Electricity consumption of Bitcoin: a market-based and technical analysis

[tbihl]

A growing trend is to mine Bitcoin in Venezuela, where the electricity is hugely subsidized, mining can pay better than something like being a doctor, and you can get food sent in from Miami (since your income is in a widely accepted currency.)

Good Econtalk on the subject: http://www.econtalk.org/archives/2017/02/jim_epstein_on.html

[nhaehnle]

In other words, the Bitcoin network consumes about 5-6 orders of magnitude more electricity than would be required to maintain a similarly-sized ledger using more traditional database techniques.

Yes, the feature set is a bit different, but it's difficult to see how Bitcoin can remain competitive in the long run. I guess it can help push down overheads elsewhere in the financial system, so at least that's a good thing. And it's always been a good educational experience.

[runeks]

The point of Bitcoin is to consume as much electricity, roughly, as a block is worth. Consuming this electricity, and using it to calculate a proof of the consumed electricity, means that the blockchain becomes immutable: no one can change the past, because it would require re-doing the proof-of-work.

So, out of this -- seemingly meaningless -- activity of burning off energy, arises the trustless property of the Bitcoin blockchain: with digital currencies that use proof-of-stake, or an SQL backend, every participant could -- theoretically -- have mutually agreed on assigning themselves 100x as many currency units, right before you enter and buy $1000 worth. There's no way to prove that this didn't happen, as it takes little effort to change history. This is unacceptable for a digital currency, hence the need for proof-of-work, and Bitcoin.

[ballenf]

Bitcoin is both the ledger and the printing/minting mechanism and the delivery mechanism (armored cars delivering new bills & coins to banks and picking up and destroying old ones).

Factor in those costs and suddenly bitcoin is bargain, energy-wise.

[mrb]

"it's difficult to see how Bitcoin can remain competitive"

Quite the contrary, the fact Bitcoin has been successful & growing for 8 years in spite of using so much energy is proof it is a non-problem. Energy per tx is rapidly decreasing (http://blog.zorinaq.com/bitcoin-mining-is-not-wasteful/) so it will only become more and more competitive from now on.

[canadian_voter]

In the future bitcoin[1] mining is banned on inhabited planets and instead done on Dyson spheres.

[1] It's the future, so neither bitcoin nor internet are capitalized.

[vivekd]

if this happens, bitcoin would become valueless. The value of bitcoin comes from the fact that you can't just pump them out, the energy requirements required to solve the calculations required for mining are one of the limits to bitcoin production. Free energy like feasible solar or dyson spears would just be a license to print free digital currency making it worthless.

[bitxbitxbitcoin]

I knew I couldn't be the only person with this thought. Solar powered Bitcoin mining will eventually be economically viable :).

[n00b101]

I think a rough estimate of the cost of 500MWh/year is $500 million per year. That doesn't include cooling, hardware, real-estate, staff and other operating expenses. I guess the majority of this cost is ultimately paid for by speculators who buy Bitcoins off of the miners.

[hollerith]

$500 million per year is roughly what I get, too, but 500MWh/year is very different from 500MW, which is what I think you meant to write since the OP expresses its conclusion in MW.

[danblick]

If you accept that (1) there are economies of scale in Bitcoin mining and (2) miners are rational and will only mine when it is profitable, then doesn't this suggest that large amounts of mining power should become concentrated in the hands of just a few major miners? Doesn't that seriously undermine Bitcoin's validity?

[danblick]

This article seems to support my suggestion.

https://www.cryptocoinsnews.com/declining-profitability-for-...

Quoting the conclusion of the referenced paper:

"Each future halving of the Bitcoin block reward will narrow the range of profitable entry for new Bitcoin miners considerably. The stronger relative position of incumbents compared to that of new entrants supports further consolidation of Bitcoin mining. Consequently, the distributed Bitcoin ledger, the blockchain, may become more vulnerable to attack, and its trustless nature may ultimately even be destroyed."

[peter303]

At one ton of CO2 per megawatt hour, we could be looking at 2 million tons CO2 a year. https://www.eia.gov/tools/faqs/faq.cfm?id=74&t=11

100 gallons of gasoline also creates a ton of CO2 for context.

[pmorici]

You are assuming the mining electricity comes predominately from fossil fuels which couldn't be further from reality. In reality the cheapest power is often in areas where hydroelectric is the dominate power source and miners choose their location based on availability of cheap power. Look at Washington State for example. It's a major producer of hydropower, has the cheapest electric rates in the US, and has a large number of Bitcoin mining facilities. Even in China it holds true that many mining facilities are in areas supplied by hydro electric power.

[npongratz]

> 100 gallons of gasoline also creates a ton of CO2 for context.

I thought I understood the Law of Conservation of Mass, but I guess I do not. If 100 gallons of gasoline has a mass of ~283.49 kg [0], how is a ton of carbon dioxide created from this?

[0] Maybe I'm wrong to use the first site that came up, but I used http://www.aqua-calc.com/calculate/volume-to-weight/substanc...

[linsen]

They make the assumption that unprofitable hardware has been retired. But this assumes that the person profiting from the mining is also paying for the electricity.

[foepys]

> But this assumes that the person profiting from the mining is also paying for the electricity.

Otherwise it doesn't make sense. You cannot steal electricity forever.