4 ms·

Global wealth is $400T. All crypto currency combined is worth about ~$2T at this point. So to store 0.5% of the world's wealth, we are using 0.6% of the world's

Global wealth is $400T. All crypto currency combined is worth about ~$2T at this point. So to store 0.5% of the world's wealth, we are using 0.6% of the world's energy. Banks obviously don't use anywhere near this much energy. Bitcoin is estimated to use more energy than all other server farms put together. So we are using 0.6% of the world's energy to store 0.5% of the world's wealth. And < 0.6% of the world's energy to store the other 99.5% of the world's wealth. Doesn't seem like the ideal wealth storage technology.

delaaxe 6y ago
I like this reasoning in terms of global wealth
lotsofpulp 6y ago
I would include the energy needed to maintain trust in other currencies including efforts to prevent counterfeits, which I might argue includes some portion of a nation's militaristic might. Trust is an even more ambiguous, yet crucial aspect of maintaining a currency's value, tied up in the "order" or predictability of the society using the currency, which involves various legal systems and at the most basic level, relationships between its peoples. It takes a relatively minuscule amount of energy to maintain a database of numbers associated with certain people and entities, but quite a significant amount to make it mean something.
- abalone 6y ago
  If this were actually true, Coinbase would not need to exist with a market cap of $100B.
- g_sch 6y ago
  I don't really understand this argument. If militaries are part of the embodied infrastructure of a country's banking system, this would imply that replacing the banking system with something decentralized (like cryptocurrency) would cause countries across the world to reduce their military footprint. I find it much more likely that military resources would be diverted to somewhere upstream of mining in the value chain. For example, if we continue relying on carbon-intensive proof-of-work blockchains, why wouldn't armies simply be diverted to secure energy resources?
  - lotsofpulp 6y ago
    Yes, similar to countries going all over the world to find gold in years past. In that sense, fiat would require less military since you don’t need to go conquer anyone, just being able to project enough of a threat to stop counterfeiting is enough. Either way, it’s very convoluted and tough to tease out line item costs, but I don’t think comparing electricity usage is a good proxy.
    - g_sch 6y ago
      My point is that, if a country no longer derives its power and wealth from controlling the banking system through military might, rather than freely giving up that power, it's going to flex that military might in other ways to ensure that it maintains that power and wealth. If crypto merely displaces military resources (as I think it would) instead of replacing them (as you seem to be arguing), then it's not really fair to count the military as part of the banking system's energy/carbon footprint.
reidjs 6y ago
This implies that the energy required to store wealth in centralized databases is easily calculable. It also implies that the goal of storing wealth is optimizing for low energy usage, which seems less important than security/safety, ease of transfer, taxation, automation, and other factors. I’m not making an argument for or against PoW. Just want to point out it’s possible >.6% of humans energy output may in fact go towards banking and payments.
- abalone 6y ago
  This is a poorly reasoned comparison. The .6% figure was in reference to .5% of wealth; presumably much more energy would be required to store closer to 100% of wealth with crypto. Given that we are nearing the irreversible destruction of our climate and that existing electronic systems offer all the benefits you mention, but with massively lower energy cost, your claim that energy “seems less important” is unsupported.
rozap 6y ago
That's why we need centralized exchanges like coinbase to enable off chain transactions within their walled garden. Then we can have the worst of both worlds.
Consultant32452 6y ago
What's the total energy cost, including human capital, of keeping the petrodollar afloat via global wars/hegemony?
- onlyrealcuzzo 6y ago
  Even if it is greater than 0.6% (it's plausible) - dollar denominated wealth accounts for 25% or global wealth. Which is 52.5x the amount of wealth as all of crypto. The US doesn't even use 20% of the world's energy. So you would need to think that 125% of the energy the US produces and consumes goes directly into fighting wars and "supporting the petro dollar" - which is absurd. Almost 50% of energy is spent on transportation and utilities alone... In the most generous of worlds, Bitcoin is 10x less efficient than the current systems. It is probably closer to 1000x less efficient (or more).
  - Consultant32452 6y ago
    Well the US has killed over a million people in Iraq, Afghanistan, and Syria in the current wars. How are you calculating the cost of that million lives to prop up the dollar? This is one of the biggest selling points of crypto, it’s not tied to a government that may decide to commit mass murder for its sake.
Grustaf 6y ago
The energy is not spent on storing though, it's expended when verifying transaction, isn't it?
- ufo 6y ago
  In the sense that verifying transactions is what keeps the bitcoin network alive.
  - Grustaf 6y ago
    Yeah but if people would mostly store their bitcoins, wouldn’t the energy needs go down?
    - ufo 6y ago
      Here is where Bitcoin's wasteful algorithm comes in. The vast majority of the energy expenditure comes from bitcoin miners burning compute cycles to bid for the right to add the next round of transactions to the ledger, which happens every 10 minutes. The more energy that the miner spends on computing SHA1 hashes, the higher the chance that they'll find a lucky hash that entitles them to a monetary reward from the transaction fees, plus freshly minted bitcoins. The idea behind this proof-of-work scheme is that creating an alternative blockchain history becomes prohibitively expensive, pushing the network to achive a distributed consensus. However, it's tremendously wasteful because the energy isn't actually being spent on "useful" work.
ozmbie 6y ago
The energy spent on bitcoin’s proof of work is not tied to the volume of transactions though. At a technical/protocol level, the same amount of mining would be needed if there was $100 trillion being stored or $1 being stored. Although higher prices make larger mining operations more enticing and profitable.
beervirus 6y ago
> So to store 0.5% of the world's wealth, we are using 0.6% of the world's energy. It's even worse in terms of energy per transaction.
- andxor 6y ago
  Which is a useless metric because the energy usage doesn't scale with the number of transactions.
deleted 6y ago
[deleted]

delaaxe 6y ago

I like this reasoning in terms of global wealth

lotsofpulp 6y ago

I would include the energy needed to maintain trust in other currencies including efforts to prevent counterfeits, which I might argue includes some portion of a nation's militaristic might. Trust is an even more ambiguous, yet crucial aspect of maintaining a currency's value, tied up in the "order" or predictability of the society using the currency, which involves various legal systems and at the most basic level, relationships between its peoples. It takes a relatively minuscule amount of energy to maintain a database of numbers associated with certain people and entities, but quite a significant amount to make it mean something.

abalone 6y ago
If this were actually true, Coinbase would not need to exist with a market cap of $100B.
g_sch 6y ago
I don't really understand this argument. If militaries are part of the embodied infrastructure of a country's banking system, this would imply that replacing the banking system with something decentralized (like cryptocurrency) would cause countries across the world to reduce their military footprint. I find it much more likely that military resources would be diverted to somewhere upstream of mining in the value chain. For example, if we continue relying on carbon-intensive proof-of-work blockchains, why wouldn't armies simply be diverted to secure energy resources?
- lotsofpulp 6y ago
  Yes, similar to countries going all over the world to find gold in years past. In that sense, fiat would require less military since you don’t need to go conquer anyone, just being able to project enough of a threat to stop counterfeiting is enough. Either way, it’s very convoluted and tough to tease out line item costs, but I don’t think comparing electricity usage is a good proxy.
  - g_sch 6y ago
    My point is that, if a country no longer derives its power and wealth from controlling the banking system through military might, rather than freely giving up that power, it's going to flex that military might in other ways to ensure that it maintains that power and wealth. If crypto merely displaces military resources (as I think it would) instead of replacing them (as you seem to be arguing), then it's not really fair to count the military as part of the banking system's energy/carbon footprint.

reidjs 6y ago

This implies that the energy required to store wealth in centralized databases is easily calculable. It also implies that the goal of storing wealth is optimizing for low energy usage, which seems less important than security/safety, ease of transfer, taxation, automation, and other factors. I’m not making an argument for or against PoW. Just want to point out it’s possible >.6% of humans energy output may in fact go towards banking and payments.

abalone 6y ago
This is a poorly reasoned comparison. The .6% figure was in reference to .5% of wealth; presumably much more energy would be required to store closer to 100% of wealth with crypto. Given that we are nearing the irreversible destruction of our climate and that existing electronic systems offer all the benefits you mention, but with massively lower energy cost, your claim that energy “seems less important” is unsupported.

rozap 6y ago

That's why we need centralized exchanges like coinbase to enable off chain transactions within their walled garden. Then we can have the worst of both worlds.

Consultant32452 6y ago

What's the total energy cost, including human capital, of keeping the petrodollar afloat via global wars/hegemony?

onlyrealcuzzo 6y ago
Even if it is greater than 0.6% (it's plausible) - dollar denominated wealth accounts for 25% or global wealth. Which is 52.5x the amount of wealth as all of crypto. The US doesn't even use 20% of the world's energy. So you would need to think that 125% of the energy the US produces and consumes goes directly into fighting wars and "supporting the petro dollar" - which is absurd. Almost 50% of energy is spent on transportation and utilities alone... In the most generous of worlds, Bitcoin is 10x less efficient than the current systems. It is probably closer to 1000x less efficient (or more).
- Consultant32452 6y ago
  Well the US has killed over a million people in Iraq, Afghanistan, and Syria in the current wars. How are you calculating the cost of that million lives to prop up the dollar? This is one of the biggest selling points of crypto, it’s not tied to a government that may decide to commit mass murder for its sake.

Grustaf 6y ago

The energy is not spent on storing though, it's expended when verifying transaction, isn't it?

ufo 6y ago
In the sense that verifying transactions is what keeps the bitcoin network alive.
- Grustaf 6y ago
  Yeah but if people would mostly store their bitcoins, wouldn’t the energy needs go down?
  - ufo 6y ago
    Here is where Bitcoin's wasteful algorithm comes in. The vast majority of the energy expenditure comes from bitcoin miners burning compute cycles to bid for the right to add the next round of transactions to the ledger, which happens every 10 minutes. The more energy that the miner spends on computing SHA1 hashes, the higher the chance that they'll find a lucky hash that entitles them to a monetary reward from the transaction fees, plus freshly minted bitcoins. The idea behind this proof-of-work scheme is that creating an alternative blockchain history becomes prohibitively expensive, pushing the network to achive a distributed consensus. However, it's tremendously wasteful because the energy isn't actually being spent on "useful" work.

ozmbie 6y ago

The energy spent on bitcoin’s proof of work is not tied to the volume of transactions though. At a technical/protocol level, the same amount of mining would be needed if there was $100 trillion being stored or $1 being stored. Although higher prices make larger mining operations more enticing and profitable.

beervirus 6y ago

> So to store 0.5% of the world's wealth, we are using 0.6% of the world's energy. It's even worse in terms of energy per transaction.

andxor 6y ago
Which is a useless metric because the energy usage doesn't scale with the number of transactions.

deleted 6y ago

[deleted]