 11y agoThe problem with this line of thinking is if someone subsidizes mining by a small fraction of fees paid they can become the largest miner. (A classic monopolistic tactic.) So, really in the long term the network is protected by ~5% of fees paid over an extended period. Worse, miners must be on the internet, so infecting a few machines could let you control the network with minimal investment. At which point double spending is probably more profitable than the minimal coins mined before the infection is detected.
- nunyabuizness 11y agoUnless the hashrate of the sum of miners declines once they stop creating the cryptocurrency and start only validating transactions, the amount of energy spent on mining will always be high and will always be ecologically-unfriendly.
- droffel 11y agoSure, any energy expenditure over and above what would be necessary to run a centralized database can be considered inefficient, and therefore "ecologically unfriendly". However, the hashrate isn't burning energy for no utility: the security of the network is directly proportional to the energy expended in hashing. Considering that the energy is being expended for a purpose (security against malicious actors), and that it is economically infeasible to expend more energy than the marginal fee revenue in a given moment (once we transition from the current block subsidies to a pure fee market), I question whether calling mining "economically unfriendly" is fair. The energy usage will scale linearly (not exponentially) with usage, which seems perfectly alright to me.
- nunyabuizness 11y agoI completely agree with everything you said; however to clarify what I meant originally, I say "ecologically unfriendly" because of all the ways to do distributed consensus, proof-of-work is the least efficient mechanism when compared to the various proof-of-stake algorithms and Ripple/Stellar's cascading consensus model. They all have their own individual tradeoffs (some technical, some political), but when talking about energy consumption, there's no argument that PoW is the most costly.