What a huge waste in times where we have global warming and urgently need to cut our carbon footprint a bunch of greedy people are living like there is no tomorrow.
this post was submitted on 03 Feb 2024
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The economics of Bitcoin mining are a bit weird in that it impossible to make it more energy efficient.
The system auto adjusts the computational complexity of mining bitcoin so that it always costs a little less than one bitcoin to mine a bitcoin, and at scale the only variable expense is electricity so as the price of bitcoin goes up, so does the amount of money that must be spent on electricity.
Current 6.25 Bitcoin are mined every 10 minutes. So globally about $2 million must be spent on electricity every hour.
In a little over 2 months the block reward cuts in half to only 3.125 bitcoin every 10 minutes. That will have the side effect of reducing the money spent on electricity for mining bitcoin so long as the price of bitcoin remains the same.
"The System" is not really that intelligent. The statement that "It will always cost a little less than one Bitcoin to mine a Bitcoin" is only correct because the incentives in the system steer everyone toward that. There's no direct link between the two. Bitcoin Miners are intently aware of how much energy they consume, and if the price of Bitcoin dips below what they are paying for electricity, they likely will shut down their rigs, because no one wants to mine at a loss.
The real issue with Bitcoin is that the algorithm used to find more Bitcoins is kind of basic in terms of its difficulty mechanism. It was the first one ever used for cryptocurrency. It was originally envisioned that owners could mine more bitcoin with spare cycles on their CPU, but since it was first designed, people have come up with custom mining chips that can mine faster and much more power efficiently. But paradoxically, this has made things worse, because the bitcoin mining difficulty simply scaled up to account for all that. So now the only way to mine Bitcoin is to have this custom hardware -- it's too hard to do any other way -- and you need so much of it that you are just as power hungry as before.
There are other algorithms that don't have these same problems. They have been designed to use other computing resources (like gobs of memory) that are much harder to concentrate on custom chips, making it much more expensive (monetarily and spatially as well as computationally) to simply spam more of them. Ethereum uses a totally different model now that doesn't rely directly on power consumption at all.
OG Bitcoiners seem to think that the massive power consumption is a net benefit, because it is spent in making the overall network more secure, and less likely to be attacked. So they will never try to change their block algorithm, even though other projects are just as secure with less power consumed. And if that opinion holds, the only way to eliminate this source of power consumption would be to crash the price, and cause the Bitcoin miners to have to mine at a huge loss to continue.
the massive power consumption is a net benefit, because it is spent in making the overall network more secure
I really have trouble understanding this argument. Joining a mining pool secures nothing.
The whole point of mining is to arrange transactions into blocks, and then generate a cryptographic hash of the block that meets some difficulty criteria. It costs some small amount of computing to do that. But an astonishingly large number of hashes won't meet that difficulty criteria, which is why miners have to try a gazillion times to find one that works.
However, once a block has a valid hash, it is added to the chain. Then, the hash of that valid block must be used in the next block, which will be equally hard to find.
By "security", what is really meant is "How can I be sure that a transaction can't be undone once it is committed"? And it's because all these blocks are stacked on top of each other, and cryptographically related. Once a transaction appears in a block, and a few blocks get mined on top of it, it becomes prohibitively difficult to un-do it, because someone would have to put in the computing power to re-authenticate a string of blocks, all while the rest of the network is adding blocks to the valid chain at a faster rate.
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Is it not a way in which some governments could collaborate to end this Bitcoin madness?
Genuinely question.
Like maybe some big countries could agree to collaborate and join resources to make a 51% attack and bring Bitcoin price to 0 so people stop wasting resources on it.
2% of enery usage for something that do not add any value to society is INSANE.
I think the best solution would be to properly tax carbon. That way Bitcoin miners would either become unprofitable or move to greener energy.
I don't think it's a good idea to establish the precedent that gov't can decide what you can and cannot do with your energy. You may think it's a waste of energy, but if the externality is properly taxed, I don't see the problem with letting it continue
Agreed, tax what the problem is not just one facet of it.
Then it's just gonna suck up "green energy". It's still energy. We have already have provably secure PoS (not Ethereum btw, it's PoS sucks ass).
Yeah I'm pro PoS in general, but I don't think we should forbid people from running PoW on their own computers. Seems like a step too far.
Side note, what's wrong with Ethereum's PoS in your opinion?
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I think the best solution would be to properly tax carbon. That way Bitcoin miners would either become unprofitable or move to greener energy.
I think cap and trade can be a good idea, the problem is getting all the countries in the world to sign onto it. Any country that doesn't ends up with a competitive advantage. But if you somehow got them to all agree, blockchain actually provides a perfect way to build a cap-and-trade system that every country can participate in, transparently, without having to trust one country or group of countries to run it honestly. That's the essential problem blockchain solves: administering systems trustlessly.
Bitcoin miners do by and large use green energy since it tends to be the cheapest (off-peak hours from over-provisioned grids). If electricity gets more expensive, it doesn't mean it becomes unprofitable to mine, that's only one side of the equation. The other side is how much people are willing to pay to get transactions added to the blockchain, which is a number, on average, that has increased year after year. Not that you ever need to make an on-chain transaction, with Bitcoin lightning you can do transactions off-chain while getting much of the security of on-chain transactions. You can move money internationally in under a second for pennies in fees. And it works just as easily as venmo. In fact, if you have cash app on your phone, you already have the ability to use the lightning network, though it's a custodial wallet (meaning you are trusting cash app not to take/lose your BTC).
If you destroy Bitcoin, another currency would take its place.
Good. Most don't use proof of work anymore because they don't feel the need to watch the world burn for no reason other than propping up techno bros.
A lot still do, and that's where the miners would go
If governments started regulating bitcoin because it was proof of work based then people aren’t going to pump real money into another proof of work scheme to replace it - why would they take the risk of it happening again when there are alternatives? the mining profit margins would disappear and so would they.
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Please don’t buy Bitcoin if you want the Earth to last.
I avoid it to not feel like a dumbass.
Saving the energy is just a bonus..
How can we expect North Korea’s criminal enterprise to flourish without it?
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I think bitcoin is a waste of electricity. Never got the hype around something that takes so much energy, but doesn’t even even actually exist to make it worth it. Disgusting.
Anything is only worth what someone will pay. Always. Nothing has value beyond that.
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Honestly eth just made more progress between built in smart contracts and proof of stake, I'm surprised Bitcoin is still holding on. Sunk cost fallacy I guess.
I'm not an economist or anything, but I don't think it's a sunk cost fallacy I think it's just a market. They're all mining both. Just leaning heavier on whichever one makes them more money in the moment. The market is going to have a hell of a lot of inertia.
The market is run by people, and people have been proven not to be rational. So, sunk cost easily applies to the market
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At first I thought the article was inaccurate but It sounds like there has been a huge increase in US Bitcoin mining since 2020.
Some interesting information from their source article:
"The CBECI estimates that the global share of Bitcoin mining occurring in the United States rose from 3.4% in January 2020 to 37.8% in January 2022"
"the CBECI estimates put electricity supporting Bitcoin mining in 2023 at about 0.2% to 0.9% of global demand for electricity."
Honestly surprised it is that low.
I can't believe its that high, what a fucking big, stupid, dumbdumb thing. So wasteful and for what benefit?
The argument on the other side of the coin is that renewable electricity is often produced in excess, and when it cannot be stored, mining bitcoin is an effective way to convert that excess electricity into money. Normally, that energy would just be wasted, reducing the efficiency and economic viability of renewable electricity sources.
This argument is sound, but the problem is that it doesn't describe reality. The reality is that Bitcoin miners set up shop wherever electricity is the cheapest and consume inordinate amounts of electricity whether that electricity is in excess or not, and whether that electricity was generated renewably or not.
First of all I doubt the profits generated from this go towards anything or anyone worthwhile, second, doesn't bitcoin mining cause diminishing returns individually and across the network? Like aren't the problems getting harder and more expensive computationally?
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Maybe the larger American owned projects are located in places where energy is cheaper / cooling is easier
This is the best summary I could come up with:
While its analysis is preliminary, the Energy Information Agency (EIA) estimates that large-scale cryptocurrency operations are now consuming over 2 percent of the US's electricity.
The EIA report notes that, in the wake of a crackdown on cryptocurrency in China, a lot of that movement has involved relocation to the US, where keeping electricity prices low has generally been a policy priority.
One independent estimate made by the Cambridge Centre for Alternative Finance had the US as the home of just over 3 percent of the global bitcoin mining at the start of 2020.
Tracking the history of five of these plants showed that generation had fallen steadily from 2015 to 2020, reaching a low where they collectively produced just half a Terawatt-hour.
To better understand the implications of this major new drain on the US electric grid, the EIA will be performing monthly analyses of bitcoin operations during the first half of 2024.
But based on these initial numbers, it's clear that the relocation of so many mining operations to the US will significantly hinder efforts to bring the US's electric grid to carbon neutrality.
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