Bitcoin Forum

This must have been covered before, but I cant find where.

Even tho there isn't a direct causal relationship between mining costs and bitcoin price, there is a market relationship which ensures that mining costs do tend to correlate with bitcoin prices. Correct?

If so, does that mean that when Bitcoin takes over the world and bitcoin prices increase a million fold, mining power will increase from the current 5MW to 5TW?

That's a big "if". And the power usage of all PC's around the world is a mere fraction of total energy consumption.

You also have to consider that the block reward is decreasing - today you'll get 50 BTC for every mined block which halves roughly every 4 years. So the price of one BTC could theoretically double every 4 years without changing mining profitability.

In the end it will be only the transaction fees covering the miners cost but if we assume, say 1 BTC total transaction fees per block, you could still have a Bitcoin worth 1000 USD with current mining profitability levels (ie. roughly the same power usage).

Well, a lot of dollars are printed each years, same for gold and what else

DID YOU READ THE SATOSHI PAPER?!!?!?

It clearly states that by his estimations he had to size the total volume of bitcoin and release of new coins in such a way that mining operations had an impact on the world by increasing electricity costs noticeably, but not in a disruptive manner.

Energy costs in producing all the world's secure bitcoins should be lower than energy costs mining the same value of gold.  Energy cost is not the only production cost in manufacturing bitcoin - capital cost and human effort should not be neglected in the calculations.

At some stage when the bitcoin network reach more than half the total processing hashing power in the world - maybe the threat of a hostile 50%+ attack will be less and this fact will become a new influence in the network growth as well?

Quick calculation:

In a few years, assume BTC price rises by a factor of 1000 and total bitcoins = 10M

BTC Market Cap = 10M BTC @ $20 x 1000 = $200B (not a huge %age of the world's current currency)
Power = 5MW x 1000 = 5GW

So, market cap of $200B = 5 Nuclear power stations (@ 1GW each)

I might be out by factors of 2, but not factors of 10.

Where is this calculation wrong?

Nope. Mining costs don't affect the supply and they don't affect the demand.

Mining costs don't affect supply/demand, but the bitcoin price affects how profitable mining is.

Price doubles -> it's worth spending twice as much to mine the same amount of BTC

look in the mining thread, there was several discussions there.

What does market capitalization have to do with the electricity used for mining?
Seriously, did you even read the posts in this thread?

The incentive for miners to mine does not depend on market capitalization. Difficulty (~hashrate, hence energy usage) loosely follows price, but difficulty will roughly be halved about every 4 years due to decreased block reward. Therefore if in 20 years we have 1 BTC = 1000 USD we would have about the same energy usage as today (if energy prices stay the same).

I, for one, agree here.


The hash rate will increase, but total power consumption may not.  Chips will get more power efficient, in an exponential manner of Moore's Law.  So no, mining power consumption could stay roughly the same.  But the money spent on chips, and the hash rate, will increase dramatically.

Not sure about this. I think it steady states when the electricity-cost/hour equals bitcoin-value-mined/hour. Increase in efficiency just produces increased hash rate as a side effect, which is good for the integrity of the network, but won't save power.

OK, I'll simplify things somewhat.

If in 18 months time, when the reward is still 50BTC, the price has gone to $2000 ($20x100), the power used in hashing will be 500MW (5MWx100), which is about half a nuclear reactor. Yes?

The power might be 50MW or 500MW (doesn't really matter how much) because that determines the cost of production, but not the price someone is prepared to sell at.  Normally people like to make a profit, but that's not always the case, especially when there is a fixed/variable relationship.  So for the short-run cost (SRMC), if you can sell with a margin, you should, if not, don't.  You might choose to stock-pile or cease production.  At some point the transaction fee per block is supposed to become material when the coin reward is not.

Those that can produce cheaply will, those that cannot won't.

Ok sorry, I misinterpreted your previous timeframe ("in a few years") to mean something longer than 18 months.
If we really would see a 100 fold price increase in 18 months then energy usage will probably be very high as well but there are a few factors which you might not have considered:

1. If difficulty increases steadily at the required ~29% per month then we will reach block 210.000 already in about 13 months.
2. New mining hardware will not be bought anymore some time before block 210.000 because there is not enough time left to recoup the costs.
3. Peak energy usage will probably only be held for a relatively short period of time.
4. Increasing energy prices (which are probably to be expected in the next years) will further cut down on energy usage.
5. Intermediate price decreases or even crashes due to speculation might scare off some potential big mining investors.

There could also be other factors which would limit the power requirements if it really gets out of hand - for example, miners could agree that new blocks are only accepted within a 5-minute time window (granted - this is highly speculative and such changes would have to be very carefully designed to not change the basic dynamics of the system).

Having said that, I very much doubt that we would see a 100 fold increase in price within the next year, but if it really happens, then it is obvious that society deems Bitcoin as a very valuable service and therefore it is probably justified to use up some energy (which is hopefully saved in part with other financial services becoming less important then).

Last, I really hope that the percentage of energy coming from renewable sources increases in the next years, which would also mitigate some of the ecological impact.

No worries, I only had the question half formulated when I first typed it in. It'd be interesting to factor in those points above, and graph out the corresponding max value of BTC over time assuming a max of 1GW mining power.

The main point I'm trying to make is that with the current setup, bitcoins going to $10,000 or taking any significant percentage of world GDP or the world black market over the next few years isn't going to happen. It's too severely limited by the power available in the world.

No no this is all wrong, ugh.  If Bitcoin demand rises then Bitcoin prices rise then mining demand rises then power demand rises and power prices rise and the price of
Bitcoins in dollars has nothing to do with the amount of power available anyways.

If Bitcoin ever becomes that big, mining will be so competitive that it will use electricity that can can be used for little else but mining.

A new kind of electricity?  ???

Maybe he mean the low price? Mh...still make no sense  :D

No, the old kind, except consumed in times and places where it would have gone to waste before.

In Europe (or at least in Germany, I don't really know about the rest of Europe) mining already isn't profitable anymore. The price for one kWh is somewhere around 20 Euro cents which equals to about 30 US cents. Is it true that in the US, a kWh costs below 10 US cents? If yes, well, mining is of course profitable for you there. In Germany, mining only makes sense if you want to support Bitcoin or if you speculate on higher prices in the future.

And even that is quite idiotic, given that at current prices, buying Bitcoins is chepaer than mining them (at least if you have to buy hardware first, and maybe even without counting the hardware).

It can already be seen now that mining rigs tend to be where electricity is cheap. Which might be a problem in the future if a country where a lot of hashing power is amassed tries to ban Bitcoin completely.

water power, wind power and solar power, is the long haul.

Energy companies around the world could use surplus energy in times of low demand to mine Bitcoins. This would be a really efficient scenario.

Exactly. Also, there are a lot of electric heaters in the world that could be replaced with mining rigs.

Mining is a highly competitive market, so it will drive towards these kinds of solutions where the marginal cost of electricity is zero.

Nobody will be buying electricity to mine anymore, 6 months from now.

Sorry, I find that funny.  Surplus energy - not really.  Most systems use some kind of fossil fuel and they would prefer to hold it until someone places enough alue on it to consume it.  They are not likely to throw away money on mining.

On the flip side, there is a computing community that computes for nothing - I've swapped over for a while - and when it becomes too expensive to mine, I'll probably go back because mining is not very interesting.

Oh but surplus energy does exist - I happen to live in a country where about 60% of the electricity is generated by hydropower-plants and they are not turned off at night just because electricity demand drops. Instead they built lots of pumped storage systems to salvage at least some part of the surplus energy to use during daytime.

Unfortunataly the geographical locations suitable for pumped storage hydroelectric systems are limited and they are desperately trying to find more.

With a growing percentage of energy coming from renewable sources like wind or solar, the problem of fluctuating energy production becomes even more severe. Large scale grid storage systems are expensive and/or inefficient therefore temporary surplus energy will be a growing factor in the future.

As mining rigs are not terribly location dependent and it is no problem to design them in a way to quickly adapt their power usage it is not too far fetched that power companies distribute some rigs throughout the grid to make good use of surplus energy. This could help to stabilize the power grid, make efficient use of energy because you could use the energy close to where it's produced and of course: earn the power companies money.

Ugh indeed. At least I hope there is a consensus that there is an approximately linear relationship between cost of production and bitcoin reward.

(I'm making a lot of assumptions here, like ignoring cost of equipment, no energy price fluctuations, just talking about the next 18 months with the 50BTC reward, wareens other points, etc. - but I'm looking at orders of magnitude here)

So, the assumption is that if the bitcoin market price rises by 10, the overall ongoing spend for power for mining will increase by 10 too, which will roughly equate to 10 times power consumption.

I'm not saying that the price of bitcoins in dollars has anything to do with power available. I'm saying that if the bitcoin price goes up too fast over the next 18 months there won't be enough power stations to satisfy the consequent power demand from bitcoin miners.

The idea that bitcoin mining might actually increase to the point where it significantly affects energy prices disturbs me!

If the price of bitcoins seriously shoots up 1000 fold in the next few years, those 50BTC or 25BTC rewards will be worth a lot of money! At $10,000/BTC in 3 years, each reward would be worth $250,000. In this case the mining won't be limited by the competitive market, it will be limited by the supply of graphics boards and the amount of power the electricity companies will ration you. This is the scenario I'm pointing to. It's the scenario that's implied when people say Bitcoin is scalable to cope with a significant %age of world GDP.

You are mostly correct in your calculations. Comparing BTC to a real currency is good thought experiment that proves it's a flawed, wasteful concept.

Don't worry - it won't!
Heck, you could even hedge against that risk by buying some BTC today and use them to build your own DESERTEC (http://en.wikipedia.org/wiki/Desertec) in 18 months ;)

It's complex. Electricity is not a perfectly liquid commodity.  

For example, powering up and down a gas power plant to match demand reduces the efficiency compared to a plant that is always running at optimum speed. Thus energy is wasted indirectly.  

Nuclear power plants cannot be powered down at all.

Pumped storage incurs losses.

Long distance transmission incurs losses.

Wind power is highly intermittent, and it's on the rise (6% of electricity in Germany comes from wind).


The complex economics of the electricity grid will favour bitcoin mining over storage/long distance transmission/throttling in some places at some times.

In my opinion

• in the mid-term (October) the availability of ASICs will change mining completely, they will consume less power but will be more expensive, at least in the beginning. Therefore the price of the ASICs will be the deciding factor for mining profitability. Because of their computing power beeing orders of magnitude larger than GPUs, GPUs cannot compete anymore.
• long-term, the technology used for mining does not matter, as long as it is available to everybody, thus energy will be the factor again

This is one of the most important points in all of this. Increased technology will increase the overall hash rate but it won't decrease the overall power used.

Difficulty follows price. If the price were to quadruple from current levels, for instance, miners might try to fire up CPUs again but other than that, there isn't much current excess capacity out there.  i.e., it wouldn't rise immediately.  Mining would once again be extremely profitable and it might take a couple of months or so for difficulty to catch up to price.

This is assuming there isn't some technological innovation (e.g.., cheap and low power ASIC) that comes along first.

Yes, there will be a lags and other dynamics, but in the steady state we'll still end up in the situation where a few power stations are needed to support a significant bitcoin price (e.g. $10K) in the near future.


Cheap ASICs will push up the hash rate, but won't reduce the power used.

I'm not sure it's a flawed concept. That's certainly not what I'm trying to prove. If the equations worked out better, it's valid to expend power to generate integrity in the network. It's just a shame it's that much power. Perhaps once most of the mining has finished and most income is generated from transactions things will get more sensible, but that's a long time in the future.

It's certainly a flaw, a major one. Is it a mortal flaw ? I don't know. It's the same flaw that killed gold as a viable medium of exchange. If the current monetary system of the US would suddenly require 70% of the energy production to stay secure, how do you think the society will react ?
I'm not saying security is bad, I'm saying that Bitcoin pays a hefty price for it's security, up to the point where it doesn't really make sense to want it as a replacement for the current monetary system. At least the executive bonuses at AIG go into nice looking palaces and generate employment. Bitcoin's overhead goes into killing the planet.

So, before this thread goes to sleep, I'd like to leave a working conclusion that if the bitcoin price increases 200 fold over the next year or so, bitcoin mining will be using in the order of 1GW of energy, or about 1 large power station.

Won't the more direct relation between electricity consumption and profit result in more efficient hardware that use less electricity, as well as an increased stimulus for reaching for sources of electricity cheaper than what big power companies provide?

Going a bit off topic - I too live in a country with greater than 60% hydro electricity, and I am aware of the pumped storage systems around the world too.  However, they cost serious money and they would prefer not to use it if they could avoid it.  Pumped storage is used because it's a lower cost option, not because the electricity is "spare".

More efficient technology will give more hash power, not less power consumption.

Power sources will have a relatively secondary influence. We need to reduce the power by orders of magnitude if Bitcoin becomes a significant %age of the world economy.

ASICs/FPGAs are at least an order of magnitude more power efficient (at least 10x more power efficient) than current AMDs.  And AMDs are more power efficient with each generation. 

When the older inefficient chips are replaced by new ones, that will result in more hash power and less power consumption.

I disagree. See rest of thread.

Stated like this it is really misleading - you need way too many assumptions for this conclusion to be of any worth by itself.
Apart from all the other influential factors mentioned in the thread you also ignored the fact, that mining is no rational investment in a market which seems to be consistently growing all the time (your premise).

Example: consider a starting price of 1 BTC = 1 USD and you invest 10.000 USD in a mining rig which gives you 50 BTC per week. With difficulty following price (your conclusion) you'd roughly end up with 650 BTC by the end of the year, worth 130.000 USD. Including electricity costs you'd have a mere 11 fold return on your investment compared to a 200 fold increase if you had bought BTC directly to begin with.

You see that you have to also make very specific assumptions on the expectations of the future price level for predicting the amount of new hashing power entering the market. If for example, miners suspect a pump and dump by big speculators (which would not look too differently to the price explosion you base your argument on), new miners might not enter the market despite its seemingly short-term profitability.

To conclude from my perspective:
Yes, if price shoots up 200 fold within a year, Bitcoin's total energy consumption will be much higher by the end of that year but your conclusion of a 1:1 relationship is ignoring so many factors that it most certainly does not even hit the right order of magnitude.

Also, regarding the usefulness of extreme extrapolation:

There is absolutely no way for Bitcoin mining to consume more than even a fraction of the electricity produced in the world today.  We will have assimilated all available GPUs and run out of chip manufacturing lines to build new ASICs before we even come close to that scenario.

Bedini motors for everyone!

Flug's point is an important one, but nonetheless there are few ways to avoid power consumption, ceteris paribus.

Bitcoin's value is because it is difficult to fake. As more and more wealth gets into the network, every possible exploit will be found. ASICs and FPGAs will drive GPUs out. But if the tech is shared or parallel tech is developed, then power usage will be back to where it used to be. Hash rate will be at a level where ordinary people won't be able to touch it, but power consumption will continue be correlated. Even if something incredibly power efficient like DNA based computing is developed, there will be a large temporary dip, but the power consumption will go back to a high level.

This is because of an exceedingly simple reason - Every automatic way of making money in the world will eventually be tried out. Mining is an automatic way of making money in the bitcoin world.

Money is the fulcrum of the world economy. Billions of people decide what they want to do daily based on money. It is the ultimate coordination mechanism. Many people see this power consumption as wasteful, but I see true agoric commerce as a wonderful new way of coordinating society.

We wish we could trust everyone to the extent that their word is enough, but in reality, we don't.

We need proof of resources, which translates into the world of the internet as Proof of Work.

OP, this has been discussed a few times that I'm aware of, and since I'm new, probably dozens of times.
I tend to agree that this aspect of Bitcoin is a serious flaw.

As money is moved into bitcoin its value will increase.
As the value increases the profits from mining will increase.
More miners will then enter, increasing the difficulty, until the profits are minimal.

Unless I have the relationships wrong, the worlds (environmental) demise is tied to Bitcoins success.

This isn't mindless extrapolation. This is concentrating on the primary market driver.

Cost of mining will tend to gravitate to the rewards of mining.

In a decade's time, when (the few) people who can afford it have invested in expensive ASIC mining rigs and paid them off, and the bitcoin price has stabilized at $10,000 to become a major world currency:

(a) cost of mining will be mostly power costs, not capital costs
(b) investing in bitcoins won't make easy money anymore.

So I think we will approach a 1:1 relationship. At least, it will definitely be in the same order.

I think the calculation you gave is important in understanding the problem, but only looks at at small time window during the initial stages of Bitcoin. In the long term I think the picture will approach a different steady state.

Yes, there will be balance. But in 8 years time, the block reward will be 1/4, whereas the bitcoin price will be x1000+ if it becomes a major world currency.

In summary.. if bitcoin becomes a major world currency its price will soar -> mining rewards will soar -> amounts spent on mining will soar -> amount of energy consumed will soar -> number of power stations will soar.

I don't think there's any way round this.

Better hardware doesn't solve this.

Highly competitive markets have near zero profitability... see http://en.wikipedia.org/wiki/Perfect_competition#Profit

For mining to be profitable...

$/฿ > (kWh/฿ x EP)

where

EP  - is $/kWh

Assuming EP remains fairly stable then an increase in Bitcoin value will have a near 1:1 relationship with the energy consumed to mine them.

This is the biggest issue to face bitcoin by a long stretch.

*** Look away now if you're averse to slightly lunatic ideas. ***

Bitcoin value is in proof-of-work. For bitcoin to progress it requires that the energy consumed in generating them is not wasted and that in turn requires that as we consume energy it is measured. Therefore, the future of Bitcoin isn't a new range of Alpaca socks, it's the efficient conversion of mining rigs into useful objects.

*** Really nutty tin-foil hat stuff ahead ***

Imagine a company that provides 'electric heaters' to hospitals/schools on the basis that they connect those 'heaters' to the internet and that the heating company will pay for 50% of their heating bills. Assuming those 'heaters' are as efficient as the thing they're replacing - congratulations! - you've just reduced your mining rig costs by 50% and the school is only paying half of what it used to.

Time for a nice cup of tea. Now where did I put that Bitcoin hashing kettle?

MONK'S FINAL THOUGHT
=============
*Sits on chair and looks out at audience *

If Bitcoin were to become successful then the real achievement would be it's ability to act as a metric of real work done. Those who
find novel ways of converting the hashing energy into something useful will have a huge competitive advantage over those who waste it heating up their garage. That's competition and profit seeking in action. Ultimately the rewards will go to those who do/make something with all this energy and I think that's kinda nice.

Capitalism - I'm lovin' it.

Using miners as heaters is pretty insightful. Sadly it can't work in real life. At 60 centigrade internal temperature the GPUs fry, and waste heat from coiling them is probably 40-45 degrees at most. That's not really very useful for heating, maybe only if you blow the heated air directly into the rooms. Electric heating is also very expensive, and is often employed in a heat pump configuration that uses electricity to drive a motor (mechanical work), and achieves much better efficiency than simple Joule heating. It's also not needed year-round.

While we fixate on electricity as the main waste for Bitcoin, in reality the capital costs of designing and manufacturing rigs will be quite high. Allot of resources will go into manufacturing, with the associated environment impact. Electronics manufacture requires rare, pure, toxic substances, precision industrial machinery, world wide shipping etc. If Moore's law holds for mining bitcoins, the old hardware might be tossed before it has a chance to equal the environmental footprint of it's production. This is certainly the case with consumer electronics.

I was thinking of ASICs that have a large footprint and a huge heat sink attached to them (i.e. the size of a domestic radiator). Even if they were only 50% as efficient as central heating then the school/hospital would pay < 50% of the electrical costs and you'd have a huge competitive advantage.

I can't see how a heat sunk ASIC could be anything other than near 100% efficient. Where does the energy go if it's not heat? light? sound? potential? chemical potential? Information transmission? Information entropy!! Wow. That'd be something. My guess is that you could convert at least 95% of all that electrical energy into heat. Where else would it go?


You'd create a spread out 1000-core ASIC hashing wafer. 1m^2 x 1m^2 might do it. You're hashing rate is your temperature control and if you cranked it right up then the fusebox would melt. Your only limit is the amount of money you want to spend on electricity and the fuse current limit from your electricity supplier.

So let's assume you can make an electric hashing heater that's not too noisy and doesn't produce light - although that might be nice too - say 95% conversion to useful output. The question then is the relative price of energy sources.

Natural Gas - 4.1p / kWh
Electricity - 13p / kWh

* source http://www.biomassenergycentre.org.uk/portal/page?_pageid=75,59188&_dad=portal
** These are bulk fuel purchase prices.

Looking at http://www.decc.gov.uk
It would appear that domestic costs for England 2010 for typical amount of use is...
Gas - 3.5p / kWh
Electric - 10.4p / kWh

Assuming 98% efficiency of a condensing gas boiler or 70 -80% for conventional boiler. You could expect an all electric heater to cost about 3 times more than the equivalent gas boiler heater. Once you factor in the additional costs of manufacture etc then you're looking at getting less than 10% of the bill covered. When you also take into the account that these people might have environmental concerns about the tripling of their fuel bill (even though they'd only be paying a third and energy consumption was ~ the same but when's logic ever mattered to an environ-mentalist, right?) then it's starting to look like a non-starter.

I've convinced myself that this isn't workable but, the point is that their is a competitive advantage to measuring 'real' energy use by hash computation.

Bitcoin air conditioner anybody? I guess that's not possible either or you'd have servers farms that self-cool.

I'm still of the opinion that Bitcoin needs to measure real world 'proof-of-work' or it just won't succeed due to the huge demand in energy to run the thing.

If only there was some way to convert the hashing heat back into something more useful...

Quick! Someone invent a turbine that hashes as it spins!

Hmm... interesting stuff this Bitcoin. Makes you rethink all sorts of things.

I'm sorry, I did not intend to accuse you of anything mindless - your concerns are very valid!
I just think that the development of the Bitcoin economy is so hard to predict - even for weeks - that I think its just not feasible to make useful forecasts over years or decades.

Yes that connection is indisputable - as for the exact numbers and the timeframes our opinions diverge, so lets settle with that ;)

Of course, if Bitcoin really does become a major world currency, the implications for large parts of the world economy would be very severe, making predictions of the overall ecological impact even harder.

One more point I'd like to add: the potential of Bitcoin to "sell electricity" without having a good connection to the power grid.
There are lots of remote places where electricity could be generated efficiently but where it's not economical because it is too far off the grid. A single wireless / satellite uplink is much easier to install than building a long-distance power line.

Regarding future mining hardware: I could imagine solar panels in connection with decent GPUs to be a long term competitor to FPGAs or even ASICs. They share high one-time costs and little or even no operating costs but with the solar+GPU combo you always have the possibility to earn money on selling electricity whenever Bitcoin mining stops being profitable (or even in the case of a Bitcoin collapse). If Bitcoin will ever play a major role in the world economy, Bitcoin mining will probably be tightly connected to power plant operators for its unique usage of electricity.

PS. I worked for many years on the thermal design of electronics in hot sandy places. I even made an evaporative cooling jacket for people who had access to water rather than batteries. I'd like to think that I'm not making this shit up :)

EDIT - removed quote from previous poster as it wasn't relevant to this comment.

Yeap, I'll go with that. It was bugging me that I'd seen a potentially serious problem, and it wasn't being sufficiently acknowledged. As long as we're all aware of it, and factor it in to our predictions for the future of Bitcoin (i.e. Bitcoin is not infinitely scalable without cost), all is good.

^^ True that.

As another commentator mentioned - technological improvements does not help the issue with the 1:1 price/energy in a wasteful mining system. If Bitcoin is to remain a proof of work then it needs to do something along the following lines...

Fuel -> electrical energy -> hashing -> electricity energy -> consumer.

The market will/would be driven by how efficient you can make the conversion to and from the hashing. The BTC price will reflect how much proof-of-work you can measure. The hashing seems a lot like a 0.01 Ω sense resistor in a circuit. You want it measure work without throwing too much away. Best place to put that sense resistor is probably somewhere within the power station as that's the only place you're likely to get any kind of efficiency.

Obsessed by this topic today but did some digging around (pardon the pun) regarding gold price and extraction costs...

http://www.moneyweek.com/blog/what-is-gold-really-worth-00301

It would seem that extraction costs of Gold are about $600/oz. So within an order of magnitude and not far from the previously relatively stable gold price.

So the question is... what's stopping me from going and buying myself a piece of this money farm? We'll I'm guessing the actual cost of extraction for a new entrant would be close to the current gold price or why would the current owner sell their mining land, equipment and knowledge to a new entrant? Seems to me that mining difficulty proably hasn't changed that much in the last few years and therefore it must be the dollar losing value.

Interesting. It suggest that the BTC price probably wouldn't be too far from the cost of mining it and thus the major factor in the mining cost will drive the price. At the moment, the BTC mining cost is the labour, knowledge attainment and opportunity costs.

Someone should launch a pool that directs a percentage of the fees towards carbon credits...

But... i like carbon!

I wish to nominate this for post of the week.  Extremely erudite.  There is no shortcut to creating/securing value.  There is no "nightmare."  Consider all the ecological damage associated with propping up the dollar and the U.S. political system.

I've thought about this myself, (using the generated heat for another purpose).  In permaculture, this is called stacking functions.  In regards to max temp on the chips not being high enough for a heater, I wanted to point out that the lower temperature heat could be used to preheat a water system, then another source could be integrated to raise it to the desired temp.  I've been considering using waterblocks on my 3ghash mining setup to preheat water for my home brewery.

room heating is very easy. one dude used his watercooled rig for floor heating.

If the BTC price goes up to $10,000 in the next year, mining earnings will be 50*6*10,000 = $3,000,000/hour

@10c/kWh, this is 30,000,000kWh/hour = 30GW = 6 power stations

Is this a realistic scenario? If so, is this a nightmare?

What's the point in restating the same question this thread has been about the whole time?
There have been dozens of good arguments regarding this question so please - anybody who wants to contribute something: read the whole thread before you do.

And flug: really, what's the point? More than two weeks ago you said (https://forum.bitcoin.org/index.php?topic=23360.msg306938#msg306938):
Seems like you acknowledged the issue as having been reasonably dealt with...
We discussed this back and forth and I think we have settled that this scenario is possible but not very probable.

We cannot possibly quantify the exact probability that this "nightmare" will happen and I doubt any further discussion will change this.

I acknowledged that the issue had been acknowledged  :D

If Bitcoin becomes a significant part of the world economy in the next decade, mining power will go crazy. No way out. We won't solve the problem by continually discussing it, but it is important to keep the question open and visible. I don't think an occasional bump of this thread is so bad.

if it became necessary to make mining less profitable in a world where it was too cheap and was causing problems, AND it was mainstream, all that would need to be done is make the mainline client mine by default, then it would make it at least 10% more difficult just because of the sheer volume of cpus that would be mining.

That would be great if I was the only one mining - say one 4850 or 9800 card somewhee, or even one i7 core.  The statement misses too many of the other variables to be sensible (sorry).

If difficulty is near zero and only one person mines, six block per hour will still be created.  This does not imply 30 GW.

In what scenario would only one person be mining when $3,000,000/hour is up for grabs?

Perhaps i should start selling carbon credits (in BTC of course) for not mining...

that only works if you are required to pay silly...

An unlikely one.  The point is, all of the variables and relationships do not necessarily hold over the entire range.  Hence, while enormously improbable, it is at one end of the possible spectrum of outcomes.

If the relationships were exactly matched, the profit margins from mining would still be high like they were 1, 3 or 6 months ago?  This has not happened, and forecasting out to the $3m/hr scenario the relationship is unlikely to hold as other block economics start to have an influence.

It's funny, you tried to explain it again again, and still people still refuse to accept it. 

"1:1 relationship is ignoring so many factors that it most certainly does not even hit the right order of magnitude."

Yet he does not list a single factor.


Yes, incentives are there, almost all of the mining awards will go to pay for the power costs.  However, all this money must come from the bitcoin economy, and pass trought exchanges, since plants don't accept bitcoins yet.   This will push the price of bitcoins down, and in this way the energy problem will be solved. 

It's amazing how accurate this estimation was. This thread is fascinating in retrospective.