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Resources are being utterly and completely wasted on mining bitcoins
- wccrawford 15y agoExcellent article. I would only add that we're using a LOT of energy to create a fake (read: virtual) resource. The best part about virtual resources is that they don't use many real resources, but this one is the opposite. Granted, it's a 1-time cost, but as the article notes, it could be created with a much lower 1-time cost.
- weavejester 15y agoThat's not quite true. Bitcoins cost virtually nothing to create, but you are only allowed to create them if you succeed at securing a block of transactions. All of the processing power used in the Bitcoin network is designed to verify the transaction chain and prevent double-spending. The bitcoins generated as a result are just a reward to compensate people for their energy and hardware costs.
- wccrawford 15y agoI recently looked into generating bitcoins, and that's not really true. Very little power goes into generating a successful bitcoin, true... But a LOT of power is wasted by failing to generate them. That's why it takes days, weeks or months (depending on processing power) to generate a successul bitcoin, on average.
- weavejester 15y agoYou're confusing solving a block with creating bitcoins. The distinction is important (in my opinion), because it determines the reason all that processing power is needed. A frequent mistake is to assume that all that processing power is used to make bitcoins hard to create. This is incorrect; the processing power is used to verify the block chain. The bitcoins created as part of each block are just a reward to make it profitable to participate in the network.
- joezydeco 15y agoYou're trying to win a lottery. With everyone racing to create a "solution" that fits the difficulty criteria there's no guarantee that you'll even win a block if you throw enough horsepower at it. A newcomer with a 900Mhz Pentium could find the correct solution on his first cycle.
- joezydeco 15y agoHow much manpower and energy does it take to make a paper US dollar with nothing backing it up? [EDIT] Since I'm getting downvoted, I'll answer my own question: $0.042 every 18 months.
- iwwr 15y agoPrinting money has in itself a cost in shifting resources from the market to the government or the central banks (or the financial sector in general).
- joezydeco 15y agoUnless you live in Ted Kennedy's or Trent Lott's district, where the cotton farms and paper mills are. For decades these senators continuously sabotaged measures to eliminate the paper Dollar and get the US entirely on dollar coins. The US is probably the last major economy to still be using paper for such small denominations.
- caf 15y ago...and in most other places, even the notes aren't paper/cotton anymore.
- joezydeco 15y agoGood point. I have an Aussie bill somewhere in my drawer at home. That's a cool banknote.
- kragen 15y agoDepending on where you draw the line between "major" and "minor" economies, the US can be the only major economy to do anything at all, since its economy is bigger than that of any other country. However, in my recent and local experience, small-denomination paper is not so unheard of: Country Smallest paper bill in USD PPP GDP/year Argentina $2 0.50 $640B Brazil 2 reais 1.26 $2200B Uruguay $5 (now rare; usu.$10) 0.27 $41B
- adrianwaj 15y agoDon't the miners provide network services as well? Like how real mines don't just take from the ground, they also co-exist with civilian infrastructure built to keep the miners alive and functioning, and in bitcoin's case, the mining rigs dually enable transactions?
- Tichy 15y agoYes, "mining" is a bit misleading.
- Jabbles 15y agoThis is just a "prisoner's dilemma". The alternative is that we trust everyone not to use their full ability to generate blocks. Obviously this would completely defeat the point of bitcoins. http://en.wikipedia.org/wiki/Prisoners_dilemma http://en.wikipedia.org/wiki/Prisoners_dilemma
- rheide 15y agoYeah, that's why the only thing I could think of that would 'fix' this, is to release new miners that use less processing power, and a new client that only allows input from those miners. Even so, such a thing would be equally as difficult to introduce as, for example, a rule that would hand out 200BTC instead of 50BTC.
- StavrosK 15y agoAs other posters pointed out, someone would cheat and just get a client that used 100% and we'd be back to square one in a day.
- kiba 15y agoMy magazine have a two part series that argue the opposite that bitcoin mining is not wasteful: 1. http://bitcoinweekly.com/articles/the-wasted-electricity-objection-to-bitcoin-part-i http://bitcoinweekly.com/articles/the-wasted-electricity-obj... 2. http://bitcoinweekly.com/articles/the-wasted-electricity-objection-to-bitcoin-part-ii http://bitcoinweekly.com/articles/the-wasted-electricity-obj...
- iwwr 15y agoThat's actually quite interesting, thank you for posting. So at a guess, the network is doing now around 7MW of electrical power, although there is room for a lot of efficiency improvement.
- vladd 15y agoAny system of checks and balances will have its price. Look at what we do with gold: we dig it from a hole in Africa, we transport it in other countries, we dug holes or build vaults and throw it there. Like Warren Buffett said, it has no utility, if Martians were to look at the process they would scratch their heads. Except for the guarantee of uniqueness. Which is one of the most powerful invariants against corruption and government-sponsored inflation, goals which are worth these effort.
- gus_massa 15y agoGold also is usefull in the industry and electronics: http://en.wikipedia.org/wiki/Gold#Industry http://en.wikipedia.org/wiki/Gold#Industry http://www.gold.org/technology/uses/ http://www.gold.org/technology/uses/
- joelthelion 15y agoGold's market value is far above what it would be if it wasn't used as a value store.
- duskwuff 15y agoWhich ends up being harmful to industries which could make good use of gold... if it just weren't so bloody expensive.
- joelthelion 15y agoIn the same way the car industry harms the industries that could use all that oil we burn in our cars... Using gold as a store of value is useful, otherwise we wouldn't do it.
- masklinn 15y ago> Except for the guarantee of uniqueness. There are a few more actually: gold is one of the least putrescible materials out there (it's one of the least reactive elements available and as one of the royal metals very few acids can attack it), it has a distinctive look, and it has a very high density (most denser metals were only discovered in or after the 19th century, and are generally more valuable) which makes it easy to differentiate pure and impure golds (such as fake coinage). It also used to strike a good balance between rarity (which ensures the market won't be flooded) and availability (which actually made it usable as money). Of course, most of this broke down as new, very productive, mines were found (e.g. in South America) and mining techniques improved. And nowadays we have the opposite issue: gold mining output declines, and is unable to follow the value growth of the world itself. This is one of the reasons why most countries moved first to fractional gold standards and then to convertible currency.
- JoeAltmaier 15y agoThe hypothetical solution is flawed: it would take not 50% of miners to adopt a 1% implementation; it would take 100%, since if only 1 defects, that one wins all the coins and all the cooperative 'prisoners' lose.
- kragen 15y agoBased on my minimal understanding, you need about 0.99% to defect (and collude!) to win all the coins, not just one miner.
- JoeAltmaier 15y agoThe defector(s) are using 2 orders of magnitude more CPU time to solve problems. So they win almost all of the time (all of the coins).
- kragen 15y agoThere are two mechanisms by which defectors could win coins. First, they could simply mine more coins. For them to win almost all the (new) coins this way, they have to do almost all the mining. Say, 80% of it, although it's really a matter of what you mean by "almost all". Second, they could collude and subvert transaction audit trails so that the Bitcoin system transfers ownership of all existing coins to them. For them to win all the (new and old) coins this way, they only have to do more than 50% of the mining. So, if collusion is feasible, the second approach is easier; so let's forget about the first one for the moment. The point at which the defectors, each using 2 orders of magnitude more CPU time, are doing more than 50% of the mining, is when they control more than about 0.9901% of the network's total raw computing power, because at that point, the cooperators control only 99.0099% of the network's total raw computing power, and the cooperators are using only 0.990099% of the network's total raw computing power to prevent counterfeiting. If a single defector controls only, say, 0.5% of the network's computing power, they will get only about a third of the new bitcoins mined, and will not be able to subvert the network. Only needing to have 0.99% of the network collude in defection to break the system is a pretty bad problem, but it's not nearly as bad as any single person being able to break the system.
- perlgeek 15y ago> There is a solution to this problem. If someone releases a new Bitcoin client (and miners) that run on only 1% of the available processing power, and gets more than 50% of the network to adopt this new client, then total electricity costs drop would drop hugely No, because you can't cryptographically enforce that all compatiable clients use only 1% of their available processing power. If such a client took over the bitcoin network, somebody would use a patched version of that client that pretended to use only 1% of the computing power, but actually used all of it. There's no way the other clients could know, so the whole spiral would start anew.
- ramchip 15y agoOr just use VMs, etc.
- weavejester 15y agoThe author misses the point. The security of the Bitcoin network (at least in terms of double-spending) is tied to the level of work required to generate a block. If everyone decided to use only 1% of their computing power, they'd use less electricity, but the Bitcoin network would then be 100 times less secure. When people talk about "wasting resources", it's an indication they don't understand how Bitcoin works. One might as well complain about wasting resources on SSL when you could just send data in plaintext.
- rheide 15y agoThe trick lies in changing the bitcoin protocol. If the majority of clients can agree on a way to use less resources, then that's what will be enforced by the network. If a new bitcoin client enforced a mandatory delay of one hour and invalidated blocks that were made before that one hour, we would effectively have added one hour of idle time to the network. This is not a solution, but it is a demonstration of how the protocol can be altered, as long as the majority agrees on it.
- gus_massa 15y agoThe problem is that it is easy to simulate that you are waiting. 1) Save current time 2) "Precalculate" the current block 3) Wait until the 3601th second 4) Publish the block that you "calculate" in just 1 second 5) Profit??
- weavejester 15y ago
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- icegreentea 15y agoWhy can't we tie the bitcoin mining process to some sort of useful calculation? Maybe some variant of folding @home or something? We just need some problem with a hard to calculate, but easy to verify 'right answer' right?
- weavejester 15y agoMore than that. It needs to be a problem that takes a predictable time to solve, it needs to be a problem that we're unlikely to discover faster algorithms for, and it needs to be something we can tie to a set of data. Cryptographic hashes are designed to have these exact properties. If we wanted to replace this with a "useful" calculation, you'd essentially need to create a new hashing algorithm that also had some practical use beyond hashing a set of data. Given that creating good cryptographic hashing algorithms is hard enough, I suspect that creating one that is tied to a "useful" result is not feasible.
- mike_esspe 15y agoEven if such calculation could be possible, bitcoin network probably would be less secure, because attacker can attack it and be compensated for attack.
- DennisP 15y agoNo, mining solves a specific problem: it generates an agreed-upon ordered list of transactions, so if anyone double-spends, everyone agrees that the first recipient owns the coin. The new coins are just an incentive to solve the problem. To solve this problem, the input has to be bitcoin transactions, rather than biologically-relevant amino acid sequences.
- extension 15y agoHere is another amusing example of resources being "wasted" creating money: http://www.npr.org/blogs/money/2011/02/15/131934618/the-island-of-stone-money http://www.npr.org/blogs/money/2011/02/15/131934618/the-isla...
- mike_esspe 15y agoThe same argument can be applied to gold: resources are being utterly and completely wasted on securing Fort Knox, let's shutdown it and store all gold on a lawn without guarding it. Mining is securing the bitcoin network in the similar sense, as Fort Knox secures gold.
- lukeschlather 15y agoComparing it to gold doesn't make sense; we've been off the gold standard for a long time. What it should be compared to is minting coins, printing money, and banking. (As far as banking goes, I'm not sure bitcoin really solves any of those security issues.)
- ArchD 15y agoIsn't the waste also present even without bitcoin, too? Governments make complex laws and regulations in different industries. They do 'magic tricks' to make fiat currency appear and disappear. Banks do complex things to make a profit that largely do not correspond to creating real value for society. Competing companies do the same things, duplicating effort, mostly to make a profit. (e.g. Do we really need so many social gaming companies?) Companies also do other things that do not create real value (e.g. lobby politicians to gain political advantage). A large part of human endeavor is not about increasing value in the world, but rather increasing value for oneself, possibly with the side-effect of decreasing value for others. It's just the way we are. I don't think bitcoin's purpose is to aggravate or ameliorate this pervasive problem. To me, the point of bitcoin is to shift economic power from the circles of people who presume to rule the rest of us with complex economic policies and regulation that ostensibly keep the economy stable and growing. With or without bitcoin, the 'waste' from competition still going to be there, and I have no reason to think that the adoption of bitcoin is going to increase the total amount of 'waste'.
- duairc 15y ago> A large part of human endeavor is not about increasing value in the world, but rather increasing value for oneself, possibly with the side-effect of decreasing value for others. It's just the way we are. It's not just the way we are, it's the way we are under capitalism. But I agree that the wastefulness of Bitcoin is nothing compared to the waste caused by capitalism as a whole.
- billybob 15y ago"It's not just the way we are, it's the way we are under capitalism." What line of reasoning makes you think that humans are naturally unselfish and are made so only by an external economic system (which is itself created by humans)? Judeo-Christian thought says that humans are naturally sinful and selfish. Evolution says that the fittest survive at the expense of others (though this may involve cooperation with related creatures). Who says we're all basically nice? "But I agree that the wastefulness of Bitcoin is nothing compared to the waste caused by capitalism as a whole." What system would you have instead of capitalism? If socialism or the like, can you give an example of when that has ever worked well? There are many counter-examples in history, you know. Workers sitting down doing nothing because the government quota said to only make 250 pairs of shoes today, etc.
- michael_dorfman 15y agoPersonally, I'm more concerned by the resources that are being utterly and completely wasted discussing Bitcoin on HN. Hasn't it been talked to death already? Is there really anything new to say?
- joezydeco 15y agoThere's a lot to say. I personally think the Bitcoin debate is interesting because it's making a lot of people question the concept of money - especially in the current state of the world economy. It's also a new and interesting intersection of technology, economy, and personal trust.
- michael_dorfman 15y agoAll those things are true. But I still am not seeing any points raised in the discussion here that haven't already been made in any of the countless other discussions that have already played out here on HN in the past few weeks. It's not that Bitcoin isn't new and interesting-- it is-- but that there is nothing new and interesting to say about it today that wasn't said (here) yesterday.
- alphadogg 15y ago..and no one has just started reading HN in the last few weeks, huh?
- joezydeco 15y agoIf you have, welcome! But understand that not every day is chock-full of new and amazing technological innovations and announcements. Sometimes you're going to see multiple articles from different sources on the same thing. If you need NewFlashyShinyThingOMG constantly...maybe Gizmodo would be more your speed.
- palish 15y agoI didn't see any Bitcoin discussion yesterday. To be blunt, you're doing more harm than good by complaining about the discussion. For every person that cries "dupe", there are ten more who are grateful for that dupe. Dupes are a good thing.
- iqster 15y agoThe way I understand bitcoins might be flawed but would certainly appreciate clarification ... My problem with bit coins is that early people who start mining have a greater advantage than later ones. While that's not the classic definition of a Ponzi scheme (in the classic definition, payouts at each round are funded by new participants), it is a feature bitcoin shares with them. If someone started mining bitcoin when it first started, they have a significant stash created by now. As people start to assign value to the virtual currency, these people are getting a significant proportion of value for simply being early adopters.
- iwwr 15y agoAlternatively, maintaining a hard limit on the number of BTC saves resources, compared to a system that allowed for a fixed growth. Once the 'mining' stage ends, no new computational resources are invested. The system accumulates a kind of computational capital (a mathematical problem difficult enough to be intractable) which needs no further upkeep, other than a network presence to provide verification.
- caf 15y agoEven after the mining phase ends, the hash chain continues to be extended, requiring the same computational resources.
- iwwr 15y agoIt would only be extended with new transactions, not blocks. Computational resources will be devoted to verification rather than brute-forcing hashes (a much less computationally intensive matter).
- caf 15y agoNo, blocks are still created in exactly the same way, the only difference is that no new bitcoins are created as a side-effect. It is necessary for new transactions to be locked into the block chain with a bruteforced hash, as it's this expenditure of processing power that makes the transactions permanent and prevents double-spending.
- summitpush 15y agoI don't think the bitcoin system is in any way designed to benefit the miners. Its intent is to create a digital currency that has a guarantee of retaining its rarity in the future. Making mining difficult and inefficient is kind of the point.
- mahrain 15y agoSo, when we waste our processing power on credits generated on limited supply by the Bitcoin network, it's a waste, but when we waste our time on acquiring credits created in limited quantities by the (Central) Banks it's okay. I guess the issue here is that calculated bitcoins don't contribute anything. The grid should be used for something useful such as folding proteins or even SETI for that matter.
- jfoutz 15y agoReally? It seems like the computational power thrown at this is way less than the latest console game.
- rms 15y agoGood thing we have so much coal left to burn! o.0
- GrandMasterBirt 15y agoThis is exactly as one math professor mentioned in his lecture: "Everyone secretly write down a number on a piece of paper. I will give the prize of one million dollars to the person with the highest number, but the prize will be divided by the number written." He wound up paying 1 cent. Which went on to prove that if people cooperate anonymously, everyone wins, yet some people will always chose to not cooperate and screws the whole pot. All the class had to do was collectively write 1 and split the 1 mil evenly between each other.
- pstack 15y agoNo, you guys. You don't get it. Bitcoins are going to take over the world. We're ALL going to be part of an economy of Bitcoins, just like we all universally adopted Swatch Internet Time[1]! [*1] http://en.wikipedia.org/wiki/Swatch_Internet_Time http://en.wikipedia.org/wiki/Swatch_Internet_Time
- clistctrl 15y agoThe future economy may not (I'm guessing will not) be bitcoin. It will probably have a few very different ideas built into the core of it. But the foundation is being laid right now as we discuss the problems of bitcoin.
- DennisP 15y agoI was worried about this so I worked out the math. It wasn't as bad as I expected. Let's say it's 20 years from now, the total size of the bitcoin economy is $1 trillion, and there are 10 million bitcoins in existence. (We could find the number of bitcoins exactly, but 10 million makes the math easy and it's within a factor of 2 of the ultimate limit. There are about 6 million coins right now.) $1 trillion / 10 million coins = $100K per coin, so we can expect people to spend almost that much money to generate a coin. The rate of coin production is currently 50 per 10 minutes, dropping in half every four years, giving us 9 coins per hour in 2031. That's 78K coins per year, at $100K per coin, or $7.8 billion in computer time and energy spent per year. Let's say half of that is energy, call it $4 billion, including the energy to make the dedicated mining computers. At ten cents per kilowatt-hour, we're talking 40 billion kilowatt-hours per year. Divide by the number of hours in the year and we get 4.5 gigawatts. In other words, a $1 trillion bitcoin economy can be run on the output of roughly five typical nuclear power plants (assuming it's 20 years from now). If we get to $1 trillion in only 12 years, energy usage will be four times higher, since coins will be worth about the same but four times as many will be generated per hour. If people use custom ASICs to generate coins, they'll be costly but more energy-efficient, weighting expenditures more heavily on hardware than energy. People can grant transaction fees to miners to make their transaction go through faster. If transaction fees become prevalent, resource usage will be higher, since there will be additional reward for completing blocks. But $7.8 billion is already almost one percent of the bitcoin economy. If the average bitcoin changes hands once per year with a one percent fee, or ten times per year with a 0.1 percent fee, we add $10 billion to mining rewards and approximately double our resource usage. Edit: $1 trillion is about equal to the amount of U.S. currency in circulation: http://en.wikipedia.org/wiki/Money_supply http://en.wikipedia.org/wiki/Money_supply
- gammarator 15y agoI don't know much about economics, but this seems to illustrate why bitcoin must ultimately fail. Since producing new bitcoins by design becomes exponentially (!!!) more difficult as time passes, the true cost in resources (electricity, computing time, etc.) to produce a new coin can only increase. That resource use can be justified, but only if the value of the bitcoin is also increasing. Here's how I see it playing out: eventually it will be too costly for most people to produce new bitcoins. Since nothing forces one to use bitcoins, bitcoin holders will cash them out, and the exchange rate will plummet. Deflationary panic? http://en.wikipedia.org/wiki/Deflation#Money_supply_side_deflation http://en.wikipedia.org/wiki/Deflation#Money_supply_side_def...
- vrsmn 15y agoimagine all that computing power being used to boinc projects. World problems would be solved
- pspeter3 15y agoWhat you're proposing is a cartel of users who agree to only use 1% of their computing power. The Prisoner's Dilemma still applies and thus the incentive to cheat still remains because using more than 1% can give you a competitive advantage. By assuming every one will compete as much as they can the prisoner's dilemma disappears because there is a limit of how many resources a user can expand. The main issue is whether bit coin is a valid expenditure of those resources
- ck2 15y agoThere is a solution to this problem. If someone releases a new Bitcoin client (and miners) that run on only 1% of the available processing power... It's fairly easy to throttle a bitcoin client. But if they mean run slower but do the same amount of work that's not possible unless someone makes a dedicated chip to do the needed calculation.
- richardw 15y agoMost of the time graphics cards aren't used for anything remotely as socially beneficial as contributing to the bitcoin network. Rather than complain about the waste, find a way to do something more useful with them and set up an equivalent reward system for people to respond to.
- dennisgorelik 15y agoDo you realize that BitCoins is elaborate pyramid scheme that targets computer geeks?