5 ms·

Your math is wrong, making your entire premise/argument invalid. A transaction costs $0.60 of electricity as of right now: 150000 kilowatt (power consumption o

by mrb 12y ago

Your math is wrong, making your entire premise/argument invalid. A transaction costs $0.60 of electricity as of right now: 150000 kilowatt (power consumption of the global Bitcoin network [1]) ÷ (3600 (sec/hour) * 7 (transaction/sec)) = 6.0 kWh/transaction The worldwide average price of 1 kWh is $0.10, so a transaction costs $0.60 in electricity to be processed by the network. Also, the 7 transaction/second limit comes from the current 1MB block size limit which was chosen by agreement. It will be increased in the near future. If it is raised to, say, 10MB this would allow 70 transaction/sec, hence reducing the electricity cost of a transaction down to $0.06. [1] http://www.eetimes.com/document.asp?doc_id=1323522 http://www.eetimes.com/document.asp?doc_id=1323522 - the global hashrate has increased by 50% since this article was written (~200 petahash/sec in August 2014, up to ~300 petahash/sec today) but at the same time hardware efficiency (hash/sec per watt) has increased, so the ballpark number is correct

imaginenore 12y ago
His logic is wrong too. $0.60 is not a transaction cost - the persons making the transaction are not paying that. It a cost to the miner.
- danbruc 12y ago
  These are the transaction costs, the costs to process the transaction. The user pays the transaction fee which is currently (usually) lower because miners still get the block reward. But at some point in the future only the transaction fees will have to pay for the transaction costs.
  - imaginenore 12y ago
    No, there is no other fee except the standard one. So if some miners aren't happy with that, they will quit. It's a self-correcting system.
    - danbruc 12y ago
      You are missing the point. Right now you are getting 25 BTC for mining a block, but that block reward will drop to zero while the costs for processing a transaction will remain more or less the same. Therefore transaction fees will have to go up until they cover the transaction costs without subsidizing them with the block reward. The other alternative, lowering transaction costs, is not a real option because it would make the Bitcoin network vulnerable.
      - imaginenore 12y ago
        > but that block reward will drop to zero while the costs for processing a transaction will remain more or less the same No, you're missing the point. If your narrative were true, we would see fee increases after every reward drop. Never happened. This is how it actually works: reward drops -> unhappy miners quit -> difficulty drops -> cost per transaction drops.
        danbruc 12y ago
        There was only a single drop from 50 BTC to 25 BTC so there is no basis for your claim. And it can not work the way you describe. With 100k transactions per day and $0.10 fees per transactions miners can collect 3.65 million Dollars per year. So everyone with a handful million dollars to spare can easily completely destroy the Bitcoin network. Even better, there are already people with a lot of mining hardware out there, they would only have to pay electricity for a few weeks.
        imaginenore 12y ago
        And did the fee go up after the drop? That's right, there's no basis for your claim.
        danbruc 12y ago
        Have a look at the charts showing the fees per day [1] and the network deficit [2]. On the one hand fees went up, but before the block reward dropped, on the other hand the network operated at a deficit for quite some time. One has of course to take these graphs with a grain of salt because it is quite hard to estimated the real costs of running the Bitcoin network. But I really don't understand what you are arguing for. Once the block reward becomes mostly irrelevant you have essentially two choices - relatively expensive transactions or a weak network, i.e. low hash rate. Don't you agree with that? [1] https://blockchain.info/charts/transaction-fees?showDataPoints=false&show_header=true&daysAverageString=1&timespan=all&scale=1 https://blockchain.info/charts/transaction-fees?showDataPoin... [2] https://blockchain.info/charts/network-deficit?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0 https://blockchain.info/charts/network-deficit?timespan=all&...
sharpneli 12y ago
Where do you get 150 000 kW? Even assuming all the miners are the best I could find (Achilles lab series) [1] that comes to 190000kW based on current hashrate [2]. Your transactions/second is also bit off. Right now based on blockchain.info the highest transaction day had 115787 transactions [3]. And that day the backlog of unconfirmed transactions got as high as almost 6000 unconfirmed transactions [4]. It doesn't matter at all if the network can "theoretically" support 7tps if it chokes at 1.3tps That brings the actual kWh cost into 40kWh/transaction and up to the same ballback as what GP had. Based on the arguments on forums right now it looks that increasing the block size is impossible. Because that would hard fork the blockchain. When new coins are no longer being awarded to miners then people will have to start to pay the transaction fees themselves. Right now the mining is subsidized by what basically amounts to printing money and thus effectively is a small inflationary tax to everyone using bitcoin. [1] https://en.bitcoin.it/wiki/Mining_hardware_comparison https://en.bitcoin.it/wiki/Mining_hardware_comparison [2] https://blockchain.info/charts/hash-rate https://blockchain.info/charts/hash-rate [3] https://blockchain.info/charts/n-transactions https://blockchain.info/charts/n-transactions [4] https://imgur.com/GAklIdZ https://imgur.com/GAklIdZ The most delicious moment was not screencapped, but this is quite close. Even as this was happening the miners happily issued small blocks (500kB and less).
- vanzard 12y ago
  The network never "choked" at 1.3tps. There are peaks of activity near the theoretical max of 7 tps (check for blocks close to 1MB in size). There are thousands of unconfirmed transactions because their senders chose to include fees that are too low (or no fee at all), so miners decide to not process them. > When new coins are no longer being awarded to miners then people will have to start to pay the transaction fees themselves That's not how it works. People (senders) already pay the transaction fees themselves.
  - danbruc 12y ago
    Yes, they pay the transaction fees, but not the transaction costs. He wanted to say that transaction fees will become as high as the transaction costs.
  - 12y ago
danbruc 12y ago
I just looked it up in a comment [1] I wrote about a month ago - 250 PHash/s hash rate with 1 GHash/J mining efficiency, 100 $/MWh energy costs and 100k transactions per day. Sources for these numbers in the linked comment. But even your hypothetical $0.60 or $0.06 are still way to high for real micropayments if we, for example, think about paying maybe $0.10 for reading a news article as an alternative to subscriptions based or ad-financed online news. [1] https://news.ycombinator.com/item?id=8782877 https://news.ycombinator.com/item?id=8782877
- mrb 12y ago
  "100k transactions per day" There lies your miscalculation. You use the underutilization of the network (~1.1tps currently) to calculate a transaction cost and you claimed this cost cannot decrease (you said "processing more transaction will or should not lower these costs"). But as it is, the network is in fact capable of processing 7tps, therefore the true minimum electricity cost of a transaction is ~7x lower than what you claimed. "1 GHash/J"* This is a second but smaller error. Miners currently average closer to 1.5 Ghash/J, so that is another 1.5x decrease in your calculated transaction cost. These 2 errors (7 * 1.5 = 10.5) explain why your calculation was 10x off. Regarding micro payments, opinions are split but personally I do not think Bitcoin is well suited to them, or even needs to be suited to them to be a successful transaction processing system. So a $0.60 or $0.06 electricity cost per transaction is good enough right now, keeping in mind cost will go down as the block size limit is increased and as chips become more efficient in terms of Ghash/J.
  - danbruc 12y ago
    Slightly above 1.5 GHash/J seems to be the best available hardware. I have no idea how often people throw away their mining equipment but I find it unconvincing that everybody is already using the newest hardware. The calculation of the transaction costs was for that particular time frame so 100k transactions was a pretty fair assumption. But I was also talking about the future without block rewards so you have a point there that there is room for more transactions. So maybe we will end up at about a Dollar if we throw in hardware costs, rental, cooling, profit and so on. This is still prohibitive for micropayments. And it makes the assumption that the network will not grow if the transaction volume grows. The problem I have with this is that I don't think that it would be a good idea. Processing ten times the volume as of today but protecting it with the same amount of money in hardware and electricity costs as of today kind of makes the network ten times more interesting to attack. I estimated that gaining 50 % of the processing power would cost you 100 million in hardware, add electricity for two, three months and you end up in a range where a determined state, large company or even individual could wreak havoc.

by mrb 12y ago

imaginenore 12y ago

His logic is wrong too. $0.60 is not a transaction cost - the persons making the transaction are not paying that. It a cost to the miner.

danbruc 12y ago
These are the transaction costs, the costs to process the transaction. The user pays the transaction fee which is currently (usually) lower because miners still get the block reward. But at some point in the future only the transaction fees will have to pay for the transaction costs.
- imaginenore 12y ago
  No, there is no other fee except the standard one. So if some miners aren't happy with that, they will quit. It's a self-correcting system.
  - danbruc 12y ago
    You are missing the point. Right now you are getting 25 BTC for mining a block, but that block reward will drop to zero while the costs for processing a transaction will remain more or less the same. Therefore transaction fees will have to go up until they cover the transaction costs without subsidizing them with the block reward. The other alternative, lowering transaction costs, is not a real option because it would make the Bitcoin network vulnerable.
    - imaginenore 12y ago
      > but that block reward will drop to zero while the costs for processing a transaction will remain more or less the same No, you're missing the point. If your narrative were true, we would see fee increases after every reward drop. Never happened. This is how it actually works: reward drops -> unhappy miners quit -> difficulty drops -> cost per transaction drops.
      - danbruc 12y ago
        There was only a single drop from 50 BTC to 25 BTC so there is no basis for your claim. And it can not work the way you describe. With 100k transactions per day and $0.10 fees per transactions miners can collect 3.65 million Dollars per year. So everyone with a handful million dollars to spare can easily completely destroy the Bitcoin network. Even better, there are already people with a lot of mining hardware out there, they would only have to pay electricity for a few weeks.
        imaginenore 12y ago
        And did the fee go up after the drop? That's right, there's no basis for your claim.
        danbruc 12y ago
        Have a look at the charts showing the fees per day [1] and the network deficit [2]. On the one hand fees went up, but before the block reward dropped, on the other hand the network operated at a deficit for quite some time. One has of course to take these graphs with a grain of salt because it is quite hard to estimated the real costs of running the Bitcoin network. But I really don't understand what you are arguing for. Once the block reward becomes mostly irrelevant you have essentially two choices - relatively expensive transactions or a weak network, i.e. low hash rate. Don't you agree with that? [1] https://blockchain.info/charts/transaction-fees?showDataPoints=false&show_header=true&daysAverageString=1&timespan=all&scale=1 https://blockchain.info/charts/transaction-fees?showDataPoin... [2] https://blockchain.info/charts/network-deficit?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0 https://blockchain.info/charts/network-deficit?timespan=all&...

sharpneli 12y ago

Where do you get 150 000 kW? Even assuming all the miners are the best I could find (Achilles lab series) [1] that comes to 190000kW based on current hashrate [2]. Your transactions/second is also bit off. Right now based on blockchain.info the highest transaction day had 115787 transactions [3]. And that day the backlog of unconfirmed transactions got as high as almost 6000 unconfirmed transactions [4]. It doesn't matter at all if the network can "theoretically" support 7tps if it chokes at 1.3tps That brings the actual kWh cost into 40kWh/transaction and up to the same ballback as what GP had. Based on the arguments on forums right now it looks that increasing the block size is impossible. Because that would hard fork the blockchain. When new coins are no longer being awarded to miners then people will have to start to pay the transaction fees themselves. Right now the mining is subsidized by what basically amounts to printing money and thus effectively is a small inflationary tax to everyone using bitcoin. [1] https://en.bitcoin.it/wiki/Mining_hardware_comparison https://en.bitcoin.it/wiki/Mining_hardware_comparison [2] https://blockchain.info/charts/hash-rate https://blockchain.info/charts/hash-rate [3] https://blockchain.info/charts/n-transactions https://blockchain.info/charts/n-transactions [4] https://imgur.com/GAklIdZ https://imgur.com/GAklIdZ The most delicious moment was not screencapped, but this is quite close. Even as this was happening the miners happily issued small blocks (500kB and less).

vanzard 12y ago
The network never "choked" at 1.3tps. There are peaks of activity near the theoretical max of 7 tps (check for blocks close to 1MB in size). There are thousands of unconfirmed transactions because their senders chose to include fees that are too low (or no fee at all), so miners decide to not process them. > When new coins are no longer being awarded to miners then people will have to start to pay the transaction fees themselves That's not how it works. People (senders) already pay the transaction fees themselves.
- danbruc 12y ago
  Yes, they pay the transaction fees, but not the transaction costs. He wanted to say that transaction fees will become as high as the transaction costs.
- 12y ago

danbruc 12y ago

I just looked it up in a comment [1] I wrote about a month ago - 250 PHash/s hash rate with 1 GHash/J mining efficiency, 100 $/MWh energy costs and 100k transactions per day. Sources for these numbers in the linked comment. But even your hypothetical $0.60 or $0.06 are still way to high for real micropayments if we, for example, think about paying maybe $0.10 for reading a news article as an alternative to subscriptions based or ad-financed online news. [1] https://news.ycombinator.com/item?id=8782877 https://news.ycombinator.com/item?id=8782877

mrb 12y ago
"100k transactions per day" There lies your miscalculation. You use the underutilization of the network (~1.1tps currently) to calculate a transaction cost and you claimed this cost cannot decrease (you said "processing more transaction will or should not lower these costs"). But as it is, the network is in fact capable of processing 7tps, therefore the true minimum electricity cost of a transaction is ~7x lower than what you claimed. "1 GHash/J"* This is a second but smaller error. Miners currently average closer to 1.5 Ghash/J, so that is another 1.5x decrease in your calculated transaction cost. These 2 errors (7 * 1.5 = 10.5) explain why your calculation was 10x off. Regarding micro payments, opinions are split but personally I do not think Bitcoin is well suited to them, or even needs to be suited to them to be a successful transaction processing system. So a $0.60 or $0.06 electricity cost per transaction is good enough right now, keeping in mind cost will go down as the block size limit is increased and as chips become more efficient in terms of Ghash/J.
- danbruc 12y ago
  Slightly above 1.5 GHash/J seems to be the best available hardware. I have no idea how often people throw away their mining equipment but I find it unconvincing that everybody is already using the newest hardware. The calculation of the transaction costs was for that particular time frame so 100k transactions was a pretty fair assumption. But I was also talking about the future without block rewards so you have a point there that there is room for more transactions. So maybe we will end up at about a Dollar if we throw in hardware costs, rental, cooling, profit and so on. This is still prohibitive for micropayments. And it makes the assumption that the network will not grow if the transaction volume grows. The problem I have with this is that I don't think that it would be a good idea. Processing ten times the volume as of today but protecting it with the same amount of money in hardware and electricity costs as of today kind of makes the network ten times more interesting to attack. I estimated that gaining 50 % of the processing power would cost you 100 million in hardware, add electricity for two, three months and you end up in a range where a determined state, large company or even individual could wreak havoc.