Hello all,

Since market prices have reached "those" levels again, I would like to have a discussion about the Bitcoin network's electricity consumption.

It seems to be a little bit of a convoluted topic as there are multiple factors to consider. In terms of Bitcoin price being feasible in regards to other systems that exist (e.g. environmental systems, the broader economy and markets), the carbon footprint of the bitcoin is a key indicator as a direct extension of electricity consumption.

We have miners that are distributed all over the world, as location of the miner is not constrained by the protocol, miners would migrate to areas where electricity is cheaper. Therefore the specific CO2 production will vary with miners based on:

- proportion of electricity obtained from the grid and independently generated
- What the average CO2 production is from their local electricity grid
- What the average CO2 production is from their independent electricity generation methods.

This data is hard to get without having some form of survey done on each one. And as since BTC is decentralized, it is difficult to survey everyone.

Factors to consider are:

• Since the last major bull run their has been a halving in the BTC reward (12.5btc to 6.25btc). The next halving is predicted to occur in 2024. This means that the profit a miner would have to spend on electricity would be less.
• The peak hash rate since the 2017 peak was approx 55 EH/s. It is currently approx. 126 EH/s
• Mining Rigs would have become more efficient meaning more hashes per KWh. I do not know the eff of state of the art mining rigs.

There are some insightful studies done in the realm of understanding BTC electricity consumption:

- https://digiconomist.net/bitcoin-energy-consumption/
- https://www.sciencedirect.com/science/article/abs/pii/S2214629620302966?via%3Dihub

So, I guess the question is, what is the feasible price of bitcoin when considering other objective functions such as environmental sustainability?

I am looking at the Bitcoin space and I see great things happening in progressive steps:

• Looking at the commits to the Bitcoin Core is one indicator
• The Lightning Node Network is another great development providing a possible future for feasible use of POW based cryptocurrencies in micro and everyday transactions
• Wallets have come so far from the days that I started using Bitcoin (e.g. UI's, Security, etc. )
• Exchanges have also made leaps and bounds (However, given the role they play, I feel they have a lot to improve on to be up to spec.)

My question is, what do you think are the current critical frontiers in infrastructure development in Bitcoin? Not just the Protocol itself, but the entire first and base application (currency). I guess we could categorize it thematically:

• 1st and 2nd layer Protocols
• Ease of Use
• Exchanges and third party infrastructure

if you can think of other development themes, please let me to know to add it to this list.

But it would be great to have a thread where we discuss the developments, why they are critical and what efforts are being made towards them.

Hi there,

I have had an account for a long time. however I have only made a few posts, and have left the account inactive for a long time. So I imagine there is very low activity associated to my account. I have, since today, decided I want to be apart of the community again.

There is a thread I would like to contribute to in the "Serious discussion" Section. However i noticed there is no reply or new topic buttons available to me when in this section. I just read the forum rules and FAQ, but found nothing about forum section permissions. Anyone care to enlighten me here?

Cheers

In the beginning there was bitcoin. And people traded manually, pure p2p. With time past, the volume and price increased, a need for exposure to liquidity arose. If you needed to change your market position at any point in time, there needed to be a market available. Enter local bitcoin and a plethora of exchanges.

- Local bitcoin utilized p2p matchmaking which mitigated the need to have a online wallet or remote locations of your bitcoin. This came at the cost of manual match making, communication overhead between peers and in some cases, non-benevolent behaviour amounst peers.

- Exchanges utilized the classical structure of trading marketplaces, by implementing a clearing house of offers and bids. This allowed for heterogeneous order volumes and prices to be dynamically matched. Further more it allowed for a global price determination within that exchange. This came at the cost of having remote storage of the peer's coin on the exchange.

Over the history of exchanges existing for bitcoin and now alternate coins, security has been a huge issue, with a successful hack of an exchange happening every six months or so. Observing the community of exchanges, as a whole progress has been poor. Now there are exchanges that have good empirical data when it comes to hacks. And it might be a choice of peers to select the right ones, but i think that multiple exchanges leads to diversification, access point redundancy and other advantages too, we should have a diverse community of exchanges.

Given that exchanges make an large amount of absolute volume over each day in trading, I find these hacks unacceptable within the community. I am not saying that the security aspect of an exchange is trivial. I am saying that exchanges should be on par with classical market place institutions by this time given the resources that have been provided to them.

In my perspective I see progress requiring two things, resources and knowledge. In this function, one is able to exchange resources for knowledge by acts of research and development. Observing the lack of progress made by the community and the resources available to them, I assume that there is a lack of knowledge in how exchanges should be run. Hence the title (finally):

- Is there a consortium for crypto exchanges where best practices, standards and certification levels are provided?
- If not, should we create one?

[What I have come to understand:]

Hello.  I am new.
I have been thinking about the issue of Bitcoin's seemingly indirect relation between BTC price to computational difficulty and therefore electricity consumption. The other day I came to this realization and I would like people to critique it:

One of the issues that caused the correction in price this year was that bitcoin technically lost utility to be used in small transactions. This was because the fee to effectively place information on the ledger was quite high due to high request volumes. Another issue was that the algorithm difficulty of the bitcoin protocol was so high due to the proportional hashing power available to the network. This caused the electricity consumption of the network to exceed that of a small country. Surely there are other factors for the price correction, but let’s just keep to those two for now.

People have said the PoW algorithm is the cause of this, and to an extent it is true. A miner has the incentive to mine based on profit. When they mine a block, they obtain the transaction fees and the reward for that block. With this profit, they pay their overhead and manage the net profit as they wish. At this point in time, the reward of the block is 12.5 coins. Correct me if i am wrong, but there is about 2000 transactions in a block, each of which will be associated to the highest fee transactions in the request pool.

Therefore:
block_profit BTC = block_reward BTC+ trans_feesBTC

The issue that we faced, at least from what I could tell, was that when a miner created a block and the price was 20,000USD per bitcoin, that’s how much their gross income was scaling ((12.5+trans_fees)*20,000USD). The incentive of the miner is to be competitive to other miners (which is the doing of PoW), so the game theoretic choice would be to increase the hashing power they contribute to the system with the profit they made. As a result, the hashing power went up and the bitcoin protocol therefore increased difficulty which lead to more electricity consumption. My initial thought was that due to the competitive, game theoretic behavior of participants when using the PoW algorithm, Bitcoin's price would have a barrier based on electricity consumption. If the price increases, the miners will just increase the mining capacity on the network because they are competitive as per the PoW algorithm.

I find now, this is wrong, and I am under the impression that other people maybe following the same logic (OR... Ia m a simpleton and just made a realization that everyone already knew)
What I have come to understand:

The bitcoin protocol is still in the phase of distributing coins into circulation. When mining first started, we got 50 coins as a reward. At this time the transaction fees were minimal as the use of Bitcoin blockchain real-estate was not so high in demand. The protocol states that the reward will halve after every 200,000 blocks or so. Eventually the reward value will decrease to an infinitesimal amount as we approach the maximum amount of Bitcoin that will be in circulation. This means that the miner's profit from the block will dominantly be in the form of transaction fees.

The reason why we had excessive electricity consumption of the bitcoin network was because the demand of Bitcoin was excessively high at the time. And the total profit of the block consists of the block reward of 12.5BTC + trans_fees. Just the gross income from the block reward was 12.5*20,000USD =250,000USD every 10 minutes. The PoW algorithm in a way regulated this price increase with high computational power demand. It actually seems like a feature and not a bug.

As the block reward depletes, the difficulty of the network with be regulated in a game theoretic manner. Here, the game players are the end users (people making transaction requests). The game they will play will be how much fee should they put down and the outcome of the game is whether their transaction will be selected from the transaction pool by miners. As the volume of transaction requests increase, I would expect to see the players put more down in fees. And of course, the end users will be observing the fees placed by their competitors. The profit made by the miner from these fees is what will dictate the computational power delivered by the miner network. (at this point, the word miner will also be somewhat diminished).  

This game between end users will also be effected by secondary layers such as the lightning node network. Lightning nodes will be placing transactions on the Bitcoin blockchain that summate a multitude of transactions. So the overhead cost of a lighting network node would include the payment of fees to the Blockchain miner network.

In this scenario, the electricity consumption and network difficulty seems to be a function of transaction request volume and the game theoretic transaction fee amount. Which is doesn’t seem to be a bad thing.  But I would like to hear others thoughts on this. It is the block_reward that is skewing the miner’s behavior to place more hashing power on the network which made PoW seem unfit. But at the moment, to me this seems like the protocol penalizing excessive demand and price whilst in the token distribution phase.