Comparing the energy used for Visa transactions to Bitcoin is a false comparison. Bitcoin not only handles transactions, but more importantly, it maintains current wealth and the entire history of every transaction that took place, including the rules that manage it.
You should compare the energy bitcoin uses to all energy used by traditional banks, their corporate headquarters, the government regulators responsible for managing the system, lawyers / judges / institutions managing conflicts, mobile apps and servers powering it, etc.
Bitcoin is doing all of these things without formal institutions, employees, governance, and official regulation.
> Bitcoin is doing all of these things without formal institutions, employees, governance, and official regulation.
All at a whopping pace of 4 transactions per second... Which means that if the entire population of Denver used Bitcoin, they'd only get to make a single transaction once every 2 days.
I don't care what you say or what you compare it to, Bitcoin is very inefficient at what it does. And worse, its energy consumption is not a function of its transaction volume, but of its price in fiat. The higher the price, the more energy miners will throw at it as they attempt to win the next block reward.
And it is this way by design. Take all that inefficiency away and you give up all that makes Bitcoin what it is....
The best way to think about it is like gold. The gold standard didn't mean that everyone was doing day to day trading in gold. While you could carry around physical gold (and coins did contain precious metals), gold-backed notes were a big part of the equation.
If Bitcoin became a major currency, you'd have banks that pay you interest for your deposits and then issue you notes (not necessarily physical). They would pay for your interest and make their profit by lending out a portion of deposits.
So essentially Bitcoin is so terrible as an actual currency / method of transferring money that we'll need to create another crypto on top of it that fixes all of the original issues of Bitcoin. All the while Bitcoin will still be using > 15% of all energy consumed in the world. Oh and we still have to trust Banks to make the underlying transactions on the Bitcoin when we use this new currency but Bitcoin is too slow to keep up with the needed transaction rate.
This is a disaster. And like most technologists, everyone enamored with the technology is completely blind or in denial of the actual societal interaction - which will be abysmam.
Bitcoin will be society's first grey goo. It's just a waiting game until people are ready to admit it.
GP means that you can't subtract the energy cost of lawyers, courts, or whatever fraud detection/resolution mechanism as GGP suggests, because in order for Bitcoin to really replace current transaction systems it will have to handle conflict resolution too.
That's fair, but if you were to say, American Express and count its entire energy usage across all sections of the company and its entire business, it'd still surely use orders of magnitude less than BTC while processing orders of magnitude more transactions.
Yeah, but you don't get to pick just AE if you're doing a fair comparison, as Bitcoin serves pretty close to every cryptocurrency user on the planet. It's reasonable to compare it to the sum power usage of every financial institution willing to handle US dollars somewhere in their infrastructure.
You don't get to pick just the bitcoin exchanges as well. If bitcoin ever became a standard, you would by your logic have to include every financial institution that pops up to service bitcoin, custody bitcoin, swipe bitcoin at a store - and include all their headquarters etc etc. That whole layer you include for fiat will also exist for bitcoin, only, now we have the much larger energy expenditure to maintain bitcoin vs fiat.
No it's not reasonable. Bitcoin is moving a tiny fraction of the value of what just Visa by itself is processing (nearing $10 trillion in total annual volume; 141 billion transactions; 65,000 transaction messages per second). They also store a record of every transaction they process, along with vast troves of connected information.
American Express is a full-stack institution with its own processing network, own bank, own card issuance, own customer service, etc. It also serves a ton more people than Bitcoin does. If the comparison is unfair, it's in Bitcoin's favor as Amex does significantly more.
I can write anything i want into the bitcoin chain for $1 and all the computing power in the world wouldnt be able to undo it after a few days.
Even quantum computing can't touch it (though can trivially work out my private keys).
Many people throughout history can and have been censored, don't see that changing soon.
The bitcoin blockchain is a modern technological wonder without anyone really appreciating the power at their disposal.
Using it only for transactions now is like hiring a tank so you can go get money out from an atm. Predict eventually use cases will come into their own.
It's not nearly that bad, because it makes more sense to compare these numbers to gold. Gold is economically similar, since most of its value comes from speculation on the notion that it is deflationary.
If we assume that 85% of total global gold production comes from primary gold mining only, then the 88 million oz (Moz) produced in 2016 consumed the energy value of an estimated 123.2 million barrels of oil equivalent versus 6.6 million barrels of oil equivalent for all Bitcoin production.
The speculative power of gold comes from a kind of "Proof of Work" very much like Bitcoin, by a different mechanism (with different economic properties, of course).
If Bitcoin partially replaces gold (in market cap), and we don't find alternatives for Proof-Of-Work, it seems reasonable to assume that it will also partially replace gold's energy consumption as well.
I really don't understand how people can relate gold to bitcoin - other than the fact they both seem to trade at prices unrelated to fundamental underpinnings.
In my opinion, bitcoin is not digital gold, and quite the opposite. Both require a large amount of energy to be mined, however, once gold is produced (i.e. found), there is no more energy required to keep that nugget of gold in existence. Bitcoin, on the contrary, requires a constantly increasing amount of energy to maintain it's utility.
If today we stopped mining gold, all the mined gold in the world will still be there and will probaly increase in value due to scarcity.
If today we stopped mining bitcoin, all the bitcoin in the world will be worthless.
Nobody is forcing anyone to build mining rigs and pay to power them. To the extent that there are environmental externalities to Bitcoin mining, they are the result of improper pricing on these externalities - such as a lack of a carbon tax in many places.
If the energy required to mine BTC costs more than the value generated, miners stop mining. Tax the externalities properly and there is no environmental problem here.
You are correct, but does that change the conclusion? The externalities on energy production have never been appropriately priced, and recent political history of the world has convinced me that won't change any time soon.
The only real hope is technological change, for example battery technology being more economic than gas powered vehicles. The current implementation of Bitcoin is a technology that takes us in the other direction.
Well, they are not and rarely have been in most polluting industries. “Improper pricing” is a rather disarmingly technocratic way of characterizing global warming. Bottom line we’ve got to curb greenhouse gas emissions, now.
>Tax the externalities properly and there is no environmental problem here.
If the people who always say "tax the externalities" were ever actually leading the political charge to do so, I'd be much more sympathetic. Instead it always seems to be a gas lighting move in bad faith, where on one hand it's "easy problem, it's all externalities!" and with the other hand they're the people fighting tooth and nail against the environmental regulations and taxes we so desperately need.
Either the negative externalities of energy consumption are included in the energy price, or they aren't. Bitcoin is just bringing this point to light.
So, that’s a yes, then? Coming from Bitcoin, the harbinger of free marketry, her proponents calling for additional taxes to be levied upon energy to help unfree a market is a bit odd.
“We made this thing which consumes about as much energy as Serbia on an international scale, and is very likely in the running for the most expensive computation on the planet. It’s designed incredibly inefficiently to brute force through SHA2 in 30MW+ space heaters around the world because we believe centralization is Evil, but now that what it makes is valuable, we can deflect criticism of its energy consumption to the pricing of the electricity markets. Raise the price of energy to stop us. What’s that? A lot of people already can’t afford electricity?”
You're setting up a complete straw man. Believing in benefits of an international, decentralized currency in no way implies you're against taxation or higher taxes.
Free markets don't exist in a vacuum. Taxes pay for all the institutions that enable free markets -- including but not limited to law, enforcement of contracts, and especially (hopefully) the proper accounting of externalities.
Right now, the miners have an incentive to mine more than is socially optimal because the impact on the environment (the externality) doesn't affect their profits. If you add a tax such that the cost to mine bitcoins matches the cost to society, the market will restructure itself to produce the socially optimal amount.
I don’t like the power consumption but it seems interesting what we value. A distributed currency is bad. But Google consuming something like 26 TWh per year (by my back of napkin math) to serve Youtube videos of cats is fine? How much do Facebook and all the other social networks consume?
The reality is we produce power and price it for a reason. Because the modern world runs on it for all kinds of things. What we really have a problem with, that all these articles are upset about, is that we DO NOT price power correctly and allow it to externalize all environmental cost. Let’s be intellectually honest and rather than attacking Google, or Facebook, or Bitcoin for existing, let’s make sure we price in the environmental cost correctly through carbon taxes.
I understand your argument, but specifically with Google, they now claim:
"100% renewable energy for our global operations — including both our data centers and offices." [1]
I'm not here to debate the merits of cat videos vs bitcoin mining, but to point out that the youtube cat videos are hosted on environmentally friendly data centers.
Etherium’s proof of stake should solve this problem. But I agree, the incentives aren’t aligned to help the environment and that should be a major concern for anyone who cares about future generations livelihood.
Coins like NXT already use proof of stake. And NEM has so-called proof of importance.
Do you know how that might play out long term? I'm rather fond of their approach but then I see the top coin holders get almost all the rewards for "forging".
I'll read your linked document in a bit when in not on mobile anymore
Anyone who tells you they know how cryptocurrencies are going to play out long term is blowing smoke up your arse.
The killer feature of bitcoin is that it's distributed. That has a lot of tradeoffs, because it's a fundamentally different way of doing electronic money. Bitcoin is shit for doing some things, but hey, so are SWIFT transactions. Bitcoin uses more electricity than AMEX but it pulps less trees than paper notes, pick your poison. It's all about having a broad set of tools in the toolbox, so you can pick the right one for the job. The reason bitcoin has value is because it offers a unique set of tradeoffs that can do /some/ jobs better than all prior financial tools.
A lot of people are going to spend a lot of time trying to find ways to fix the negative parts of the tradeoff, but thus far the fixes that have been proposed generally involve making the network more centralized and/or accepting a certain number of trusted actors in the system.
The thing is, if you're going to have a centralized system that maybe hinges on trusted actors, you might as well use an actual bank. Banks have tradeoffs as well and there are certainly downsides to them, but one of the pros is that a bank operates under regulation that creates legal ramifications if it breaches it's trust responsibilities (at least in theory). Why would anyone want a version of bitcoin that requires you to trust that you won't get lied to when you bring a new node online to join the network?
So my guess (and it is just a guess) is that proof of stake systems will not overtake bitcoin in market value /unless/ they become subject to government regulation that enforces trust through threat of arms (police kicking down your door). Without that, their inherent bias towards creeping centralization will cause them to hit a value plateau.
This author has no vision. Within five years, we will have big energy crisis: we will produce more energy than what we can consume! Solar farm in Dubai is built for only 3¢/kWh this year. Solar energy is crushing fossil fuels. We will become type 1 civilization faster than you can imagine.
Legendary Satoshi foresees this energy crisis and invented bitcoin to save energy companies from bankruptcy and accelerate the progress we become type 1 civilization.
Thinking bitcoin just as a digital currency? Think it again!
A friend recently pointed out that all these projections are based on a single source: Digiconomics. A source that has an interest in touting the technologies it “reports” on, which have a perennial credibility problem.
So I wouldn’t take all these discussions of bitcoin-powered ecological doom too seriously yet.
I am sending this message from the year 2025. Things are looking bleak here, and some of you will carry blood on your hands. If you don't believe me, please move on, as I have no way of proving to you I'm really who I claim to be.
I don't want to waste any of your time, so I'm merely going to explain what happened. On average, every year so far, the value of Bitcoin has increased by about a factor ten. From 0.1 dollar in 2010, to 1 dollar in 2011, to 10 dollar in 2012, to 100 dollar in 2013. From now on, there's a slight slowdown, as the value increased by a factor ten every two years, to 1,000 dollar in 2015, to 10,000 in 2017, 100,000 in 2019, and 1,000,000 in 2021. From here onwards, there's no good way of expressing its value in dollars, as the dollar is no longer used, nor is any central bank issued currency for that matter. There are two main forms of wealth in today's world. Land and cryptocurrency.
There are just over 19 million Bitcoin known to be used in the world today, as well as a few hundred thousand that were permanently lost, and we're still dealing with a population of just over 7 billion people today. On average, this means the average person owns just under 0.003 bitcoin. However, due to the unequal distribution of wealth in my world, the mean person owns just 0.001 bitcoin. That's right, most of you reading this today are rich. I personally live next to an annoying young man who logged into his old Reddit account two years ago and discovered that he received a tip of 0.01 Bitcoin back in 2013 for calling someone a "faggot" when he was a 16 year old boy. Upon making this discovery he bought an airline ticket, left his house without telling anyone anything and went to a Citadel.
"What is a Citadel?" you might wonder. Well, by the time Bitcoin became worth 1,000 dollar, services began to emerge for the "Bitcoin rich" to protect themselves as well as their wealth. It started with expensive safes, then began to include bodyguards, and today, "earlies" (our term for early adapters), as well as those rich whose wealth survived the "transition" live in isolated gated cities called Citadels, where most work is automated. Most such Citadels are born out of the fortification used to protect places where Bitcoin mining machines are located. The company known as Coinbase to you is known to me as a city where Mr. Armstrong rules as a king.
In my world, soon to be your world, most governments no longer exist, as Bitcoin transactions are done anonymously and thus most governments can enforce no taxation on their citizens. Most of the success of Bitcoin is due to the fact that Bitcoin turned out to be an effective method to hide your wealth from the government. Whereas people entering "rogue states" like Luxemberg, Monaco and Liechtenstein were followed by unmanned drones to ensure that governments know who is hiding wealth, no such option was available to stop people from hiding their money in Bitcoin. Governments tried to stay relevant in my society by buying Bitcoin, which just made the problem worse, by increasing the value of Bitcoin. Governments did so in secret of course, but my generation's "Snowdens" are in fact greedy government employees who transferred Bitcoin to their own private account, and escaped to anarchic places where no questions are asked as long as you can cough up some money.
The four institutions with the largest still accessible Bitcoin balance are believed to be as following:
- Coinbase - 50,000 Bitcoin
- The IMF's "currency stabilization fund" - 70,000 Bitcoin
- Government of Saudi Arabia - 110,000 Bitcoin
- The North Korean government - 180,000 Bitcoin
Economic growth today is about -2% per year. Why is this? If you own more than 0.01 Bitcoin, chances are you don't do anything with your money. There is no inflation, and thus no incentive to invest your money. Just like the medieval ages had no significant economic growth, as wealth was measured in gold, our society has no economic growth either, as people know their 0.01 Bitcoin will be enough to last them a lifetime. The fact that there are still new Bitcoin released is what prevents our world from collapse so far it seems, but people fear that the decline in inflation that will occur during the next block halving may further wreck our economy. What happened to the Winklevoss twins? The Winklevoss twins were among the first to die. After seeing the enormous damage done to the fabric of society, terrorist movements emerged that sought to hunt down and murder anyone known to have a large balance of Bitcoin, or believed to be responsible in any way for the development of cryptocurrency. Ironically, these terrorist movements use Bitcoin to anonymously fund their operations.
Most people who own any significant amount of Bitcoin no longer speak to their families and lost their friends, because they had to change their identities. There have been also been a few suicides of people who could not handle the guilt after seeing what happened to the bag-holders, the type of skeptical people who continued to believe it would eventually collapse, even after hearing the rumors of governments buying Bitcoin. Many people were taken hostage, and thus, it is suspected that 25% percent of "Bitcoin rich" actually physically tortured someone to get him to spill his password. Why didn't we abandon Bitcoin, and move to another system? Well, we tried of course. We tried to step over to an inflationary cryptocurrency, but nobody with an IQ above 70 was willing to step up first and volunteer. After all, why would you voluntarily invest a lot of your money into a currency where you know your wealth will continually decline? The thing that made Bitcoin so dangerous to society was also what made it so successful. Bitcoin allows us to give into our greed. In Africa, surveys show that an estimated 70% of people believe that Bitcoin was invented by the devil himself. There's a reason for this. It's a very sensitive issue that today is generally referred to as "the tragedy". The African Union had ambitious plans to help its citizens be ready to step over to Bitcoin. Governments gave their own citizens cell phones for free, tied to their government ID, and thus government sought to integrate Bitcoin into their economy. All went well, until "the tragedy" that is. A criminal organization, believed to be located in Russia, exploited a hardware fault in the government issued cell phones. It's believed that the entire continent of Africa lost an estimated 60% of its wealth in a period of 48 hours. What followed was a period of chaos and civil war, until the Saudi Arabian and North Korean governments, two of the world's major superpowers due to their authoritarian political system's unique ability to adapt to the "Bitcoin challenge", divided most African land between themselves and were praised as heroes by the local African population for it.
You might wonder, what is our plan now? It's clear that the current situation can not be sustained, without ending in a nuclear holocaust. I am part of an underground network, who seek to launch a coordinated attack against the very infrastructure of the Internet itself. We have at our disposal about 20 nuclear submarines, which we will use to cut all underwater cables between different continents. After this has been successfully achieved, we will launch a simultaneous nuclear pulse attack on every densely population area of the world. We believe that the resulting chaos will allow the world's population to rise up in revolt, and destroy as many computers out there as possible, until we reach the point where Bitcoin loses any relevance. Of course, this outcome will likely lead to billions of deaths. This is a price we are forced to pay, to avoid the eternal enslavement of humanity to a tiny elite. This is also the reason we contacted you. It doesn't have to be like this. You do not have to share our fate. I don't know how, but you must find a way to destroy this godforsaken project in its infancy. I know this is a difficult thing to ask of you. You believed you were helping the world by eliminating the central banking cartel that governs your economies.
Here is something funny: as irrational as it might sound, I genuinly feel like this may be the kind of comment that we need to ban people for; this kind of lack of self-awareness is one of the biggest indictments of your personality and intellect possible.
The difficulty automatically adjusts every 2016 blocks based on the amount of time it took to mine them, so a breakthrough in mining efficiency would increase the difficulty until it reached the 1 block/10 minutes target again.
And if Satoshi hadn’t thought “how do I make this hard? I know: spin a computer through SHA2 as fast as possible until it finds a magic hash,” we would be having a much different conversation because Bitcoin and it’s derivatives wouldn’t consume a medium-sized nation state’s worth of electricity.
It was a bad decision. Satoshi fucked up. Please stop justifying it as a community, I beg you. Now we are all paying for that incredibly stupid design, and any criticism is being bearish on cryptocurrency itself.
It’s an important learning experience. Decentralization made a brilliant engineer reach for a brute force hash, and what seemed to be a pedestrian decision while writing a paper now has gigawatt ramifications and a comment section advocating for alterations to world energy policy. Hold the paper another year and come up with something more reasonable and respectful of the world around you; there’s already other currencies attempting proof of work without plugging in a billion hair dryers around the world.
Now the cat’s out of the bag, so to speak, so let’s call it a cat. Bitcoin is one of the most inefficient, wasteful computing systems ever developed. It happens to produce value.
>Decentralization made a brilliant engineer reach for a brute force hash
This isn't about SHA-256. This about the concept of Proof of Work. This applies to every coin based on Proof of Work out there.
What I'm saying is that the entire concept of Proof of work is dependent on people 'wasting' energy to prevent an attacker from taking over the network. It has to be so expensive that someone can't just spend a million dollars and be able to take over the network.
I think of it has a bank spending a couple million on a secure safe to prevent breaking in. What you're saying is "Banks are spending lots of money on safes, and that's bad". Safes' value is nothing unless an attacker tries to get in. The bitcoin network's mining seems worthless until someone tries to take over the network.
This is a very new thing, but I'm surprised HN is still struggling to understand. Every news outlet parroting the same thing as if the bitcoin community is stupid is what gets me the most. I'm almost beginning to think there's a PR campaign going on against bitcoin.
I'm all for the environment. So let's get rid of the wasteful safes, cameras, lasers and guards protecting pieces of paper. Let's get rid of cash counters, counterfeit currency detectors, cashiers at banks who take money to deposit all day long. I assure you, that'll result in less wastage of resources.
>there’s already other currencies attempting proof of work without plugging in a billion hair dryers around the world.
Take a different proof of work algorithm. The same thing will happen. People will buy and build computers to do the same thing. The resource consumption is a factor of the value of the coin, not the PoW algorithm. The power consumption might vary a little depending on the exact algorithm, but the net total of resource spent will be similar. Take some time to understand this.
There are better alternatives people are really trying to come up with. Proof of Stake, Proof of Space, etc. But the thing is, no one is sure about their validity. Ethereum has been talking about Proof of Stake for a long time now, but there still isn't a sure schedule.
This isn't great, but it is the best we have. If you have a better idea, I'm all ears.
AMD already building coin mining optimised gpu's, making the algorithm memory-hard to exempt asic's doesn't really change much except the direction of hardware manufacture
> And if Satoshi hadn’t thought “how do I make this hard? I know: spin a computer through SHA2 as fast as possible until it finds a magic hash,”
Hashcash algorithm used in Bitcoin predates it by about a decade, it was used for spam detection for example. Approaches to secure a blockchain are an active area of research, did you have a better idea to propose?
From a strictly environmental perspective, mining in China in general is going to be worse for the global environment than in the US due to restrictions on pollution from energy generation in the states, at least for now.
Are you sure about that? I thought one of the reasons a lot of this happens in China is because they can locate in areas with very cheap surplus hydropower.
Also the idea that the US just automatically can be assumed to have cleaner energy policy than China is archaic at this point. The world changes fast.
China still burns a shit ton of nasty poorly regulated coal. The hydro (and in the near future nuclear) doesn't cover the growing needs of 1.4b people.
Coal is literally like 3/4 of China's electric generation capacity. If Bitcoin is taking up some of the hydro, the slack is gonna come from coal.
This was my understanding as well. Since the location of miners is probably economically decided they probably go to places with cheap power and that is usually hydroelectric. They could go to Washington state but as you say China is cheaper.
> Bitcoin boom may be a disaster for the environment
Probably the most important implication of this undeniable truth is that it's a ready-made justification for liberal governments to ban Bitcoin if it becomes sufficiently disagreeable to them. (It's a great justification for despotic governments as well, but they don't really need one -- one of the perks of being despotic!)
EDIT: I meant "liberal" in the classical, pro-freedom sense (as opposed to despotic), not trying to place governments on the liberal/conservative spectrum of contemporary American politics. I thought that was clear from the context.
Why do you use the term liberal as opposed to something more general? I think the descriptor 'tax-collecting' might capture some of the reasons why a government might want to ban Bitcoin (if they could).
Although it might be harder to tax, since regular banks are mandated to do a lot of the reporting leg work for the tax collectors, is it really different than taxing other commodities like gold. If we can admit its not really a practical currency.
You should compare the energy bitcoin uses to all energy used by traditional banks, their corporate headquarters, the government regulators responsible for managing the system, lawyers / judges / institutions managing conflicts, mobile apps and servers powering it, etc.
Bitcoin is doing all of these things without formal institutions, employees, governance, and official regulation.