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A proper CO2 tax wouldn't be disruptive to bitcoin, bitcoin only cares that everyone pays the same price for electricity. If the absolute cost of electricity go

by Taek 5y ago

A proper CO2 tax wouldn't be disruptive to bitcoin, bitcoin only cares that everyone pays the same price for electricity. If the absolute cost of electricity goes up, nothing changes.

arcticbull 5y ago
Unless the tax applies globally then they’ll just flee to Kazakhstan. Oh wait; they won’t have to flee far.
akira2501 5y ago
> If the absolute cost of electricity goes up, nothing changes. The cost of electricity does impact the cost per transaction on the network, does it not?
- RamshackleJ 5y ago
  nope, transactions clear at a rate unrelated to mining(so long as at least 1 person is mining). The only thing that impacts transaction costs is how many other people are trying to clear their own transactions and bidding up the sat/vbyte rate.
  - IfOnlyYouKnew 5y ago
    Either transaction costs go up, or electricity usage per transaction goes down. Anything else just doesn’t add up.
    - arcticbull 5y ago
      Most coiners conveniently ignore block reward when calculating the cost of a transaction - that's your missing factor. Consider that the only reason you need to secure the blockchain is because it is mutable, if it were immutable it would be sufficient to simply publish it with a known hash. Ergo, 100% of the energy consumption of the Bitcoin network is attributable to transaction processing and therefore can be quantized into and proportionally assigned to transactions. TotalCost = DirectCost + ProportionalAllocationOfBlockReward The value of the block reward is proportional to the price of bitcoin, and this block reward determines the ceiling of the consumption of resources in mining. The floor is determined by prisoners dilemma and so likely approaches the ceiling at the limit. So yes, the transaction cost does scale with consumption of resources, albeit in a tail-wagging-the-dog kind of way, because the price of the block reward changes with price allowing more resources to be consumed. Currently the actual cost of a Bitcoin transaction is $2.44 in direct costs + (6.25 * 41000)/2750 = $93 in indirect costs, so right around $95.44 - and that's using I believe the maximum possible transactions per block, the reality is it's more expensive still. Move over Bank of America, there's a new king in town.
      - deleted 5y ago
        [deleted]
      - mikeblackson 5y ago
        You can do 1+ million lightning network transactions that will settle as 1 transaction on the BTC blockchain, so ~$93/1,000,000? Sounds amazingly cheap for uncensorable transactions. ESG people are trying to solve something that is already solved. POW is here to stay and will scale tremendously well as we all move to layer 2.
        arcticbull 5y ago
        As I mentioned upthread I can't possibly disagree more. PoW is designed specifically not to scale. The higher the price the more it wastes. It's an embarrassingly poor technology. You completely synthesized $93/1000000 obviously, and as we discussed it would take 75 years to open a channel for everyone alive today and $300,000,000,000.
        mikeblackson 5y ago
        This is a poor take, I addressed the false $300B channel claim elsewhere in the thread but was downvoted so my response is invisible. The HN echo chamber must stay intact at all costs I guess.
    - andruby 5y ago
      Sorry, that's not how it works. The network adapts the difficulty to target 1 new block every 10 minutes. More mining → higher difficulty → higher electricity usage per block. The transaction costs paid are independent of difficulty or number of miners. Transaction cost depends on the demand. A block has a limited size in bytes. If more people want to send transactions than there is room in the current block, the miner that mines that block will include the transactions that include the highest fee. When sending a transaction, you can choose that fee. Higher fee → higher chance of being included. Bitcoin clients will usually calculate a reasonable fee for you, based on the demand.
    - vel0city 5y ago
      Miners don't set the transaction cost, they can only maximize fee revenue by picking the highest fee transactions at that time in the mempool. So, if it becomes unprofitable or not profitable enough for the taste of the miner, hashrate will go down, which will lead to a difficulty adjustment, which means overall electricity usage per transaction goes down. So its scenario #2 in your comment.
- vel0city 5y ago
  The network self-adjusts difficulty so a block is mined roughly every ten minutes. A block has a maximum size of data in it, pretty much the maximum amount of transactions per block. As long as there aren't massive fluctuations to the mining rate, the rate of transactions will remain relatively constant. As long as there is free space in the blocks, average transaction fees will remain low. If there are a lot of transactions in the mempool waiting to be included in a block, users will need to submit transactions with higher related fees to ensure they get picked to be included in a block soon. Remember, miners don't necessarily set transaction fees. Users choose what they're willing to pay for their transactions, essentially placing a bid. Miners choose the transactions that maximize the fees per block. Miners always want as full of blocks as possible because there will only be a block roughly every 10 minutes.
godelski 5y ago
The cost of electricity (coupled with the rewards and cost of hardware) changes how profitable mining is. The more profitable the more players. The more players the more transaction throughput. This is exactly why miners have bought powerplants and why they operate in locations with cheap electricity, because it makes it more profitable for them. Bitcoin mining is directly related to the cost of electricity. That said, not every cryptocurrency is reliant upon brute forcing hashing algorithms to verify.
- snikeris 5y ago
  It's the same transaction throughput regardless of the number of miners.
  - idiotsecant 5y ago
    Same transaction throughput, but not same security.
    - arcticbull 5y ago
      Right people say that, but here in the real world we usually define some sense of sufficiency. Just adding more "security" by burning up all the worlds coal at some point has no meaningful benefit. This is just a nice narrative. Security is good -> more security is better no matter the externalities is a terrible way of looking at the current situation. We don't make seatbelts out of titanium 8 inches thick with their own airbags when they're mounted in a go-kart. When the hash rate dropped what, 75%, off the back of the China exodus literally nothing happened. tl;dr: Same transaction throughput, same security, just less efficient.

by Taek 5y ago

A proper CO2 tax wouldn't be disruptive to bitcoin, bitcoin only cares that everyone pays the same price for electricity. If the absolute cost of electricity goes up, nothing changes.

arcticbull 5y ago

Unless the tax applies globally then they’ll just flee to Kazakhstan. Oh wait; they won’t have to flee far.

akira2501 5y ago

> If the absolute cost of electricity goes up, nothing changes. The cost of electricity does impact the cost per transaction on the network, does it not?

RamshackleJ 5y ago
nope, transactions clear at a rate unrelated to mining(so long as at least 1 person is mining). The only thing that impacts transaction costs is how many other people are trying to clear their own transactions and bidding up the sat/vbyte rate.
- IfOnlyYouKnew 5y ago
  Either transaction costs go up, or electricity usage per transaction goes down. Anything else just doesn’t add up.
  - arcticbull 5y ago
    Most coiners conveniently ignore block reward when calculating the cost of a transaction - that's your missing factor. Consider that the only reason you need to secure the blockchain is because it is mutable, if it were immutable it would be sufficient to simply publish it with a known hash. Ergo, 100% of the energy consumption of the Bitcoin network is attributable to transaction processing and therefore can be quantized into and proportionally assigned to transactions. TotalCost = DirectCost + ProportionalAllocationOfBlockReward The value of the block reward is proportional to the price of bitcoin, and this block reward determines the ceiling of the consumption of resources in mining. The floor is determined by prisoners dilemma and so likely approaches the ceiling at the limit. So yes, the transaction cost does scale with consumption of resources, albeit in a tail-wagging-the-dog kind of way, because the price of the block reward changes with price allowing more resources to be consumed. Currently the actual cost of a Bitcoin transaction is $2.44 in direct costs + (6.25 * 41000)/2750 = $93 in indirect costs, so right around $95.44 - and that's using I believe the maximum possible transactions per block, the reality is it's more expensive still. Move over Bank of America, there's a new king in town.
    - deleted 5y ago
      [deleted]
    - mikeblackson 5y ago
      You can do 1+ million lightning network transactions that will settle as 1 transaction on the BTC blockchain, so ~$93/1,000,000? Sounds amazingly cheap for uncensorable transactions. ESG people are trying to solve something that is already solved. POW is here to stay and will scale tremendously well as we all move to layer 2.
      - arcticbull 5y ago
        As I mentioned upthread I can't possibly disagree more. PoW is designed specifically not to scale. The higher the price the more it wastes. It's an embarrassingly poor technology. You completely synthesized $93/1000000 obviously, and as we discussed it would take 75 years to open a channel for everyone alive today and $300,000,000,000.
        mikeblackson 5y ago
        This is a poor take, I addressed the false $300B channel claim elsewhere in the thread but was downvoted so my response is invisible. The HN echo chamber must stay intact at all costs I guess.
  - andruby 5y ago
    Sorry, that's not how it works. The network adapts the difficulty to target 1 new block every 10 minutes. More mining → higher difficulty → higher electricity usage per block. The transaction costs paid are independent of difficulty or number of miners. Transaction cost depends on the demand. A block has a limited size in bytes. If more people want to send transactions than there is room in the current block, the miner that mines that block will include the transactions that include the highest fee. When sending a transaction, you can choose that fee. Higher fee → higher chance of being included. Bitcoin clients will usually calculate a reasonable fee for you, based on the demand.
  - vel0city 5y ago
    Miners don't set the transaction cost, they can only maximize fee revenue by picking the highest fee transactions at that time in the mempool. So, if it becomes unprofitable or not profitable enough for the taste of the miner, hashrate will go down, which will lead to a difficulty adjustment, which means overall electricity usage per transaction goes down. So its scenario #2 in your comment.
vel0city 5y ago
The network self-adjusts difficulty so a block is mined roughly every ten minutes. A block has a maximum size of data in it, pretty much the maximum amount of transactions per block. As long as there aren't massive fluctuations to the mining rate, the rate of transactions will remain relatively constant. As long as there is free space in the blocks, average transaction fees will remain low. If there are a lot of transactions in the mempool waiting to be included in a block, users will need to submit transactions with higher related fees to ensure they get picked to be included in a block soon. Remember, miners don't necessarily set transaction fees. Users choose what they're willing to pay for their transactions, essentially placing a bid. Miners choose the transactions that maximize the fees per block. Miners always want as full of blocks as possible because there will only be a block roughly every 10 minutes.

godelski 5y ago

The cost of electricity (coupled with the rewards and cost of hardware) changes how profitable mining is. The more profitable the more players. The more players the more transaction throughput. This is exactly why miners have bought powerplants and why they operate in locations with cheap electricity, because it makes it more profitable for them. Bitcoin mining is directly related to the cost of electricity. That said, not every cryptocurrency is reliant upon brute forcing hashing algorithms to verify.

snikeris 5y ago
It's the same transaction throughput regardless of the number of miners.
- idiotsecant 5y ago
  Same transaction throughput, but not same security.
  - arcticbull 5y ago
    Right people say that, but here in the real world we usually define some sense of sufficiency. Just adding more "security" by burning up all the worlds coal at some point has no meaningful benefit. This is just a nice narrative. Security is good -> more security is better no matter the externalities is a terrible way of looking at the current situation. We don't make seatbelts out of titanium 8 inches thick with their own airbags when they're mounted in a go-kart. When the hash rate dropped what, 75%, off the back of the China exodus literally nothing happened. tl;dr: Same transaction throughput, same security, just less efficient.