Cryptocurrencies are worse for the climate than you think
rollen.ioWhat article is claiming is based on a misunderstanding of how Bitcoin works, this really is an odd way of thinking about it.
If half of all people stop sending bitcoin around, the amount of electricity used doesn't go down by 50%. So you sending or not sending bitcoin doesn't impact the electricity spend by miners at all.
Miners mine to secure the network, there is not a certain amount of electricity needed per transaction.
But, the only purpose of mining -- the whole purpose of the blockchain -- is to facilitate transacting.
So if the network can only do X transactions per day, and it costs $Y to run the network, it seems fair to use a "cost per transaction" to describe that inefficiency.
Kind of like how I could represent the total cost of ownership of a car (purchase price, oil changes, tire changes, big repairs, fuel) in terms of $ per mile, even though out of all those costs, only fuel is directly consumed by driving a single mile.
It is incorrect to assume that the only, or even the most important, purpose of bitcoin is for transactions. Bitcoin users primarily hold Bitcoin as a store of value or speculative savings technology, typically held over long periods of time (years) with an expectation of price appreciation at the expense of short-term volatility.
It is not, as many on HN have correctly pointed out, a viable transactional currency for most use cases due to price volatility, taxation related friction, limited real-world adoption for payments or transaction costs. The only compelling transactional use cases I know of are censorship resistant payments (e.g, Wikileaks) or high value international funds transfers outside G8 countries where wires are slow and risky.
Most Bitcoin is held by savers or speculators over long periods and transactions are infrequent. Therefore the primary purpose of Bitcoin mining is securing the network from bad actors. Bitcoin is a secure vault on the internet. Just because people put money in and take money out of a vault doesn’t mean the purpose of a vault is transactions. It is security against 51% attacks.
Therefore, the appropriate measure is not cost per transaction. It is cost per total value secured.
I didn't say the only purpose of Bitcoin was to conduct transactions, but that the only purpose of mining (and the blockchain) was to do so.
Specifically, mining exists to ensure that if you send me Bitcoin, I can be quite confident you haven't sent the same Bitcoin to somebody else. All that expenditure is there to guarantee nobody double spends. It facilitates trustworthy transactions.
Now, it's fair to say that in a way, that also protects people who are just sitting on their Bitcoin not transacting it, since their Bitcoin wouldn't be worth anything if they didn't believe that they could transact if they wished to. But the literal, direct purpose of mining is to protect people receiving Bitcoin in trade, not people sitting on it, who are protected from theft by the secrecy of their private keys.
Mining hash rate is correlated with value in network. It is not correlated with transaction volume. If tx volume dropped by half it would not meaningfully impact the hash rate. If Bitcoin’s price were to drop by half the hash rate would definitely fall.
For now, that's true, since miners are mostly paid with newly minted BTC. The payout for the job of mining is currently based on BTC's valuation, but the reason for the mining is to secure the transactions. That also aligns with its design.
Why else would Satoshi design Bitcoin's block reward to slowly dwindle towards zero? Apparently in his vision, the eventual steady state for Bitcoin is to be supported entirely by demand for block space (aka, transaction volume), with no correlation to "value in network".
Edit: to put a finer point on my question...
Does the transaction-fee-only mining model work?
If it does work, isn't the current block reward wasteful, funding tens of millions of dollars a day worth of mining, when the fees set by competitive demand for block space are a fraction of that? If fees alone are going to be enough to secure the network adequately, why can't Bitcoin adopt a more aggressive halving cycle and move to fee-only by, say, 2040 instead of 2140?
If it doesn't work, that means there will eventually be a problem with Bitcoin as it slowly moves toward that model. How can Bitcoin change its design to fix this, without compromising the "only 21M coins ever" promise that many of its stakeholders consider a fundamental strength?
Even in the future when mining rewards shift to tx fees, the purpose of the fees paid to miners will still be to secure the network primarily, not for the txs themselves.
> It is incorrect to assume that the only, or even the most important, purpose of bitcoin is for transactions.
Transactions may not be the only purpose of Bitcoin, but they are essential to the existence and security of Bitcoin. The block rewards for mining drop by half every few years and will eventually drop to zero. Soon, miners will be paid by transaction fees.
As Satoshi Nakamoto reportedly said: "In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes. I’m sure that in 20 years there will either be very large transaction volume or no volume."
Still, the primary purpose is most likely to be security of the network, not transactions which makes the cost to secure the network the better metric.
> Therefore, the appropriate measure is not cost per transaction. It is cost per total value secured.
Have you run the math on this? A quick DDG search brings up (https://www.investopedia.com/tech/how-much-worlds-money-bitc...), which estimates about 2.9% of the world's money supply is in Bitcoin.
It's not clear whether they estimated how much of that money supply is actually still accessible (ie, how many dead wallets there are), and it's not a given that all of that money could actually be cashed out anyway (see the recent stablecoin fiascos). But lots of asset classes are vulnerable to runs, so let's assume that it's completely accurate, and Bitcoin is using all this power to meaningfully secure 2.9% of the world's money.
In order to secure that 2.9% of the money, Bitcoin generates more e-waste than a mid-sized country and uses roughly the same amount of energy as the entire country of Sweden every single year. And the problem is that even the most generous estimations of the amount of power that current financial markets use make that energy expenditure look really inefficient. Even pro-Bitcoin articles that I find online (ex. https://news.bitcoin.com/banking-system-uses-significantly-m...) are estimating that gold and banks each use in the neighborhood of 2-4x more power than Bitcoin annually. Which is a little bit embarrassing given that Investopedia above suggests that Bitcoin secures less than 10% the amount of money that gold secures. Similarly, it's tough to estimate how much money is held inside the financial sector (and of course, banks do way more than just secure value), but nobody I can find is giving estimates as low as 6-12%, instead I'm seeing some estimates as high as 25%.
I would not really classify gold as an environmentally amazing asset, but when considering gold we're still looking at a store of value that per-year is basically 2-5x more energy efficient per "dollar-secured" than Bitcoin is.
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And I feel like this should honestly be kind of intuitive to people, if anything people should be surprised that those numbers aren't worse. Bitcoin's design is such that it uses electricity proportional to the amount of profit available from mining. Until the mining rewards drop to zero, as Bitcoin rises in value the energy/hardware expenditure will also rise to match that value. If it doesn't then the value of the coin will eventually get high enough to make 51% attacks profitable.
So take a step back and think about that: a system that keeps its assets secure via a constant, massive expenditure of energy, that has to grow in energy expenditure as the price of the asset increases, and that has to be maintained in perpetuity in order to win an ever-escalating computing arms race against attackers... well, that's not a system that's exactly setting itself up to be an amazingly efficient store of value. It's not surprising that more traditional methods of running and securing databases and coordinating databases/transactions would be more efficient. It's not surprising that even a mostly physical asset would be more efficient to secure.
If we are comparing energy consumption of monetary systems I think we also need to look at the incumbent system’s costs with open eyes. The US dollar is the global reserve currency. It is no longer backed by gold. Instead it is backed by energy and military might in the form of the largest military industrial complex in the history of the world, responsible for more death and destruction of humanity and the environment than any other single entity over the last 70 years.
Unlike Bitcoin which currently consumes a greater proportion of green/renewable energy than virtually any other industry, the US military operates almost exclusively on carbon-emitting fossil fuels and has left a trail of dead and wounded, mostly innocent civilians with brown skin, whose only crimes were being born with our oil under their feet.
The US military is by far the single largest fossil fuel consumer in the world. Isn’t it curious that so little attention is focused on reducing the military’s dependence on fossil fuels? Where are the ESG proponents on the topic of the single largest contributor to global greenhouse gases?
Will you stay silent on the subject now that you are aware of the fully-loaded costs of supporting the USD as the world’s reserve currency?
By contrast, Bitcoin uses less energy than the world’s hair dryers to secure a considerable amount of value without the need for violence. If we consider the full extent of externalities required to secure the current monetary system, Satoshi’s invention of Nakamoto consensus starts to look like an alternative worth considering for at least some of the world’s wealth.
It is ridiculous to blame USD for costs that would still exist, arguably not even reduced in size, if we didn't use USD.
Without having to defend the USD as the global reserve currency, the US military would still have to exist, yes, but not nearly on the scale it does today.
Here is a US general Wesley Clarke explaining in his own words in 2000, before 9/11, how the US was already planning to invade 7 countries, all of whom had the nerve to act outside USD hegemony and some of which had the audacity to run their own central banks outside the approved system.
> and some of which had the audacity to run their own central banks outside the approved system
The US was not pushing to invade those countries in order to prop up the USD, it was pushing to invade them because of aid they were sending to other countries and to assert control over those areas. Where are you getting from that Wesley Clarke video that this was primarily about currency or that aid/funding going over Bitcoin would remove those motivations?
I mentioned elsewhere that you can buy and sell oil with Bitcoin, but it bears repeating: Bitcoin doesn't make exploitation, theft, or manipulation impossible. The United States does a lot of unethical stuff in order to secure value and control, and moving from USD to Bitcoin doesn't get rid of the concept of value. It doesn't mean that the United States would magically stop wanting to control the financial infrastructure around currency exchanges, it doesn't mean it would stop caring about raw materials and economic agreements with other countries.
There's nothing in the Bitcoin protocol that prevents it from being spent on guns, oil, or bribes. There's nothing in the Bitcoin protocol that prevents it from being funneled to dictators, or used to fund coups or tear down governments. The US didn't sabotage a bunch of countries after the Cold War because they had a different currency than us, it sabotaged them because they were Communist and the US didn't like the form of government they had chosen.
Of course, there would be benefits to a decentralized currency, and if Bitcoin was good at being a decentralized currency then there would be benefits to moving to Bitcoin. But even if Bitcoin was a good decentralized currency, moving to it would not magically get rid of any of the underlying motivations countries have for wielding geopolitical power in unethical ways. It's not that having more ways to move money around or make payments wouldn't probably be good for the world. But it wouldn't solve every problem, or even most problems.
Even with tariffs: a lot of the mechanisms the US uses for tariffs target shipping, currency exchanges, raw materials, and market access. If Bitcoin could help circumvent anything it would be tariffs, but in practice it's not even particularly amazing at circumventing them on a large scale. And I don't see much evidence that Bitcoin actually does get rid of motivations to prop up governments or artificially shape geopolitical environments around market access. That's not to say that the USD doesn't matter at all, just... not as much as you're characterizing. Cars don't run on Bitcoin, they run on cheap oil.
Please read up on the petrodollar and then take note that each of the countries General Clarke warned we would invade before 9/11 either had their own central bank not linked to the Bank of International settlements or they had the audacity to sell oil for something other than USD. The fact that the US military invaded these countries short after is not a coincidence.
> or they had the audacity to sell oil for something other than USD
This is unbelievably silly, you might as well say that they were targeted because they had the audacity to use different languages than English when they were selling oil. Their use of a currency other than USD was not the actual fundamental reason the US got mad at them, it was just a way that those countries moved their oil markets outside of US control.
The reason the US opposed those countries was because of who they were selling the oil to and to assert control over the oil market in general. Countries used other currencies other than USD in order to avoid US control. But the avoidance of US control was the part that the US was primarily mad about, not the specific currency involved. If USD went away, the US would not suddenly say, "we never cared about control in the first place, just the USD, so now you can sell oil to whoever you want and we won't pay attention to it."
The US would still oppose the countries selling oil to Bitcoin addresses that they didn't like. They would still want to target exchanges, they would still mark coins as dirty or get mad at countries who accepted coins from banned addresses or allowed dirty coins to transact, and they would still threaten countries that used techniques to try and anonymize who they were selling oil to or launder coins.
It's not about the USD, it's about the market. The USD just happens to be what the market uses right now, but the US government would still be "protective" of its market even if it used a different currency.
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I'm trying to come up with an analogy here that makes it more obvious what the error is that you're making... it's like saying that the USD is responsible for all bank heists because criminals in the US mostly target banks that are carrying primarily USD money, and if all banks switched to Bitcoin then criminals would stop trying to steal from any banks. It's like saying that most website fingerprinting happens in Javascript, and that can't be a coincidence, so if browsers used C++ for site scripting instead of Javascript then fingerprinting would go away.
But of course that would be ridiculous. Bank robbers want money, and they won't stop wanting money just because the money is in a different form. They're not targeting banks because they love USD specifically and uniquely, they're targeting banks because they want spendable money, and they would still want spendable money even if that money was Bitcoin.
And similarly, the US wants control over the oil market itself, and it will not stop wanting control over the oil market just because the oil is all being sold for a different currency. If the US switches to Bitcoin, it is still going to get mad at countries that are participating in markets outside of its control, because the USD is just a way that the US exerts control over markets, not the primary reason why it exerts control over markets.
Again, please look into the details of petrodollar hegemony before responding. It is the primary purpose of the USD as a global reserve currency.
Again, please understand that a mechanism for exerting control over a market is not the same thing as the primary reason for exerting control over a market.
USD is in part a method to exert control over the oil industry. You are asking me to believe that if it went away, the US would throw up its arms, get rid of a substantial portion of its military, and stop trying to control the oil market. That's not a reasonable claim to make, there is no possible world where this would play out the way you're describing.
Do not confuse a mechanism with a motivation.
> If we are comparing energy consumption of monetary systems I think we also need to look at the incumbent system’s costs with open eyes.
This is kind of goalpost moving. It's fair to ask about the human costs of other monetary systems, but I thought we were just trying to determine whether or not Bitcoin was efficient. It's not. But whatever, I'll follow that goalpost for a little while.
In isolation I do think that criticism of government policy to value/devalue and secure traditional currencies would be a good argument... if Bitcoin was well positioned to be a replacement for traditional currency.
But by your own admission Bitcoin isn't primarily a system for transactions, it's a system for storing value (actually I would argue it's primarily a speculative asset, not a traditional value store, but whatever, it doesn't matter). Bitcoin is not in its current state trying to replace dollars, because dollars need to be good at transactions, and Bitcoin is bad at transactions: it's wildly inefficient and environmentally unfriendly, it's slow and has high fees, it requires you to essentially move off chain to get anything approaching a normal transaction experience.
> Isn’t it curious that so little attention is focused on reducing the military’s dependence on fossil fuels?
If the biggest problem with the US military complex was its environmental cost, I would sleep better at night. I think a big reason why people don't talk a lot about how much carbon the military emits is because they're too busy talking about the massive human cost.
But this is kind of silly; a lot of Bitcoin's critics do criticize the military. I'm not here as part of a conspiracy to prop up government invasions of other countries, I just think your "currency" is bad and has fundamental flaws.
> Will you stay silent on the subject now that you are aware of the fully-loaded costs of supporting the USD as the world’s reserve currency?
Bitcoin is not going to replace USD. It's technologically incapable of doing that; it only supports 7 transactions per second and the last time anybody tried to fix that problem, the community hard-forked and had a giant schism. Because of course they did, Bitcoin isn't optimizing for transaction speed or transaction fees and most of the community doesn't care about any of the high-minded goals that Bitcoin was originally sold on. They just want an asset that goes up in value, so eventually they can convert it back into USD.
This could be a longer conversation, but while Bitcoin was originally based around some ideals like democratic access to currency and reduction of reliance on military/global power, I feel like it's kind of silly now that we can look at how Bitcoin has played out to say that the whole movement is still about raising people up and democratizing finance. Bitcoin is primarily a speculative market, it's not driven by ideals at this point.
Also just as a sidenote, but even in a world without traditional finance, most countries would still probably have a military; so even just the core idea of "tanks use too much power" is a little weird to me given that the US is not going to throw away all of its tanks if it transitions off of USD. Bitcoin does not get rid of the concept of exploitation, the US can still steal another country's oil and then sell it for Bitcoin.
> Bitcoin uses less energy than the world’s hair dryers
Not sure if you intended this to sound like a small amount of power, but that is a heckin large amount of power in order to secure such a small proportion of the world's wealth that it has next to no impact on the current exploitative measures taken to secure other existing currencies.
Bitcoin does not do enough to address the exploitative nature and human cost of securities like gold in order to justify its enormous energy expenditure, and there is little reason to believe that it is capable of scaling to the point where it could address those problems, and there is a ton of reason to believe that if it did manage to scale to that point it would in the process start consuming even more energy.
Even taking everything you've said at face value and assuming that Bitcoin is actually just straight-up liberating value from a highly exploitative system (rather than in more than a few ways participating in that same system) -- no; quite frankly, it is not worth using the same amount of energy as Sweden just to liberate a measly 3% of the world's wealth. That is too inefficient, it costs way too much power to do way too little. Come up with a more efficient way to secure that wealth, preferably one that actually scales.
No moving of goalposts here. OP claimed that Bitcoin’s primary purpose was transactions. I countered that the primary purpose was network security not txs, though pointed out two transaction use cases where Bitcoin beats every other payment method or monetary system.
You compared Bitcoin’s energy use to nation states. I compared it with hair dryers and one nation’s military, while pointing out that the US military’s energy consumption was only a small portion of it’s fully loaded cost in terms of externalities (others being: death, destruction, fossil fuel usage greater than any other entity to ever exist)
Again, no moving of goalposts. Simply fair comparisons of different forms of money.
Bitcoin never claimed to replace all uses of USD or gold, but it does reduce the total external costs in many important ways while providing the world with a powerful new alternative that is peer to peer, can be self-custodied, and has a fixed low inflation rate from now to infinity making it harder money than any that has ever existed.
> Bitcoin never claimed to replace all uses of USD or gold
If Bitcoin is not going to replace USD or get rid of the externalities of USD, then it is a waste of time to argue that Bitcoin is more efficient because it doesn't have those externalities. You are propping up a currency that is less efficient than gold and USD in terms of energy usage, and does next to nothing to prevent the negative externalities of those systems.
> but it does reduce the total external costs in many important ways while providing the world with a powerful new alternative
Bitcoin in its current form is not an alternative to USD, it is at best a system that complements USD, and I see no evidence at all that the existence of Bitcoin has reduced military presence anywhere in the world. You don't get to act like Bitcoin can subtract the negative externalities of USD from its environmental ledger when it is not currently reducing those externalities.
> peer to peer, can be self-custodies, and has a fixed low inflation rate from now to infinity making it harder money than any that has ever existed.
I'm not going to get into it, but I disagree that Bitcoin is P2P in the way that most people actually care about P2P; Bitcoin relies on a mostly functioning Internet, there is no way to securely make payments on the blockchain without eventually connecting back to the rest of the network and reaching network consensus. This is in contrast to what people usually think of when they talk about P2P networks, where information often does not need to propagate to the rest of the network at all. The most exciting work in P2P networks are in areas where constant consensus isn't required at all.
I also think the inflation claim is ridiculous given that Bitcoin's price fluctuates wildly. And the inflation is not "to infinity", Bitcoin is set to eventually run out of coins on purpose. The inflation is set to eventually reduce to zero. Bitcoin is a deflationary asset, not an inflationary asset. This is actually one of the things that turns out to be bad for Bitcoin as a currency, Bitcoin has been a good demonstration in a lot of ways as to why a deflationary asset is inherently not particularly well suited for transactions.
And again, by your own admission, Bitcoin is primarily a store of value, not primarily a currency designed to be regularly exchanged. If you want to talk about Bitcoin like it's an alternative to USD, then I'm going to criticize the fact that its transaction rate and per-transaction environmental costs are garbage and unscalable.
> Bitcoin in its current form is not an alternative to USD, it is at best a system that complements USD, and I see no evidence at all that the existence of Bitcoin has reduced military presence anywhere in the world.
I agree with this statement to date but in the future as Bitcoin grows in importance I believe we will all see a diminishment of USD petrodollar hegonomy.
> I'm not going to get into it, but I disagree that Bitcoin is P2P in the way that most people actually care about P2P
I wish you would get into it. To my knowledge most internet based p2p networks do rely on the internet. The internet allows for p2p networks that operate between any 2 players on the internet, effectively any 2 of 7 billion people, the very definition of p2p. What am I missing?
> I also think the inflation claim is ridiculous given that Bitcoin's price fluctuates wildly.
The inflation claim is sound and is based on the proportion of Bitcoin created per block not the speculative USD value of the created supply. It is like valuing the inflation of the gold supply based on the speculative nature of gold in USD fiat, rather than the gold supply itself.
> And the inflation is not "to infinity", Bitcoin is set to eventually run out of coins on purpose. The inflation is set to eventually reduce to zero. Bitcoin is a deflationary asset, not an inflationary asset.
I agree with this statement.
> This is actually one of the things that turns out to be bad for Bitcoin as a currency, Bitcoin has been a good demonstration in a lot of ways as to why a deflationary asset is inherently not particularly well suited for transactions.
This is a statement without substance that I fundamentally disagree with. Please provide evidence or back down on such baseless accusations
> And again, by your own admission, Bitcoin is primarily a store of value, not primarily a currency designed to be regularly exchanged.
Agree, but I did provide a couple examples where Bitcoin is a superior medium of exchange today than Gold or USD.
> If you want to talk about Bitcoin like it's an alternative to USD, then I'm going to criticize the fact that its transaction rate and per-transaction environmental costs are garbage and unscalable.
If you are going to focus singularly on the transaction use case, over the store of value use-case, I will call you out as missing the point. The only guarantee of the USD is that by design it will lose 2-8+% of its value per year, every year to infinitity. If you take the lower end of that at 2%, then over a 40 year average career, an income earner loses 40% of their income to an invisible tax. This theft is what Bitcoin’s deflationary asset backed system protects against. Infinity/21 million is better than 1/infinity (exponential inflationary money supply) over the long term. The only reason you don’t understand that yet is that you haven’t sufficiently studied Bitcoin. I encourage you to do so.
> I agree with this statement to date but in the future as Bitcoin grows in importance
Bitcoin isn't scalable and part of the point I'm getting at is that its power consumption is out of control and would be even more out of control if it did rise in importance, since the price would rise and mining would increase to compensate.
You're asking me to imagine a world where Bitcoin has grown in the amount of value it's securing (which necessarily because Bitcoin is a deflationary asset requires that the price of Bitcoin increase dramatically), but you're also asking me to substitute in the current energy requirements of Bitcoin when I think about that world.
In a world where Bitcoin actually held a substantial portion of the world's value, the amount of energy required to actually secure that system against 51% attacks would be ridiculous, it would dwarf the energy requirements of any other financial system.
> To my knowledge most internet based p2p networks do rely on the internet
A lot of P2P applications are about allowing direct connections between devices even if the Internet goes down. But more importantly, when most people think about P2P they're thinking about systems where you don't need fast consensus. The blockchain is a distributed ledger that forces constant consensus. In contrast, if you look at something like (just as one example) P2P Matrix you can run rooms entirely offline, and essentially you can run rooms that don't immediately propagate their state to the entire rest of the network. They might never connect to the rest of the Matrix world.
One of the big advantages of P2P is the idea that you don't need to have access to the entire network. But Bitcoin fails that test, if you don't have at least indirect access to the entire network and you can't get your changes onto the chain in time, then it's too late.
This is part of what people mean when they say that Bitcoin is kind of like a decentralized way of running a centralized service. Bitcoin relies on a having a nearly always up-to-date shared consensus of everyone's transactions. It gets at the shared consensus in a decentralized way, but there is still one centralized "state" that everyone is relying on. The really interesting work in P2P networks does not rely on constant consensus or on having one singular state at all. A true P2P cryptocurrency in the way that most people understand P2P networks today (or at least the good P2P networks) wouldn't have the blockchain. It wouldn't require a single unified ledger that contained every block.
> It is like valuing the inflation of the gold supply based on the speculative nature of gold in USD fiat, rather than the gold supply itself.
Okay, but that's a ridiculous thing to do because if you think about inflation only in those terms then your inflation numbers don't really indicate how much value the asset is actually worth. But if you believe otherwise, I might have some Beanie Babies somewhere to sell you.
> This is a statement without substance that I fundamentally disagree with. Please provide evidence or back down on such baseless accusations
:) Crud, my evidence is the entire heckin history of Bitcoin, the fact that it is not being used primarily for transactions today even though a lot of the early proponents were arguing that it would be. My evidence is the "all" view on this price chart (https://www.coinbase.com/price/bitcoin). That is not the chart of a functioning currency.
The question of whether a deflationary asset was good as a currency got brought up a lot during early Bitcoin talks, and the answer that was often given was that other forces would come into play and people wouldn't just sit on their Bitcoin and treat it the same way they treat stocks. But it didn't happen, people do basically just sit on their Bitcoin the same way they sit on stocks. It turns out that when an asset experiences rapid growth, that's bad for its use-case as a currency.
Which, I mean... obviously. You're not on here arguing that Bitcoin is primarily about transactions, are you? You're arguing that it should be thought of like a bank vault. Early Bitcoin proponents back when I first entered the space were arguing differently. They turned out to be wrong. Bitcoin today is the evidence that deflationary assets are inherently poorly suited for currencies.
> Agree, but I did provide a couple examples where Bitcoin is a superior medium of exchange today than Gold or USD.
I'm not entirely unreasonable, there are some very minor things that Bitcoin does well. Most of them are done better by other cryptocurrencies, and it says something that the community continues to focus on a cryptocurrency that has been technologically obsoleted by other coins multiple times over, but even so, there are some things the coin does well.
But there aren't very many things, and my point is that the energy costs are too high to justify with those minor improvements. Bitcoin is not meaningfully changing the game on censorship for most people (even though that's what Bitcoin does best). It is not reducing military presence in the world. It isn't really democratizing finance in the way its proponents claim. And it introduces huge environmental costs and tons of negative externalities in exchange for such tiny, insignificant gains.
> If you are going to focus singularly on the transaction use case, over the store of value use-case, I will call you out as missing the point.
Cool, Bitcoin is garbage at both transactions and as a store of value. Mathematically, it's worse than the other systems we have at both of those tasks. Now, you are telling me to ignore that math because the existing systems also have a ton of separate externalities, and I actually agree with you that the existing systems have a ton of externalities.
But if you are arguing that Bitcoin is going to do anything about those externalities, then it needs to get a whole lot more usable and whole lot more efficient at being both a store of value and a method of transactions. Otherwise, I don't really care about the carbon emissions of the military in regards to Bitcoin because Bitcoin isn't going to do anything to reduce them.
Pointing out that existing systems are bad does not make Bitcoin magically good. Bitcoin is an ineffective way of addressing systemic problems with existing currencies, and yet it still imposes large environmental and social costs of its own.
I'm supposed to ignore the massive environmental costs of transactions and the lack of scaling, and yet somehow believe that Bitcoin will be able to meaningfully compete with any other currency. It won't, not unless it gets better at transactions. I'm supposed to ignore that Bitcoin's energy cost to secure money is out of control, but I'm also supposed to believe that it will outcompete gold in any meaningful way. It won't because it's bad at storing value. It can't address the negative externalities of gold because it's mathematically worse than gold at the primary purpose of storing value, and the other negative externalities of gold are not going to help Bitcoin compete with gold.
It's not enough to realize that gold and fiat money have problems, the alternative that you propose still has to actually work better than them.
> Infinity/21 million is better than 1/infinity (exponential inflationary money supply) over the long term.
Not if you're building a currency :)
> The only reason you don’t understand that yet is that you haven’t sufficiently studied Bitcoin. I encourage you to do so.
Oh please, I've been in this space for ages, I've gone to the talks, I've read the papers, I've learned the algorithms. I know the early economic theories that Bitcoin proponents were proposing back when it first started to break out of extreme niche circles, because I one-on-one talked to early proponents about how they thought this was going to work out and asked them questions about how they thought a deflationary asset would work as a currency. It was an interesting idea, and I was hoping that they would be correct. But they turned out to be wrong and their predictions about usage and human behavior on the network didn't actually come true. That's all there is to it.
Part of the reason I'm cynical about Bitcoin is because I'm not coming into Bitcoin discussions through the lens of revisionist history, and I'm not coming into Bitcoin discussions from a perspective that the technology must just magically have some way of dealing with scalability or efficiency problems. I've spent enough time studying both the technology and the economic theories, and I've spent enough time just sitting back and watching the space evolve, that I now know behind the complexity there are fundamental assumptions being made about how currencies work that are just... incorrect.
I wish they were correct, a decentralized currency would be great. But I'm not sticking my head in the sand and pretending that Bitcoin is capable of being that currency.
First I want to thank you for your engagement. It is rare to find some one so deeply engaged in the topic with such a well considered point of view. Secondly I want to point out the areas where we agree.
For example I would like to agree with your perspective on bitcoin, p2p and the internet.
I fundamentally agree that Bitcoin was born of the internet and if the internet were to go down then Bitcoin would likely go down with it. I view Bitcoin as the native currency of the internet and it would be nothing without the internet. I don’t believe the internet is going to fail for many reasons but I do agree that Bitcoin would likely fail without the internet.
Where we disagree is: 1/ Bitcoin is bad as a transactional currency today. 2/ Bitcoin is a bad store of value today. 3/ Bitcoin’s energy usage is out of control and bad for the environment.
Let me elaborate: 1/ Bitcoin is the best transactional currency for any transfer outside the G8 countries for any value between $100USD and 10 billion USD, where the one of the parties exists outside of the G8. This represents over 70% of the global population. It is convenient for most on HN to ignore this fact but 70+% of the global population exists outside your bubble. For these transactions, Botcoin allows for perfect censorship resistant p2p transactions between two parties with zero compLexity.
2/ The gov and taxation policy has convinced you that 1+ years is the definition of a long-term investment but this is not the case. In Bitcoin terms, long-term means 3 years +. If you look at 3+ years as a timeframe, Bitcoin has returned an average of over 200% APR on average, handsomely beating any reasonable investment over a period of 13 years since inception.
3/ Bitcoin’s energy consumption is designed to consume only the lowest marginal cost of energy. It consumes the lowest cost energy sources which over the long term coincide with renewable energy sources for whom there is no other consumer. If there were then other consumers it would push them out at a higher marginal cost. By contrast, gold can only consume fossil fuels and rape the planet through strip mining while USD can only rape the planet through fossil fuels or through military violence.
If 50% of Bitcoin users went away tomorrow or stopped transacting, almost certainly the amount of electricity used would decrease, because the value of the coin would decrease.
This is like saying that if the US banned gold that gold mines wouldn't be impacted at all. Demand (and thus profitability of the asset) fuels mining.
People mine because mining is profitable, not to secure the network. Securing the network is a side effect.
True, but the network serves a purpose. Without transactions, would there be a network to begin with? Therefore, you can model a per transaction cost within certain bounds.
It's incorrect, but absent Bitcoin having an actual plan to increase transaction volume it's a reasonable way to imagine what a world where Bitcoin actually functioned as a currency might look like. It's possible that the bitcoin design is fundamentally flawed and cannot scale, but in some ways, OP has a very charitable way of imagining what it would look like if Bitcoin could actually function as a global currency.
It's not so odd. Those people are willing to transact in Bitcoin because it's sufficiently secure against a 51% attack. So in a sense they're consuming the benefit of the overall network hashrate, even though the cost they pay is heavily subsidized.
> Miners mine to secure the network
They are ultimately humans, not machines, so they mine for the mining reward, not as a public service of securing the network.
Transactions are the only service provided by Bitcoin (what else is a currency for other than transactions?), so it's totally fair to consider it's energy cost per transaction, especially since the banking system is evaluated in the same way.
> there is not a certain amount of electricity needed per transaction.
Not yet. But that will be increasingly the case in the coming decades as the block subsidy gets repeatedly halved into insignificance. Then the brunt of Bitcoin's security (protection against 51% attacks) will have to be borne by transaction fees.
How saturated is Bitcoin currently? I stopped following the details years ago but I guess Bitcoin could not handle a ten fold transaction rate increase today, right? Which means at best - if you completely saturate the network - you could get the costs per transaction down to 10% of the given number.
If all people stop using bitcoin, the amount of electricity goes to zero.
Classic confusion about marginal costs.
The price of bitcoin is supported by inflow of "fresh money" from newcomers. If this inflow stopped, for how long would mining continue?
The price of Bitcoin is not supported by the amount of fresh money coming in. It’s based on the lowest price a current Bitcoin holder is willing to sell for.
If all Bitcoin holders decide tomorrow that it’s worth $200k per coin, then that’s the price, even if there are very few buyers at that price.
It’s like the price of a stock: it’s not dependent on trading volume.
To be accurate, the equilibrium price is the highest price a buyer is willing to pay, and that someone is willing to sell for.
If the highest price is zero, there is no market, and mining would cease.
So?
It’s so frustrating having these discussions about energy consumption.
If you make a statement about the absolute energy consumption of a PoW blockchain, the first response usually is “But this other thing consumes way more energy!!!!”
In order to compare the consumption of the network to anything you will need to calculate it by some unit of utility. Transactions is the only metric that makes sense.
here we go again, they use a faulty understanding and a faulty source
> Each Bitcoin transaction consumes around 2,150 kWh as of the time of this writing.
This is wrong because Proof of Work blockchains use the same amount of energy whether any individual makes a transaction or not.
Doesn't anyone else find it ironic that actually understanding how that blockchain works could bolster that particular anti-energy use reaction?
Ah! but the same people don't want to spend any of their own energy understanding how blockchains work because they've already made up their mind that its not worth doing that!
I've mentioned this elsewhere, but even assuming that usage doesn't affect mining, why on earth do people think this would be a positive?
----
"My car constantly consumes oil at a prodigious rate even if I only drive it to the grocery store occasionally."
"Even if it's just sitting in your garage? Does... does that make it go faster or further?"
"No, even if my car suddenly starts consuming a lot of additional oil out of the blue, I still can't drive it any faster or further than I could before. The maximum distance I can drive it in a week is a fixed distance regardless of how much gasoline I pump into this bad boy."
"..."
"Anyway, this should probably be the future of transportation."
----
The reasonable conclusion here is not, "when you think about it, driving my car has no environmental impact". The reasonable conclusion is, "holy heck, why would you design a car that way?"
Nobody is saying it is a positive, as I wrote in my post:
> Doesn't anyone else find it ironic that actually understanding how that blockchain works could bolster that particular anti-energy use reaction?
I'm saying make the better, more accurate, argument. I also think if people were able to independently come to those arguments, they would discover things they find interesting about blockchains in the process, as well as where to place that energy
> I'm saying make the better, more accurate, argument.
I do not believe that expending a ton of energy every block regardless of the number of transactions on it means that it's unreasonable or inaccurate to criticize the energy usage in terms of the number of transactions that it on-average supports through that energy expenditure.
I get into this below, but pretty much any system that expends energy to perform a task can be made to act like Bitcoin and expend constant energy regardless of usage by just leaving it running all the time. Doing that doesn't get rid of the "how much energy per-transaction is Bitcoin using" question.
I guess some people have taken issue with the car analogy, so I'll use another: If I leave my shower running 24/7, does that mean that the amount of water I use divided by the number of showers I take is no longer relevant to conversations about my water usage and whether my showering system is water-efficient? No, of course those questions are still relevant, leaving the shower on constantly just makes those numbers really bad for me.
Or yet another analogy, if you're doing math on whether to keep an Amazon Prime subscription, how do you determine if the subscription is worthwhile? Typically, you would add up the number of things you order, and you might say something like, "I'm on average with my current usage paying <subscription cost>/<orders> dollars per-order for same-day delivery using Amazon Prime." And if Amazon jumped in and said, "no, that metric isn't applicable because you'll still pay the same amount with a different number of orders", we would pretty much all recognize that as a bad argument.
Bitcoin has a maximum block size. The fact that in theory people could transact more or less isn't really relevant to the cost/benefit calculation that we're doing right now. Yes, in theory Bitcoin could have max block sizes of 500mb instead of a single megabyte. But it doesn't.
So with the numbers we have now, it is reasonable to say that each Bitcoin transaction cost us 2.5 months worth of household power, even if Bitcoin would have used that power anyway. If the volume of transactions went down, the numbers would be even worse. Bitcoin is currently a system where we can collectively as a society get ~7 transactions per second at the cost of 2.5 months worth of household power for each transaction. I think that phrasing and critique is entirely accurate, and I don't think that the details of the blockchain change anything about that critique or its implications.
Particularly when Bitcoin's energy usage is often compared against much larger financial systems as a way of excusing its excesses, it is entirely appropriate to point that Bitcoin is currently much less efficient than those systems. And breaking things down and looking at the amount of energy per transaction is a reasonable way of determining the network's current efficiency.
Interesting rationale, unfortunately I am not able to see it this way - being more like the Amazon itself who can only see it from the technical way - so lets look at why I can't see it that way and why I find it counterproductive.
Bitcoin is more than transactions, and it is more than onchain transactions, and it is more than its layer 2 transactions which I don't think we can quantify.
It has a much greater use as collateral. It has a much greater use as a reference value for derivatives (sometimes where it is also collateral, sometimes where it is not). As collateral several orders of magnitude more transactions occur - just onchain! And offchain, several orders of magnitude more.
I would say (even if we weren't seemingly in a debate) that none of this justifies its energy use, but only because that is a completely separate phenomenon. Barring any alternative solution for that, I lead to focusing on putting its energy use where it is most applicable and sustainable. Primarily at flare gas mining sites that don't pull from the grid.
I’m not sure that clarifies anything or makes the point you want to, since it would generally be a good thing for a car’s energy consumption to be independent of distance traveled. (“O(1)”)
> it would generally be a good thing for a car’s energy consumption to be independent of distance traveled. (“O(1)”)
No, not unless the energy consumption when taking into account actual average usage is lower than a car where the consumption is tied directly to the same level of usage.
If you really believe that constant rate O(1) is always superior to usage-based consumption, then send me $3000 a month for your electricity bill regardless of how much power you use. Of course, Bitcoin still has an upper limit on how many transactions per-second it can fulfill, so similarly you would still have an upper limit on how much electricity you can use throughout each month.
But, you'd pay $3000 to me regardless of whether you had your fridge running or not, so technically the fridge is now free to run, right?
You’re missing the forest for the trees. Yes, O(1) is not always better, but you’re using an analogy that attempts to demonstrate badness by comparing to a scenario that is generally good. That does not help clarify your criticism!
You’re effectively saying, “that’s bad, because it’s like a good scenario that happens to be bad in this case”. What explanation do you think you’re improving upon?
> by comparing to a scenario that is generally good
It's good if cars use gasoline even when they're not being driven? If people aren't understanding the comparison, then fine, I'm open to better ones, but my point is that it's not improving energy numbers to expend energy even when transactions aren't happening. Even in the world of public transportation, that's an undesirable outcome that we would love to avoid if possible.
I'm not sure what the better comparison would be. Having a fridge lightbulb that stays on even when the door is closed? Running your shower 24/7 to make the number of showers you take independent of the water usage? Take your pick, I'm not married to cars, anything will work.
My point is that anyone can make any system O(1) energy cost by never turning off the thing they're using. You could make your car O(1) energy right now by forcing the engine to run at full speed even in your garage. But in most cases, we recognize that this is bad for energy usage, so it doesn't make sense in the world of cryptocurrency for people to argue that they can invalidate a measure of efficiency as a criticism by purposefully being less efficient.
And I think in those situations, it still does make a lot of sense to compare the total energy expenditure to the actual amount of usage it gets. I don't think that turning on a shower 24/7 means that it no longer makes sense to ask how many showers a household takes, I think that it just makes the water usage to shower ratio really bad. I think similarly, it makes a ton of sense to look at the amount of energy mining is using and compare that to the number of transactions per second that are actually happening on the network.
Reducing it down to "O(1)" is disingenuous. While true, that "1" in the Big-O can actually be pretty large.
If my car burns 30 gallons of gas every week regardless of how much I drive, then that'd be pretty damn bad considering I work from home and drive <15 miles per week on average. The fact that I could then drive a 2,000+ mile road trip and still only burn that 30 gallons doesn't make it good if I never make a road trip like that.
A car that got <max traversable distance in a week> per 30 gallons would be awesome, and the existence of people who don’t drive that much wouldn’t change that fact.
You’re just validating my point that it’s a bad analogy in terms of blurring more than it clarifies.
No, not at all. Let's talk about public transportation.
If you have a public bus that seats at max 20 people, and it's continuously running on a loop, it is entirely appropriate to take the gasoline cost of running the bus for one loop, divide it by the average number of people who ride each loop, and compare that to the costs of normal transportation.
If the bus uses way more gasoline per loop than is justified by transporting 10-20 people each loop, then riding the bus is bad for the environment. It would be wild to look at that situation and say, "well, the bus is going to spend that power regardless, so actually riding it is environmentally free and the criticism doesn't make sense."
The bus exists because of the passengers, and how much work it's doing per loop and the number of passengers it's serving should factor into an analysis of whether it's worth keeping it around.
Similarly, Bitcoin's POW system exists to provide transactions, and it is entirely reasonable to take the average number of transactions it processes per block and ask whether it's good that Bitcoin spends so much energy to process so few transactions.
It's especially valid to question whether it's good that Bitcoin's energy usage can increase without increasing the number of transactions it handles. At least with a public bus, the amount of gasoline it uses doesn't start dramatically rising just because the bus became more popular, independently of how often it makes a loop or what its seat capacity is.
The existence of such a car might be nice, but if everyone owned one of them, it'd be an utter disaster.
> Proof of Work blockchains use the same amount of energy whether any individual makes a transaction or not.
Not entirely; that depends on the blockchain in question and on how much block subsidy is left. For bitcoin at this time (as well as for blockchains with a tail emission at any time), it's mostly correct since tx fees are a small part of the block reward. But in a few decades the bitcoin tx fees will dominate the every halving block subsidy.
The article is really about the environmental cost of the network. Breaking it down to transactions is just a basic tool to promote understanding and quite a common one (like in cost of ownership ratios.) Mind that the whole purpose of the network is still to enable and maintain these transactions. The article eventually transitions from there to the total cost of the network in TWh and the number of those participating in this network by individual transactions.
Its next section does slightly better, after doubling and tripling down on the household consumption framework.
The source of energy is way more important, bitcoin's source of energy is pretty good compared to any industry, and it can be better. Individual vigilance should be placed on ensuring that the overall source of energy for bitcoin gets better. because some of those major sources are reducing pollution and emissions. more mining can happen at more of those places. while other energy sources can be avoided.
Except that energy usage is mostly zero-sum: if Bitcoin is using all renewable energy sources [0], then all other uses of energy must use dirtier sources if those sources are already heavily utilized by bitcoin. Homes have to use more coal if Bitcoin is using all the wind/hydro. The pool of available energy resources is currently quite finite and while "the grid" abstracts away most of the sources from your view as an electricity user, it doesn't eliminate the fact that there are some very big zero-sum tradeoffs between the sources and "the grid" will adjust to increased demand with increased supply of increasingly dirty sources to meet that demand.
[0] Which is a presumption that is extremely arguable given how much we've seen shutdowns/restarts of coal-powered plants in for instance China and Kazakhstan impact the Bitcoin mining pools over time.
> Except that energy usage is mostly zero-sum
So great that its not totally zero-sum. Now that we both acknowledge that, and a large portion of bitcoin mining is using energy sources that are not taking away from other energy uses, and a larger portion of bitcoin mining can use more of this kind of energy. Because, well we've come full circle, Bitcoin doesn't use that much energy. There is way more untapped energy, thats been there for decades just being wasted and spewed away, because nobody else could figure out a use for it.. except the bitcoin miners.
You have a very different understanding of the word "mostly" than I do. You are also presuming that by the parts not covered by "mostly" in my hedge that I mean "positive sum", but I very much was considering and including cases that are truly "negative sum" games where more consumption is actively worse for all players involved. (For physical example: blackouts and brownouts.)
You are also assuming that Bitcoin is a good use of energy, which is also not something that I would agree with. Bitcoin mining is a massively distributed partial preimage attack on a cryptographic hash function of some importance to internet/world security and I have a very hard time seeing that as a good (both as in good ethics and as in good utility) use of energy.
Yes, I'm familiar with the flowchart and how the goal posts always move to "but I don't like that energy use anyway, so it doesn't matter how wrong I was earlier, surely something else must be able to use that energy". correct me if I'm wrong because its not intended to be a strawman.
But, bitcoin mining at flare gas sites disconnected from the grid is a significant source of the amount of energy being used bitcoin mining, and this use reduces pollution and emission over 60%, and it takes away from nothing else. And if there was any vigilance towards proof of work it should be to ensure more of this happens, and less of other sources. because obviously the flaring isn't going to stop, and the proof of work isn't going to stop, so lets focus on the parts you can influence.
Those were two separate points, so I don't believe I'm moving any goal posts. You are right, believing it is too much energy usage and believing it is bad energy usage are unrelated things.
You are also probably correct that proof of work is unlikely to stop at this point without either massive government intervention or a bubble pop massive enough to entirely dry out bitcoin investors.
Where we seem to disagree is that I think because it is both too much energy usage and frighteningly bad energy usage, at this point I'm in optimistic moments hoping for massive government intervention and cynically hoping for the massive bubble pop. I take no solace whatsoever in how much of that energy wastage is "renewable".
I think we can find much better uses for renewable energy than proof of work. Even if it is just putting that energy to work in giant gravity batteries and whatnot.
Speaking of moving the goal posts: flare gas sites are the exact opposite of renewable energy and I'm very confused why you'd even bring them up if you were trying to make a point that proof of work uses more renewable sources than not.
> Speaking of moving the goal posts: flare gas sites are the exact opposite of renewable energy and I'm very confused why you'd even bring them up if you were trying to make a point that proof of work uses more renewable sources than not.
I never wrote renewable and that was intentional. I wrote it reduced pollution and reduced emission. and that proof of work should be isolated to areas where its presence causes that to occur.
One bitcoin transaction costs two orders of magnitude less than my monthly power bill, yet the author claims one transaction uses 2.5 household-months worth of electricity. Something seems way off with the numbers.
I'm not an expert on Bitcoin's power usage, however a few things spring to mind.
- Electricity costs are not constant everywhere, not everyone burning that power is spending the same amount as you (and in general, home farming Bitcoin using the cost of electricity in your area is probably not profitable, at least for most people reading this). It's almost certainly a mistake to use your local electricity rates as a baseline for how much money mining costs.
- Not everyone mining Bitcoin actually pays for their electricity, some of it is stolen. Some mining happens on hacked hardware, sometimes mining rigs tap into electrical sources that they shouldn't have access to.
And the really big reason that springs to mind:
- You are not paying the full electricity cost for mining Bitcoin in transaction fees, the generation of new coins is offsetting some of that cost.
Remember that Bitcoin is a speculative asset first, and a transaction method second. The network, and payout/fee structure for transactions are also constructed in a way that can mess with market forces a bit. There's a lot more going on than just "you want to spend money, pay enough to cover the electricity fees to make that happen."
> You are not paying the full electricity cost for mining Bitcoin in transaction fees, the generation of new coins is offsetting some of that cost.
This is the big factor.
As the block reward decreases, transaction costs will need to increase dramatically.
Or the number of miners contracts in response to the reduced rewards.
If the network was amiable to increasing the number of miner contracts per block, wouldn't they have done it already?
Transaction speed and cost is already a regular criticism of the Bitcoin network. It's so much of a criticism that the Bitcoin community made the Lightning Network and started pulling transactions off-chain and pooling them to address that concern.
But they didn't collectively decide to increase the number of allowed miner contracts. They literally built a second network rather than change the max block size.
And in fact it was not only not accepted, it was a big source of controversy to even try to increase the block size. That was the whole deal with Bitcoin Cash, people were outright hostile to this idea.
>If the network was amiable to increasing the number of miner contracts per block, wouldn't they have done it already?
“Contracts” is a verb in that sentence, not a noun, and yes, miners do leave the market as it loses profitability, and no, the network does not have a requirement that there be a minimum number of miners, and there are reasons why they haven't left now but might not leave in the future.
You're not using the "why haven't they done it already" heuristic correctly.
Oh, I see what you mean -- you don't mean contracts as in the number of miner's transactions/rewards per block, you mean contracts as in "the miner pool decreases in size." My bad, that was a mistake on my part.
Agreed, that's definitely a possibility, and that would improve energy usage. However, it would also make the network more vulnerable to 51% attacks, and if Bitcoin were to have enough value to actually replace a financial market, it would need a lot of miners to secure that value or it likely lose that value.
But... quibbles aside, you are completely correct that if mining stops being profitable then fewer people will mine, and that is also the correct answer for how to deal with Bitcoin's energy usage. Bitcoin miners will use as much much energy as it is profitable for them to use, and the only way to make that energy usage go down other than banning crypto would be to decrease the profitability of mining (ie, by keeping transaction fees and payouts low and by reducing other mining rewards) -- and that could be accomplished through either reducing the rewards, moving to another system like PoS that removes the miners entirely, or by Bitcoin's price crashing.
The difference is the mining subsidy. The energy expenditure for a block is related to the total mining reward, which is transaction price + 6.25 newly minted bitcoins.
There are generously 2k transactions per block. Block reward is 6.25 bitcoins. A bitcoin costs $30,000 so the block reward is $187,500. Amortizing over 2k transactions, each transaction is worth a smidge under $100, before transaction fees (which as you point out are two orders of magnitude smaller so don't really matter here). $100 is about the average US monthly power bill, and it doesn't seem unreasonable that miners making use of the cheapest energy around the globe would be paying 2.5x less than that.
A miner gets like 6 bit coins for each block they mine. The transaction fees are just icing on the cake for them.
The article is estimating the cost at 2150 KWh per transaction vs the total bitcoin estimated power usage.
So this is trying to average out the total electrical cost including mining into a per-transaction cost.
If they increase the arbitrary block size by x100 this number will become 21.5 KWh and nothing will change but at least these annoying articles will go away.
That already exists and is called bitcoin cash
That comparison makes no sense. Your monthly power bill includes taxes, grid connection fees, etc - not just the cost of the power. Depending on where you live, there may also be natural gas bundled with electricity, adding costs that are not relevant to bitcoin. A lot of those fees don't scale with electricity used, but are fixed (driving down the marginal cost, etc).
Further, the rates for your home are not the same as rates in other places (odds are that somewhere else has cheaper electricity than you do).
> One bitcoin transaction costs two orders of magnitude less than my monthly power bill
How much is your monthly bill? I pay somewhere around 10€.
For a start, miners don't pay your local rates. They find something cheaper.
I don't think the method is correct. There is no "energy cost for transaction" in Bitcoin, it's an energy cost per block. And it's a global constant, it doesn't make sense to say that you making 26 transactions a year will be worst for the environment than 1, or 0 for that case.
You're right that the energy cost is incurred at the block-level, but since each block can hold a certain number of transactions, you can then infer what the effective cost is per transaction. The source for kWh per transaction comes from Digiconomist's bitcoin energy consumption index, and you can find their methodology here: https://digiconomist.net/bitcoin-energy-consumption#assumpti...
It's just an incorrect attribution. If there are no transactions, blocks will still be mined. If there are more transactions than can fit in a block, no extra blocks will be mined. If the transaction format changes so that more transactions can be included in a block, the energy usage doesn't change.
It's just a very obfuscating way to describe what's happening. Not only is it not a useful abstraction, but it actively leads you to wrong conclusions to talk about it in terms of energy use per transaction.
I think this commenter put it pretty well, so I'll just link to it: https://news.ycombinator.com/item?id=31596781
All of those things are directly attributable to miles on the car. More miles means more repairs, more frequent oil changes, faster depreciation of your purchase price etc. On the other hand, number of transactions is purely a function of block size and transaction size (which again has no influence on energy usage).
> And it's a global constant, it doesn't make sense to say that you making 26 transactions a year will be worst for the environment than 1, or 0 for that case.
The amount of energy spent on a Bitcoin transaction is partially a function of the expected payout for mining that transaction.
The network doesn't only pay the energy cost one time per block, Bitcoin by design duplicates effort mining that block because miners compete with each other -- that's the whole point of POW, duplicated effort. The amount of attention/price of Bitcoin influences that, which is partially dictated by usage.
If Bitcoin crashed to $10 a coin tomorrow, the amount of energy being expended on each block would go down because there would be fewer people mining it. The number of miners (and the amount of duplicated work) will increase with Bitcoin's usage.
Energy usage in Bitcoin is not a global constant, the coin is designed so that people will suck up as much available electricity as possible until the cost of that electricity is higher than the profitability of mining. It is designed to always take up the maximum amount of electricity/hardware possible and to immediately consume any extra bandwidth or lower prices on the electrical grid (sidenote, this is why the "Bitcoin pushes renewables" argument is so silly).
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> There is no "energy cost for transaction" in Bitcoin, it's an energy cost per block.
This feels like word games to me. The blocks are getting mined in order to process the pooled transactions, that's why mining was invented in the first place.
If we say that the transactions aren't contributing to the energy usage, then we might as well take it a step further and say that the energy is all wasted because it would be spent anyway, regardless of how many transactions are happening. But I think the more reasonable way to approach what's going on is to say that the energy is expended in order to keep a functional network that supports transactions, and that it supports transactions at a fixed maximum rate.
It's like arguing that the environmental/human cost of gold shouldn't be factored into its usage because literally handing someone a block of gold doesn't at that moment incur that cost. That doesn't mean the gold mine stops existing and it doesn't mean that the usage of gold as an asset isn't the main reason why the mine was built in the first place.
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And in a lot of ways, this take (the block would be mined anyway so transactions are environmentally free) is kind of the opposite of the conclusion that would be more logical to reach. The fact that Bitcoin's energy usage can rise independently of functional usage is a flaw, not a strength. One of the sources for the article goes into more detail (https://digiconomist.net/bitcoin-energy-consumption#scalabil...). It argues:
> Unlike the network’s transaction limit, the energy consumption of the network isn’t capped. The price of Bitcoin is the main driver of the network’s environmental impact, and there’s no limit to how high this can go.
It isn't actually a positive that Bitcoin's energy usage can spike to match the entire country of Hungary while still only processing at max 7 transactions per second; far from meaning that individual transactions don't matter for energy usage, this means that individual transactions can spike to even higher energy usage than they would otherwise require regardless of how congested the network is. It's bad that the spike in energy usage does not come with any benefits to scalability.
Apologies, I meant that "for the same security level"/"for the same price of bitcoin" (these two have causal effects on the other), the amount of energy is constant, a global limit. We can asume the blocks are about full all the time.
If you leave the amount of transactions constant, and the price rises, the security of those transactions goes up (this might be too idealistic of a model, maybe wrong, but it's widely accepted basic microeconomics, not macro). If you leave out the speculation aspects of the price of bitcoin (say, in a couple of decades), a price increase means the market wanted to pay for more security (which is why the price rises). If the price goes down to say, $10, it's just the market signaling that bitcoin is not useful anymore.
I don't know about you, but I would like to have some backup next time Trudeau wants to freeze my accounts for protesting his measures. I'm not sure about 30k, or $10, probably right now something in the middle. But if that isn't a concern that bothers me, I would leave for a warmer authoritarian country, if there are any left.
The title should be: 'Proof-of-work cryptocurrencies are worse for the climate than you think'. The author knows it as described in the footnote [0], but why not put in some clickbait anyway and hide the fact that the study they linked to are related to all PoW cryptocurrencies [1].
Not all cryptocurrencies are PoW like Bitcoin. XRP, Cardano, Solana, Polkadot, Stellar and Algorand to name a few with over $1B market cap are not 'burning the planet'. Maybe by that logic, every single car (including electric ones) is worse for the climate than you think. Is that a safe generalization? Does that mean you should stop driving your car, truck, etc? No.
Greener alternatives to petrol and diesel actually exist for such vehicles. The same is true for some 'cryptocurrencies' (coins) that have over a billion market cap which are greener alternatives to PoW cryptocurrencies like Bitcoin.
But nice try with the clickbait headline and sweeping generalization to all cryptocurrencies though. How comes this petition, led by many critics also know this difference? [2] They tried to ban mining in the UK and it appears to have failed to get attention and enough signatures for a discussion in parliament in the UK.
[0] https://rollen.io/blog/crypto-climate/#footnote:1
[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7402366/table/t...
Not all cryptocurrencies are proof-of-work, which are the ones that use lots of energy.
EDIT: PoS is a dumpster fire. But PoW and PoS are not the only games in town.
Arguably, only the ones that can really claim to be decentralized. PoS, in its different variations, seems to introduce more obvious centralization in one from or another. I’ve yet to hear a solid argument otherwise.
PoS cryptocurrencies are like attaching wheels to horses.
Why make alternative finance systems based on the same fact that the wealthiest entities control the policy of the network? Exactly like in the current system with central banks and governments.
That is not arguable. Chia's Proof of Space and Time uses Nakamoto consensus (like Bitcoin) and is even more decentralized.
"omg bitcoin's 0.5% of global energy use (while being a smaller footprint than all these other industries) is the same amount of energy as countries!"
which means everything that uses 0.5% or more of global power uses the same amount of energy as many countries
seems like an irrelevant metric, and it is. this isn't about "pointing out worse things to justify bitcoin's energy use", its about this just being a bad metric to begin with.
Yes , proof-of-work crypto is a terrible idea for the environment.
But also, this article gets so many things wrong I don't even know where to start. For one, it confuses a "transaction" with "mining a block". A single block can facilitate around 500 transactions on the bitcoin chain, so if an end user wants to "send a bitcoin" as the article states, divide that monstrous energy usage by 500, and suddenly the graphs are not quite as emotionally charged anymore.
The other part is that not all energy is created equal. A third of the time, the world has a surplus of energy that can't be efficiently used or stored (daylight for solar, wet season for hydro...) — miners have taken advantage of that years ago and most mining is done when and where energy is cheap because it's a surplus. Doesn't mean that this nullifies the impact, but any comparisons of bitcoin energy use to that of a physically constrained country are incredibly misleading.
No, the calculation is done per transaction, not per block. You can calculate the per-block consumption pretty easily based on the stat that there are about 150[1] blocks mined daily and the total TWh used per year for the network is 200[2]. 200 TWh per year / (365 days * 150 blocks) = 3.6MWh per block. The amount of transactions per block is around 2,000[3], so if you divide that number by 2,000 you get around 1,800 kWh per transaction
[1] https://stats.buybitcoinworldwide.com/blocks-daily/ [2] https://digiconomist.net/bitcoin-energy-consumption/ [3] https://ycharts.com/indicators/bitcoin_average_transactions_...
If we end cryptos today, in the grand scheme of things, we are going to see no real difference proportional to the global energy consumption of everything else as, while enormous quantity wise, consumption is still below 0.5% or so (so really not that big of a deal percentage wise). How did the predictions and articles from a few years ago on how Bitcoin was going to take, by 2020, the global energy share of consumption pan out? Obviously they were wrong, as consumption of everything else grew as fast or faster than it.
The drama against cryptos and their energy consumption is unproductive and is imho going to yield no change (in the grand scheme of things), as the field can't really be tamed the same way other industries can due to its decentralized approach of doing things. Instead of wasting time with this approach, we should be pushing for and incentivizing cheap green energy sources, as that is where the real issue comes for every industry.
As long as the source is green, which it already is fo a huge chunk of the energy behind cryptos, and as long as it is not messing with the availability for the demand in the grid for other industries/consumers, then who cares how much it consumes?
My issue with takes like this is that Bitcoin is currently barely used by anyone (many people are holding, almost no one uses it as their primary medium of exchange), and yet it’s responsible for about 0.5% of the world’s power usage. If Bitcoin remains a niche hobby and doesn’t grow, then yeah, that’s not a big deal. But the people saying “It’s only 0.5%!” are also the people advocating for it to overthrow the world financial system and bring about a global decentralized digital monetary system.
And if that happens, if Bitcoin goes from being used by ~0% of the world population (for everyday exchange) to being the main way people transact goods and services, then we can expect the demand for miners to skyrocket, possibly leading to an energy draw that is a multiple of the world’s current non-blockchain usage.
If/when that will happen is unclear, and I’d agree that “this much by 2030” forecasts that just extrapolate the current trend will likely be inaccurate. But if we’re debating whether Bitcoin/crypto should be more used or less, I think it’s only fair to reckon with the effects that future crypto growth would have on its energy draw. We can’t argue about tomorrow’s revolution with yesterday’s numbers.
I don't disagree but at the end of the day how do you really plan to tame it if it's still a "niche" hobby in 10 year? Which I doubt a lot as Wall Street and other industries are starting to get quite involved in it now investment-wise. The practical approach from a government pov would be to regulate the hell out of mining businesses but nothing prevents me as a user to set up a mining rig at home and join a pool somewhere around the world. Look at China as an example. They still have 20% of their previous mining activity happening (after the ban) and they have the "best" surveillance system in the world. That's why I think fighting it is less productive than guiding it to use clean sources.
If it remains a niche hobby in 10 years then that means we’ve succeeded in preventing Bitcoin from becoming mainstream for another 10 years, which would be good. We might even make progress on clean energy sources in that time. It will still be wasting energy for little societal benefit, but that’s not the scenario folks are most worried about, we’re worried about what happens to the environment if it becomes more popular or becomes the dominant world currency (which is what many Bitcoin proponents are pushing for).
> still be wasting energy for little societal benefit
I don't think you are paying attention to developments in the Global South with it. Use of it is increasing at an insane pace in Latin America (where I'm from) and I don't see it stopping any time soon. Similar trend is happening in Africa. Does it make sense to use it if you live in a developed country? Probably not. You already have all the infrastructure and financial privilege you can have. Plus your organizations are the ones setting the rules for the rest of the world. Good for you. But not all people using it are gambling my friend. As of now, there are 2 countries that have adopted BTC as legal tender. I'm willing to bet that by the next (or around) the next halving, we are going to have more countries in that list, specially from the Global South.
The problem is, cryptocurrencies as an aggregate industry, see "success" as replacing all of the global monetary system as a whole. So even though this weird hobby that some people have is not currently, today, a major percentage of total climate-harming CO2 emissions, if the end-game comes to pass it will be a disaster.
Similarly, F1 or NASCAR racing are incredibly inefficient uses of fossil fuels. But there is no threat of performance racing becoming how everyone's cars work. So it can stay as just some weird hobby of rich people and not represent an existential threat to life as we currently know it.
The point of continuing to advertise the climate cost of cryptocurrency is to help keep consumers informed. If people care about the climate, are thinking about getting into crypto, and they learn ahead of time that crypto is bad for the environment, then they might skip getting involved in the first place. In this way, we can hopefully cut off the supply of Greater Fools that are necessary to keep the cryptocurrency-cum-hyper-speculative-asset-investment pyramid scheme from growing.
> The drama against cryptos and their energy consumption is unproductive
Why is it "drama" to put forth arguments against crypto and why is assessing pros and cons less productive than any other argument on Hacker News? Making a statement like that marks you, at least in my mind, as a true believer.
Because it has being going on since it's inception and nothing has changed because the dynamics of how it operate are not the same as other industries. Hence drama, because the approach of trying to take down mining has not worked and is unproductive at the end of the day if the goal is to reduce carbon emissions. And yes I am also a crypto enthusiast so put me in the believer camp.
Every true faith welcomes doubts and questions as a way of either strengthening faith or finding out the one's faith is misplaced. Organizations that are hostile to questions and criticisms are cults.
I agree with literally all the problems in the criticism presented here. I think the problems are real as well. My only issue is that the approach to solve some of the issues generated in crypto industry are either not practical, sustainable, or effective, hence my criticism of the criticism presented in this thread. I don't like the idea of insane power consumption, specially when coming from non renewable sources. But at the same time I also recognize that the incentives built into the protocol (BTC specifically here) are stronger than the environmentalist approach of either killing the industry or moving to POS (which has not been proven to work at scale or in the wild outside a testnet yet). Which is why I think that a better approach is to guide the industry into ONLY using and incentivizing renewables.
[...] consumption is still below 0.5% or so (so really not that big of a deal percentage wise).
What? Look at all the things we do with electricity. Spoiler, there are quite a few. Spending half a percent on crypto currencies is a lot.
As long as the source is green, which it already is fo a huge chunk of the energy behind cryptos, and as long as it is not messing with the availability for the demand in the grid for other industries/consumers, then who cares how much it consumes?
Even if the energy is green, it could be used for better purposes. [1]
[1] Yes, I have heard about the green energy used in remote places where there is no other demand. If this is the dominant source of electricity, then calculate as much hashes as you want.
You are missing on the incentives side of the equation. If I'm a miner and the green energy source is cheaper, I will get that infrastructure built for it. This could also help to recoup investment, for someone who doesn't see mining as its main goal, in the case where renewable infrastructure is not cost effective for a specific region but could help with reducing overall carbon emissions.
If public concensus is negative on crypto, the market shrinks. You can criticize crypto and support green energy at the same time.
Other than price of most of them (due mostly to macroeconomics really and unhealthy rapid expansion which is not uncommon to happen each cycle) adoption and use of them in almost every metric is up and increasing.
I would argue this can only be proven by showing the number of individual users buying crypto over time. Of course, due to the pseudonymous nature of crypto this is impossible to prove. One person can open 10 billion accounts and make a minor transaction on each in the extreme case. Do you have any data that proves your case conclusively?
global adoption metrics:
https://go.chainalysis.com/rs/503-FAP-074/images/Geography-o...
from (in case the link of the doc doesn't work)-> https://go.chainalysis.com/2021-geography-of-crypto.html
this data clearly doesn't show current situation (June 2022 to be precise) as that report is not out yet but the macro situation is clearly affecting valuations in all markets (commodities, equities, crypto, etc) specially crypto and growth-driven tech companies as they are obviously more risky in a higher interest and more uncertain (from the global macro perspective) environment.
While these environmental critics are trivial, at least they are true for PoW, and have made a significant change. Crypto projects now like to offset their carbon footprint even if they have a very low one to begin with.