Guest essay by Eric Worrall
Grist has joined the rising chorus of greens condemning the vast energy expenditures of Bitcoin miners.
Bitcoin gobbles up clean energy — just when the real world needs it most
By Eric Holthaus on Feb 16, 2018
One of the biggest near-term threats to our clean energy future doesn’t even physically exist — but the danger is increasingly very real.
The stupendous growth of the virtual currency Bitcoin is creating real-world consequences. Massive number-crunching computer facilities for mining Bitcoin have popped up in parts of the planet where renewable electricity comes especially cheap. And now it looks like this mining is starting to siphon green energy away from everybody else.
…
To maintain security as its network grows, the math problems that Bitcoin “miners” must solve are getting ever more difficult. That requires a constant supply of additional computing power, which requires a constant supply of additional electricity. One Bitcoin transaction uses as much energy as a single U.S. household consumes in three weeks, and there are nearly 200,000 transactions around the world every day. In total, Bitcoin now consumes about as much energyas Portugal.
And it’s about to get much, much worse than that. A couple of months ago, I wrote that Bitcoin mining’s rapid growth was unsustainable, because the electricity required to feed it would overtake the supply. In Iceland, that’s starting to happen.
“We are spending tens or maybe hundreds of megawatts on producing something that has no tangible existence and no real use for humans outside the realm of financial speculation,”Smári McCarthy, an Icelandic member of parliament recently told the Associated Press. “That can’t be good.”
…
Read more: https://grist.org/article/bitcoin-gobbles-up-clean-energy-just-when-the-real-world-needs-it-most/
I must say its entertaining watching greens who believe in the imaginary climate crisis condemn the enthusiasm of people who believe in an imaginary currency.
But sooner or later Bitcoin’s insatiable thirst for electricity may spill into real world consequences – ordinary people could experience power price spikes or worse, for the sake of an activity which produces no real world value.
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I love this story, it pits one group of mindless millennials against another.
I have some virtual land and am seeking money to build some virtual bridges on it to connect up the virtual communities I am planning.
I need backing please.
Only those with vast wads of real money need apply
tonyb
My sister and a few of her friends used to have a side business where they joined one of those on line games, and instead of adventuring, they spent all their times making stuff inside the game. They then sold that stuff to people who were too impatient to spend the time to make their own. Real people would send them real money in exchange for their make believe weapons and supplies.
Thanks, but I’m not interested in property in Sim City.
Didn’t Elizabeth Magie come up with the idea at the beginning of the last century?
i’ve made 6 million ‘gold’ inside World of Warcraft which bugs my brother no end (for the record i’m 51) – mainly because I’m not wealthy in the real world , He asks why don’t I apply the same techniques (mostly pumping and dumping ) in the stock exchanges.. My answer is I cannot on moral grounds. I don’t gamble, I couldn’t sleep thinking I’d ruined a family somewhere. He thinks that’s naive because they willingly gamble and I’d just be playing them at their own game. He may be right but I don’t care, I made a moral decision that I won’t take stuff from people, even greedy b@stards who’d do the same to me if they could because I wouldn’t want them to do it to me. He doesn’t get it..
Bitcoin, sure as I’ve said elsewhere on WUWT I accept it’s a fiat currency but I’ve also stated why I like the idea of a finite, infinitely divisible currency that’s not controlled by any authority, bank or country so it cannot be watered down or diluted with counterfeit currency … but the mining of it being criticized? OK, Tell us how gold is of any real use to us? Silver sure, it has antimicrobial properties, uses in dozens of industries, it’s a metal and metals have always had value for their use and ability to be reused in a myriad forms but gold? largely useless – unless they decide to target gold too (I’d laugh if they tried!) any whimpering about the costs of mining bitcoin is just typical childish left resentment.
re: Karlos51 – The many industrial uses of gold include chemical reaction vessels due to its low chemical reactivity, electronics because it is almost as perfectly conductive as pure copper or silver and far more resistant to corrosion (which drops conductivity to nearly zero), microcircuity (in addition to excellent conductivity, it can be shaped into layers only a few atoms thick and still maintain its integrity), medicine and the aerospace industry.
And, of course, those non-corrosive properties make gold very appealing in jewelry, gilt and other decorations. Do all those uses add up to an intrinsic value that matches the market price for gold? Maybe not. But neither can you say that gold is “largely useless” when compared with the non-currency uses of silver.
Mike Rossander – and I know of at least one instance in which gold was used as a lubricant. Expensive, but essential.
virtual land?
https://decentraland.org/
They are making millions
You laugh.
they laugh all the way to the bank
Mike Rossander .. The many industrial uses of gold ..
my bad, I was trying to find a way to say effectively useless when considered proportionally but it kept coming out unwieldy – I certainly know of the many uses in electronics but I was thinking the tiny amounts used were negligible relative to the amount in bullion /jewelry. I’ve messed about with nitric acid and recovered gold from quite a few old ICs, CPUs and PCB tracks and the recovered amount is barely worth the effort unless it was done on an industrial scale with other metals recovered at the same time. My meaning was that gold’s value largely lay in it’s scarcity and as a proxy for wealth, mining it in the real world is mining for this rather than it’s industrial uses, much as is the case for bitcoin in the relative sense. Make sense?
for the sake of an activity which produces no real world value.
and fiat currency like the US Dollar provides no real world value.
A fiat currency, such as the dollar, has real world utility. If the currency is well-controlled and not intentionally inflated, it serves as a transaction medium for all kinds of trade. As long as the number of dollars maintains a growth commensurate with inflation people can make transactions on a daily basis without losing value. That is a huge value to the economy. Having to make big purchases by shipping gold around, or paying some banks to shift it around in their vaults is a lot more expensive than monitored and balanced electronic transactions.
One problem with that began with the recession was the growth of private lending. People and companies are lending money against the capital they owned(dollar accounts and stocks, bonds, etc.) and increasing the money supply without regard to inflation. A number of the big banks were doing that and took on more than they could handle, resulting in the government bailouts to keep the economy from going into a deeper recession if they went bankrupt.
Bitcoin is only as valuable as what the next buyer is willing to pay for it in some fashion. Its only control is the agreements between the miners, for what that’s worth.
There is a misunderstanding about money. It is not ‘value’, it represents value. It is a medium of exchange. When the craziness is over and the loons have had their run, we will go to a gold and silver basis again. Billions of people in the world never gave it up – they are just not living in money-cloud-cuckoo land in the West where they have no influence.
Tiny news item: Germany flew all their bullion from New York to Germany so the assets of the country in physically in the country. Do you know why? And why other countries are trying to get their reserves out of New York basements? Because there is a big, fat chunk of it missing, with a little note on the floor of ‘that country’ promising to pay it back because it has been loaned to another country. One day that crow is going to come home to roost. Who has physical gold will carry one with a believable currency.
Ask the people of Zimbabwe or more recently Venezuela whether the US dollar has value compared to say their own currencies.
OK here is something for you guys to get a kick out of;
https://oxygen.trade/?utm_source=top_banner&utm_medium=changelly&utm_campaign=personal
You can now sign up for Oxygen!!! This allows you to;
– Earn interest by lending crypto assets
– Raise liquidity against your holdings
– Borrow crypto assets to go short
– Cover inventory gap
I am just waiting for the ICO for CarbonDioxide LOL!!!
What will it allow YOU to invest in???
Disclaimer;
I have traded some Bitcoin and other cryptocurrencies just to learn what it is about. I have my initial stake back in my bank account and I’m about 400% ahead at the moment. I have diversified into some of the more “penny stock” cryptocurrencies (cryptos) and have become a “hodler”… go look it up!
I am not normally a trader/gambler – just interested in how the world works.
I do think that cryptos in some form are here to stay – unless we’re hit by a comet, Yellowstone goes up or Kim Jong-un drops a few bombs about. Note: Please don’t let Yellowstone go up just yet we’re about to visit that part of the world from Australia next month.
There are some cryptos that do not require the high energy cost of mining (as Mosh says they use Proof of Stake or Proof of Space algorithms). Some use the CPUs of computers that are already running when nothing much else is happening. Think; a certain Atomic Energy facility in Russia :-).
This is happening so quickly that the majority of folks in the world have no concept of why it might be important. Tulips it is most definitely NOT!
James,
Have no fear about visiting Yellowstone. The threat level is still low; no eruptions are imminent. And it is magnificent country, especially in the spring. Enjoy.
And you’re right, blockchain technology is here to stay, and will transform the world as we know it. The only question is will it be a boon or a curse.
Cheers
Kind of puts our fearless leaders in an interesting spot, when you shamelessly promote one mass hysteria it gets real difficult to condemn another.
Of course this ability to believe 6 impossible things before breakfast is the mark of a True Progressive Creature.
John, love your reference to ‘six impossible things,’ so here it is again for those who missed it:
It’s a true classic.
Sorry, wrong link somehow… I’ll try again
https://youtu.be/19q1i-wAUpY?list=FLRJTC1EGJW8qcfH1zoyQ0Iw
Help! Mods- if you could delete these two non-sequitur vids I would appreciate it.
so how much energy does this mining use globally, even an estimate?
Best estimate is from my buddy
http://blog.zorinaq.com/serious-faults-in-beci/
around 18 TW as of January.
It will peak once we run out of cheap, otherwise unused, electricity.
Mornin’ Steven,
I just belatedly replied to your comment of Feb 17 on the earlier bitcoin thread. Should perhaps have put it here. I note that Venezuela is already running out of reliable electricity, with major area wide blackouts. What they do have is in fact cheap, as you noted, but only because it is government subsidized. Maduro’s response? Create his own electronic currency, the Petro. We will see how that goes….
Mosh
Where is this cheap unused electricity please and can you send some over to the UK please?
tonyb
TW is a unit of power, not energy. Do you mean to say that 18 TW are continuously used to mine bitcoin?
Mosh;
18TW is not a measure of energy, it is a measure of power.
Tom G
18TW
sorry for the shorthand
18.40 TWh/yr
Mark Helsinki – I guess that you didn’t bother to read the article before rushing to comment
This is one of the rare times that I agree with the greens. While I think the climate change scare is over hyped, I am concerned with the mindless waste of our precious energy resources on an enterprise that has zero real value.
Doesn’t bitcoin work for the purchase of such items as groceries or real estate? How is it, then, that it has no real value?
Trebla, there is literally hundreds-of-billion$ expended each year, ….. on entertainment, ….. which has zero real value.
Interestingly, bitcoinmania uses almost as much energy as Romania.
Some people live in an imaginary world of free endless magic energy.
Others live in an imaginary world of free endless magic money.
See the connection?
“Everybody wants a box of chocolates
And a long-stem rose”
Leonard Cohen “Everybody Knows”
And another group believe in an imanginary global warming/CAGW climate disaster. They would be correct if they studied history and found that Catasthrophic Climate Change (CCC) always comes from a significant cooling event that causes mayhem to societies at large around the planet. Never from a long term warming episode.
The Krypto/Crypto fad will explode in everyone’s faces too, and many innocent ‘investors’ will get fleeced. They already are if you bought in last month, but then this is really gambling when you more closely examine it. Or theft if you look at who promotes it. And a waste of good energy and resources.
This is blowing up faster thanI thought it would but it appears there is a direct correlation between the energy useage and its eventual demise. Watch it fall further in the next few month’s or sooner as Governments around the world begin to examine all this with much more scrutiny and begin to either start heavily regulating it, or start blocking it.
“many innocent ‘investors’ will get fleeced” – shouldn’t that read “many stupid greedy ‘investors’ will get fleeced”
“YUP”, and so is the “buying n‘ selling” of stocks via brokers and the Stock Markets (NYSE, NASDAC, Chicago Futures Market, etc.)
Stock Markets are the greatest ever legalized “poker game” ever devised by man, ….. wherein the brokers and government agencies take a “rake-off” [fee/tax] every hand that is played.
If one buys “stock” they are betting the “sale price” is going to increase.
If one sells their “stock” they are betting the “sale price” is going to decrease.
Yes – the problem is bound to solve itself eventually when the whole house of cards collapses as it must.
So if someone develops a very fast quantum computer see https://www.sciencedaily.com/releases/2018/02/180215141713.htm does that lead to a sudden drop in both energy usage and bitcoin ‘value’?
There are TWO security attack vectors against bitcoin
1. Attack the Proof of Work ( rewrite history)
2. Crack the Signatures
The PoW is resistant to Quantum computing. A 4.4 Million Qbit quantum rig
is 1000 times SLOWER than a single machine I ship today.
Crack the Signatures and steal the money:
Using Shor’s integer factoring you could attack the secp256k1 elliptic curve that BTC uses for signatures
Recent estimates: at 10GHz a quantum chip with 500000 Qbits could crack the signatures in 30 minutes
Block get built every 10.
What this means is that sometime in the future you have to fork the code to a quantum resistant signature.
Which one was used for famous bitcoin thefts?
@Curious George
Neither. They cracked the “wallets” where the bitcoins were kept.
Would that be another security attack?
“Would that be another security attack?”
Thats an attack on the wallet, not on BTC per se
“Using Shor’s integer factoring you could attack the secp256k1 elliptic curve that BTC uses for signatures”
My son was building computers 10 years ago that could crack 1024 bit encryption in 3 hours. Perhaps rather than steal ‘coins there is some honesty left in people who have access ti very large computing systems. I can’t see 256 bits stopping even a casual criminal with petaflops to spare.
If quantum computing ever works it means an end to all cryptography world wide, global economic collapse and global security collapse. I.e. very bad.
Only briefly. A different proof of work will be used. Some are even developing proof of stake which is a way of determining how long you have held a token.
When I was doing an economic course at University I was once asked what money was. I said it was the faith that a worthless bit of paper had value. I think they gave me an E – and a remark along the lines of “A mark isn’t worth anything – except what you think it’;s worth”.
There are two lessons here. First I was right – money is worthless, but secondly, whilst that is completely true – in practice it is not as a lot of people do value money and you can make a huge amount of money from things that have no value. So long as you can find enough gullible people to give you something in exchange for the valueless product, you can get a lot more of that valueless product.
Money can baseline the value of disparate products and therefore take the inefficiency out of barter. Trouble only comes when more money appears. Bitcoin is a temporary phenomenon but that doesn’t mean folks can’t make or lose on it.
I once wrote to the Chancellor of the Exchequer with a simple question –
Chancellor – how many pounds sterling are there?
I never got an answer and, what puzzled me most, all the economists and accountants that I have spoken with since either had never pondered the question or thought it irrelevant. Of course, my question was a little bit tongue-in-cheek. That was in the days before QE (at least, QE that was called QE). Answers still welcome!
In the US there are various counts of how many dollars there are, M1, M2, etc. Depending on how you count things like checking accounts and 401k accounts.
In my first economics class, they taught me how to calculate the money supply.
A dollar bill has no value like a title to a car has no value.
Or, like your employment contract has no value.
MarkW – do any of those include EuroDollars? Or the dollars printed by Saddam Hussein?
The thing that is very difficult to count is the Dollars that are created when a non-dollar country makes a contract with a different non-dollar country using a contract requiring payment in Dollars. In effect, such transactions create Dollars that are not under the control of the USA and are not channeled through US Banks. At present, there are more such contracts outside than inside the USA banking system. It has certain persons worried.
Because the Dollar has no inherent value, the whole system can collapse in short time once ‘confidence’ in it has been eroded. Changing oil contracts to be valued in gold instead of Bit or Other Coins would trigger such a panic.
Irony is that intrinsic values of the small ‘value’ coins is far greater than the much larger ‘value’ of (now plastic) notes.
that’s why they’re slowly withdrawing coinage from circulation – removing the last vestige of ‘store-able wealth’ we had. In Aus the 1 and 2c coins are gone, the 5c coin’s being eyeballed and the banks are promoting the idea of ‘going cashless’ .
yes – run screaming..
I understand Canada withdrew it’s pure nickel coins and shafted it’s population by re-issuing them as nickel plated steel coins. Nice. For every $600 in nickel metal they took (stole) from people they gave back the face value – approximately $200 worth of the essentially valueless coins.
talk about scam ! Of course they have to do this as they’d devalued the currency so much with essentially counterfeit cash created by banks and their government,
In answer to the question how many pounds are there in the UK, can’;t say but Aus treasury has figures for Australia – 32 billion (maybe UK treasury has information also). I also incorrectly stated (typo) that there was 2 trillion in ‘money’ circulating in Australia, the actual amount is 20 trillion .. the bulk of it created by banks when they give loans. 20 trillion backed by 32 billion in legitimate notes backed by 320 million in bullion reserves,
Unlike normal debt which is acceptable in any monetary system, the current money creation schemes of banks are no different to the cash printing they indulged in in the past – the debt is never destroyed when the money is repaid, so it remain floating about devaluing the real money / causing inflation (same thing).
The green equivalent of arguing how many angels can sit on the head of a pin.
Most of the articles on that site are just more green globiness.
It’s a great place to experience hipster g̶r̶e̶e̶n̶ yellow journalism.
From the article: “One Bitcoin transaction uses as much energy as a single U.S. household consumes in three weeks,”
Wow!
Its also WRONG. they are counting TXid and assuming that every TXid is a single transaction.
For many transactions you have 1 Input split and paid to 10s, 100s and thousands of outputs
Here is an example
https://blockchain.info/address/17A16QmavnUfCW11DAApiJxp7ARnxN5pGX
Say I have 100 BTC, and I want to have low fees, and I want to send 100 people each one BTC
I create one transaction with 100 outputs.
That creates one TXid, but in reality its 100 transactions
I really like your comments on bitcoin. Obviously very knowledgeable about it.
Steven is at the right end of this craze. When the gold rush was running hot in California, some miners made a mint, others barely got by, and most gave up broke eventually. The folks who never had a problem? The sutlers, selling pans, pick axes, hardtack, bacon, eggs and all the other sundries miners needed to do their thing.
” The sutlers, selling pans, pick axes, hardtack, bacon, eggs and all the other sundries miners needed to do their thing.”
Yup. we use that metaphor all the time
Bitcoin is perfect for green energy. They can mine only when they have electric. Put a UPC in so that when they see their black out has arrived. It shuts down the farm and restarts when the power is back up. No hardened alum. in a smelter, no humans having to take a lunch break to wait. Although their returh on invenstment will alter wrt time, it will stay cheap in electric invested, infact maybe even improve since they would ONLY take high wind volume energy which we all know is cheap cheap!
Agreed. Bitcoin and other cryptocurrencies are the perfect back up for unreliables (aka renewables). Mine for currency when you have a surplus of energy and then use that currency to purchase conventional energy when the wind doesn’t blow or sun doesn’t shine. Who needs expensive pumped storage backup when you can purchase gas generated electric?
A marriage made in heaven. Bitcoin and ‘renewable’ energy. Or is that a marriage made in hell?
I wont even begin to explain why this is stupid
[this from the man who demands everyone else show their work, data, and code -mod]
‘Agreed. Bitcoin and other cryptocurrencies are the perfect back up for unreliables (aka renewables). Mine for currency when you have a surplus of energy and then use that currency to purchase conventional energy when the wind doesn’t blow or sun doesn’t shine. Who needs expensive pumped storage backup when you can purchase gas generated electric?”
I wont even begin to explain why this is stupid
[this from the man who demands everyone else show their work, data, and code -mod]
NOTE how the Mod, doesnt get that the OP made the claim!
The OP is the one claiming that this is a good approach for Mining.
Its the OP that has the burden of proof, to show his work.
I’ve done my work on this exact approach. I dont need to convince you that its stupid> If you want to buy machines from me and try it, go right ahead. I will buy your machines back when you bankrupt yourself.
Its easy to prove I am wrong and you are right. Buy machines and try. I’ll sell you 5000 of them.
Burden is on you
[now instead of showing why he’s right, he demands we buy something from him. Truly the mark of a scientist -mod]
In SM’s defense…it would seem a great deal of whatever wealth he has in BTC been obliterated over the past weeks. Hence, it’s hardly a wonder why he needs to sell some machines.
🙂
Even right now it is uneconomical to mine bitcoin if the cost of energy exceeds the value of the coins mined. The process is self-limiting – mining more bitcoins requires exponentially more energy, which makes it exponentially more expensive to do and requires an exponentially increasing value for the coins. When the cost of mining exceeds the value of the coins, mining stops. That puts a hard cap on the value of the currency – the cost of energy vs what people are willing to pay for the coins.
I’m no economist, but it seems to me that bitcoin suffers from the same problem as gold (or tulips or whatever), in that the supply is inherently limited, which limits the expansion of its use for economic growth. Those who have bitcoin will hoard them looking for higher prices, which chokes the supply of money needed for new enterprise. Maybe someone who knows more can fill in my blanks.
“Even right now it is uneconomical to mine bitcoin if the cost of energy exceeds the value of the coins mined. The process is self-limiting – mining more bitcoins requires exponentially more energy, which makes it exponentially more expensive to do and requires an exponentially increasing value for the coins. When the cost of mining exceeds the value of the coins, mining stops. That puts a hard cap on the value of the currency – the cost of energy vs what people are willing to pay for the coins.”
Today if you have 43 cent electricty you are break even. The cost of electricty = the value of BTC mined
In Kuwait it costs roughly 1500 dollars to mine a bitcoin worth 10K+
The process does not require exponentially more energy.
Let me explain what happens
with a simple example:
Suppose there are 10 people mining and it costs them 5000 each in electricty to mine a 10K
bitcoin.
The $5000 is related to the DIFFICULTY of the puzzle.
As long as only 10 people mine the difficulty remains the same. The profit remains the same
Now suppose 10 more people start to Mine and it costs them 7500 to mine the same 10K coin.
Well, the difficulty changes.. it doubles. and now it will cost the first 10, 10K to mine the coin
and the second 10 will start to lose money -2500
Suppose 5 guys with expensive power quit. Difficulty goes down.
It will now cost 7500 to mine a 10K coin
So 10 people are now making 2500, and 5 guys are break even.
Suppose the coin goes down to $7500 price.
Now, 10 guys are break even and 5 guys lose money. So the 5 quit
Now the difficulty changes again, and it now costs 5000, to Mine a coin work $7500.
Then the coin goes up to 10K, and more people start to mine.
Basically the number of people Mining drives the difficulty (cost) of mining. Today people with
expensive power can make money, as soon as they start to lose money, they drop out and the
difficulty decreases.
In short, Mining doesnt stop when the cost of mining exceeds to price. the distribution of electricty costs
runs from 0 to about 15 cents. Here is your yearly profit at 15 cent power
https://www.cryptocompare.com/mining/calculator/btc?HashingPower=13&HashingUnit=TH%2Fs&PowerConsumption=1200&CostPerkWh=0.15&MiningPoolFee=1
############################
I’m no economist, but it seems to me that bitcoin suffers from the same problem as gold (or tulips or whatever), in that the supply is inherently limited, which limits the expansion of its use for economic growth. Those who have bitcoin will hoard them looking for higher prices, which chokes the supply of money needed for new enterprise. Maybe someone who knows more can fill in my blanks.
The supply is limited, but the value is not. There are only 21 million coins that can be minted.
If people hoard it, and more people want in, the price goes up. In fact the recnt run up fueled
a bunch of new enterprise.
“I’m no economist, but it seems to me that bitcoin suffers from the same problem as gold (or tulips or whatever), in that the supply is inherently limited,”
Clearly, you are not a gardener.. Nor have you been in Holland in the spring.
@Walter
Look up the Tulip Craze, Holland in the early 1600’s.
The supply is limited to 21 million, but remember to tell them that each each bitcoin is divisible out to 8 decimals (I think)
Markopanna, I disagree. Beginning any form of business requires an investment and you may be negative to start. I had an opportunity to buy a group of miners many years ago. (regret ) The assumption that future gains will offset present costs is a legitimate assumption\ for the risk takers.
Comparing bitcoin to a real gold mining operation does require current sales figures to show a profit to recover investment. But I seem to remember the sub-prime loans were considered (by many) the perfect vehicle to get people into a home and then refinance later when when you home has appreciated enough & their own credit improved enough.
How could that actually go bad?????
Oh yeah, I guess it did.
But those people thought they were not taking a risk.
Risk investors see no problem with such an investment, ie stock options… so un-economic for the standard-human. Wildly successful for those few that invested early. Let see: Didn’t they report 50cent had a large amount of bitcoins because he opted for bitcoin payments on single downloads? Seem in hindsight a brilliant move on his part.
One way to look at bitcoin is as a binary bet
it either takes over all types of money and payment and spreads like the internet
or
it dies at zero someday
In case 1 it becomes worth easily 1 Million per coin
Its a speculative bet. Dont bet more than you can afford to lose.
Unlike IPOs ( facebook, google, etc) where you have no way to play, you can make an Angel investment
in bitcoin. Get a wallet. Buy $100 bucks worth. Watch. read. talk to others.
Maybe that 100 will vanish. who cares?
Maybe that 100 will fuel the internet of money? and be worth 10K.
Dolthaus claims he’s working with others on a SimCity-type, climate video game; video gaming uses much more electrical power than bitcoin mining does. I’m sure the irony would be lost on him.
SimEarth was released in the early 90s, and it’s still a perfectly functional climate model. The mechanics of global warming are a bit off, but it has some of the basics down.
If the climate game uses a lot of power to get the wrong answer as to future temperatures, then good money could be invested in making that game smarter. The idea is not get perfect answers, but to use less total power to get the same wrong answer.
As more efficient algorithms are invented, the cost of getting the wrong answer can be brought down immensely. At some point, say by the year 2100, we will be able to have the wrong answer for next to nothing. Somehow that seems worth the effort.
I think they should go back to trading tulips.
At least when the market crashes, they’ll still have a flower to look at.
It was tulip CONTRACTS..
Mosh
Whilst contracts were a very large part of the Tulip mania bubble huge sums were also paid for actual physical bulbs with a view to selling on the bulb itself or propagating them. If we substitute the word ‘bitcoin’ for tulip bulb or contract, from this account, I guess that few of us will be surprised to see the market collapse in due course.
“As the flowers grew in popularity, professional growers paid higher and higher prices for bulbs with the virus, and prices rose steadily. By 1634, in part as a result of demand from the French, speculators began to enter the market.[30] The contract price of rare bulbs continued to rise throughout 1636, but by November, the price of common, “unbroken” bulbs also began to increase, so that soon any tulip bulb could fetch hundreds of guilders. That year the Dutch created a type of formal futures market where contracts to buy bulbs at the end of the season were bought and sold. Traders met in “colleges” at taverns and buyers were required to pay a 2.5% “wine money” fee, up to a maximum of three guilders per trade. Neither party paid an initial margin nor a mark-to-market margin, and all contracts were with the individual counter-parties rather than with the Exchange. The Dutch described tulip contract trading as windhandel (literally “wind trade”), because no bulbs were actually changing hands. The entire business was accomplished on the margins of Dutch economic life, not in the Exchange itself.[31]
By 1636 the tulip bulb became the fourth leading export product of the Netherlands, after gin, herrings and cheese. The price of tulips skyrocketed because of speculation in tulip futures among people who never saw the bulbs. Many men made and lost fortunes overnight.[32]
Tulip mania reached its peak during the winter of 1636–37, when some bulbs were reportedly changing hands ten times in a day. No deliveries were ever made to fulfil any of these contracts, because in February 1637, tulip bulb contract prices collapsed abruptly and the trade of tulips ground to a halt.[33] The collapse began in Haarlem, when, for the first time, buyers apparently refused to show up at a routine bulb auction. This may have been because Haarlem was then at the height of an outbreak of bubonic plague. The existence of the plague may have helped create a culture of fatalistic risk-taking that allowed the speculation to skyrocket in the first place; this outbreak might also have helped to burst the bubble.[34]”
Perhaps an outbreak of cyber theft of bitcoins or a general concern over cyber security might be the modern version of the plague.
tonyb
yes tony there were actual deliveries on the contracts, but the collapse is down to the contracts.
there is no parallel between bitcoin and tulip bulb contracts. Further the collapse is most a myth
http://www.independent.co.uk/news/world/world-history/tulip-mania-the-classic-story-of-a-dutch-financial-bubble-is-mostly-wrong-a8209751.html
“Perhaps an outbreak of cyber theft of bitcoins or a general concern over cyber security might be the modern version of the plague.”
No one can steal your bitcoins if you hold your keys. The ways most people lose their bitcoin is by storing
their keys online with a third party. and then the third party steals them or gets hacked.
Thats why we tell people to hold their own keys. You can store your keys on an offline computer.
you can store them on paper.
or you can “store them” in a 12 word pass phrase that can be used to recreate your keys.
Your actual bitcoin are secured by the block chain. That cannot be forged, or duplicated, or destroyed.
it is immutable. They cant be stolen or moved without your keys.
To access your coins you need keys. Keys can be
A) stored by a third party ( dangerous and hackable)
B) stored in a hot wallet ( your own computer/phone connected to the internet, safer)
C) stored off line in a cold wallet. really safe
D) stored on a physical medium ( paper, secure usb sticks, steel, etc, )
E) not stored but recoverable at any time by a using a pass phrase ( 12 or 24 words) unhackable unless
you do something stupid like leave the 12 words laying around or have a keylogger infecting your system.
Mosh
The UK had its first bitcoin armed robbery a few weeks ago.
http://uk.businessinsider.com/crypto-traders-danny-aston-amy-jay-held-at-gunpoint-moulsford-oxfordshire-2018-1
I understand that, though by no means common, it has happened elsewhere in the world.
Presumably as this is a new type of crime and bitcoin has only recently become so valuable, the organised serious gangs, as well as the informed opportunists, are only just moving into this market.
So holding your own keys could surely put you in personal danger? Presumably the very nature of bitcoins means its difficult to trace once its been stolen.
tonyb
Doesn’t make any difference. If you were that last man on the merry go round when the music stopped, you could take delivery. If you have a tulip bulb, you can plant it and have pretty flowers in the spring. If you are stuck with the bitcoin, you can?????????
BTW, tulips are still a very remunerative crop for the Dutch. If you want to see something spectacular go to Holland in the spring.
“So holding your own keys could surely put you in personal danger? Presumably the very nature of bitcoins means its difficult to trace once its been stolen.
tonyb
1. No publically talking about the amount of money you have is always dangerous.
2. Theives dont care if you hold or keys or entrust them to others.
3. Its traceable, the key is being able to tie it to a person.
OK.
Tulips might not be the best comparison.
How about “Beanie Babies”? 😎
Or, if computer stuff is required, “prestige points” in Pacific General?
Funny Eric argues we are creating c02.
I argue that we mostly use renewable
Now the argument is we eat all the green
Anyways
“One Bitcoin transaction uses as much energy as a single U.S. household consumes in three weeks, and there are nearly 200,000 transactions around the world every day. In total, Bitcoin now consumes about as much energyas Portugal.”
The guy cited is dead wrong. Mark Bevand has been pointing out his errors and the guy keeps making shit up. Liberal. He counts transactions wrong, and doesnt actually calculate the actual power used.
He estimates the Cost of power from the revenue. Dead wrong. Since he has never actually looked
at the balance sheet of miners or run a mine he has no clue.
Once he was called out, the Digieconomist now argues that his 60% is a prediction of the future.. and NOT the current energy use. He even admits that the 60 percent is wrong for todays power
The latest distortions added to this are the claims that a lot of power goes into cooling: Not with my customers. Second he cites the TSMC wafers going to bitcoin at 15-20K in Q1
Wrong: that’s 16nm wafers going into ALL crypto coin asics.
Another way to see his error is to look at the actual energy efficiency of the miners
The Digieconomists energy efficiency estimate is 230 Watts per terahash. (.233 per gigahash)
Today all suppliers are around 100Watts per terahash or better, 7nm will drop that by 40%
Miners built last year ( around 150 W per terahash) will be retired in a year.
The people claiming Bitcoin is gobbling the renewable revolution are greens Mosher, I never said their claims are accurate.
Ummm… Mosh, you’ve got some things confused there.
A. Power usage
First, a TeraHash (TH) is an amount of work. As you know, the current AntMiner S9 can do 12-14 TH per second.
Next, a Watt is a *rate* of energy use. So “230 Watts per TH” makes no sense.
Here’s a real calculation: AntMiner S9 uses 1378W at 14TH/sec = 98W at 1TH/sec = .0273 KwH per TH (divide by 3600 sec per hr). That’s 27.3 WH per TH. (Multiply the KwH by your power cost… if ten cents per KwH, that’s 0.273 cents per TH.
B. Technology advances
Next, are you actually claiming that 100% of everybody moves to the latest mining box as soon as it’s available? Seems more than a little strange.
C. Profitability
Multiple issues.
“Basically the number of people Mining drives the difficulty (cost) of mining.”
Wrong. The combined worldwide total calculation rate drives the difficulty of mining. They want one mined about every ten minutes worldwide. No matter how many people, no matter how fast the miners. So in theory, you must keep improving your technology efficiency at the same rate as the growth in miners.
However, there’s another problem that’s not factored in:
AFAIK, the following is a HUGE gotcha that none of the calculations incorporate. Suppose your Bitcoin Mine is 99.999 percent of the way through the intense work to calculate the next coin.
a) You don’t know how many others are doing the same thing
b) You don’t know how far along they are
c) You don’t get to “reserve” the work on “your” bitcoin
RESULT: at random (I’ve not seen stats on this) your energy investment is simply tossed and you get to start over.
I may have missed something but am pretty certain this is correct. The problem here: your probability of losing out is related to:
– The number of other miners/groups
– The speed of other miners and/or mining aggregation groups
This latter gotcha is why basically nobody working on their own is likely to earn anything at all.
Imagine going up against the 200MW Chinese mine. They’re calculating about 145,000 TH per second (145 PH/s.) This one mine has a little less than one percent of the total global calculation rate. Get a few of those going and you sew up the market.
D. Risk
Umm… here are two rather significant categories of risk. All blockchain implementations are based on software…and an algorithm that’s public. Implications:
a) Software has bugs. Bugs are a method for loss or theft of bitcoins.
b) There is no limit on the number of bitcoin-like implementations. While BTC1 may only allow N coins, someone can easily go into competition to create other currencies. Which of course is happening. Given a million or more currencies, it becomes obvious there’s little or no inherent value to BTC.
SOOO much fun! 🙂
“A. Power usage
First, a TeraHash (TH) is an amount of work. As you know, the current AntMiner S9 can do 12-14 TH per second.
Next, a Watt is a *rate* of energy use. So “230 Watts per TH” makes no sense.
Here’s a real calculation: AntMiner S9 uses 1378W at 14TH/sec = 98W at 1TH/sec = .0273 KwH per TH (divide by 3600 sec per hr). That’s 27.3 WH per TH. (Multiply the KwH by your power cost… if ten cents per KwH, that’s 0.273 cents per TH.”
For the technically minded we use Joules per Gigahash
For marketing people are shifting to Watts per Thash
We all know how to do the cost calcs
“B. Technology advances
Next, are you actually claiming that 100% of everybody moves to the latest mining box as soon as it’s available? Seems more than a little strange.”
err no. Not claiming that. Digieconomist claims that average of all miners is .235 J/GH
That’s no where near correct, given what we shipped and what bitmain shipped last year
at performance better than .15J/GH
“AFAIK, the following is a HUGE gotcha that none of the calculations incorporate. Suppose your Bitcoin Mine is 99.999 percent of the way through the intense work to calculate the next coin.”
happens all the time.
But you dont understand Pools and how they smooth out the variance with rewards.
Think of it as buying lottery tickets with thousands of other machines and spliting the winnings.
Your “GOTCHA” was solved years ago. Go figure.
D. Risk
Umm… here are two rather significant categories of risk. All blockchain implementations are based on software…and an algorithm that’s public. Implications:
a) Software has bugs. Bugs are a method for loss or theft of bitcoins.
b) There is no limit on the number of bitcoin-like implementations. While BTC1 may only allow N coins, someone can easily go into competition to create other currencies. Which of course is happening. Given a million or more currencies, it becomes obvious there’s little or no inherent value to BTC.
SOOO much fun! 🙂
BUGS: The public nature of the software means that it can be viewed and tested by many eyes.
Changes are rare and infrequent. Almost all of the new commits are for unit testing and regression
testing. Getting a change done is extremely difficult as all changes are kinda permanent and worth
billions of dollars. And ya we have a testnet where stuff gets tested and attacked. Think of this
way. Your a miner getting paid millions per day to run the existing software. Someone wants
to change it. How much testing do you demand for code that protects Billions of dollars
and hundreds of millions of your own money?
What if millions of BTC forks?
Yup. And the market shows you exactly what people think of forks. the Value of a fork is related
to the capital investment made in the security.
And yes,, No currecny has inherent value. Nothing is valuable in and of itself. All value is relative
to human choice and use.
Unless God is passing out the cash, money is and will always be a human invention that symbolizes
trust.
Oh wow; my imaginary reality is turning on me. 🙂
I thought that the trick in mining bit coins was to use other peoples’ computers/energy. Am I deluded here?
Alasdair has it, alas.
Academics and staff in institutions such as universities have substantial unsupervised computing resources.
The ‘other people’ in this case are the rest of us.
There is nothing so cheap as what you use but other people pay for.
You are thinking of Monero
Bitcoin and otter crypto currencies obviously produce real world value. They offer a replacement for fiat currencies. They offer a currency that is not controlled by a central bank or any government. Monetary assets that so far cannot be unilaterally frozen by the US.
There is Huge potential value in decentralized ledger technology. They have not been counterfeited so far – so even better than paper. Potentially this could eventually trigger a fiat currency crisis and as an alternative to the USD and Euro as a globalreserve currency becomes desirable. The ever larger issue of trillions of treasury debt is a clear misguided use of their fiat right to produce reserve currencies by central banks but so far their is no practical alternative to USD or Euro. The lack of alternatives may have delayed the inevitable which can ONLY end in tears, as did the Weimar experiment in unbridled printing of paper marks.
The value of an imaginary or paper currency depends on people’s acceptance of it. Should fiat currencies lose acceptance then crypto currencies will likely be the principal beneficiary. Gold will also gain but is not as practical due to storage requirements. Crypto currencies can be transacted electronically and stored on a USB stick – a big advantage over physical gold.
“They offer a replacement for fiat currencies. They offer a currency that is not controlled by a central bank or any government. Monetary assets that so far cannot be unilaterally frozen by the US.”
In 1306, Philip “the Fair” IV of France was in debt to the Jews so he took forcible possession of their property, real and personal. Their houses, lands, and movable goods were sold at auction, and Philip collected all debts owed to the Jews by Christians. Philip decreed that the Jews, taking only the clothes which they had on their backs and the sum of 12 sous tournois each, they would have to leave France within one month.
Philip also owed a lot of money to the Knights Templar. At daybreak on Friday, 13 October 1307, hundreds of Templars in France were simultaneously arrested by Phip’s agents. They were then tortured and burned at the stake.
This time is not different. Bitcoins cannot be frozen, but bitcoin owners and miners can wind up wishing they had been frozen.
these are the dangers we face every day were we to live in extreme left wing (totalitarian) or right wing (anarchic) societies. anything you have can be taken. solution – appear to have little.
the derisive attacks on bitcoin by the banks and governments make sense too as BTC’s success jeopardizes their control over our personal wealth.
BTC can only work if people want it to work , no different from shopkeepers happily assuming their customers waving a bit of plastic at a machine means they just got paid, or me accepting a stylish looking piece of paper as money (I’d still rather you paid me in gold or silver)
Minor correction. Bitcoin IS a fiat currency, just not a government-declared one.
From the article: “To maintain security as its network grows, the math problems that Bitcoin “miners” must solve are getting ever more difficult.”
If I understand the process (and I might not), there is only one math problem (though with different inputs each time) and the increasing time isn’t because the problem is more difficult, but because it just takes longer, and therefore eats up more electricity.
Essentially they have to add the new data to the old and then start crunching numbers. They’re looking for any one of a very large number of possible solutions to the problem. Each of those solutions must be a 256 bit binary number starting with the currently required number of zeros. In the early days if only two zeros were required, for example, all numbers 00xxxx….xxxx(254 x’s where x is 0 or 1) would have “solved” the problem. The first miner to generate such a number and input it back into the overall system would win (earn?) the bitcoin awarded for a successful attempt. Clearly this is just a brute force guessing game. When the solutions required just two zeros, every fourth guess on average would work. With three zeros, every eighth guess will work, with four zeros required every sixteenth guess will work on average, etc., so 11 or 12 zeros obviously makes the task take longer.
To increase the difficulty (which is done when it starts to take significantly less than ten minutes to “mine” a transaction) they add a zero. Last I checked I think they needed to have 11 zeros to solve the problem.
So, we have thousands of computers around the world using monumental amounts of electricity to essentially guess at solutions to a single problem that’s being input with new starting numbers approximately every ten minutes.
Granted, I haven’t explained the exact workings of the “problem,” but it’s not high-powered math problems that are being continually solved. It’s pure guessing, and at the fastest possible rate they can generate. The only creativity that I can see is the work done to determine which transactions you’re going to include in the next block, since part of the reward is the fees attached to each transaction.
Miners are accountants!
Creativity is not wanted nor required.
you want them to create a good ledger and be honest
to inforce honesty you require them to INVEST money in work.
If they cheat, they lose that.
if they are honest they get paid
How long before someone suggests paying Bitcoin miners to NOT mine? i.e. subsidise the process?
They can be just like ethanol producers, wind turbine owners, and solar cell plants. It has to happen.
If the claim that the best guess is that bitcoin mining requires 18 TWhrs per year, then all you need is a typical nuclear power reactor’s output (1.5GW, yields 13 TWhrs per year) plus a bit more. That is NOT the tremendous amount of power they are describing.
Yup.
But the left continues their scare mongering by using false numbers and false comparisons.
It’s so funny to see some libertarians and some conservatives here swallow the crap
“We are spending tens or maybe hundreds of valuables on producing something that has no tangible existence and no real use for humans”,
Exactly applies to the very work of Smári McCarthy, as a member of parliament.
“That can’t be good.”,
I agree.
This seems backwards. The normal story we hear about electronics and computerization is a saving of material and an improvement in efficiency.
Because of dematerialization we now consume less physical material than we used to, even as the population has increased. On the other hand, our per capita energy use has doubled in my lifetime. link Bitcoin’s energy use seems to conform to the existing trend. ie. The problem isn’t just about bitcoin.
If the price of BTC goes up, more people will pursue it with computing costs.
The ones with the least computing costs will win the pursuit while those with higher costs will be forced out by the market.
What it is worth.
Ask my dog.
If people pursue it as an investment and not as a work opportunity (mining), yes there can be problems.
High prices for oil puts people to work in oil fields and low prices does the opposite. Oil isn’t work nothing because Greenpeace mind tricked us so the price of oil falls. But then we realize Greenpeace was wrong and the those working the oil fields were right all along. They were right because they guessed right or enough people were stupid. Those with superior market knowledge should go up against my dog’s investment record.
The demand.
Governments try to control you. They have a need to know about your money. Al Capone. They use the dollar to make sure you are doing what they say you should. You should not sell drugs. We’ll have 100,000 people who as some part of their job, will look at your money and decide if you are doing something wrong and then follow through if you are. Apple did not unlock one of its phones when a terrorist may have used it. People valued that. Other people supported the government’s efforts.
Three of my favorite forms of money:
Papua New Guinea Shell money:
Micronesian Stone/Millstone money:
http://www.itchyfeetphotography.com/wp-content/uploads/yap-stone-money-rai.jpg
African Tribal currency (in certain regions):
https://en.wikipedia.org/wiki/Bride_price
Fancy leaving all that money lying around for anyone to come along and pick up…
Proof of work.
“But sooner or later Bitcoin’s insatiable thirst for electricity may spill into real world consequences – ordinary people could experience power price spikes or worse, for the sake of an activity which produces no real world value.”
Value is a subjective thing….all currencies are faith based. The proof of work completed by miners is valuable work to secure the blockchain.