Nobody Knows How Much Energy Bitcoin Is Using (vice.com)

dmoberhaus writes: A new report published in 'Joule' today claims Bitcoin may use up to 0.5% of the world's energy by the end of this year. We often hear about how bad Bitcoin is for the environment -- it already uses the same amount of energy as the country of Ireland -- but these numbers are usually just the /minimum/ amount of energy the network must be using. The actual amount of energy used by the Bitcoin network is likely substantially higher, but getting an accurate reading on that energy level is hard. The only researcher trying to quantify Bitcoin's energy use spoke to Motherboard about opening Bitcoin's 'black box.'

Comments

Re:More importantly

[NicknameUnavailable]

There are entire multi-megawatt coal fired plants that are privately owned running Bitcoin mining rigs in multiple countries right now.

Re:But how much energy is used by traditional fiat

[Solandri]

Traditional currency has a financial incentive to reduce transaction costs. If the transaction costs are too high, people will simply stop using the currency. They will instead use a different currency or resort to bartering to reduce their costs. Over the centuries, this has driven the per-transaction cost down to cents or fractions of a cent.

• A dollar bill costs about 5 cents to make. and will last a bit more than 5 years (older bills would last less than 2 years). Higher denominations are about 10 cents to make (more anti-counterfeiting measures). If you average them across all denominations, it works out to about 1.5 cents per $1. So the cost of producing the bill amortized per transaction is on the order of hundredths or thousandths of a cent.
• A store owner carrying a bag of the store's receipts for the day to the bank, if he's carrying say $1000 in revenue to a bank 2.5 miles away, that's 5 miles at a IRS-estimated vehicle cost rate of 55 cents/mile, or $2.75 for the round trip. And the cost to carry the bag to the bank is then 0.275 cents per dollar. If that revenue is from 50 transactions ($20 per transaction), that works out to a cost of 5.5 cents per transaction. (I'm deliberately erring on the high side to favor bitcoin. Most businesses I know choose a bank which is much closer. And $1000 revenue per day is about as low as a small business gets.)

How does bitcoin compare?

• Production energy costs are very close to the value of the bitcoin generated. So call it 80 cents per dollar. Nearly two orders of magnitude higher than paper currency.
• Bitcoin deliberately imposes a high energy cost in each transaction. So high that many online stores have stopped accepting bitcoin because the costs have reached several dollars per transaction.

Basically, bitcoin's problem is that it replaced gold's natural scarcity with artificial scarcity produced by imposing a high energy cost to generation and transaction. Consequently, its production and transaction costs are roughly two orders of magnitude higher than traditional currencies. Mathematically, it (blockchain) is a brilliant concept. But it's obvious its developers had little practical knowledge of both monetary economics and day-to-day business economics.

Limit hash rate of miners or a region

[drnb]

One way to think about it is that BTC needs to do all the same things in terms of power usage as the current banking network AND large amounts of expensive math on top of it. The power cost for mining is in addition to the power consumed by doing stuff the banking system also does.

One way to mitigate the waste of bitcoin is to have fewer miners. The bitcoin network needs a reasonable number of distributed and independent miners. More miners don't necessarily make the network any more secure, they just increase the power consumption. Matter of fact one could argue that the unbounded number of miners creates an opportunity for an insecure network. The industrialization and commercialization of bitcoin mining is what brought us near to a hypothetical 51% attack a few years ago.

Perhaps mining should be restricted. Large scale miners prohibited. Software could solve this, sorry, you or your region is providing too much hash rate and excess mining solutions will be discarded.