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The fightback against the Bitcoin energy guzzlers has begun

105 points by edwinksl 8y ago

awemany 8y ago
From the article: > The amount of energy required to process a single bitcoin transaction could power 100,000 Visa card transactions. Well, there's a certain, well-known company in the space, backed in part by credit card processors that has used IMO quite despicable propaganda tactics to keep the number of transactions that can happen on the Bitcoin network down. The past 1MB blocksize limit war ... And that certainly isn't helping with the energy efficiency of Bitcoin BTC. The same miners can, however, mine Bitcoin BCH (Bitcoin Cash) which does not have that limit.
ryanlol 8y ago
>Is the libertarian dream of bitcoin as an unregulated global currency about to be destroyed by municipal electricity companies? Sounds like author has no idea what he’s talking about.
- nannal 8y ago
  That never happens when reporters talk about cryptocurrenices.
- UnhelpfulYoda 8y ago
  Libertarian 'dreams' are routinely destroyed when faced with reality. (I can't wait for that 'crock o shit' libertarian sea nation to get it's first visit from the libertarian pirate nation.)
  - ryanlol 8y ago
    There is absolutely zero chance of municipal electricity companies destroying bitcoin. Cutting off some miners will not destroy bitcoin. Raising electricity costs aren’t going to destroy bitcoin. This isn’t about libertarian dreams, that’s just not at all how PoW works. The author is clearly utterly clueless (or intentionally trolling). If you happen to disagree, I’d absolutely love to know how municipal electricity companies could even hurt bitcoin.
mihaifm 8y ago
Bitcoin mining can scale depending on demand, from a bunch of laptops to massive farms. It is only greed that brings more and more miners into the game, pushing energy demands higher. It's normal for governments to crack down on mining at some point, the energy consumption is indeed hilarious, but that's not going to bring down bitcoin anytime soon.
- vegardx 8y ago
  You can make the same argument about letting only a select few participate.
- bunderbunder 8y ago
  Nah, I'd say the waste is built into the Bitcoin design itself. The reward rate is relatively constant, since the protocol automatically scales the difficulty of completing a block to try and make it happen on about the same interval regardless of how many people are mining. And mining is also a zero-sum game. (Unlike in real-world mining.) This creates a completely wacky incentive structure where, instead of incentivizing producers to only expend enough resources to satisfy market demand, and no more, they're instead incentivized to expend as much energy as possible, at all times. It's like if there were a King who likes to buy cheeseburgers for $10,000 apiece, and he always buys the first cheeseburger he sees, but he considers any cheeseburger that is more than 1 second old to be spoiled. So then you end up with a market where people are furiously making cheeseburgers as fast as they can, and just littering them everywhere, in the hopes that one of the cheeseburgers they made happens to be the one that the King sees first whenever the urge for a snack strikes him. Meanwhile, the world is getting increasingly littered with spoiled, rotting cheeseburgers.
  - VonGallifrey 8y ago
    > This creates a completely wacky incentive structure where, instead of incentivizing producers to only expend enough resources to satisfy market demand, and no more, they're instead incentivized to expend as much energy as possible, at all times. This is not entirely correct. You pointed out that the reward rate is relatively constant which limits the income of all miners combined to 1.25 Bitcoin/minute. They really can't be spending more then that on mining. That includes Hardware + Energy + Salaries + Offices + Warehouse. Any single miner is also only going to get a fraction of that 1.25 Bitcoin/minute and anyone spending more then what they get will find themselves with a deficit. That is also just until ~May 2020 when the next Halving is going to occur. They have until then to figure out to decrease their spending on mining to be lower then 0.625 Bitcoin/minute.
emddudley 8y ago
> Thanks to nearby Niagara Falls, Plattsburgh has a quota of cheap electricity available at a low rate Plattsburgh is 300 miles away from Niagara Falls, on the other side of the state! I don't know why Plattsburgh prices are so low, but it's certainly not proximity to the Robert Moses Niagara Power Plant.
- jellicle 8y ago
  But it is. The town is allocated cheap electricity from Niagara Falls, and until recently, did not use its full quota.
al_ramich 8y ago
as long as there is value in mining there will be miners. But it's a new drain resource that required energy and I'm sure energy companies, governments, and greens will have a say. Not clear to me though why mining requires so much power? Is there a way or existing initiatives to reduce this? https://arstechnica.com/tech-policy/2018/05/new-study-quantifies-bitcoins-ludicrous-energy-consumption/ https://arstechnica.com/tech-policy/2018/05/new-study-quanti...
- Isomatik 8y ago
  Proof of work mining is just a bunch of computers trying to brute force the password for the next block so they can get the mining bounty and fees from the transactions they include, so the vast majority of the results are thrown away. For bitcoin in particular, the difficulty is a sliding scale based on how quickly the most recent blocks have been mined, so increasing the number of miners leads to more energy being required to mine a block while the transaction capacity stays relatively constant.
- zhte415 8y ago
  > as long as there is value in mining there will be miners. I'm gonna get a bit Marxist on value here. Transaction value, or intrinsic value? A bitcoin can be exchanged at the current exchange rate, as can any commodity given unit of exchange. What is the intrinsic value of that commodity? The amount of wind needed to blow through a windfarm makes it virtually free aside from the depreciation and cost of producing that windfarm, which is the cost of production. What is the future discounted future value of Bitcoin? That will depend on the Bitcoin interest rate, for which there is only a transaction value, there is no yield on Bitcoin. Not yield means no return on capital. Given it has cost to produce, yet to yield (intrinsic return on capital) it is a negative sum game, so zero. If the power's there, why not use it, even at below market rates? Because Bitcoin may be using cheap power, but why does that power even need to be there? Paying little / subsidising producers to over-produce for negative-sum good is still paying something, and encouraging over-production and inefficient production. Bitcoin is interesting, has some transaction value, but negative intrinsic value/opportunity cost.
  - 8y ago
akerro 8y ago
I'm sure air conditioners in US banks or public offices consume more energy than Bitcoin mining worldwide. They never turn off computers at night, insurance companies require to leave lights on at night, each office has a few TVs with chomecast showing pictures of nature (irony ha!) all day and night long... but it's BTC mining they're fighting with.
- nonbel 8y ago
  Yea, I did a similar analysis on the energy wasted due to the new reddit layout (I got 3 TWh per year, or ~10% of bitcoin electricity usage): https://news.ycombinator.com/item?id=17619025 https://news.ycombinator.com/item?id=17619025 I'd love to see someone go more in depth with these types of "how much energy is wasted on x" estimates. Including just addressable grid and power plant inefficiencies. I suspect bitcoin is simply not a big deal (at this point), so this entire issue is concern trolling. And then you come to the problem of what it means for the electricity to be "wasted". Eg, is going to church "wasting electricity"? What about the entire alcohol industry? Playing videogames? Preparing and storing deserts?
  - A2017U1 8y ago
    There's many criticisms to make about cryptocurrencies, but people in glass houses shouldn't throw stones. (I live in a country which uses more energy per capita then virtually every country on Earth) https://phys.org/news/2015-12-christmas-energy-entire-countries.html https://phys.org/news/2015-12-christmas-energy-entire-countr...
  - viraptor 8y ago
    > I suspect bitcoin is simply not a big deal (at this point), so this entire issue is concern trolling. Or people actually care. The fact there are existing, worse ways to use energy doesn't mean we shouldn't care about Bitcoin. For the same reason I'm composting, even though the nearby supermarket throws out way more packaged food than I'd ever buy.
    - nonbel 8y ago
another-one-off 8y ago
There is something interesting to be said about Bitcoin's ability to expose and correct market distortions so neatly. I personally quite like the idea of a quota system for access to cheap, local power. It is interesting however to imagine what might happen if the power was sold into the market at market rate and the profits divided up amongst local businesses and residents instead of giving them cheap power. That way, they in theory would be no worse off (they can buy power and the dividend cancels the loss of the subsidy), but they can also directly buy things that have higher utility than the direct energy would provide them. That would also stamp out local bitcoin mining operations and divert the cheap energy to uses more productive than burning it for crypto creation.
- merpnderp 8y ago
  Why would anyone mine bitcoins there if the profits would be taken and distributed to the locals? Or does your proposal include the local government managing the bitcoin operation?
  - jakemoshenko 8y ago
    I don't think you understand. Theoretically with an efficient grid there should only be one "market rate" for power. Bitcoin miners would pay market rate regardless of where they are geographically. Certain places pay a vastly reduced marginal rate to generate power, and there are a number of ways to handle the delta between the generation cost and the market rate. One way is to give those who paid for the generation infrastructure (locals in this case) cheap power. That results in bitcoin miners becoming locals. Another way is to just sell it on the open market at market rate, and give the money back to locals. In this latter scenario, the market rate would likely drop a small amount due to the increased supply, and the locals who are now being compensated in dollars rather than an energy surplus, could use those dollars for more productive things like food, or startup capital. There are actually (at least) two distortions being exposed here: 1. Power being sold for below market rate 2. Someone being able to join the original investor pool (i.e. become a local) and reap the benefits of an earlier investment by the municipality
dalbasal 8y ago
If the future if money is bitcoin, and the input to bitcoin is energy... does that mean energy companies will eventually create all the money?
- 21 8y ago
  Using your logic this is already happening, the vast majority of money in the world is just records in computers.
pandasun 8y ago
Man that's a good deal. I'm paying $2,200 per month in electricity costs for mining and am getting nowhere near those kinds of rates.
ISL 8y ago
Isn't the solution to charge more? One could have a tiered rate system, where the first N kWhr are inexpensive and the rates rise after that (just as we do in Seattle) http://www.seattle.gov/light/Rates/docs/2018/Jan1/Schedule%20RSC%20Jan%201%202018.pdf http://www.seattle.gov/light/Rates/docs/2018/Jan1/Schedule%2... If supply is constrained, and demand grows, it won't stop growing until the price goes up. An imposition of a quota system is interesting, just because it might yield free residential heating for homes that welcome miners into their basements.
- NickM 8y ago
  That may not be nuanced enough for the desired results. Sounds like a lot of these places would like to still provide plentiful cheap power to industrial companies that actually create jobs and generate useful output that stimulates the local economy.
  - jessriedel 8y ago
    If government-directed job creation is the desired goal, why not just hand the preferred companies cash? That would be a lot more transparent and targeted than subsidizing utilities Venezuela-style.
    - gruez 8y ago
      probably because subsidizing electricity sounds better to voters than handing out cash. same reason why governments prefer giving tax breaks rather than cash to entice multinationals to "create jobs".
    - 394549 8y ago
      > If government-directed job creation is the desired goal, why not just hand the preferred companies cash? That would be a lot more transparent and targeted than subsidizing utilities Venezuela-style. This isn't a subsidy, it's hydro power; which is limited, but cheap to produce. If the bitcoin miners drive the price up without providing many jobs, it may incentivize the actual employers that were attracted by the low price to leave for other areas. It's a net negative for the community. To benefit from cheaper electricity, you have to use it, and traditionally that's been through employing people to operate machines. If the companies got a cash subsidy instead, they would probably pocket the cash without doing as much as they promised to do to get it.
uncletammy 8y ago
It would be interesting for miners to offer all merchants within the geographic area affected by their power consumption fee-less transaction processing (free mining for their neighbors) . If it's technically achievable I could see it introducing some unusual but generally positive dynamics.
- jstanley 8y ago
  It would be easy to do, but the savings in transaction fees would not be enough to be worth the increased energy cost, even for the people who use Bitcoin, which most of them probably don't.
UnhelpfulYoda 8y ago
Weren't the smarter miners already relocating to places like Iceland which have more cheap surplus geothermal power than they ever use themselves anyway?
crispyambulance 8y ago
I admit I don't know much of anything about cryptocurrency, but is there something fundamental about the need for "mining" (in whatever form) for currency? It seems like the intent behind bitcoin mining was to mimic the scarcity of mining for gold or other precious metals by substituting hefty computations. But isn't that just a means of getting the currency bootstrapped in some way which ensures that it becomes scarce? Aren't there other, less energy intensive ways to do that? I mean, could there not be a cryptocurrency which bootstrapped off of the exchange with "real currency"? Or perhaps by direct exchange of goods and services?
- lytedev 8y ago
  Unfortunately I believe one of the core concepts is the "proof-of-work" and Bitcoin cannot work on the decentralized and distributed manner it achieves without it.
  - brohee 8y ago
    We should really rename "proof-of-work" as proof-of-waste, as it is what it is, frankly...
    - wanderfowl 8y ago
      I understand that a central respository of work and the need to make the busywork scale cleanly and linearly makes it tough to be decentralized, but I regularly wish that a dominant cryptocurrency could find a way to do proof of (real) work with these cycles. There are so many projects which just lack for computing power (e.g. folding, prime hunting, etc), so it feels like even more of a waste to turning real power into arbitrary hashes.
    - wyldfire 8y ago
      What does the word 'waste' mean to you? Why would you use this word to describe what is done by the proof of work? If you think cryptocoins have no utility, then it stands to reason that the proof of work is wasteful. And beyond: the time and money spent by developers, corporations, exchanges, etc: all waste. But if you think that cryptocoins do have some utility, then it seems unfair to call it a "proof-of-waste". The PoW is the only way to equitably mint new currency.
4rgento 8y ago
If the revenue from the money transfers business is 30 billions per year and the cost of electricity is 0.12 U$D per KW/h. Then the cost, in energy terms, of the money transfer business is 250 TW/h in a year. This is a lower bound.[1] Bitcoin miners are consuming in the order of 73TW/h[0] annually. Let's consider those quantities equal for the next argument: Isn't it a good thing that crypto is generating business for the energy sector? If those revenues are invested in more energy research it is favorable to human kind, isn't it? Why deny the energy sector its business and favor the financial sector? [0] https://digiconomist.net/bitcoin-energy-consumption https://digiconomist.net/bitcoin-energy-consumption [1] https://www.quora.com/How-big-is-the-international-money-transfers-market https://www.quora.com/How-big-is-the-international-money-tra...
- jjeaff 8y ago
  >Isn't it a good thing that crypto is generating business for the energy sector? Wouldn't it be good for the window industry and service/repair industry if we all went around town throwing rocks through windows? https://en.m.wikipedia.org/wiki/Parable_of_the_broken_window https://en.m.wikipedia.org/wiki/Parable_of_the_broken_window The energy sector is primarily producing the energy in question with non-renewable resources that pollute the environment and raise costs for everyone else, disproportionately harming the poor. Not to mention rising food costs due to money grabs in the ag industry with things like corn based ethinol.
- biot 8y ago
  What is the amount of money transferred per TW/h for each system?
gwbas1c 8y ago
I thought part of Bitcoin's design is to use the cost of electricity as a way to prevent wide-scale mining? Anyway, turning off power to mining companies will just trigger investment in better off-grid power solutions. It's a double-win for everyone else.
khazhou 8y ago
Seems to me if Bitcoin was going to "become a thing" (to use American parlance), it would already have done so by now. What milestone could mark success for this currency? Conversely, when shall we declare failure?
- bunderbunder 8y ago
  As a tradeable commodity, I'd say that an easy bar for having "made it" would be when you see a BTC exchange-traded fund on a major stock exchange. Progress seems to be happening on that, but we'll see. As a currency, I'd say that, in the narrow case of BTC itself, failure is baked into its design. The current protocol imposes an estimated upper limit of 3-7 transactions per second on the network. That's just not acceptable for a currency (assuming it has dreams of being more useful and widely accepted than Ithaca Hours, anyway), and the suggested plans around forking are awkward at best. There are also solutions like the Lightning network. To me, I have a hard time seeing those as efforts to make Bitcoin a currency so much as efforts to create a new currency that is backed by Bitcoin. Sort of like the gold standard of old, where different currencies were backed by commodity reserves.
  - gbhn 8y ago
    Sure, but a main point of a crypto currency is realizing there's no reason to back a monetary currency with anything. It's just a shared hallucination. There's no rational reason a new currency would be "based" on btc holdings. That's just silly. My view is that the upper end of btc viability is taking over some fraction of why people want gold. The system is way too expensive for a viable txn network (a la cash or Visa) and will never become one.
    - bunderbunder 8y ago
      > a main point of a crypto currency is realizing there's no reason to back a monetary currency with anything I'd argue that BTC is very much backed with something - lots and lots of thermal dissipation. The entire argument for why it should be accepted as a stable, reliable, trustworthy store of value is based on proof of work. If BTC is challenging anything about money, it's challenging the idea that money needs to be something that exists under the auspices of a government body.
andirk 8y ago
Isn't the energy spent for the security of the network, instead of armed guards and bombs? Compared to that, is it more or less wasteful then how we secure USD?

105 points by edwinksl 8y ago

From the article: > The amount of energy required to process a single bitcoin transaction could power 100,000 Visa card transactions. Well, there's a certain, well-known company in the space, backed in part by credit card processors that has used IMO quite despicable propaganda tactics to keep the number of transactions that can happen on the Bitcoin network down. The past 1MB blocksize limit war ... And that certainly isn't helping with the energy efficiency of Bitcoin BTC. The same miners can, however, mine Bitcoin BCH (Bitcoin Cash) which does not have that limit.

ryanlol 8y ago

>Is the libertarian dream of bitcoin as an unregulated global currency about to be destroyed by municipal electricity companies? Sounds like author has no idea what he’s talking about.

nannal 8y ago
That never happens when reporters talk about cryptocurrenices.
UnhelpfulYoda 8y ago
Libertarian 'dreams' are routinely destroyed when faced with reality. (I can't wait for that 'crock o shit' libertarian sea nation to get it's first visit from the libertarian pirate nation.)
- ryanlol 8y ago
  There is absolutely zero chance of municipal electricity companies destroying bitcoin. Cutting off some miners will not destroy bitcoin. Raising electricity costs aren’t going to destroy bitcoin. This isn’t about libertarian dreams, that’s just not at all how PoW works. The author is clearly utterly clueless (or intentionally trolling). If you happen to disagree, I’d absolutely love to know how municipal electricity companies could even hurt bitcoin.

mihaifm 8y ago

Bitcoin mining can scale depending on demand, from a bunch of laptops to massive farms. It is only greed that brings more and more miners into the game, pushing energy demands higher. It's normal for governments to crack down on mining at some point, the energy consumption is indeed hilarious, but that's not going to bring down bitcoin anytime soon.

vegardx 8y ago
You can make the same argument about letting only a select few participate.
bunderbunder 8y ago
Nah, I'd say the waste is built into the Bitcoin design itself. The reward rate is relatively constant, since the protocol automatically scales the difficulty of completing a block to try and make it happen on about the same interval regardless of how many people are mining. And mining is also a zero-sum game. (Unlike in real-world mining.) This creates a completely wacky incentive structure where, instead of incentivizing producers to only expend enough resources to satisfy market demand, and no more, they're instead incentivized to expend as much energy as possible, at all times. It's like if there were a King who likes to buy cheeseburgers for $10,000 apiece, and he always buys the first cheeseburger he sees, but he considers any cheeseburger that is more than 1 second old to be spoiled. So then you end up with a market where people are furiously making cheeseburgers as fast as they can, and just littering them everywhere, in the hopes that one of the cheeseburgers they made happens to be the one that the King sees first whenever the urge for a snack strikes him. Meanwhile, the world is getting increasingly littered with spoiled, rotting cheeseburgers.
- VonGallifrey 8y ago
  > This creates a completely wacky incentive structure where, instead of incentivizing producers to only expend enough resources to satisfy market demand, and no more, they're instead incentivized to expend as much energy as possible, at all times. This is not entirely correct. You pointed out that the reward rate is relatively constant which limits the income of all miners combined to 1.25 Bitcoin/minute. They really can't be spending more then that on mining. That includes Hardware + Energy + Salaries + Offices + Warehouse. Any single miner is also only going to get a fraction of that 1.25 Bitcoin/minute and anyone spending more then what they get will find themselves with a deficit. That is also just until ~May 2020 when the next Halving is going to occur. They have until then to figure out to decrease their spending on mining to be lower then 0.625 Bitcoin/minute.

emddudley 8y ago

> Thanks to nearby Niagara Falls, Plattsburgh has a quota of cheap electricity available at a low rate Plattsburgh is 300 miles away from Niagara Falls, on the other side of the state! I don't know why Plattsburgh prices are so low, but it's certainly not proximity to the Robert Moses Niagara Power Plant.

jellicle 8y ago
But it is. The town is allocated cheap electricity from Niagara Falls, and until recently, did not use its full quota.

al_ramich 8y ago

as long as there is value in mining there will be miners. But it's a new drain resource that required energy and I'm sure energy companies, governments, and greens will have a say. Not clear to me though why mining requires so much power? Is there a way or existing initiatives to reduce this? https://arstechnica.com/tech-policy/2018/05/new-study-quantifies-bitcoins-ludicrous-energy-consumption/ https://arstechnica.com/tech-policy/2018/05/new-study-quanti...

Isomatik 8y ago
Proof of work mining is just a bunch of computers trying to brute force the password for the next block so they can get the mining bounty and fees from the transactions they include, so the vast majority of the results are thrown away. For bitcoin in particular, the difficulty is a sliding scale based on how quickly the most recent blocks have been mined, so increasing the number of miners leads to more energy being required to mine a block while the transaction capacity stays relatively constant.
zhte415 8y ago
> as long as there is value in mining there will be miners. I'm gonna get a bit Marxist on value here. Transaction value, or intrinsic value? A bitcoin can be exchanged at the current exchange rate, as can any commodity given unit of exchange. What is the intrinsic value of that commodity? The amount of wind needed to blow through a windfarm makes it virtually free aside from the depreciation and cost of producing that windfarm, which is the cost of production. What is the future discounted future value of Bitcoin? That will depend on the Bitcoin interest rate, for which there is only a transaction value, there is no yield on Bitcoin. Not yield means no return on capital. Given it has cost to produce, yet to yield (intrinsic return on capital) it is a negative sum game, so zero. If the power's there, why not use it, even at below market rates? Because Bitcoin may be using cheap power, but why does that power even need to be there? Paying little / subsidising producers to over-produce for negative-sum good is still paying something, and encouraging over-production and inefficient production. Bitcoin is interesting, has some transaction value, but negative intrinsic value/opportunity cost.
- 8y ago

akerro 8y ago

I'm sure air conditioners in US banks or public offices consume more energy than Bitcoin mining worldwide. They never turn off computers at night, insurance companies require to leave lights on at night, each office has a few TVs with chomecast showing pictures of nature (irony ha!) all day and night long... but it's BTC mining they're fighting with.

nonbel 8y ago
Yea, I did a similar analysis on the energy wasted due to the new reddit layout (I got 3 TWh per year, or ~10% of bitcoin electricity usage): https://news.ycombinator.com/item?id=17619025 https://news.ycombinator.com/item?id=17619025 I'd love to see someone go more in depth with these types of "how much energy is wasted on x" estimates. Including just addressable grid and power plant inefficiencies. I suspect bitcoin is simply not a big deal (at this point), so this entire issue is concern trolling. And then you come to the problem of what it means for the electricity to be "wasted". Eg, is going to church "wasting electricity"? What about the entire alcohol industry? Playing videogames? Preparing and storing deserts?
- A2017U1 8y ago
  There's many criticisms to make about cryptocurrencies, but people in glass houses shouldn't throw stones. (I live in a country which uses more energy per capita then virtually every country on Earth) https://phys.org/news/2015-12-christmas-energy-entire-countries.html https://phys.org/news/2015-12-christmas-energy-entire-countr...
- viraptor 8y ago
  > I suspect bitcoin is simply not a big deal (at this point), so this entire issue is concern trolling. Or people actually care. The fact there are existing, worse ways to use energy doesn't mean we shouldn't care about Bitcoin. For the same reason I'm composting, even though the nearby supermarket throws out way more packaged food than I'd ever buy.
  - nonbel 8y ago

another-one-off 8y ago

There is something interesting to be said about Bitcoin's ability to expose and correct market distortions so neatly. I personally quite like the idea of a quota system for access to cheap, local power. It is interesting however to imagine what might happen if the power was sold into the market at market rate and the profits divided up amongst local businesses and residents instead of giving them cheap power. That way, they in theory would be no worse off (they can buy power and the dividend cancels the loss of the subsidy), but they can also directly buy things that have higher utility than the direct energy would provide them. That would also stamp out local bitcoin mining operations and divert the cheap energy to uses more productive than burning it for crypto creation.

merpnderp 8y ago
Why would anyone mine bitcoins there if the profits would be taken and distributed to the locals? Or does your proposal include the local government managing the bitcoin operation?
- jakemoshenko 8y ago
  I don't think you understand. Theoretically with an efficient grid there should only be one "market rate" for power. Bitcoin miners would pay market rate regardless of where they are geographically. Certain places pay a vastly reduced marginal rate to generate power, and there are a number of ways to handle the delta between the generation cost and the market rate. One way is to give those who paid for the generation infrastructure (locals in this case) cheap power. That results in bitcoin miners becoming locals. Another way is to just sell it on the open market at market rate, and give the money back to locals. In this latter scenario, the market rate would likely drop a small amount due to the increased supply, and the locals who are now being compensated in dollars rather than an energy surplus, could use those dollars for more productive things like food, or startup capital. There are actually (at least) two distortions being exposed here: 1. Power being sold for below market rate 2. Someone being able to join the original investor pool (i.e. become a local) and reap the benefits of an earlier investment by the municipality

dalbasal 8y ago

If the future if money is bitcoin, and the input to bitcoin is energy... does that mean energy companies will eventually create all the money?

21 8y ago
Using your logic this is already happening, the vast majority of money in the world is just records in computers.

pandasun 8y ago

Man that's a good deal. I'm paying $2,200 per month in electricity costs for mining and am getting nowhere near those kinds of rates.

ISL 8y ago

Isn't the solution to charge more? One could have a tiered rate system, where the first N kWhr are inexpensive and the rates rise after that (just as we do in Seattle) http://www.seattle.gov/light/Rates/docs/2018/Jan1/Schedule%20RSC%20Jan%201%202018.pdf http://www.seattle.gov/light/Rates/docs/2018/Jan1/Schedule%2... If supply is constrained, and demand grows, it won't stop growing until the price goes up. An imposition of a quota system is interesting, just because it might yield free residential heating for homes that welcome miners into their basements.

NickM 8y ago
That may not be nuanced enough for the desired results. Sounds like a lot of these places would like to still provide plentiful cheap power to industrial companies that actually create jobs and generate useful output that stimulates the local economy.
- jessriedel 8y ago
  If government-directed job creation is the desired goal, why not just hand the preferred companies cash? That would be a lot more transparent and targeted than subsidizing utilities Venezuela-style.
  - gruez 8y ago
    probably because subsidizing electricity sounds better to voters than handing out cash. same reason why governments prefer giving tax breaks rather than cash to entice multinationals to "create jobs".
  - 394549 8y ago
    > If government-directed job creation is the desired goal, why not just hand the preferred companies cash? That would be a lot more transparent and targeted than subsidizing utilities Venezuela-style. This isn't a subsidy, it's hydro power; which is limited, but cheap to produce. If the bitcoin miners drive the price up without providing many jobs, it may incentivize the actual employers that were attracted by the low price to leave for other areas. It's a net negative for the community. To benefit from cheaper electricity, you have to use it, and traditionally that's been through employing people to operate machines. If the companies got a cash subsidy instead, they would probably pocket the cash without doing as much as they promised to do to get it.

uncletammy 8y ago

It would be interesting for miners to offer all merchants within the geographic area affected by their power consumption fee-less transaction processing (free mining for their neighbors) . If it's technically achievable I could see it introducing some unusual but generally positive dynamics.

jstanley 8y ago
It would be easy to do, but the savings in transaction fees would not be enough to be worth the increased energy cost, even for the people who use Bitcoin, which most of them probably don't.

UnhelpfulYoda 8y ago

Weren't the smarter miners already relocating to places like Iceland which have more cheap surplus geothermal power than they ever use themselves anyway?

crispyambulance 8y ago

I admit I don't know much of anything about cryptocurrency, but is there something fundamental about the need for "mining" (in whatever form) for currency? It seems like the intent behind bitcoin mining was to mimic the scarcity of mining for gold or other precious metals by substituting hefty computations. But isn't that just a means of getting the currency bootstrapped in some way which ensures that it becomes scarce? Aren't there other, less energy intensive ways to do that? I mean, could there not be a cryptocurrency which bootstrapped off of the exchange with "real currency"? Or perhaps by direct exchange of goods and services?

lytedev 8y ago
Unfortunately I believe one of the core concepts is the "proof-of-work" and Bitcoin cannot work on the decentralized and distributed manner it achieves without it.
- brohee 8y ago
  We should really rename "proof-of-work" as proof-of-waste, as it is what it is, frankly...
  - wanderfowl 8y ago
    I understand that a central respository of work and the need to make the busywork scale cleanly and linearly makes it tough to be decentralized, but I regularly wish that a dominant cryptocurrency could find a way to do proof of (real) work with these cycles. There are so many projects which just lack for computing power (e.g. folding, prime hunting, etc), so it feels like even more of a waste to turning real power into arbitrary hashes.
  - wyldfire 8y ago
    What does the word 'waste' mean to you? Why would you use this word to describe what is done by the proof of work? If you think cryptocoins have no utility, then it stands to reason that the proof of work is wasteful. And beyond: the time and money spent by developers, corporations, exchanges, etc: all waste. But if you think that cryptocoins do have some utility, then it seems unfair to call it a "proof-of-waste". The PoW is the only way to equitably mint new currency.

4rgento 8y ago

If the revenue from the money transfers business is 30 billions per year and the cost of electricity is 0.12 U$D per KW/h. Then the cost, in energy terms, of the money transfer business is 250 TW/h in a year. This is a lower bound.[1] Bitcoin miners are consuming in the order of 73TW/h[0] annually. Let's consider those quantities equal for the next argument: Isn't it a good thing that crypto is generating business for the energy sector? If those revenues are invested in more energy research it is favorable to human kind, isn't it? Why deny the energy sector its business and favor the financial sector? [0] https://digiconomist.net/bitcoin-energy-consumption https://digiconomist.net/bitcoin-energy-consumption [1] https://www.quora.com/How-big-is-the-international-money-transfers-market https://www.quora.com/How-big-is-the-international-money-tra...

jjeaff 8y ago
>Isn't it a good thing that crypto is generating business for the energy sector? Wouldn't it be good for the window industry and service/repair industry if we all went around town throwing rocks through windows? https://en.m.wikipedia.org/wiki/Parable_of_the_broken_window https://en.m.wikipedia.org/wiki/Parable_of_the_broken_window The energy sector is primarily producing the energy in question with non-renewable resources that pollute the environment and raise costs for everyone else, disproportionately harming the poor. Not to mention rising food costs due to money grabs in the ag industry with things like corn based ethinol.
biot 8y ago
What is the amount of money transferred per TW/h for each system?

gwbas1c 8y ago

I thought part of Bitcoin's design is to use the cost of electricity as a way to prevent wide-scale mining? Anyway, turning off power to mining companies will just trigger investment in better off-grid power solutions. It's a double-win for everyone else.

khazhou 8y ago

Seems to me if Bitcoin was going to "become a thing" (to use American parlance), it would already have done so by now. What milestone could mark success for this currency? Conversely, when shall we declare failure?

bunderbunder 8y ago
As a tradeable commodity, I'd say that an easy bar for having "made it" would be when you see a BTC exchange-traded fund on a major stock exchange. Progress seems to be happening on that, but we'll see. As a currency, I'd say that, in the narrow case of BTC itself, failure is baked into its design. The current protocol imposes an estimated upper limit of 3-7 transactions per second on the network. That's just not acceptable for a currency (assuming it has dreams of being more useful and widely accepted than Ithaca Hours, anyway), and the suggested plans around forking are awkward at best. There are also solutions like the Lightning network. To me, I have a hard time seeing those as efforts to make Bitcoin a currency so much as efforts to create a new currency that is backed by Bitcoin. Sort of like the gold standard of old, where different currencies were backed by commodity reserves.
- gbhn 8y ago
  Sure, but a main point of a crypto currency is realizing there's no reason to back a monetary currency with anything. It's just a shared hallucination. There's no rational reason a new currency would be "based" on btc holdings. That's just silly. My view is that the upper end of btc viability is taking over some fraction of why people want gold. The system is way too expensive for a viable txn network (a la cash or Visa) and will never become one.
  - bunderbunder 8y ago
    > a main point of a crypto currency is realizing there's no reason to back a monetary currency with anything I'd argue that BTC is very much backed with something - lots and lots of thermal dissipation. The entire argument for why it should be accepted as a stable, reliable, trustworthy store of value is based on proof of work. If BTC is challenging anything about money, it's challenging the idea that money needs to be something that exists under the auspices of a government body.

andirk 8y ago

Isn't the energy spent for the security of the network, instead of armed guards and bombs? Compared to that, is it more or less wasteful then how we secure USD?