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Bitcoin's vast energy use could burst its bubble
- jmfldn 6y ago""If Bitcoin were to be adopted as a global reserve currency," he speculates, "the Bitcoin price will probably be in the millions, and those miners will have more money than the entire [US] Federal budget to spend on electricity." "We'd have to double our global energy production," he says with a laugh. "For Bitcoin." He says it also limits the number of transactions the system can process to about five per second. This doesn't make for a useful currency, he argues."
- briefcomment 6y agoPeople just want an asset that can't be manipulated away. If it takes tons of energy, or if it totally changes power dynamics, or if we need to transact in different ways, then so be it. No one is going to give up the opportunity to own something like this for any reason. Regardless of whether people like it or not, they will have to adapt, since there is probably no viable way to stop something like this when people decide they want it.
- 0-_-0 6y agoCountries could make it illegal to own due to its energy consumption
- throwamon 6y ago> then so be it yeah, and fuck living in an inhabitable planet
- briefcomment 6y agoI feel like you're coming from a place of ignorance.
- neither_color 6y agoYeah imagine air so toxic you can't go out in public without a mask on...
- newnamenewface 6y agoWell, there's one very real way that complex financial instruments disappear in a huff. Bitcoin has only existed for less than 15 years. There's no indication that it's invincible to, say, a bubble burst and rapid permanent devaluation besides it having not happened yet. If in 86 years this is still the case, you could maybe convince me I won't see it in my lifetime, but just barely.
- briefcomment 6y agoI mean, it's going to do its thing whether you are convinced or not.
- newnamenewface 6y agoNo, a swarm of autonomous actors in a decentralized system will continue to support it so long as it's profitable and legal (or at the very least, easy enough to get away with). Those are two huge assumptions for e.g. Bitcoin which has very little inherent value as a tool and is a relatively fragile as a value store. Should the internet be fragmented along national/political lines, I imagine BTC will lose most of its value over night.
- briefcomment 6y agoBlack swan events like that would effect everything. I imagine bitcoin succeeding is no less likely than any other culturally dependent phenomenon, seeing how much utility and incentive for adoption it provides.
- pavlov 6y agoMany people would choose to dump toxic waste into a river if they can make some money off it. They want it, but that doesn’t mean we have no way to stop them.
- briefcomment 6y agoThe point is a critical mass of people want this to happen. In fact, probably everyone wants this, and they just don't know it yet.
- EarthLaunch 6y agoPeople want such an asset, but it absolutely can viably be stopped. Governments outlawing it will lower the price and utility. Governments doing a 50% attack or similar will end it. What's interesting to me is that Proof of Work competes with government's Proof of Force. I wonder, is this a choice between running the world on math (or profit) versus running the world on democracy (or force)?
- briefcomment 6y agoGovernments are people too.
- BobbyJo 6y agoBlockchains would be easy to stop if governments wanted. The power footprint of miners is easy to find, and wallets and transactions are easy to trace. The reality is, if a blockchain ever got large enough and widespread enough to impact a host government's currency, it could be shut down probably overnight.
- briefcomment 6y agoThe people who don't want it won't be able to effectively collude because so many people do want it. Many people will people will change their mind as well. Governments are just people after all.
- frankenst1 6y ago> The power footprint of miners is easy to find. it could be shut down probably overnight. This only works for single large-scale miners after you raided all factories/households with above average energy consumption. Many small miners would continue to mine from home (with average energy consumption levels) while collaborating in a global mining pool.
- BobbyJo 6y agoSure, but then you've dramatically reduced the scale at which it can operate, which makes it way less viable than now.
- frankenst1 6y agoThere is no reduction, you can't even distinguish a large-scale single miner from a mining pool with thousands of at home miners.
- BobbyJo 6y agoMost of the hash power is currently contributed by large scale miners. Shutting just them down would cripple thing considerably. Then they could go after the methods of organizing pools, but I suspect that wouldn't be necessary. For large economies, just saying it's illegal without enforcing anything at all would be massive blow, since blockchains' only current use case is speculation. If the the US government said tomorrow 'bitcoin is illegal' the price would crash to the point that mining no longer even made financial sense.
- dale_glass 6y agoBitcoin is extremely manipulable. Just look at the fact that the modern BTC no longer complies with its original ideals. Remember the pizza? Buying games on Steam? All that ended, because the core group controlling bitcoin decided a tiny block size limit suited their interests. This makes perfect sense for people sitting on a hoard of coins and who want to keep on increasing the contention and driving up the value, but has nothing to do whatsoever with the original vision of "A Peer-to-Peer Electronic Cash System". It's an interesting thing, really. Bitcoin had some successes, but failed at stopping it from being controlled by a central cabal.
- briefcomment 6y agoIt could be bitcoin, it could be something with a bigger block, but it will be the hardest thing to manipulate away.
- frankenst1 6y agoHow ironic that the forks of Bitcoin with bigger block sizes appear to be the coins more likely to be manipulated by "influential leaders" - resulting in numerous and continuous coin splits.
- frankenst1 6y ago> the core group controlling bitcoin decided a tiny block size limit suited their interests Even if there was some conspiracy going on, this happened in what 2017? The price of Bitcoin rose from ~2K to ~60K up to today. So whatever 'the group behind bitcoin' did, the market seems to agree with 'them'. All the Bitcoin forks who misleadingly claim to be "the real Bitcoin" are either dead now or the market values them at <1/100 of BTC. Conspiracy theories tend to grow over time so maybe this is now just 'the group behind Bitcoin' manipulating the global markets as well?
- briefcomment 6y agoI do have questions about the Digital Currency Group, Blockstream, MasterCard, and the former head of the Bilderburg group, but I'll need to read up on that in depth to come to any conclusions.
- gus_massa 6y agoRemember that every 4 years the amount of coins the miners get out of thin air halves, and after 2040 the miners will only get the fees.
- tromp 6y agoMiner competes not only for block subsidy, but for tx fees as well. Those can be expected to dominate within 4 or 5 halvings, putting a lower bound on the energy consumption of bitcoin.
- gus_massa 6y agoLet's imagine that overnight the price of bitcoin increase x50 to $1000000 like in the article. In a imaginary word where miners get only the block subsidy, they get x50 more money are incentive to use like x50 more electricity. In a imaginary word where miners get only the tx fees, they can reduce the fees x50 and get the same money. (Moreover, the size of the transactions will be x50 smaller in Bitcoins.) In the real world where miners get both, it's something in between more complicated, but each halving makes it more similar to the second scenario.
- neither_color 6y agoIf Bitcoin were to be adopted as a global reserve currency," he speculates, "the Bitcoin price will probably be in the millions, and those miners will have more money than the entire [US] Federal budget to spend on electricity. If you spent the entire US federal budget on a global reserve currency that worked without a military that's a net positive for humanity though, isn't it?
- robjan 6y agoCryptocurrencies will not remove the need for a military. Anything that can be bought by a Bitcoin can also be "bought" by force, often more effectively. As an example, how could bitcoin being the reserve currency fix the South China Sea dispute? There are still multiple countries who want the islands.
- kierkegaard_s 6y agoThe people that write these articles haven't the faintest idea of the protocol and repeat the same tired arguments over and over again. Why does Bitcoin have to justify its energy usage when the legacy financial system does not? Who becomes the arbiter of what tech or sector deserves to draw on the grid?
- thrill 6y agoBecause there are alternatives to Bitcoin that don't suffer from that design flaw.
- dale_glass 6y agoThe "legacy financial system" is far, FAR more energy efficient in comparison. Bitcoin's rising power usage doesn't achieve a greater capacity, it's simply the result of an arms race between miners. The faster others mine, the faster you must do so as well, if you want to keep making money. But Bitcoin's design results in that the increased power doesn't really do anything for the network. It doesn't make it faster, or give it a higher capacity. Bitcoin is also not a financial system, it's a global game of chicken. Even Bitcoin Cash, which keeps the same stupid design is a more attractive option if one wants to have anything resembling an economy simply due to that they increased the block size limit.
- splintercell 6y ago> Bitcoin's rising power usage doesn't achieve a greater capacity, it's simply the result of an arms race between miners. When the difficulty rate rises the network is more difficult to be attacked. The upper limit to the difficulty rate is the point at which the miners can be profitable. We want the network to be as secure as possible. Though, I would say that we also want the network to be as efficient as possible (ie larger block size for more tx per block) like in Bitcoin Cash.
- poundofshrimp 6y agoIncreased power increases security of the Bitcoin network because it makes a potential 51% attack more expensive.
- darig 6y agoBitcoin's energy use is only high because so many people want to participate in mining, the difficulty constant had to increase. If the "bubble burst", bitcoin would continue to operate unhindered with the exact same number of processed transactions with a much lower use of energy. The assertion that bitcoin may be doomed specifically because more people want to participate, is laughably wrong. It is designed to adapt to a market that is itself adapting to it.
- pier25 6y agoAt some point mining will stop and energy use will only amount to running the blockchain nodes. How far are we from the total number of Bitcoins the system allows?
- foota 6y agoThat's not how it works. As the number of coins minted nears the maximum the difficulty and reward for mining coins increases exponentially.
- mgerullis 6y agoApparently it is still more than 100 years before block rewards stop, unless the protocol is being changed. Wondering if quantum computing will break it beforehand
- poundofshrimp 6y agoIf you mean the hashing will stop - it won’t, because that’s how the system is secured. The creation of new bitcoins is irrelevant as far as energy use goes.
- varajelle 6y agoThe creation of new bitcoin is what incentives miner to spend so much. When the reward go down, the miners would presumably spend less energy. (But it has so far been offset by the increase of value of bitcoin itself.)
- X6S1x6Okd1st 6y agoThe next halving is in 1100 days when the subsidy drops to ~3 BTC. Total reward has been ~10-15% composed of tx fees recently. Waiting for reward to drop off by halving will take a long time and if current trends persist will be nicely padded by tx fees. https://btc.com/stats/fee https://btc.com/stats/fee
- X6S1x6Okd1st 6y agoSome day the miner subsidy will stop, if mining stops the network stops
- mareko 6y agoLuckily there is a whole new generation of PoS networks that don't rely on proof of work. Some even automatically buy carbon offset credits to maintain a carbon neural footprint.
- haolez 6y agoAFAIK, PoS networks have not been proven as secure as PoW. Would love to see someone smarter than me commenting on this.
- HenryKissinger 6y agoI've been reading about proof of stake cryptocurrencies for years, and how they will solve the problem of bitcoin's energy usage. Yet the problem persists. What will it take to end bitcoin's predominance?
- darig 6y ago> What will it take to end bitcoin's predominance? Trust.
- tacotime 6y agoMaybe something like Chia (chia.net) that "farms" from pre-computed "plots" as proof of work? There is still an energy intensive cost to the initial plot creation phase, but it is soon amortized by the low cost farming phase, where the precomputed proofs begin to do their work. As SSD storage is expected to become less $/TB than HDD storage in about 5 years, this could make for a very energy efficient PoW scheme. I don't understand enough to know if it's a design decision or a technological limitation but the barrier to entry for something like chia also seems much lower, hopefully democratizing the ability to participate in the creation/validation side of the network. Chia requires a single ~100GB plot file (and 332 GiB scratch space when creating the plot) to start farming, which is a pretty low bar. I don't have to buy an expensive special purpose bitcoin ASIC and I don't have to stake the equivalent of 68,416.96 United States Dollar (32 eth) to get started and start contributing.
- xyst 6y ago"Proof of stake" to establish distributed consensus will solve the energy problem related to cryptocurrency. Ethereum is one example of such cryptocurrency that uses this mechanism.
- pavlov 6y agoEthereum doesn’t use PoS. They’ve been promising it since 2014, but the network is still on PoW.
- ENGNR 6y agoBeacon chain is on PoS now. They’re doing a very very controlled migration from the legacy chain over to the new PoS ones for obvious reasons (change management, testing, comms) but the tech is in prod and ready to go
- neodypsis 6y agoOther examples are Cardano and Nimiq.
- danpalmer 6y agoEthereum does not use Proof of Stake, it is a proposed change that is being worked on, with a timeline of several years before it will be put into action, and that's only if the network accepts it.
- lgierth 6y agoIt's actually up and running for a while, with large sums already staked, and the flipping of the switch on mainnet will very likely happen before end of summer. https://ethereum.org/en/eth2/staking/ https://ethereum.org/en/eth2/staking/
- meowkit 6y ago> timeline of several years ETH 2.0 has launched in parallel with ETH 1.X. The timeline is ~1 year for final merge, not years. This is potentially going to be accelerated (https://notes.ethereum.org/@vbuterin/B1mUf6DXO https://notes.ethereum.org/@vbuterin/B1mUf6DXO). The "network" doesn't accept anything. ETH updates via hard forks. You either get on the train with the most support, or you don't. The majority wants proof-of-stake and there is already almost 4 million Ether staked on the ETH 2 chain (https://launchpad.ethereum.org/en/ https://launchpad.ethereum.org/en/).
- thinkloop 6y ago> He says [the energy consumption] also limits the number of transactions the system can process to about five per second. Doesn't bode well when the expert of the article makes a mistake like this.
- Black101 6y agoWe have been hearing that every other week for the last few years... and Bitcoin is at an almost all-time high today. aka $60k
- X6S1x6Okd1st 6y agoAssuming those numbers are correct. It's pretty amazing that it only took 10 years for the money subsidy to be a threat to the world. I don't see how it'll pop the bubble, but imo the day where there's a moral imperative to switch to a PoS chain is coming. I wonder if the btc community could switch to PoS if they seriously were looking at losing Bitcoin dominance
- danpalmer 6y agoThere is no other comparable way to convert power so directly into money like Bitcoin and proof-of-work networks provide. This means that Bitcoin mining and energy prices form an arbitrate opportunity, which will force energy prices higher and higher as usage increases. A friend of mine proposed that proof-of-work could be the Great Filter.
- X6S1x6Okd1st 6y agoThis doesn't give a concrete thesis as to how this will pop the bubble.
- mr_woozy 6y agoMost hit pieces don't
- stblack 6y agoThe total value of Bitcoin produced and changed as fees is presently in the order of US$50M per day. Miners are competing very profitably, on aggregate, for this amount of money daily. Therefore the full-factor cost of the global Bitcoin network is under $50M per day. So whatever these people say about global energy use, it's under $50M per day.
- oliwarner 6y agoI feel like this stretches the meaning of value into deep space. It's a speculative monetary value, based in confidence of return. Its value evaporates with that confidence. It only takes one person or ban from one country to start a cascade sell off, and see its value go off a cliff. > So whatever these people say about global energy use ... Is that it's destroying the planet for fun and profit. It's using a large country's power to do nothing of any tangible value. And it seems to be a bizarre thing to encourage as we cruise into a global climate disaster.
- tradertef 6y agohttps://99bitcoins.com/bitcoin-obituaries/ https://99bitcoins.com/bitcoin-obituaries/
- albybisy 6y agoxlm ... in retrospect, it was inevitable
- yalogin 6y agoI am afraid the tipping point has long been crossed with BTC. The value accumulated in the ecosystem will sustain it and automatically validate investment in it. Also the community and investors don’t give up after such a high valuation even it’s completely useless. So it’s here to stay.
- krackpot 6y agoHere’s another interesting perspective on the energy argument: https://cryptonews.com/exclusives/a-closer-look-at-the-environmental-impact-of-bitcoin-mining-9869.htm https://cryptonews.com/exclusives/a-closer-look-at-the-envir...
- neither_color 6y agoI don't think there is much overlap between the people who run large mining farms or speculate on crypto, and environmentally conscious consumers.
- bko 6y agoThe energy cost of mining will always be bid up to approximately the net value of the reward. So as the price of Bitcoin goes up, so does the mining effort. If the price drops, the energy expended would drop as well. It's important to note that the cost of energy its priced to is more or less the global lowest cost of energy. No one mines Bitcoin in Los Angeles during the summer. Bitcoin is a way to convert cheap or excess energy anywhere in the world into money, much of it renewable or energy that would go to waste. And most mining is centralized in a few locations for this reason. So doing a simple energy calculation is dishonest. > The two essential features of a successful currency are that it is an effective form of exchange and a stable store of value, says Ken Rogoff, a professor of economics at Harvard University in Cambridge, Massachusetts, and a former chief economist at the International Monetary Fund (IMF). > He says Bitcoin is neither This made me chuckle. The reason the price of bitcoin (and hence the energy cost of mining) is going up is that people have lost faith in the monetary institutions. In a world where the US money supply can go up 23% in a given year with no end in sight is a world in which you can't trust your savings. We had a global pandemic and stock market is up 30% from pre-covid. This is insane. And people aren't dumb. They're just waiting for the other shoe to drop. In the meantime some find Bitcoin to be an effective hedge.
- quicklime 6y ago> Bitcoin is a way to convert cheap or excess energy anywhere in the world into money, much of it renewable or energy that would go to waste. Is there somewhere where I can get good data on where the electricity for Bitcoin mining comes from? The article itself says this: > And the electricity the Bitcoin miners use overwhelmingly comes from polluting sources.
- bko 6y agohttps://www.theweek.in/news/biz-tech/2021/03/24/5-of-the-largest-bitcoin-mining-farms-in-the-world.html https://www.theweek.in/news/biz-tech/2021/03/24/5-of-the-lar...
- mdoms 6y ago> The reason the price of bitcoin (and hence the energy cost of mining) is going up is that people have lost faith in the monetary institutions No, the reason bitcoin has increased in price is speculation of future increases.
- chabes 6y ago> He says it also limits the number of transactions the system can process to about five per second. This hasn’t been the case since segregated witness was integrated into the protocol. This number is also “on-chain” transactions. The article fails to mention that most transactions are off chain, or are only settled on the main layer. No mention of second layer protocols that are made specifically for transactions (lightning), or off-chain uses, such as centralized databases like exchanges, or bearer bonds like opendime.
- TazeTSchnitzel 6y agoI think the thing that will burst the current bubble will be when the fake USD (“Tethers”) filling the market are finally recognised as not actually being backed by fiat reserves. (There's a lot written about this. For example: https://davidgerard.co.uk/blockchain/2021/02/23/new-york-settles-with-tether-a-wrist-slap-with-a-strong-leash/ https://davidgerard.co.uk/blockchain/2021/02/23/new-york-set...)
- DougN7 6y agoI keep wondering what would happen if bitcoin disappeared tomorrow? Would the world be swimming in excess electricity? Would prices all over drop because of over supply? I’m not sure, but I doubt it.
- solnyshok 6y agoif, by bitcoin you mean "all cryptocurrencies" then we would get cheaper electricity, CPUs, and especially - GPUs.