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Is Bitcoin Mining a Real-World Environmental Problem?
First time accepted submitter HeadOffice writes "Mark Gimein points out that Bitcoing mining uses a lot of power, enough that it is a real world problem: 'About 982 megawatt hours a day, to be exact. That’s enough to power roughly 31,000 US homes, or about half a Large Hadron Collider. If the dreams of Bitcoin proponents are realized, and the currency is adopted for widespread commerce, the power demands of bitcoin mines would rise dramatically. If that makes you think of the vast efforts devoted to the mining of precious metals in the centuries of gold- and silver-based economies, it should. One of the strangest aspects of the Bitcoin frenzy is that the Bitcoin economy replicates some of the most archaic features of the gold standard. Real-world mining of precious metals for currency was a resource-hungry and value-destroying process. Bitcoin mining is too.' However, not everyone is convinced that virtual mining is as bad for the environment as the real thing."
"About 982 megawatt hours a day, to be exact"
982 MWh/day / 24 = ~41 megawatts
Come on reporters, convert brain-dead units into normal units.
On where the power is coming from. Wind Powered bittcoin mining wouldn't be so bad right?
The Blade Itself
982 MWH/day costs approximately $100,000 per day. Is the marginal utility of mining bitcoins worth more than $100,000 per day to the world economy? If so, carry on. If not, everybody please stop.
Hard to say how bitcoin compares to mining gold and silver when you don't even know how much bitcoin is worth. If bitcoin gains enough value, they might be better for the environment than printed paper money.
How much is bitcoin worth? There was an interview recently with some 'bitcoin millionaires', people who had a million dollars worth of bitcoin. That of course raises the question: if they sold their bitcoin, would there be enough buyers to actually get them a million dollars? Or would such a large sale cause the market to collapse?
"First they came for the slanderers and i said nothing."
That's "41 megawatts" for those of you who prefer it in non-retarded units. In case you were wondering, that's 0.003% of the US's electrical generation capacity. Yeah, that's a real environmental disaster, there. It's not a problem, it's a rounding error.
So we take a controlled monetary system and try to create a better monetary system and then spend effort analyzing how it fails?
.. you're kidding yourself. Quit wasting time analyzing why bitcoin isn't going to get anywhere and just accept it.
The problem with the existing monetary system isn't that it's controlled by a small group of people, it's that those people are corrupt and are manipulating the system. Bitcoin has the same problem, it's just obscured because the people 'mining' the system aren't a central group, they're a distributed group.
This is crowd sourced corruption, nothing more. If you didn't expect there to be costs related to tens of thousands of people running resource intensive software to game a system designed to protect people from responsibility
If you're able to game the monetary system, then it's lost it's value.
Digital mining has one massive advantage over real-world mining - Moore's Law. In 5 years when FPGAs and GPUs are churning out 2-3x the current bitcoin rate at far less power requirements per bitcoin less power will be required to do the same work.
Continuing my tradition of using Hydro-Québec's installed capacity as a unit of measurement, this "environmental problem" is only consuming 0.0011 Hydro-Québecs.
One thing I don't really understand is this:
> The number of bitcoins in existence will never exceed 21 million.
So once 21 million is hit...no more power is needed, because you can't generate more?
When I read that, I thought 21 million is not a lot of coins for the whole world to use. It seems screwy to me. You run into the issue that you run into with gold, if that is the case. You can't buy a loaf of bread with gold because it is worth so much.
> While the number of bitcoins in existence will never exceed 21 million, the money supply of bitcoins can exceed 21 million due to Fractional-reserve Banking.
I've tried and tried to wrap my head around this, but it makes no sense to me. How can you have fractional-reserve banking if the coins have to match a digital signature? Fractional-reserve banking creates money out of thin air. How can you create bitcoins out of thin air? And if they are just used as backing for a fiat currency, who is to say that someone kept enough bitcoins in stock to cover the fiat money?
Doctors destroy health, lawyers destroy justice, universities destroy knowledge, religion destroys spirituality
You'll need to look at the economic value of mining, and also compare the numbers to the cost of the infrastructure those of current currency/payment systems. I have no substantial information on both, but let's not pretend cash and credit cards are cheap to maintain...
The type of people who evangelize bitcoin are the same type of people who thinks the 79th element is magical.
Demand for bitcoins displaces demand for gold; lower demand drives the price of gold down; lower prices means lower profit margins and thus less gold mining.
If washing your hands takes 2 liters of water, isn't that an environmental problem if it could be done using just 1/10th that amount?
Perhaps, but is that a problem? If that amount of water costs $100: probably. If that amount of water costs $0.01: probably not.
I know so-called externalities can blur the picture, but in general the cost of things reflects how much effort was needed to produce them. So if Bitcoin mining is profitable, that probably means a produced Bitcoin is worth more than the effort it took to produce the required energy. No doubt Bitcoin market developments, and efficiency improvements (FPGA / ASICs) will change the actual numbers here.
Problem much, why? There are so many human activities that require energy, and (often) don't produce results that would be considered useful or valueable. So if you spend (for example) $10 worth of energy to find (is that the correct description?) $100 worth of Bitcoins, you could have spent that energy worse.
Btw: article would do good to report how many/what worth of Bitcoins were mined using the stated amount of energy.
I don't think many critics actually understand the dual purpose of mining. It's not only to govern the supply of new money, but also to protect the block chain. Many attacks require that the attacker control more computational power than 50% of the network, which is a lot of hardware.
Eventually mining slows down and transaction fees become the dominant reward for mining new blocks. So transaction fees will essentially be the "security cost" for protecting the network against a centralized attack. It's anyone's guess where they'll eventually stabilize.
So once 21 million is hit...no more power is needed, because you can't generate more?
The 21 million BTC figure is asymptotic. The reward for a successful hash halves every so often as the total minted value approaches 21 million. But each Bitcoin transaction can include a voluntary "transaction fee", a tip paid to the miner who includes the transaction in the next block. After that point, miners will seek tips rather than newly minted bitcoins.
It's so it's much harder for those that join in the pyramid late and to give the early adopters a deliberately designed very major advantage so long as the pyramid grows.
People Mag's intent is more honest.
Umm, no.
Gold has other uses than as money - jewelry, for instance. Or a superb conductor.
"I do not agree with what you say, but I will defend to the death your right to say it"
According to Wikipedia, if that power was generated by coal alone, that would produce nearly 1000kg of CO2 A DAY. that's not exactly an environmentally friendly number, but then the CO2 emmisions from all the complete unconstructive computer games many of us play must be a hell of a lot more in comparison....
If you gave me a choice between a printer and a giraffe with explosive diarrhoea, i'll get my ladder and my raincoat
Correct me if I'm wrong, but from my amateur knowledge of Bitcoin, doesn't mining both find coins in new blocks, as well as verifying transactions in exchange for a portion of the fee set aside for such? ie. when a transaction is performed, a small amount (under 1%) is typically marked as compensation for those who verify the transaction, which is needed as otherwise no-one would waste power on verifying transactions.
According to that understanding, the mining process makes sense, as it's providing an incentive for early adopters to adopt. It will gradually taper off to zero, at which point all miners are paid by the transaction fees, which is the ultimate goal of the system.
And honestly, computers verifying Bitcoin transactions has to be a lot more eco-friendly than the number of people needed to watch over credit and debit card transactions.
Outdated bullshit. The new ASIC mining chips run a 2 watts and are 12x faster than my 220W graphics card. This is a non-issue.
No. The rate of coin generation is fixed. The difficulty, however, is not. It increases.
Or decreases if the computational power of the network drops (granted advances in technology make that unlikely in the long term, and only minimally impactful in the short term). The difficulty self adjusts SO that the rate of coin generation remains largely fixed.
They're not independent variables, the more power you have the faster you can compute an equation to match the current difficulty, and earn more coins, it just also happens that the difficulty is self adjusting so that the rate which coins are found stays apx. = to 1 per 10 minutes. If the computational power of the network is strong enough that it's taking less than 10 minutes for someone to find a block, the difficulty rises until that is no longer true, and if the computational power of the network drops enough that it's taking more than 10 minutes for someone to find a block the difficulty drops.
In a bit of shameless internet panhandling, I accept Litecoin Donations at Lbd2oH9QsthD1GfuUXPyka12YxvWJYnBVf
Its not free of central banking controls. As others have pointed to when theoretical weaknesses of the existing protocol were pointed out, the protocol can be (and has been) evolved by consensus of a sufficient subset of those mining (verifying transactions, even once actually producing new bitcoins is no longer a function.) As that's weighted by processing power that parties can afford and dedicate to the function, its essentially just like having a "central bank" with the power to set policy that is a coalition of the most powerful banks in a system -- sort of exactly like the Fed, without the weak public accountability provided by the tie between the Fed and the government.
If you're mining in a place with power expensive enough and hardware inefficient enough that you're losing money, then you're doing it wrong. Plenty of people are able to get it right though.
Although I agree that it is not a pyramid scheme in the classical sense, it shares some similarities. By designing the algorithm to have exponential complexity, the creators definitely designed it in their favor. The reason why it works and the price is rising, is because there are more and more users joining, if it was not the case the price of Bitcoins would slowly fall as the volume rises but the value is constant. This is the second similarity to a pyramid scheme, in that to sustain the current trend of raising price, it needs to have more value flowing into it. The current state of affairs is similar to a pyramid scheme.
On the other hand I would not know how to design a hashing scheme, that is not exponentially complex as the uncovered hashes exhaust. In addition the economic implication is interesting, once the Bitcoins are all uncovered, there is no room for any fiscal policy. Currently the most of the rise of Bitcoin is not about actual Bitcoin use, but rather economic speculation. And this will be a fun bubble to see burst.
Certainly walking, swimming, flying and quacking like that duck. Maybe it is a duck?
It is isn't a pyramid scheme, it is just ruined by speculators. And the worst kind of speculators, the dumb kind that buys gold from vending machines because prices are at record heights.
If you know ANYTHING at all about successful speculation, you know that you buy LOW and sell HIGH. The dumb speculators are however slow as well as dumb and only dive on say speculating in gold when prices are already high. Buy Apple stock 10 years ago. Smart. Buying Apple stock right now. Dumb.
Bitcoin is seen as having a high value right now, like say comic books had a while ago and dumb people think that this is then worth investing in with the logic that if you buy high, you can sell at even HIGHER! And really cleanup!
It doesn't tend to work that way. Instead, you can buy high because smarter speculators are SELLING high and they are selling because they don't think it is going to go any higher. Bitcoin as a anonymous paypal alternative has some merrit. As an investment, not so much. As a currency, none whatsoever. It would be like creating a currency out of comic books or bottle caps.
Fallout fans may be familiar with that idea, it is silly but do you fully understand HOW silly it is? Bottle caps were garbage once. How can you put a real world value on an item someone may at any point find a whole stockpile off, or worse, the machines that make them in the millions? North Korea has its defacto currency, the US dollar. Even loyalty taxes to the state have to be paid in it. NK ALSO had projects to create huge piles of counterfeit US dollars. Some ended up in the rest of the world but the majority of counterfeit US dollars is in NK circulation. NK has flooded its own economy with counterfeit currency they can't even hope to spend anywhere because if you had any brains and a North Korean handed you a wad of dollars you check every note individually.
Almost anything can be used as a currency, and has. Stamps have been used as currency almost exactly as Terry Pratchett described it in one of his latest books. In fact, paper money is an alterntive not that different from bitcoin to using real precious metals as barter counters. Nobody has a need for gold however, it was just for thousand of years convenient to barter for goods with a in between mechanism of gold/silver. I trade you my chickens for X gram of precious metal I have no need off because I know that I can barter that for clothes with that other guy.
ANYTHING will do for that, and has. There have even been cases of shops creating their own low currency for giving chance to small for real currency. You give me your silver coin and I give you produce and a chit saying that you still have some spending power left in this shop.
But what you NEED for a currency to be usable is some stability. Deflation is bad because it causes people to hoard and to much inflation hurts as well because if you pay me now, I will have far less tomorrow. Rampant speculation causing a currency to go rise and fall thousands of percent are useless. How am I going to price my goods when every second the currency has a different value.
Say you are going to sell beer for REAL (and not just as a novelty value, bars can afford to "sell" some beer just for a smile if 99% of the customers buy it for hard cash) for 1 bitcoin you might get within a day get anywhere between a dollar and a 400 dollars.
There is a reason people talk about HARD cash. Hard cash needs to be hard, have a consitent value. Salt worked once because people had a stable need for salt, a stable market existed so it could be reliable used to barter with. Comic books, baseball card, tulip bulbs and bitcoins don't.
It makes no sense to invest in it, you can only speculate in it if you understand what buying low, selling high really means AND until the idiot speculation stops it is even useless as a paypal alternative because you can't mark your products in bitcoins when that goes up and down per minute.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
Like getting in early to any company stock early adopters will usually benefit.
I think it's a pyramid scheme in the same sense Visa corporation is. It's a currency system indelibly tied to a payment processing system. The currency and the network for sending payment are fundamentally linked. This is a feature that is not shared by any other currency. Credit card processors presently extract huge sums of money from the economy to process payments and bitcoin dramatically reduces or eliminates those costs. I wouldn't accuse initial investors in Visa of colluding to create a pyramid scheme. Likewise I see early bitcoin adopters as investors in a novel mixed currency/payment processor. They go out and promote use and spread of bitcoin the same way any stockholder in a nascent credit card company would. It's just traditional investor-driven marketing.
I'd just like to point out that gold have had the same characteristic, in the beginning it's easy to mine/wash/find, but as time goes it's getting harder and harder as all the easy spots are cleared out. And it's only economical to mine those harder spots out because the value of gold have risen.
Would you say gold is a pyramid scheme, because it was easier in the beginning? Bitcoin is in many ways digital gold, where the rarity comes from the resources it takes to "extract" bitcoins. Gold itself is not currency, but can be bought and sold. And also have fluctuations in value.
Personally I think bitcoin will be doomed in the long run, since there's a max limit to amount of coins, and coins will slowly fall out of the system (if the cryptographic wallet key is lost, all coins in that walled will be unable to be moved to a new address - and with time and Murphy's law, more and more coins will be rendered inactive).
It's The Golden Rule: "He who has the gold makes the rules."