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Bitcoin's energy usage is getting a lot of press of late. Deservedly, I think - it is a bit ludicrous. None of the articles I've seen really manage to get at th

Bitcoin's energy usage is getting a lot of press of late. Deservedly, I think - it is a bit ludicrous. None of the articles I've seen really manage to get at the economics of mining, or what's likely to happen in the future, though. A Big Think article projected that by 2020, at the current growth rate, Bitcoin will use as much power as is generated globally today. Obviously that's not going to happen, something will give and that something is likely to be Bitcoin's price. But even though the articles I've seen are pretty fluffy, they probably stem from an underlying issue that makes Bitcoin different from traditional, energy-heavy industry: The value produced is not directly connected to the energy expended in production. Bitcoin would work just as well with a small fraction of the hashpower it has today. Security is an issue, but surely it must be over-secured many times over at the moment. Unfortunately no mechanism seems to exist to balance security vs cost, except for the crash-boom market cycle Bitcoin constantly goes through. How much hashpower is needed? The question is moot as there is no way to moderate it, and I'm starting to think that may be Bitcoin's biggest design flaw. (Market forces will certainly bring the energy cost of mining down one way or the other, but it's not clear how much damage will be done to Bitcoin in the process.)

trophycase 9y ago
You can't really extrapolate the current growth rate. There is a maximum total mining revenue even if Bitcoin becomes the only globally used currency. The electricity usage likely won't exceed this unless miners begin to sell heat and displace traditional heat generation sources.
- hossbeast 9y ago
  "There is a maximum total mining revenue even if Bitcoin becomes the only globally used currency.". How are you coming to this conclusion? In addition to the coinbase, miners earn fees, which are valued according to current market conditions (supply and demand)
modeless 9y ago
> Unfortunately no mechanism seems to exist to balance security vs cost Bitcoin does include a perfectly good mechanism to balance security vs cost: the transaction fee market. Users decide how much they want to pay in transaction fees. The reason for the high electricity use today is the temporary block reward for mining each block. The block reward halves every three years. Once it goes away, the only thing funding Bitcoin's electricity consumption will be the transaction fees users pay. Obviously if Bitcoin does not provide enough value to users, they will not pay high fees. Electricity consumption will naturally go down to a level that matches the value people get out of the network. Remember this next time you see an article complaining about Bitcoin's electricity use. I haven't seen a single article about this written by somebody who understands the difference between the block reward and the transaction fee market.
- sliverstorm 9y ago
  The final block will be mined in 2140, so we're not quite to the transaction-fee-only point yet.
  - modeless 9y ago
    The block reward in the final blocks will be 1 satoshi (1/100000000 of a bitcoin). The block reward will be completely irrelevant many years before that. We don't have to wait until 2040 for the fee market to overtake the block reward.
- TheDong 9y ago
  Mining is required for more than just the fees or the block reward. Even if fees were zero and block rewards didn't exist, people who had bitcoin would mine so that no one else could mine and trivially double-spend (and thus devalue their bitcoin). The value of mining is based in no small part on how valuable bitcoin are since mining is what preserves that value by preventing attackers from destroying it. What's worse, the needed amount of electricity to secure an amount of bitcoins is relative to how much energy an attacker can expend, not some constant value which will remain low.
- rebuilder 9y ago
Frogolocalypse 9y ago
This seems to be the latest meme for why bitcoin can't work. The reality is that bitcoin uses as much power as it does because it is sought after at the current energy cost. If it is important to you, increase the energy cost. Bitcoin already has a fee market, and incentivized miners. If it is no longer economically feasible to mine at the current price because of energy prices, miners will cease mining until it is economically feasible again. Bitcoin isn't to blame for cheap energy. If it is too cheap, take it up with the people selling it at that price.
mrb 9y ago
«Bitcoin's energy usage is getting a lot of press of late. Deservedly, I think - it is a bit ludicrous.» Completely undeserved IMHO. Vastly more energy is wasted by sillier things. For example worldwide Christmas decorative lights consume 2.3 GW annually (assuming it's 3× the US), which is a lot more than Bitcoin (I estimate ~1.7 GW: https://news.ycombinator.com/item?id=15858966 https://news.ycombinator.com/item?id=15858966) and yet I don't see nearly as many news article criticizing Christmas lights for using so much electricity... Hence why the criticism is undeserved/unfair. If we can afford to power silly feel-good lights, surely we can afford to power a revolutionary decentralized permissionless censorship-resistant financial network. Don't forget that one of the sources cited—Digiconomist—overestimates consumption by ~2×: http://blog.zorinaq.com/serious-faults-in-beci/ http://blog.zorinaq.com/serious-faults-in-beci/
zby 9y ago
I think bitcoin will eventually be replaced by a PoS coin: https://medium.com/@zby/proof-of-stake-can-be-cheaper-than-proof-of-work-da14223a965 https://medium.com/@zby/proof-of-stake-can-be-cheaper-than-p...
- Frogolocalypse 9y ago
  I think that only people who don't understand that PoS can't be done trustlessly, and don't understand why that is an issue, say that.
cwkoss 9y ago
At current growth rate Bitcoins will each be worth over $1M by 2018. This would imply being worth 3x all of the gold ever mined. https://www.reddit.com/r/BitcoinMarkets/comments/7hvj8e/daily_discussion_wednesday_december_06_2017/dquz99x/ https://www.reddit.com/r/BitcoinMarkets/comments/7hvj8e/dail... If Bitcoin becomes the most valuable asset class in the world by two orders of magnitude (in 2020, assuming same rate), lots of crazy other side effect will occur. Bitcoin isn't going to keep growing this fast. It'll go parabolic for a while, and then settle at a midpoint between where the rally began and where it peaked.

trophycase 9y ago

You can't really extrapolate the current growth rate. There is a maximum total mining revenue even if Bitcoin becomes the only globally used currency. The electricity usage likely won't exceed this unless miners begin to sell heat and displace traditional heat generation sources.

hossbeast 9y ago
"There is a maximum total mining revenue even if Bitcoin becomes the only globally used currency.". How are you coming to this conclusion? In addition to the coinbase, miners earn fees, which are valued according to current market conditions (supply and demand)

modeless 9y ago

> Unfortunately no mechanism seems to exist to balance security vs cost Bitcoin does include a perfectly good mechanism to balance security vs cost: the transaction fee market. Users decide how much they want to pay in transaction fees. The reason for the high electricity use today is the temporary block reward for mining each block. The block reward halves every three years. Once it goes away, the only thing funding Bitcoin's electricity consumption will be the transaction fees users pay. Obviously if Bitcoin does not provide enough value to users, they will not pay high fees. Electricity consumption will naturally go down to a level that matches the value people get out of the network. Remember this next time you see an article complaining about Bitcoin's electricity use. I haven't seen a single article about this written by somebody who understands the difference between the block reward and the transaction fee market.

sliverstorm 9y ago
The final block will be mined in 2140, so we're not quite to the transaction-fee-only point yet.
- modeless 9y ago
  The block reward in the final blocks will be 1 satoshi (1/100000000 of a bitcoin). The block reward will be completely irrelevant many years before that. We don't have to wait until 2040 for the fee market to overtake the block reward.
TheDong 9y ago
Mining is required for more than just the fees or the block reward. Even if fees were zero and block rewards didn't exist, people who had bitcoin would mine so that no one else could mine and trivially double-spend (and thus devalue their bitcoin). The value of mining is based in no small part on how valuable bitcoin are since mining is what preserves that value by preventing attackers from destroying it. What's worse, the needed amount of electricity to secure an amount of bitcoins is relative to how much energy an attacker can expend, not some constant value which will remain low.
rebuilder 9y ago

Frogolocalypse 9y ago

This seems to be the latest meme for why bitcoin can't work. The reality is that bitcoin uses as much power as it does because it is sought after at the current energy cost. If it is important to you, increase the energy cost. Bitcoin already has a fee market, and incentivized miners. If it is no longer economically feasible to mine at the current price because of energy prices, miners will cease mining until it is economically feasible again. Bitcoin isn't to blame for cheap energy. If it is too cheap, take it up with the people selling it at that price.

mrb 9y ago

«Bitcoin's energy usage is getting a lot of press of late. Deservedly, I think - it is a bit ludicrous.» Completely undeserved IMHO. Vastly more energy is wasted by sillier things. For example worldwide Christmas decorative lights consume 2.3 GW annually (assuming it's 3× the US), which is a lot more than Bitcoin (I estimate ~1.7 GW: https://news.ycombinator.com/item?id=15858966 https://news.ycombinator.com/item?id=15858966) and yet I don't see nearly as many news article criticizing Christmas lights for using so much electricity... Hence why the criticism is undeserved/unfair. If we can afford to power silly feel-good lights, surely we can afford to power a revolutionary decentralized permissionless censorship-resistant financial network. Don't forget that one of the sources cited—Digiconomist—overestimates consumption by ~2×: http://blog.zorinaq.com/serious-faults-in-beci/ http://blog.zorinaq.com/serious-faults-in-beci/

zby 9y ago

I think bitcoin will eventually be replaced by a PoS coin: https://medium.com/@zby/proof-of-stake-can-be-cheaper-than-proof-of-work-da14223a965 https://medium.com/@zby/proof-of-stake-can-be-cheaper-than-p...

Frogolocalypse 9y ago
I think that only people who don't understand that PoS can't be done trustlessly, and don't understand why that is an issue, say that.

cwkoss 9y ago

At current growth rate Bitcoins will each be worth over $1M by 2018. This would imply being worth 3x all of the gold ever mined. https://www.reddit.com/r/BitcoinMarkets/comments/7hvj8e/daily_discussion_wednesday_december_06_2017/dquz99x/ https://www.reddit.com/r/BitcoinMarkets/comments/7hvj8e/dail... If Bitcoin becomes the most valuable asset class in the world by two orders of magnitude (in 2020, assuming same rate), lots of crazy other side effect will occur. Bitcoin isn't going to keep growing this fast. It'll go parabolic for a while, and then settle at a midpoint between where the rally began and where it peaked.