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>The correct comparison would be to compare the cost of Bitcoin to U.S. dollars or gold. Gold requires hundreds of dollars per ounce and untold energy to extrac

>The correct comparison would be to compare the cost of Bitcoin to U.S. dollars or gold. Gold requires hundreds of dollars per ounce and untold energy to extract. U.S. dollars require the existence of a powerful economy and trillion dollar military to keep the currency secure and desirable. No it isn't- the energy cost of bitcoin is ongoing and depends on the volume of transactions. Each time money changes hands, it costs energy to verify it. Comparing it to VISA or ACH makes the most sense, because those also incur ongoing costs per transaction.

alister 9y ago
If read the article correctly, he's including the cost of mining Bitcoin, not merely energy cost to verify a coin (which is absolutely trivial). Once all Bitcoin is mined (yes, there's a built-in maximum), or it becomes prohibitively expensive to mine, there won't be any mining costs. You can look at the current Bitcoin energy costs as the startup cost to establish a new gold mine or a new country with its own currency.
- acchow 9y ago
  > Once all Bitcoin is mined (yes, there's a built-in maximum), or it becomes prohibitively expensive to mine, there won't be any mining costs. In that future you will still mine blocks, but there won't be any new bitcoin generated in that block. Sure, you might want to use a different word for that than "mining", but it will still have very real and significant energy.
  - tylersmith 9y ago
    "Validators" is the more generic for term what are also called miners or stakers.
- jstanley 9y ago
  Once all bitcoin is mined, there will still be mining costs, but they'll be 100% paid by tx fees. Bitcoin will probably look extremely different by then, so most bets are off anyway.
- cloudhead 9y ago
  Not quite, even when the cap is reached, new blocks will still need to be created for new transactions, which will require proof-of-work to achieve consensus, and thus energy expenditure.
- hwillis 9y ago
  Mining always needs to happen. Once it stops producing coins, the cost burden just moves over to the people using the currency. The mining cost only decreases if the proof-of-work difficulty decreases. If mining becomes less profitable, fewer people will mine and the proof-of-work will tune to be less difficult, but the cost never disappears and there's still a huge amount of energy wasted in the selection process for adding blocks. If too few people mine the currency will be totally destabilized.
proofofstake 9y ago
For a fair comparison we should look at "energy" in an abstract manner. Time and money is energy too. Every time gold exchanges hands, it also costs energy.
- spiorf 9y ago
  Think about the energy expended to take that gold out of earth. And to make the chemicals for extractions....
spiorf 9y ago
This is very wrong. It does not work that way at all. Volume or value of transactions has nothing to do with the energy expended. The energy is needed to calculate a mathematic proof that makes sure your transaction cannot be reversed or tampered with. This mathematic proof on average is calculated every 10 minutes, with no correlation to the number of transactions. You make a transaction, and if the bitcoin network has expended 1TWh after you sent it, at least 2TWh are needed to reverse that transaction (and/or any other transaction). You can see how over time it becomes impossible, even with unlimited money, to reverse one.
- hwillis 9y ago
  The hashing is merely a way to choose a random block. It's not a proof and it doesn't do anything fancy. It just picks a random computer to say "this is how the transaction history looks". The energy increases with the volume of transactions because there will be more people calculating hashes. The more people mining, the harder they make the hash calculation so that the target is ten minutes. More transactions = more people mining because there is more demand to verify blocks.
  - spiorf 9y ago
    I repeat, you got it very wrong. Transaction number is not correlated with mining energy expenditure. Mining is used to secure the ledger in a way that the same amount of energy is needed to alter it. The block hash begins with a number of zeros. Try for yourself how many tries it takes to find a string that hashes to a hash beginning with 3 zeros. Bitcoin block hashes begin with 13 or 14 zeros IIRC. This means that you need to try trillions of combinations again if you want to alter a block. And then you must keep finding other hashes with enough zeros fast enough to outcompete the whole network. But the cost of hashing is the same, with 1, 10 or 1000 transactions in a block. And the block time is on average fixed at 10 minutes. You don't hash transactions directly, you hash a block header that keeps only the merkle root hash of the transactions. The merkle root is fixed size.
    - Retric 9y ago
zeroxfe 9y ago
> the energy cost of bitcoin is ongoing and depends on the volume of transactions Wait, what? That's not correct at all. The energy cost is based on the "difficulty", which is derived from the moving average of the hashpower in the network. Bitcoin effectively forces the network to take a specific amount of time to mine a block irrespective of the number of mining nodes. The transaction volume has nothing to do with it.
tylersmith 9y ago
Energy consumption is in no way related to transaction volume. Whether there are thousands of txs per block or only one the energy used will be the same.
- matt_wulfeck 9y ago
  Which is part of the problem, since the max number of transactions Bitcoin can process a second is around 10.
  - tylersmith 9y ago
    Sure, but it means it when it can handle thousands of transactions the energy usage doesn't need to increase.
mcv 9y ago
If a single bitcoin transaction uses enough energy to power 5 households for a day, that certainly makes me not want to do any bitcoin transactions anymore. I knew it was wasteful, but this article is really putting it into perspective. And because of the proof-of-work system, the wastefulness is intentional; you have to prove you've wasted enough time and energy to be allowed to mine a bitcoin.
- Taek 9y ago
  To say that one transaction costs that much power is a misunderstanding of what the power is useful for. The amount of electricity spent mining a block is a function of the block reward, which is a function of the value of the total system. A block doesn't just protect the transactions inside of it, it also protects every single transaction in the whole history of bitcoin. And, the high value transactions tend to dictate the value of the whole system. Not every transaction is equal in that regard. If all the high value transactions were to move to another system, the coin price would plummet, and so would the amount of energy required to mine blocks, and thus the 'per transaction' cost for low value transactions would plummet. The right way to think about it is that we spend around a billion dollars per year protecting $70 billion in assets. Put that way, it doesn't seem so bad. If you look at the percent of the US GDP spent on military defense, you'll see that bitcoin is quite attractive by comparison.
  - SamBam 9y ago
    It's hardly justifiable to imply that the entire military defense of the United States is simply to protect "$70 billion in assets." If the entire monetary system of the US were replaced by BitCoin, do you think there would be no need for an army? Would the block ledger be "protecting" all the actual physical assets, land, and people? You can argue over whether the US should have a military, or its size, but to imply that it's just to protect the dollars isn't going to sway anyone in an argument.
    - Taek 9y ago
      I meant only to imply that the US military alone is about 3.5% of our economy, and that the protection to value ratio there is about 1:30 I did not mean to imply that bitcoin could replace the entire military, only that the ratio of spending vs. assets defended is better.

alister 9y ago

If read the article correctly, he's including the cost of mining Bitcoin, not merely energy cost to verify a coin (which is absolutely trivial). Once all Bitcoin is mined (yes, there's a built-in maximum), or it becomes prohibitively expensive to mine, there won't be any mining costs. You can look at the current Bitcoin energy costs as the startup cost to establish a new gold mine or a new country with its own currency.

acchow 9y ago
> Once all Bitcoin is mined (yes, there's a built-in maximum), or it becomes prohibitively expensive to mine, there won't be any mining costs. In that future you will still mine blocks, but there won't be any new bitcoin generated in that block. Sure, you might want to use a different word for that than "mining", but it will still have very real and significant energy.
- tylersmith 9y ago
  "Validators" is the more generic for term what are also called miners or stakers.
jstanley 9y ago
Once all bitcoin is mined, there will still be mining costs, but they'll be 100% paid by tx fees. Bitcoin will probably look extremely different by then, so most bets are off anyway.
cloudhead 9y ago
Not quite, even when the cap is reached, new blocks will still need to be created for new transactions, which will require proof-of-work to achieve consensus, and thus energy expenditure.
hwillis 9y ago
Mining always needs to happen. Once it stops producing coins, the cost burden just moves over to the people using the currency. The mining cost only decreases if the proof-of-work difficulty decreases. If mining becomes less profitable, fewer people will mine and the proof-of-work will tune to be less difficult, but the cost never disappears and there's still a huge amount of energy wasted in the selection process for adding blocks. If too few people mine the currency will be totally destabilized.

proofofstake 9y ago

For a fair comparison we should look at "energy" in an abstract manner. Time and money is energy too. Every time gold exchanges hands, it also costs energy.

spiorf 9y ago
Think about the energy expended to take that gold out of earth. And to make the chemicals for extractions....

spiorf 9y ago

This is very wrong. It does not work that way at all. Volume or value of transactions has nothing to do with the energy expended. The energy is needed to calculate a mathematic proof that makes sure your transaction cannot be reversed or tampered with. This mathematic proof on average is calculated every 10 minutes, with no correlation to the number of transactions. You make a transaction, and if the bitcoin network has expended 1TWh after you sent it, at least 2TWh are needed to reverse that transaction (and/or any other transaction). You can see how over time it becomes impossible, even with unlimited money, to reverse one.

hwillis 9y ago
The hashing is merely a way to choose a random block. It's not a proof and it doesn't do anything fancy. It just picks a random computer to say "this is how the transaction history looks". The energy increases with the volume of transactions because there will be more people calculating hashes. The more people mining, the harder they make the hash calculation so that the target is ten minutes. More transactions = more people mining because there is more demand to verify blocks.
- spiorf 9y ago
  I repeat, you got it very wrong. Transaction number is not correlated with mining energy expenditure. Mining is used to secure the ledger in a way that the same amount of energy is needed to alter it. The block hash begins with a number of zeros. Try for yourself how many tries it takes to find a string that hashes to a hash beginning with 3 zeros. Bitcoin block hashes begin with 13 or 14 zeros IIRC. This means that you need to try trillions of combinations again if you want to alter a block. And then you must keep finding other hashes with enough zeros fast enough to outcompete the whole network. But the cost of hashing is the same, with 1, 10 or 1000 transactions in a block. And the block time is on average fixed at 10 minutes. You don't hash transactions directly, you hash a block header that keeps only the merkle root hash of the transactions. The merkle root is fixed size.
  - Retric 9y ago

zeroxfe 9y ago

> the energy cost of bitcoin is ongoing and depends on the volume of transactions Wait, what? That's not correct at all. The energy cost is based on the "difficulty", which is derived from the moving average of the hashpower in the network. Bitcoin effectively forces the network to take a specific amount of time to mine a block irrespective of the number of mining nodes. The transaction volume has nothing to do with it.

tylersmith 9y ago

Energy consumption is in no way related to transaction volume. Whether there are thousands of txs per block or only one the energy used will be the same.

matt_wulfeck 9y ago
Which is part of the problem, since the max number of transactions Bitcoin can process a second is around 10.
- tylersmith 9y ago
  Sure, but it means it when it can handle thousands of transactions the energy usage doesn't need to increase.

mcv 9y ago

If a single bitcoin transaction uses enough energy to power 5 households for a day, that certainly makes me not want to do any bitcoin transactions anymore. I knew it was wasteful, but this article is really putting it into perspective. And because of the proof-of-work system, the wastefulness is intentional; you have to prove you've wasted enough time and energy to be allowed to mine a bitcoin.

Taek 9y ago
To say that one transaction costs that much power is a misunderstanding of what the power is useful for. The amount of electricity spent mining a block is a function of the block reward, which is a function of the value of the total system. A block doesn't just protect the transactions inside of it, it also protects every single transaction in the whole history of bitcoin. And, the high value transactions tend to dictate the value of the whole system. Not every transaction is equal in that regard. If all the high value transactions were to move to another system, the coin price would plummet, and so would the amount of energy required to mine blocks, and thus the 'per transaction' cost for low value transactions would plummet. The right way to think about it is that we spend around a billion dollars per year protecting $70 billion in assets. Put that way, it doesn't seem so bad. If you look at the percent of the US GDP spent on military defense, you'll see that bitcoin is quite attractive by comparison.
- SamBam 9y ago
  It's hardly justifiable to imply that the entire military defense of the United States is simply to protect "$70 billion in assets." If the entire monetary system of the US were replaced by BitCoin, do you think there would be no need for an army? Would the block ledger be "protecting" all the actual physical assets, land, and people? You can argue over whether the US should have a military, or its size, but to imply that it's just to protect the dollars isn't going to sway anyone in an argument.
  - Taek 9y ago
    I meant only to imply that the US military alone is about 3.5% of our economy, and that the protection to value ratio there is about 1:30 I did not mean to imply that bitcoin could replace the entire military, only that the ratio of spending vs. assets defended is better.