It’s a simple equation:
So long as there is more money in mining BTC than there is cost in energy to mine it, mining will proceed.
No entity in the world can control the price of crypto. But, we can and already do regulate energy production.
I think we need a carbon tax, that is specifically a financial disincentive towards any means of energy production that directly pollutes the atmosphere.
Seriously, what are the current best arguments against levying such a disincentive?
Moreover, if energy were priced correctly (its toll on the climate priced in) would BTC become higher in value? That is, we have a supply, increasing at a rate fixed between the arbitrage of energy and mining efficiency. If energy were to become more expensive, the growth in supply would slow. Assuming demand remains constant or continues to grow as well, the only way for price to go is up.
To me it seems like Bitcoin (and other pow cryptocurrencies) are almost like the climate change scapegoat for a number of social and economic issues that have seemingly come to a head recently to facilitate their rise.
People mine because it is expensive, it isn't the other way around, so the real questions we should be asking in good faith are things like "Why it is profitable in the first place?" and I think it is probably related to other questions like why have the greater financial markets become so wonky, why has the behavior of investors changed so radically (GME et al), why have politicians been unable to be effective policymakers for decades, and why many institutions, both social and political in nature, appear to have become less trustworthy in the eye of the greater public? These are some of the questions among others which I think probably provide a better understanding of what is happening than the overly simplistic 'ponzi scam' explanation that has been repeated ad nauseam since its inception.
Bitcoin is just one of many things (pretty much everything) that have been able to use energy profitably, while subsidizing the costs by externalizing them via climate change, that part isn't new. People get too caught up on bitcoin because it is new and nobody understands it (not just from a technical perspective), so it is really easy to dismiss. Singling it out in that manner seems silly.
Mining difficulty tends to be a lagging indicator of price, not the other way around. I doubt that a price increase in power would have much affect on the price of the currency itself.
We 100% need massive carbon taxes right now. It's really telling how the energy industry is trying to push blame to consumers, especially cryptocurrency miners, in order to distract from the discussion of real carbon taxes to force polluters to pay for the damage they're causing.
I'm sure I'm one of the largest supporters of cryptocurrency in this thread so far, and I'm perfectly comfortable stating the obvious that mining with fossil fuels is an abomination. It's going to keep happening though until regulators get serious about reigning in the fossil fuel industry.
> if energy were priced correctly ... would BTC become higher in value? ... If energy were to become more expensive, the growth in supply would slow.
It doesn't work like that. The consensus algorithm targets 1 block mined every 10 minutes. If the amount of energy expended goes up (i.e. blocks are mined more frequently) then the difficulty increases to counteract it. If the rate of block production decreases, then the difficulty decreases to counteract it.
(I've used "difficulty" here in the English-language way. Confusingly, "difficulty" is kind of backwards in Bitcoin - the "difficulty" is a number that a mined block hash must be below - it gets more "difficult" to mine a block if the "difficulty" number is lower. Maybe it should be called "easiness" instead of "difficulty").
We know since many decades that a carbon price might be a good idea. But it's not that simple, because either you do it worldwide or you introduce lots of exceptions or you do something like carbon import tariffs (which the EU wants to do, but I think no such mechanism exists anywhere in the world right now).
Bottom line is: Most of the world has no carbon price, and the places that do have one (e.g. the EU ETS) there are so many loopholes that it is not very effective. It's not that it isn't worth trying to do better, but a carbon price is definitely not a short term solution.
So I'm inclined to think whoever proposes a carbon price as "the one true solution" really doesn't want a solution at all.
An increase in energy price wouldn't (in equilibrium) affect the Bitcoin price - it would affect the Bitcoin block difficulty, requiring less energy to mine the blocks (the mechanism being that miners unprofitable at the new energy price are driven out).
The growth in supply would not slow - in Bitcoin every two weeks you have a rebalancing of difficulty, so if miners have less hashing power the difficulty of producing each block gets lowered to keep the supply stable.
Wrt. your second question: Supply of Bitcoin is pretty much constant, regardless of energy expended, regardless of mining technology. The causation runs like this: demand -> price -> mining. Less demand, lower price, less mining. More demand, higher price, more mining. This is different than any other resource we are used to, because the supply of nothing else is as constant as with bitcoin. If the cost to mine Gold increases, the supply goes down and the price will rise.
Wrt your first question: The best argument against making energy more expensive is the same argument as it was 100 years ago:
If you use energy now, you build a more prosperous civilization for the future. Your grandchildren may have to deal with a warmer climate, but they will be much better able to do so than if they were more poor.
This argument stands and falls with your evaluation of the benefits of using more energy, the costs of a warmer climate and how you weigh these against each other.
> Seriously, what are the current best arguments against levying such a disincentive?
The best argument against it is: it's very hard to enforce it on everybody internationally, and if one country adopts it unilaterally, then production just moves to another country (making everyone worse off - same amount of pollution, but the production is presumably less economically efficient).
The second best argument against it is "the tax shouldn't be $x/ton, it should be $0.5x, which is a more accurate reflection of the external costs".
A distant third, but very effective in practice, is "the carbon tax is good, but it shouldn't apply to Special Interest Area X, because of these social/political/historical reasons..."
These aren't completely unsolvable problems, and people do try. But if your question was genuine, I hope you now see that there are some reasonable arguments not to just do this tomorrow.
Like, in reality miners will use whatever power is cheapest, and solar is currently the cheapest. They are also extremely* agile and can shift location/power source in a handful of days which leads me to believe that they are currently driving adoption of solar, BUT: with miners being framed as The Big Threat, we might be able to finally use that perception as a crowbar to remove incentives for energy sources that pollute and even impose heavy taxes on those sources and end up completely digging out the oil/coal industries.
Win Win Win as far as I’m concerned.
*Apparently unless you can buy an entire power plant
What we need a get rid of all the print and spend politicians. The reason for the raise of bitcoin is a direct response to the trillions and trillions of dollars just printed out of thin air.
It is insane how much grocery cost nowadays. I was at the supermarket last week and was looking at lobster, I thought it was listed for $6.99/lb for those 1 to 1.25 lb size, but when I got closed, it was $16.99/lb. It is crazy. Blue Crab at $5/each.
Well less energy does have downsides, see: all the things we use energy for. We probably don’t want to tax that except to prevent terrible harm. So I can imagine an argument being along the lines “alternative energy production isn’t ready to meet demand yet, oh and also burning carbon is useful for figuring out alternative energy (see: Tesla and the coal in China that’s burned to make their batteries) so how about instead we greatly fund alternative energy”.
Hard to do this when you can have other countries with much looser regulations allow Bitcoin miners run rampant.
What probably should happen is to make converting from any cryptocurrency to major world currencies a crime. I have no delusions that this will halt activity in this sector entirely, but it will make it reasonably difficult to make any substantial money this way without raising some serious eyebrows.
easy? How do you enforce it worldwide? If you impose it volutarily then how you don't lose competitive adventage?
It's only possible now because clean energy ia cheaper (but still cannot compete in emergency situations), so we should invest in fission and fusion research
EDIT: I'm in favor of carbon tax BTW, we can afford it now and will incentivise investment in green tech more
Why tax carbon emissions rather than directly taxing the manufacture of bitcoin? Carbon taxes increase costs for everything. Should we increase the cost of say, hospitals because some people _really_ want to mine bitcoin?
Who cares? Everyone is fixated on Bitcoin... there are tons of energy inefficient processes out there. The solution has nothing to do with Bitcoin... environmental impact needs to be priced into energy itself, whatever the application. This is a failure of the markets (and therefore ourselves). Bitcoin is a scapegoat.
I have sources who have purchased hydro plants in South America and refineries with installed power production and use the excess capacity for mining. My feeling it’s more common than a single crazy dude.
And we had imagined we'd all die in a flood of something vaguely cool, like nanotech grey goo. But no, it's going to be something as stupid as a conflagration of SHA-256 hashes.
The Greenidge team told potential investors last month that the plant had mined 1,186 bitcoins at an average net cost of about $2,869 for the 12 months ending in February. At this week’s Bitcoin price, that would translate into a profit margin of about $60,000 per mined coin.
Surely this cannot last. This kind of outsize profit ought to be bringing online enough new mining capacity to increase the block difficulty until that margin erodes away - is it the worldwide chip shortage preventing that from happening?
That's at 19 megawatts burning natural gas. So that means they spend about 140MWh of energy for one BTC. I calculate that comes to around $20/MWh, which seems to be on the low side of energy production. Coal is $40 to $143 per MWh.
The other aspect here is let's say you're a speculator and you think the price of BTC can go up another 50x or roughly $1M/BTC. Then even spending any amount less than the BTC spot price now is a bargain.
Yes, the chip shortage must be preventing the manufacture of enough ASICs.
The same can be said for Ethereum. The shortage of GPUs is preventing the difficulty to raise fast enough. The profit margin has been like 5-10x the electricity cost for the last few months. If you bought a RTX 3080/3090 it would have paid itself and the electricity by now.
Even in 2017 when AFAIK there wasn't a general chip shortage there was still a shortage of crypto ASICs because the lead time is months and Bitmain can't know how much demand there will be for mining. I doubt mining will ever reach an equilibrium.
Speculation in the value of cryptocurrency has forced the market into a regime of operation where neither the constraints of power & compute nor supply of semiconductors apply right now. The hierarchy of value constraints goes something like:
Speculation > silicon constrained mining > power & capital constrained mining
I believe the silicon constraints would instantly relax as soon as speculation falls into line based on how much hardware everyone has been stacking up on lately.
At the end of they day, the cost of energy & your ability to keep the machines operational will be the final constraint. This is the one that the long investors should anticipate. I.e. "How do I mitigate power cost in a power-cost-constrained market".
Right now at current market prices, owning an entire power plant to run your operation is folly. In a few more years when a delta of 2c/KWh is make-or-break on profitability, it makes perfect sense.
It felt like the lede is buried at the end of the article, and signals a deeper institutional issue. It looks like the Department of Environmental Conservation was petitioned to take a look at the permit for the plant claimed to be damaging lake’s environment. Meanwhile, DEC didn’t consider environmental damage when reviewing plant’s permit, wants to ignore (seemingly on a technicality) the evidence for one particular kind of damage, and furthermore last year it has discontinued the funding for tests for that kind of damage. Encouraging more coal plant construction seems strange in this age, even if we forget about this particular use case.
I'm starting to hope that crypto is a bubble and will burst soon... Massive environmental issues aside, I'd like to be able to buy a GPU at MSRP sometime in the next 5 years...
Some people throw hissy fits about how polluting cryptocurrencies supposedly are yet they remain silent about the perverse incentives that spurred their creation and use. It's the war on drugs all over again, and getting angry about crypto and trying to outlaw it is just treating a symptom and not the disease.
Many of the comments here are asking the wrong question - its not a matter of whether miners should be able to buy power plants and licences; so much as why it was cost effective for a disused coal plant to be acquired instead of a purchase of 25% of a specific wind farm's output, for example - the latter would drive renewable expansion, and the energy industry is already all over the fact this is the most cost effective way forward.
This might be a good thing. There are a few responses possible:
1. Do nothing, public gets angry.
2. Make bitcoin, or its mining, illegal. However, what is the criteria? All blockchains? Should google be illegal too? Both are just a digital product that the public wants.
3. Tax CO2 production by data centers, that might have a chance it can be coordinated broadly between nations, there is enough money there to tax, and bitcoin adds some urgency.
While doubtful CO2 can be taxed globally, without coordination, big companies play governments against each other.
The story kept getting worse when they explain that state grants covered all the money spent by lobbyists to help the new owners pay a tiny fraction of taxes compared to the old ones.
Is it possible for people to source or certify sustainable Bitcoin? Since there is a transaction chain, can you choose to buy or boycott “dirty coins”?
A simple move that would ban selling fossil power plants for cryptocurrencies mining purpose BUT allowing to do so for the carbon-neutral energy would be a win-win for both sides and will help the transition from carbon-heavy energy.
This is painted as a disaster, but I think all we're doing is cutting through to get at a consistent valuation for energy.
In order for Bitcoin to every achieve any long-term viability, in my opinion, it needs to stabilize its pricing. Practically speaking, the route to do that is through a combination of supply chain pricing and credit markets.
Pricing energy in Bitcoin (which is really all this is doing) is an interesting step towards the supply chain problem. This power plant, in all likelihood, would be happy to sell the power to another bidder if the price per Joule is higher than the expected price per Bitcoin per Joule. The natural next step is to just price electricity directly in Bitcoin.
The question then becomes how viable it is to move down the chain -- pricing natural gas or coal in Bitcoin, and putting pricing pressure on the supply chain for more complex energy products (turbines, solar panels, etc.) to match this pricing. If this is feasible (and that's a big "if") then there is a chance that we start to flip the equation -- energy prices in dollars are simply too volatile and Bitcoin becomes a standard option for international settlement.
Some of us in Texas have already been cooking up some really fantastical energy market schemes involving crypto mining...
I've been thinking about putting together trailers that contain a 2MWe gas turbine genset, switch gear, ups and crypto mining system. These could be towed out to arbitrary locations and used to burn surplus gas supply. Remember, CO2 is much better than CH4 when dealing with greenhouse gasses. Might as well make some extra $$$ while we are converting it...
They have already been doing this in ND. There are shipping containers with mining equipment inside set up next to flares. The oil companies are catching on to how much they are making though and want in on the action (since they provide access to the flare). It's in the tens to hundreds of thousands per month in profit iirc.
[+] [-] bransonf|5 years ago|reply
No entity in the world can control the price of crypto. But, we can and already do regulate energy production.
I think we need a carbon tax, that is specifically a financial disincentive towards any means of energy production that directly pollutes the atmosphere.
Seriously, what are the current best arguments against levying such a disincentive?
Moreover, if energy were priced correctly (its toll on the climate priced in) would BTC become higher in value? That is, we have a supply, increasing at a rate fixed between the arbitrage of energy and mining efficiency. If energy were to become more expensive, the growth in supply would slow. Assuming demand remains constant or continues to grow as well, the only way for price to go is up.
[+] [-] ayngg|5 years ago|reply
People mine because it is expensive, it isn't the other way around, so the real questions we should be asking in good faith are things like "Why it is profitable in the first place?" and I think it is probably related to other questions like why have the greater financial markets become so wonky, why has the behavior of investors changed so radically (GME et al), why have politicians been unable to be effective policymakers for decades, and why many institutions, both social and political in nature, appear to have become less trustworthy in the eye of the greater public? These are some of the questions among others which I think probably provide a better understanding of what is happening than the overly simplistic 'ponzi scam' explanation that has been repeated ad nauseam since its inception.
Bitcoin is just one of many things (pretty much everything) that have been able to use energy profitably, while subsidizing the costs by externalizing them via climate change, that part isn't new. People get too caught up on bitcoin because it is new and nobody understands it (not just from a technical perspective), so it is really easy to dismiss. Singling it out in that manner seems silly.
[+] [-] px43|5 years ago|reply
We 100% need massive carbon taxes right now. It's really telling how the energy industry is trying to push blame to consumers, especially cryptocurrency miners, in order to distract from the discussion of real carbon taxes to force polluters to pay for the damage they're causing.
I'm sure I'm one of the largest supporters of cryptocurrency in this thread so far, and I'm perfectly comfortable stating the obvious that mining with fossil fuels is an abomination. It's going to keep happening though until regulators get serious about reigning in the fossil fuel industry.
[+] [-] jstanley|5 years ago|reply
It doesn't work like that. The consensus algorithm targets 1 block mined every 10 minutes. If the amount of energy expended goes up (i.e. blocks are mined more frequently) then the difficulty increases to counteract it. If the rate of block production decreases, then the difficulty decreases to counteract it.
This page has more information: https://en.bitcoin.it/wiki/Difficulty
(I've used "difficulty" here in the English-language way. Confusingly, "difficulty" is kind of backwards in Bitcoin - the "difficulty" is a number that a mined block hash must be below - it gets more "difficult" to mine a block if the "difficulty" number is lower. Maybe it should be called "easiness" instead of "difficulty").
[+] [-] hannob|5 years ago|reply
Bottom line is: Most of the world has no carbon price, and the places that do have one (e.g. the EU ETS) there are so many loopholes that it is not very effective. It's not that it isn't worth trying to do better, but a carbon price is definitely not a short term solution.
So I'm inclined to think whoever proposes a carbon price as "the one true solution" really doesn't want a solution at all.
[+] [-] caf|5 years ago|reply
[+] [-] jariel|5 years ago|reply
If it were banned in the US/EU the price would crash.
Most major BTC backers have a lot of money and they can't be involved in something that is illicit.
For regular citizens, it's just not worth the risk.
That leaves quite a lot of people to play with it, but not enough to maintain the price.
Without constant headlines, Tesla's involvement, Coinbase IPO headlines etc. the price would suffer quite a lot.
It would maintain some price but not so much that people would be buying energy sources.
[+] [-] kolinko|5 years ago|reply
[+] [-] mbar84|5 years ago|reply
Wrt your first question: The best argument against making energy more expensive is the same argument as it was 100 years ago:
If you use energy now, you build a more prosperous civilization for the future. Your grandchildren may have to deal with a warmer climate, but they will be much better able to do so than if they were more poor.
This argument stands and falls with your evaluation of the benefits of using more energy, the costs of a warmer climate and how you weigh these against each other.
[+] [-] dmurray|5 years ago|reply
The best argument against it is: it's very hard to enforce it on everybody internationally, and if one country adopts it unilaterally, then production just moves to another country (making everyone worse off - same amount of pollution, but the production is presumably less economically efficient).
The second best argument against it is "the tax shouldn't be $x/ton, it should be $0.5x, which is a more accurate reflection of the external costs".
A distant third, but very effective in practice, is "the carbon tax is good, but it shouldn't apply to Special Interest Area X, because of these social/political/historical reasons..."
These aren't completely unsolvable problems, and people do try. But if your question was genuine, I hope you now see that there are some reasonable arguments not to just do this tomorrow.
[+] [-] joshspankit|5 years ago|reply
Like, in reality miners will use whatever power is cheapest, and solar is currently the cheapest. They are also extremely* agile and can shift location/power source in a handful of days which leads me to believe that they are currently driving adoption of solar, BUT: with miners being framed as The Big Threat, we might be able to finally use that perception as a crowbar to remove incentives for energy sources that pollute and even impose heavy taxes on those sources and end up completely digging out the oil/coal industries.
Win Win Win as far as I’m concerned.
*Apparently unless you can buy an entire power plant
[+] [-] skybrian|5 years ago|reply
A wealth tax on proof-of-work currencies would discourage legitimate businesses (that don’t cheat on taxes) from holding them.
[+] [-] Vinnl|5 years ago|reply
I think the biggest hurdle is that it is a tragedy of the commons: the entire market needs it, not just a single country...
[+] [-] wdn|5 years ago|reply
What we need a get rid of all the print and spend politicians. The reason for the raise of bitcoin is a direct response to the trillions and trillions of dollars just printed out of thin air.
It is insane how much grocery cost nowadays. I was at the supermarket last week and was looking at lobster, I thought it was listed for $6.99/lb for those 1 to 1.25 lb size, but when I got closed, it was $16.99/lb. It is crazy. Blue Crab at $5/each.
[+] [-] adamisom|5 years ago|reply
[+] [-] baron816|5 years ago|reply
Who cares if you’re using energy to mine Bitcoin? Or if you’re using it to play video games? Or to run the AC all day?
If it you’re internalizing the cost of any emissions, then you’ll use those resources efficiently.
[+] [-] SwimSwimHungry|5 years ago|reply
What probably should happen is to make converting from any cryptocurrency to major world currencies a crime. I have no delusions that this will halt activity in this sector entirely, but it will make it reasonably difficult to make any substantial money this way without raising some serious eyebrows.
[+] [-] machiaweliczny|5 years ago|reply
It's only possible now because clean energy ia cheaper (but still cannot compete in emergency situations), so we should invest in fission and fusion research
EDIT: I'm in favor of carbon tax BTW, we can afford it now and will incentivise investment in green tech more
[+] [-] scotty79|5 years ago|reply
[+] [-] fergie|5 years ago|reply
[+] [-] throwaway59553|5 years ago|reply
I'm pretty sure we can all afford yet one more tax.
[+] [-] caterama|5 years ago|reply
[+] [-] px43|5 years ago|reply
Current HN headline: "Bitcoin miners are buying power plants"
Actual headline: "A New Threat to New York’s Clean Energy Goals: Bitcoin Mining"
It's trying to imply that buying power plants is some hot new trend, but the article is about a single crazy dude in New York buying a single plant.
[+] [-] le-mark|5 years ago|reply
[+] [-] Black101|5 years ago|reply
[+] [-] obelos|5 years ago|reply
[+] [-] caf|5 years ago|reply
Surely this cannot last. This kind of outsize profit ought to be bringing online enough new mining capacity to increase the block difficulty until that margin erodes away - is it the worldwide chip shortage preventing that from happening?
[+] [-] bb88|5 years ago|reply
Edited to add: That's roughly 60 tons of CO2 emissions per BTC mined. https://www.eia.gov/tools/faqs/faq.php?id=74&t=11
The other aspect here is let's say you're a speculator and you think the price of BTC can go up another 50x or roughly $1M/BTC. Then even spending any amount less than the BTC spot price now is a bargain.
[+] [-] askesisdev|5 years ago|reply
The same can be said for Ethereum. The shortage of GPUs is preventing the difficulty to raise fast enough. The profit margin has been like 5-10x the electricity cost for the last few months. If you bought a RTX 3080/3090 it would have paid itself and the electricity by now.
[+] [-] wmf|5 years ago|reply
[+] [-] bob1029|5 years ago|reply
Speculation > silicon constrained mining > power & capital constrained mining
I believe the silicon constraints would instantly relax as soon as speculation falls into line based on how much hardware everyone has been stacking up on lately.
At the end of they day, the cost of energy & your ability to keep the machines operational will be the final constraint. This is the one that the long investors should anticipate. I.e. "How do I mitigate power cost in a power-cost-constrained market".
Right now at current market prices, owning an entire power plant to run your operation is folly. In a few more years when a delta of 2c/KWh is make-or-break on profitability, it makes perfect sense.
[+] [-] vmception|5 years ago|reply
yes, feel free to start a new fabrication line to arbitrage away the margin lol.
[+] [-] endisneigh|5 years ago|reply
Who knew! Of course this won’t be a problem until it is.
[+] [-] strogonoff|5 years ago|reply
[+] [-] utf_8x|5 years ago|reply
[+] [-] kemonocode|5 years ago|reply
[+] [-] Jyaif|5 years ago|reply
[+] [-] throwaway346434|5 years ago|reply
[+] [-] ozy|5 years ago|reply
1. Do nothing, public gets angry.
2. Make bitcoin, or its mining, illegal. However, what is the criteria? All blockchains? Should google be illegal too? Both are just a digital product that the public wants.
3. Tax CO2 production by data centers, that might have a chance it can be coordinated broadly between nations, there is enough money there to tax, and bitcoin adds some urgency.
While doubtful CO2 can be taxed globally, without coordination, big companies play governments against each other.
[+] [-] kfarr|5 years ago|reply
[+] [-] graiz|5 years ago|reply
[+] [-] xvilka|5 years ago|reply
[+] [-] MattGaiser|5 years ago|reply
So what’s the deal here? Is it the need for consistent base load electricity that caused them to choose coal?
[+] [-] epinephrinios|5 years ago|reply
[+] [-] andrewla|5 years ago|reply
In order for Bitcoin to every achieve any long-term viability, in my opinion, it needs to stabilize its pricing. Practically speaking, the route to do that is through a combination of supply chain pricing and credit markets.
Pricing energy in Bitcoin (which is really all this is doing) is an interesting step towards the supply chain problem. This power plant, in all likelihood, would be happy to sell the power to another bidder if the price per Joule is higher than the expected price per Bitcoin per Joule. The natural next step is to just price electricity directly in Bitcoin.
The question then becomes how viable it is to move down the chain -- pricing natural gas or coal in Bitcoin, and putting pricing pressure on the supply chain for more complex energy products (turbines, solar panels, etc.) to match this pricing. If this is feasible (and that's a big "if") then there is a chance that we start to flip the equation -- energy prices in dollars are simply too volatile and Bitcoin becomes a standard option for international settlement.
[+] [-] pontifier|5 years ago|reply
[+] [-] Animats|5 years ago|reply
[+] [-] bob1029|5 years ago|reply
I've been thinking about putting together trailers that contain a 2MWe gas turbine genset, switch gear, ups and crypto mining system. These could be towed out to arbitrary locations and used to burn surplus gas supply. Remember, CO2 is much better than CH4 when dealing with greenhouse gasses. Might as well make some extra $$$ while we are converting it...
[+] [-] nightski|5 years ago|reply
[+] [-] unknown|5 years ago|reply
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