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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.
MWH is a unit of energy. It's also readily convertible to money.
Considering that most people pay for their electricity by the kilowatt hour, the megawatt hour is not a bad unit to be using. It lets me say, for example, that it's about 200,000 times my average daily electricity usage (5 kWh on my last bill, probably because of the air conditioning). Much easier to compare scales.
Mind you, megawatts aren't bad either ... they're just not as intuitively transformable to real-world scenarios for most people.
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.
On where the power is coming from. Wind Powered bittcoin mining wouldn't be so bad right?
No. Electrical energy is fungible. So if you use wind power, there is less wind power available for others, so they have to use more coal power (or whatever). The result is the same as if you had just used the coal power directly. The only way it would make a difference is if the wind power was otherwise going unused (unlikely).
He simply wanted to say "fungible"
Pain is merely failure leaving the body
So people are paying real money for electricity to then convert it to fake currency?
Correct. You can use a bitcoin exchange to convert real money into fake currency as well.
"I mean the guys could make a mint that got in on the ground floor, because mining was super duper easy, but as more and more enter it becomes harder and harder and now I seriously doubt anyone that isn't stealing the electricity will ever break even."
That isn't why they made a killing. First, it wasn't "super duper easy" even in the beginning. I made a couple of bitcoins back in the early days, and it took my laptop grinding away for a total of about a couple of days each (I ran it overnight when I was sleeping).
That's not "super duper easy" when you consider that a Bitcoin was only worth about 50 cents to a dollar. You were lucky if you broke even on the electricity.
Most of the people who made lots of money in the market were not bitcoin miners (though that has probably changed if anybody has half a brain). It was the investors. People who bought bitcoins hoping their market value would go up.
But there's a problem with that, too, see. Last I checked (which wasn't very long ago), it was costing in the neighborhood of around $30 to mine a bitcoin, if you add up the amortized equipment cost, time and electricity. Yet Bitcoins went up as high as $250.
Wouldn't you like to be able to make something for $30 and sell it for $250? Yeah, me too. Of course it's down from that now but it's still selling for about 5 or 6 times what it costs to make. That's a pretty good markup. So people who are making bitcoins TODAY are making a killing. Not just the initial investors (though they did pretty well).
Which of course means more people will make Bitcoins, which means the price will come down, until the difficulty (cost) of making them is not that far from market price.
All you are seeing right now is a bubble. As long as they are selling for lots more than they cost to make, you are going to have an irrational, lopsided market that could crash at any time. But it's hardly a "pyramid scheme". There is lots of opportunity right now for somebody to invest in hardware and make a lot of money... if they do it quick.
"Isn't there a mechanism for adjusting the difficulty of mining depending on how much mining is done? Wouldn't that mean that the difficulty will go up if the price does, so that they will match?"
Yes, that is one of the things that would serve to bring the cost up to market place. While more miners will also bring the price down to the cost. (Actually, it's not "adjusted" per se. It's built in to the math. The more Bitcoins that are mined, the more difficult they become to mine.)
But my main point was that the market right now is very, very far from that equilibrium. It's completely irrational.