Storage of value is an application, currency is an application. I think Bitcoin is one level of abstraction higher than an application. It is a protocol that can be used to run applications. How effective it is in any given application is based on properties of the protocol and its current state (i.e. price, volatility, mempool size, block reward rate, fees, transaction throughput etc.)

Then there is 2nd layer protocols to consider which would extend Bitcoins ability to be applied in an application invariant of some of these properties. For example the Lightning Node Network would allow bitcoin to be applied in the application field of common currency invariant of the protocols transaction throughput. Besides, currency and storage are just two possible applications and there are others that Bitcoin can be applied to like asset management (e.g. Placing land titles on the bitcoin blockchain).

If your question is what application is Bitcoin currently suited to, that is a bit more of a complicated question as we need to look at the environment which Bitcoin is operating in. External factors like fiat currency hyperinflation causes people to use Bitcoin for purposes that it may not technically be suited to at this time (like storage of value). Whilst its technically not suited for storage of value purposes yet, people see fit to hold a portion of their value in Bitcoin and not in fiat or in any other asset for that matter.

I think CO2 has been commandeered as the go to metric for environmental impact because it occurs in a wide range of scaled processes. But it does paint a really incomplete picture of the situation. Perhaps a more holistic indicator could be something like environmental entropy production. Some metric that describes the rate of environmental disordering, which stresses the regulatory mechanisms that exist in our environmental ecosystem (e.g. CO2 absorption and transformation or pollinator populations that sustain flora populations).

So lets just use "impact" as a general term for human activity disordering the environmental state. Whilst the Bitcoin consumes electricity, it provides a valuable service. That is the security consensus of the PoW method which is enforced by thermodynamics. Some form of environmental impact in the form of electricity consumption, hardware manufacturing, etc. is of course acceptable. The amount of impact should be equal to the intrinsic value of processes that Bitcoin is used for (currently speculative, but the implementation horizon is fast approaching).

My quest is to find out that equilibrium point. how much impact should be deemed feasible at any given time?

My thoughts are that price is a contributor to the amount of impact. But as indicated by:

I will have to investigate the indirect relationship of price on impact

Yes! you are right. I wouldn't be surprised that other factors are apart of the equation, but that is a fair deviation from the base relationship between price and hashrate.
One extra factor from the top of my head is that mining rigs have become more efficient, therefore we are able to get more EH/KWh. The fact that miners have the choice to withhold their coins from the market in anticipation of a bull run is also a factor that makes things very non-linear.

Sorry for the late reply. Christmas season and all. Merry Christmas everyone

So interesting and diverse responses here, which is great. My thoughts on the points bought up:

POINT 1:

So from a game theoretic perspective of the miner, we can consider that they would like to increase the profit of their operation. The profit they make comes from fees of transactions included in the block and the block reward which is 6.25BTC. So as the price goes up, they can sell those BTC for cash to pay bills and re-invest in their operation. This chart shows the block reward in BTC and in USD dollar for a visual on how price effects a miners profit https://bitcoinvisuals.com/chain-block-reward.

Game theoretically, a miner wants to increase their chance of earning that block reward and fees by being the first to produce the block. This can be achieved by placing more hashing power on the network. So as the profit of a miner increases, they would put more hashing power the network to increase their chance of earning the next block's reward and fees. Of course they only do this to the point in which it is feasible, as hashing power uses electricity which costs money, contributing to the overheads of their business. Over time, as the block reward depletes via halvings, the significant source of income for a miner will be the transaction fees. At which point, people transacting on the BTC blockchain will determine how much hashing power exists on the network which provides security to the ledger, through their fees.

Here is the connection: as the price increases, miners put more hashing power on the network, the difficulty rises, which increases the computational power required to mine a block. computational power consumes electrical power. QED BTC price is connected to energy consumption. As this scales, it becomes a factor of consideration in environmentally sustainable operation.

EDIT: I will look through the posts to see other points and reply accordingly over time. Cheers

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?

Sorry to inject information that is sparsely related to the OP's topic. Just as a final note, I don't want to discredit the efforts to shift to renewable energy in china. However, under the current state of the art in the energy sector there. If the true cost of electricity was implemented, centralization in China would not be a thing.

https://link.springer.com/article/10.1007/s12182-016-0136-z

https://www.worlddata.info/asia/china/energy-consumption.php

Isn't it interesting how information flows through our complex world. I see a news article pop up about btc mining centralization in china, then another about how bitcoin's destiny as "for the people" is at stake and then a thread on bitcointalk is started . In fact I had just read an article and was doing some research,  pondering over the topic and was about to make a post myself.

There is a really useful geospatial visualization of bitcoin miner distribution developed by Cambridge university: https://cbeci.org/mining_map.  According to this map, approx 71% of hashing is conducted in china. I have some points of thought on this topic:

Point 1: How much effort is it to compromise future blocks ?
Is there a function such that E = f(node%), where E is the electricity required to successfully alter the Blockchain and node% is the amount of colluding nodes as a subset of the Bitcoin mining network? 51% attacks take alot of electricity, but what if it was a 60% attack? or 70% or 80%? Does the amount of electricity reduce as the subset of colluding nodes becomes more larger?  

Point 2: What could be done with such control over the network?
i guess this has been covered quite extensively. Basically you can edit how future blocks look like (e.g. censor transactions). My question is how does the voting for protocol feature changes get impacted by this?

Point 3: What are the causal factors for centralization in china?
I understood that centralization occurred for 2 major reasons.

• The shelf life of mining hardware was short and so it was more profitable for chip manufacturers to mine themselves than sell the rigs. This cause colocated centralization around manufacturers in china. This has now changed since we reached 16nm architecture. Andreas Antonopolous describes it in a talk: https://www.youtube.com/watch?v=GGwHIHBsjbU
  
• The electricity price in china is lower. This a main concern for me and it is a way in which government can interfere with the distribution of bitcoin mining network topology.

A ranting note on the second point. The fact that china has cheaper electricity is in itself a manipulation. It places miners in china at an advantage as their cost per hash is inherently less. But it also means that more electricity is consumed with less compensation for environmental degradation. And that is my issue and it is not unique to the case of Bitcoin. China has for decades not considered environmental impact in the scaling of their manufacturing and industrious nature. And it interferes with efforts from other global players  (which are already quite shallow). For example, having carbon credits in in Europe means manufacturers in Europe have an extra overhead cost. So, to remain competitive, these processes are moved to china where carbon credits don't exist. The ending result is not that less carbon is produced or funds are gathered to drive carbon offsetting processes. Instead it is just that carbon is produced in another location (in china). And as a convenient side effect, more economic activity is shifted to china.

This is not the fault of the Chinese people, or the miners in our local case. But it is the intentional strategic growth maneuver of the Chinese government which uses a lack of consideration for factors like the environmental impact.

Rant over. But the issue remains.

Right. I agree. A question that arises from this: is there a monetary amount that we can state as $X USD which would provide a acceptable amount of network security?  Such that X amount is purely spent on mining (i.e. including human resources for maintaining rigs, electricity for running rigs and cooling them. Not including costs such as buying new mining hardware, development of liquidation algorithms, etc.).

I assume this is a complicated question, as electricity prices are different in different locations, miners have different efficiencies of converting electricity to computations.

I often wonder about this as well. How the fees will be regulated after the bitcoin protocol's block reward is negligible? I think OP has made the assumption that the BTC fee volume stays constant. As far as I am aware, this is not the case. If it was the case, then their would not only be a correlation between BTC price and transaction fee (which insinuates some variance) but it would actually be a linear function, such that:

transaction fee = BTC fee volume (constant) * BTC price

either that, or I have missed something in the conversation.

Having said that, what are the driving forces for BTC fee volume?

I imagine that there is the amount of transactions that are being posted to the mempool. Therefore people would compete with higher BTC fee volumes to have their transactions posted first. but then what if there was a dip in transactions posted to the mempool and the fees drop?

In the future when the block reward is infinitesimal and the fees drop, then the miners are getting less money. Which would cause them to lower the hashing power (electricity spend) on the network. Would that lower the security of the bitcoin protocol?

So in the future, would it be that the fees should be regulated by the amount of money that the community believes should be spent on securing the network. Given that there is about 3000 transactions. It would be how much we want to give the miners in order to secure the network such that our storage of value is protected from 51% attacks etc.

What would that figure need to be, to ensure a secure creation of new block? if we know that, then we can divide that by the amount of transactions in a block and that would be the fee. Right?

Maybe looking at mining as a business process would be helpful here? I am not a miner, so ill probably miss something. But here it goes... Please correct me if there is errors in here.

Like any other process, we can state that miners take some set of inputs and produce an output. Conversion of input to output produces entropy (i.e. disorder. For this post, we'll call it environmental footprint). The inputs are:

• Mining hardware
• Electricity

And the output is: Hashing power for the bitcoin network (i.e. fuel of the bitcoin protocol)

Anything else required to run the Bitcoin network (bandwidth for full nodes, etc.) is being ignored for the sake of simplicity. I would imagine it would be negligible comparative to mining too.

Hardware contribution to Environmental Footprint:
Currently, PoW in the Bitcoin protocol is just work for the sake of work. It has no other use besides deciding who publishes the next block (in a decentralized way, that anyone can can contribute to, etc.). Furthermore, miners are currently enjoying the efficiency of ASIC mining rigs which are specifically built for the block reward puzzle. Based on this, we can say that the mining rigs are not used for other industry applications and the environmental footprint for manufacturing ASICs contribute solely to bitcoin's environmental footprint. In times when there are advances in chip technology and mining rig architecture, the effective lifespan of a mining rig reduces. As a result, when tech changes, the environmental footprint of bitcoin increases.

This also means, that these ASIC rigs have to be disposed of. Where do they go? are they recycled? this also contributes to the environmental footbprint

Electricity contribution to Environmental Footprint:
Electricity usage is complicated. Each miner has different locations and therefore have different electricity usage profiles (e.g. being in a hot location requires more electricity to discharge heat to the environment compared to being in a cold location). Also, different locations have  difference in accessibility energy conversion methods (e.g. HydroElectricity, Geothermal, Burning coal, etc.) which come in at different prices based on the miner's location. Also the Bitcoin protocol will, based on game theory, consume more electricity when the block profit increases.

(block profit = (BTCvol_txFees + BTCvol_block reward)*BTCprice).

Block profit indicates how much a miner can spend on their business process inputs.

So understanding the environmental footprint would, i think, require an analysis of these two parent industries. Also, we need to think about the miner and their focus. Some miners who are big, have the capacity focus on environmental factors. Others are purely thinking about minimizing electricity cost and maximizing efficiency of conversion from Electricity to Hashing Power to survive and expand.

Does Bitcoin increase the environmental footprint?
Bitcoin adds to the global environmental footprint. Unless we can utilize the "Work" in Proof of Work to some other useful application (e.g. instead of hashes, run a simulation for economic policy or something), then bitcoin is producing entropy solely to run the Bitcoin Network. Which is akin to using corn and sugarcane to make bio-fuel instead of food. Right? I mean that electricity could be used elsewhere (in homes, in some other industry) or we could be just producing less electricity which is absolutely the best for our environment. With Bitcoin around, we have another exclusive process electricity must be used on.

Is Bitcoin it friendly to the environment?
If bitcoin is effectively catalyzing the conversion of electricity production to renewable forms, then even if it is an extra source of entropy for now, its better for the future. Although effectively is the key word in that sentence.

I seem to not like the idea of creating these secondary classification names for the core protocol of Bitcoin. The Bitcoin protocol has certain parameters of operation which are dynamic. And its applicability to any application is dependent on these parameters. Consider the following parameters of the Bitcoin Protocol:

• Transaction fee: dependent on the volume of transactions in the pool
• Puzzle difficulty: dependent on the hashing power of the network

These parameters are also functions themselves. But they are more complex social functions. The transaction fee is dependent on the amount of people that are transacting on the Bitcoin Blockchain and the Puzzle difficulty is game theoretically dependent on the profit per block. profit per block is dependent on the transaction fees in a generated block, block reward volume and bitcoin market price. Market price determination is a social phenomena.

To me, the core functionality of Bitcoin is the ability to validate that something happened (i.e. an Event) and everyone has consensus on this Event as truth. This all occurs without a third party authority. What that event is, could be anything. A transaction of BTC, transaction of some asset title embedded in the transaction message, etc. I think the keyword is transact.

As the parameter values for the protocol change, then the applicability of the base bitcoin protocol to certain applications will become more or less viable. So maybe in this current social context Bitcoin may function as digital storage of value.

But I propose that we imagine a time where the cost of transacting on the blockchain is so expensive that Bitcoin doesn't serve well as a storage of value. In this scenario, the transaction fees are so high, to shift the value from one place to another viably would require shifting large sums of BTC. Now, hypothetically, Bitcoin could be more suited to storing, on ledger, commitment type transactions (e.g. Countries ratifying a treaty between each other). Which interestingly enough, would only require the transaction fee amount to place the data on the blockchain and a symbolic amount to transfer between wallets.

I am not making any predictions about future use here, but just trying to demonstrate that what we believe Bitcoin will be used for is dependent on the parameter values of the bitcoin protocol, which are subject to social behavior. Social behavior is then also constrained by law, regulations, etc.


[EDIT] I would not like to downplay bitcoin's ability to participate in applications more independently of these parameters through the use of second layer protocols

Thanks!  This is all very encouraging. Its good to be back. There are some genuine questions I have and I hope i can contribute to answering questions, which is within my wheelhouse/capacity. So, I will be around here and there

Yeah. I need to sit down and have a read of the forum rules. Will do that during the next week.   

I am so sorry, I was under the impression I was in the Bitcoin Discussion section of the forum

This thread doesn't really fit this section, but i cant delete my own threads. Any help from a mod would be nice.

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.

Thank you, I feel the same way. I just saw a post in the serious discussion section and had something to contribute. But I understand the forum rules a little better now. I work on that activity 



Cheers for that! 

I would like to point out, that 2% population statistic only came about from the rate of innovation and introduction of utility since Bitcoin's conception and the urgency that some of those people have for a new currency. These people are not using it as a luxury.

I think volatility (noise) and drift (movement) of Bitcoin's price are two real research questions. I am not a economist. But my novice understanding would have me believe that some factors that contribute to the volatility and drift are:

• The relatively small amount of liquidity (trade volume)
• The concentration of Bitcoin with whale traders
• The almost monolithic use of Bitcoin in speculation based applications
• Shady exchange behavior which contributes to the barrier for institutional investment

I think that the base technology is maturing. The Bitcoin Protocol is solid af. Lightning Node Network is a major step in my eyes for bitcoin to be used casually in everyday transactions. Which steps it closer to mainstream use of its first application (currency).

Towards optimizing:
I feel that eventually the above issues will dissipate over time. But introducing infrastructure that makes Bitcoin easy to use will greatly help for mainstream adoption. Off the top of my head, I envision a future, where every home will feature a little home server. This home server will host:

• LLN hot wallets of the residents in that home (equivalent to a transaction account for spending)
• Bitcoin wallets for the residents in that home which are able to top up the LLN hot wallet (equivalent to a savings account.. for saving)

Then on a portable device (phone or some other specific device that fits in a wallet), client side software will provide the ability for the owner to spend via the associated LLN hot wallet. The client side software will provide security features like adjustable maximum spend per day, etc. The server side software will:

• Conduct record keeping of transactions on the LLN hot wallet
• Manage opening, closing and connecting LLN hot wallet to LLN
• ensure that Bitcoin does not accumulate in one wallet (distribute to multiple wallets)(based on rules applied by owner at setup)
• Will manage some form of RAID1 data redundancy for Wallets (perhaps stored, encrypted in other peoples home servers.. hmm, don't know, risky).
• Allow multi-sig Bitcoin wallets (joint accounts between people)

This type of innovation, in my belief, will encapsulate people from dealing with the nitty gritty of bitcoin blockchain back-end infrastructure. It would lead to more adoption and variation in use cases. It would bring Bitcoin into the home and the applications can grow from there. Like asset management, automated accounting services (i mean just imagine, not having to deal with paper receipts... IMAGINE!!! ). Imagination is your ceiling really (just watch out for the serrated steel lined ceiling fan which is governments having misconceptions about Bitcoin and central banks defending market share).

Thank you. Didnt think to read the sticky... shows the extent of my Newbieness

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?

The quality and usefulness of the protocol is not dependent on the developer's name or popularity. Its dependent on the function of the protocol. No one knows who satoshi nakamoto is, yet there is real usefulness in the bitcoin protocol. Don't trust the developers, look at the code. If you cant look at the code, look at the features of the protocol, judge if there is intrinsic use for them in society and then trust the community that peer reviews the code.

If there is no peer reviewing of the code, you are dealing with a closed organization... good luck to you.