Bitcoin is unsustainable, according to Vice

[Windpower]

http://motherboard.vice.com/pt_br/read/bitcoin-insustentavel

Bitcoin’s power usage per transaction isn’t remotely sustainable as a wholesale replacement for the conventional financial system.

The year is 2018. After a rough Greek exit from the eurozone, economic malaise has spread to Italy, Portugal, Spain, and France. Nervous citizens across Europe look for a way to get their money out as currency traders hammer the weakening euro, banks impose withdrawal limits, and their purchasing power plummets.

Enter Bitcoin.

Compared to the euro, the peer-to-peer decentralized electronic currency has now become a relatively stable digital asset. Fiendish buyers trade their euros en masse online for Bitcoin, and soon, depositors worldwide join them. The price of Bitcoin rises, prompting more user adoption by spenders and speculators, and recognition from governments and populations alike.

The above scenario sounds like a nice piece of prepper-bait from conspiracy site infowars.com. But could (or should) Bitcoin actually take over? Some of the more enthusiastic Bitcoin advocates argue that the currency is ready for prime time—in other words, ready to replace national currencies, or perhaps replace global banking’s creaking clearinghouses. Would this be good for the world?

From an environmental point of view, it certainly wouldn’t be good news. Unfortunately for Bitcoin advocates, the currency uses too much electricity right now—way too much: According to my calculation, a single Bitcoin transaction uses roughly enough electricity to power 1.57 American households for a day.

All that energy expenditure has an important purpose: it secures Bitcoin from attacks by speculators, criminals, and other evil-doers by raising the price of the computer power needed to gain control of all transactions on the network. The computers that make up the Bitcoin economy’s backbone are constantly ensuring security and verifiability for the network by solving cryptographic puzzles. This process is called “mining.” Those who participate in this network maintenance are rewarded in Bitcoin, incentivizing them to bulk up their machines so they can mine more efficiently.

There is potential for Bitcoin to become more efficient by stuffing more transactions into the mining process. But at the end of the day, if Bitcoin sees increased adoption and price and many more useful transactions, power consumption is almost guaranteed to grow.

Motherboard has previously covered how big Bitcoin mining operations can get. So how much electricity are we talking about?

Let’s take this Bitcoin mine in China as an example of the scale of today’s operations. It is supposedly running at 6 PH (quadrillion hashes) per second, according to a Chinese Bitcoin company CEO posting in a Bitcoin forum, with the aim to scale up to 12 PH per second. That would give it about 3.3 percent of the total power on the Bitcoin network. Because the Bitcoin network is set up to dole out around 3,600 BTC per day to miners, this mine would rake in about 118.8 BTC per day, or more than $30,000USD at the time of writing. That’s not a bad haul when your electricity costs are among the lowest in the world at 3 to 6 cents per kw/h, about a third of US prices.

Bitcoin’s power usage per transaction isn’t remotely sustainable as a wholesale replacement for the conventional financial system

Computer cooling firm Allied Control estimates the total power consumption of the Bitcoin network at 250 to 500 Megawatts. Looking at the total hashrate, which is the number of calculations the network can perform per second, and applying a generous miner efficiency of 0.6 watts per gigahash, we can estimate our own back-of-the-envelope Bitcoin network constant power draw at just under 215 MW, although this figure is always in flux (it’s important to note that many of the variables in my calculation are constantly changing slightly). That’s around enough zap to power 173,000 average American households’ daily electricity usage.

With about 110,000 transactions per day, that works out to 1.57 households daily usage of electricity per Bitcoin transaction. Yes, every time you buy something in Bitcoin, you could be using as much electricity as 1.57 American families do in a day.

“The actual figure is likely worse, given that a large number of transactions are exchanges and miners moving bitcoins around and other low-value ‘dust’ transactions,” said Matthew Green, a cryptography expert at Johns Hopkins University. “So each transaction where there’s an exchange of goods or services happening is really representing even more electricity.”

As climate change becomes a more pressing concern for humanity every day, this huge level of energy use is difficult to justify for a currency wanting to improve on the current arrangement.

“It appears there are significant challenges to ensuring that Bitcoin’s growth minimizes environmental impacts,” offered Jeremy McDaniels, a financial system sustainability expert with the UNEP. “Energy footprints could be an issue of major scale-up is achieved.”

There is hope that Bitcoin may be able to reduce its footprint, however.

One important thing to understand is that the electricity demands of Bitcoin mining won’t scale up linearly with increased usage or transactions. Bitcoin miners use special hardware to guess over and over at solutions to computational problems for each “block,” which records transactions into a permanent ledger. The first problem-solver “wins” the block and the reward: brand new bitcoins.

Bitcoin can currently handle up to 360,000 transactions per day given current limitations built into the technology, according to Jorge Stolfi, a computer science professor from Campinas University in Brazil, so there’s some headroom left before things bog down.

It would be possible to bring down the average power cost of each transaction by modifying the underlying Bitcoin protocol, but that’s no easy feat. The Bitcoin community is currently debating a big change that would mean the network could theoretically handle about 7.2 million transactions a day on a comparable level of electricity consumption, according to Stolfi. That would require a majority of the people mining Bitcoin to agree to the change, however.

Keeping power consumption high in general also makes the network more secure by making it harder for any one entity to gain control. “The right way to think about this is that the energy expenditure provides a level of protection against attacks—it establishes a price floor, currently in the many millions, to launch a 34 percent or 51 percent attack [where an attacker can block transactions and double spend bitcoins as they please],” Emin Gun Sirer, a Cornell professor and blogger at Hacking Distributed, explained in an email.

However, that same level of security could be maintained while allowing for more transactions, he said, shrinking the cost per transaction.

All that needs to happen, then, is to expand the userbase so we have more transactions, right?

Unfortunately for Bitcoin, if user adoption spikes, so will price—and so must power consumption. Bitcoin mining leads to an arms race among miners to grab a slice of the fixed rewards doled out by the network, Stolfi said. The higher the financial rewards, the more miners will invest in powerful equipment to keep up with the competition. The Bitcoin protocol will continue to increase the difficulty of the cryptopuzzles to keep rewards constant, continuing the arms race until the last block is mined.

That makes Bitcoin about 5,033 times more energy intensive, per transaction, than VISA

The bottom line? Price = energy. “The total revenue of the mining industry is Bitcoin price times BTC revenue in USD/day, independently of anything else; and the electricity consumption, also in USD/day, is some large fraction of that,” concludes Stolfi.

Green agrees: “Almost everything in Bitcoin is flexible, but that dynamic isn’t. Miners always have the incentive to throw as many hashes [requiring power] at the job as the price dictates.”

Of course, it wouldn’t be fair to knock Bitcoin’s electricity consumption without comparing it to payment systems most people use today. Let’s take VISA as an example.

According to Network Computing, the VISA network can process more than 80 billion transactions per year or 2,537 transactions per second, using two mirrored data centers, each capable of running the entire network. The larger data center is currently pulling enough power for 25,000 households’ daily electricity, so we’ll double that to account for VISA’s total draw. In 2013, VISA’s investor reports say the company processed 58.5 billion transactions.

Working off these (admittedly imperfect) figures, each VISA transaction consumes around 0.0003 household’s daily electricity use. That makes Bitcoin about 5,033 times more energy intensive, per transaction, than VISA, at current usage levels.



Both networks use a lot of houses worth of daily juice, but one of them processes millions more transactions. Image: Motherboard
Of course, VISA runs call centers, offices, and a whole lot else on electricity as well, which isn’t counted in this comparison. But those hardly matter due to the extreme difference between the two figures.

In a rosy 2014 Bitcoin sustainability study, Bitcoin analyst Hass McCook concluded that “Bitcoin has 99.8% fewer [carbon] emissions than the banking system,” which we can treat as a rough proxy for energy use. The study neglects to account for the vast size difference between the Bitcoin economy and the conventional money system, however—the world banking system’s market capitalization in 2010 alone was over 1,989 times bigger than today’s total Bitcoin valuation.

In light of the above analysis, Bitcoin’s power usage per transaction isn’t remotely sustainable as a wholesale replacement for the conventional financial system. In the future, Bitcoin could massively gain popularity, pile on millions more transactions, and still be unsustainable due to the arms race between miners.

In an email, Bitcoin expert Piotr Piasecki added some context to the comparison: “With the increase of the block size, there will be more transactions included in the block, so the cost per transaction should go down. While it might not reach such low levels as Visa, we are talking about two somewhat different systems. One is a database entry in a single system, another one is an immutable record of history in a decentralized ledger.”

What do you guys thing? is this barrier being solved by the improvements in the blockchain technology?

Maybe in the future, the power usage per transaction will be to high for what miners get paid. But not now.

[CuntChocula]

 but now Bitcoin enthusiasts have also given up on the idea of Bitcoin becoming A Peer-to-Peer Electronic Cash System.  

only certain misguided smallblockers have.

The rest of us are as excited as ever about Bitcoin.

It won't happen. The recent dev drama is nothing new -- was always there.  Bitcoin depends on consensus. Consensus is hard to reach, and, as it became painfully clear, even agreeing on what "consensus" means can't be agreed on.
The Hitchhiker's Guide tells us that flying is simple: it involves learning to throw yourself at the ground and missing.
"Clearly, it is this second part, the missing reaching consensus, that presents the difficulties."

It already happened!  We already have a peer to peer currency.  Pretty amazing if you think about it.

And I believe that the economic majority will force us through the impasse on scalability should consensus prove to be illusive.

"Economic Majority" is the people in fiat. The folks hodling shitloads of BTC don't count -- no mechanism exists for them to enforce their decision, or even *to voice it*.
Scalability's as elusive as consensus. Remember, the blockchain keeps growing by a block every ~10 minutes. No way to prune it, currently -- just keeps growing and growing

And a system which claims to respond to the wants of "economic majority," with no clear path for this "economic majority" to make a change? "No worries brah, the market will fix everything, invisible hand lol"?

*OVER A YEAR* of arguing over this -- the most predictable, technically trivial problem -- *and still no solution*?!
Color me impressed.

[CuntChocula]

You clearly don't understand what banks do.
"... raise capital from investors or lenders, and then use that money to make loans, buy securities and provide other financial services to customers. These loans are then used by people and businesses to buy goods or expand business operations ..."
Also see here: https://en.wikipedia.org/wiki/Underwriting
When you buy your first house, you go to a bank.
Does BitFury lend money? Can it help me refinance my house? Doe it engage in underwriting? No? Then it's not a bank.
Now you know.

when you get a mortgage. you are not given funds from other peoples bank accounts..
money is created!! .. same as miners.. they create funds too (block reward)
here straight from the horses mouth
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf
create money through loans

Learn more
please

Go argue with Investopedia, from whence the quoted text was gleaned, irrelevant to my point.
Which I'll repeat:
"Does BitFury lend money? Can it help me refinance my house? Doe it engage in underwriting? No? Then it's not a bank."

[franky1]

Go argue with Investopedia, from whence the quoted text was gleaned, irrelevant to my point.
Which I'll repeat:
"Does BitFury lend money? Can it help me refinance my house? Doe it engage in underwriting? No? Then it's not a bank."

banks create money
banks control the circulation of money
banks process and ensure transactions are settled.

why are you obsessed with talking about lending which has no relevance to bitcoins function..

[CuntChocula]

Go argue with Investopedia, from whence the quoted text was gleaned, irrelevant to my point.
Which I'll repeat:
"Does BitFury lend money? Can it help me refinance my house? Doe it engage in underwriting? No? Then it's not a bank."

banks create money
banks control the circulation of money
banks process and ensure transactions are settled.

why are you obsessed with talking about lending which has no relevance to bitcoins function..

ELY2:
1. You claim BitFury is analogous to a bank office.
2. I point out that BitFury doesn't do anything that the bank does: It doesn't lend money, it doesn't underwrite, it doesn't help me buy a house or finance a business. That's what banks do.
Bitcoin will need things like banks, because people don't have a million dollars to buy a new house -- they need a mortgage. There were several flegling Bitcoin "banks," from Pirateat40's Bitcoin Savings and Trust to Danny Brewster's Neo Bee, with many in between.
Unfortunately, they didn't work out so well...
Remember the funky ads?
http://s2.postimg.org/onlche5ft/neo2.jpg

TL;DR: No. Those buildings with people in them that are called banks are no more similar to BitFury than they are to aardvarks.
Now go play your vidya.

[Ikron]

New articles making bold statements that never seem to deliver.......

[aso118]

I don't like the idea of forecasts based on power usage per transaction, or cost per transaction because nothing's fixed. Computers may become much more efficient in the future. When Intel launched its latest microprocessor for laptops, it was saying exactly that, giving users more autonomy when running on battery.

Coming increase in block size will also change a lot of things.

The total amount of energy used for Bitcoin mining is independent of the efficiency of the mining equipment used.

Why is that? For a given hashing power, total amount of energy used should decrease if the efficiency of the mining equipment used improves.

[russian_pete]

There seems to be an awful rush to declare bitcoin dead/unsustainable/scary of late - even moreso than usual. And none of it's been particularly credible or convincing so far.

Well, thank you everyone for pointing that out. Being a novice in the bitcoin world, I'm still learning how to apprehend all this FUD about our beloved coins.

While it's pretty clear news like this one have an impact on bitcoin price (in a larger or smaller scale) what is left unasked is: how could we discover who's behind this negative fuzz? Is there any way to monitor the performance of big players and plot it against such "news"?

[BurtW]

I don't like the idea of forecasts based on power usage per transaction, or cost per transaction because nothing's fixed. Computers may become much more efficient in the future. When Intel launched its latest microprocessor for laptops, it was saying exactly that, giving users more autonomy when running on battery.

Coming increase in block size will also change a lot of things.

The total amount of energy used for Bitcoin mining is independent of the efficiency of the mining equipment used.

Why is that? For a given hashing power, total amount of energy used should decrease if the efficiency of the mining equipment used improves.

There is a whole thread about it here:

https://bitcointalk.org/index.php?topic=694401.0

Basically, for a given price per BTC and a given era (BTC per block) the miners together can "afford" and will spend most of the block reward + fees on energy.  This is by design.  If equipment gets more efficient then the miners will just buy more equipment until they are consuming as much energy as they can afford.

The formula I previously derived for the amount of power, P, consumed by the Bitcoin mining network is:

P = (6(50/2^e) + f)(x)(1 - g)/c [kW]

where:

x = exchange rate [USD/BTC]
e = era [0..32] (we are currently in era 1)
f = average fees per hour [BTC/hour]
c = cost of energy [USD/kWh]
g = average gross profit margin [unitless ratio]

Note that the total power consumption is not dependent on efficiency.

[MyBTT]

http://motherboard.vice.com/pt_br/read/bitcoin-insustentavel

Bitcoin’s power usage per transaction isn’t remotely sustainable as a wholesale replacement for the conventional financial system.

The year is 2018. After a rough Greek exit from the eurozone, economic malaise has spread to Italy, Portugal, Spain, and France. Nervous citizens across Europe look for a way to get their money out as currency traders hammer the weakening euro, banks impose withdrawal limits, and their purchasing power plummets.

Enter Bitcoin.

Compared to the euro, the peer-to-peer decentralized electronic currency has now become a relatively stable digital asset. Fiendish buyers trade their euros en masse online for Bitcoin, and soon, depositors worldwide join them. The price of Bitcoin rises, prompting more user adoption by spenders and speculators, and recognition from governments and populations alike.

The above scenario sounds like a nice piece of prepper-bait from conspiracy site infowars.com. But could (or should) Bitcoin actually take over? Some of the more enthusiastic Bitcoin advocates argue that the currency is ready for prime time—in other words, ready to replace national currencies, or perhaps replace global banking’s creaking clearinghouses. Would this be good for the world?

From an environmental point of view, it certainly wouldn’t be good news. Unfortunately for Bitcoin advocates, the currency uses too much electricity right now—way too much: According to my calculation, a single Bitcoin transaction uses roughly enough electricity to power 1.57 American households for a day.

All that energy expenditure has an important purpose: it secures Bitcoin from attacks by speculators, criminals, and other evil-doers by raising the price of the computer power needed to gain control of all transactions on the network. The computers that make up the Bitcoin economy’s backbone are constantly ensuring security and verifiability for the network by solving cryptographic puzzles. This process is called “mining.” Those who participate in this network maintenance are rewarded in Bitcoin, incentivizing them to bulk up their machines so they can mine more efficiently.

There is potential for Bitcoin to become more efficient by stuffing more transactions into the mining process. But at the end of the day, if Bitcoin sees increased adoption and price and many more useful transactions, power consumption is almost guaranteed to grow.

Motherboard has previously covered how big Bitcoin mining operations can get. So how much electricity are we talking about?

Let’s take this Bitcoin mine in China as an example of the scale of today’s operations. It is supposedly running at 6 PH (quadrillion hashes) per second, according to a Chinese Bitcoin company CEO posting in a Bitcoin forum, with the aim to scale up to 12 PH per second. That would give it about 3.3 percent of the total power on the Bitcoin network. Because the Bitcoin network is set up to dole out around 3,600 BTC per day to miners, this mine would rake in about 118.8 BTC per day, or more than $30,000USD at the time of writing. That’s not a bad haul when your electricity costs are among the lowest in the world at 3 to 6 cents per kw/h, about a third of US prices.

Bitcoin’s power usage per transaction isn’t remotely sustainable as a wholesale replacement for the conventional financial system

Computer cooling firm Allied Control estimates the total power consumption of the Bitcoin network at 250 to 500 Megawatts. Looking at the total hashrate, which is the number of calculations the network can perform per second, and applying a generous miner efficiency of 0.6 watts per gigahash, we can estimate our own back-of-the-envelope Bitcoin network constant power draw at just under 215 MW, although this figure is always in flux (it’s important to note that many of the variables in my calculation are constantly changing slightly). That’s around enough zap to power 173,000 average American households’ daily electricity usage.

With about 110,000 transactions per day, that works out to 1.57 households daily usage of electricity per Bitcoin transaction. Yes, every time you buy something in Bitcoin, you could be using as much electricity as 1.57 American families do in a day.

“The actual figure is likely worse, given that a large number of transactions are exchanges and miners moving bitcoins around and other low-value ‘dust’ transactions,” said Matthew Green, a cryptography expert at Johns Hopkins University. “So each transaction where there’s an exchange of goods or services happening is really representing even more electricity.”

As climate change becomes a more pressing concern for humanity every day, this huge level of energy use is difficult to justify for a currency wanting to improve on the current arrangement.

“It appears there are significant challenges to ensuring that Bitcoin’s growth minimizes environmental impacts,” offered Jeremy McDaniels, a financial system sustainability expert with the UNEP. “Energy footprints could be an issue of major scale-up is achieved.”

There is hope that Bitcoin may be able to reduce its footprint, however.

One important thing to understand is that the electricity demands of Bitcoin mining won’t scale up linearly with increased usage or transactions. Bitcoin miners use special hardware to guess over and over at solutions to computational problems for each “block,” which records transactions into a permanent ledger. The first problem-solver “wins” the block and the reward: brand new bitcoins.

Bitcoin can currently handle up to 360,000 transactions per day given current limitations built into the technology, according to Jorge Stolfi, a computer science professor from Campinas University in Brazil, so there’s some headroom left before things bog down.

It would be possible to bring down the average power cost of each transaction by modifying the underlying Bitcoin protocol, but that’s no easy feat. The Bitcoin community is currently debating a big change that would mean the network could theoretically handle about 7.2 million transactions a day on a comparable level of electricity consumption, according to Stolfi. That would require a majority of the people mining Bitcoin to agree to the change, however.

Keeping power consumption high in general also makes the network more secure by making it harder for any one entity to gain control. “The right way to think about this is that the energy expenditure provides a level of protection against attacks—it establishes a price floor, currently in the many millions, to launch a 34 percent or 51 percent attack [where an attacker can block transactions and double spend bitcoins as they please],” Emin Gun Sirer, a Cornell professor and blogger at Hacking Distributed, explained in an email.

However, that same level of security could be maintained while allowing for more transactions, he said, shrinking the cost per transaction.

All that needs to happen, then, is to expand the userbase so we have more transactions, right?

Unfortunately for Bitcoin, if user adoption spikes, so will price—and so must power consumption. Bitcoin mining leads to an arms race among miners to grab a slice of the fixed rewards doled out by the network, Stolfi said. The higher the financial rewards, the more miners will invest in powerful equipment to keep up with the competition. The Bitcoin protocol will continue to increase the difficulty of the cryptopuzzles to keep rewards constant, continuing the arms race until the last block is mined.

That makes Bitcoin about 5,033 times more energy intensive, per transaction, than VISA

The bottom line? Price = energy. “The total revenue of the mining industry is Bitcoin price times BTC revenue in USD/day, independently of anything else; and the electricity consumption, also in USD/day, is some large fraction of that,” concludes Stolfi.

Green agrees: “Almost everything in Bitcoin is flexible, but that dynamic isn’t. Miners always have the incentive to throw as many hashes [requiring power] at the job as the price dictates.”

Of course, it wouldn’t be fair to knock Bitcoin’s electricity consumption without comparing it to payment systems most people use today. Let’s take VISA as an example.

According to Network Computing, the VISA network can process more than 80 billion transactions per year or 2,537 transactions per second, using two mirrored data centers, each capable of running the entire network. The larger data center is currently pulling enough power for 25,000 households’ daily electricity, so we’ll double that to account for VISA’s total draw. In 2013, VISA’s investor reports say the company processed 58.5 billion transactions.

Working off these (admittedly imperfect) figures, each VISA transaction consumes around 0.0003 household’s daily electricity use. That makes Bitcoin about 5,033 times more energy intensive, per transaction, than VISA, at current usage levels.



Both networks use a lot of houses worth of daily juice, but one of them processes millions more transactions. Image: Motherboard
Of course, VISA runs call centers, offices, and a whole lot else on electricity as well, which isn’t counted in this comparison. But those hardly matter due to the extreme difference between the two figures.

In a rosy 2014 Bitcoin sustainability study, Bitcoin analyst Hass McCook concluded that “Bitcoin has 99.8% fewer [carbon] emissions than the banking system,” which we can treat as a rough proxy for energy use. The study neglects to account for the vast size difference between the Bitcoin economy and the conventional money system, however—the world banking system’s market capitalization in 2010 alone was over 1,989 times bigger than today’s total Bitcoin valuation.

In light of the above analysis, Bitcoin’s power usage per transaction isn’t remotely sustainable as a wholesale replacement for the conventional financial system. In the future, Bitcoin could massively gain popularity, pile on millions more transactions, and still be unsustainable due to the arms race between miners.

In an email, Bitcoin expert Piotr Piasecki added some context to the comparison: “With the increase of the block size, there will be more transactions included in the block, so the cost per transaction should go down. While it might not reach such low levels as Visa, we are talking about two somewhat different systems. One is a database entry in a single system, another one is an immutable record of history in a decentralized ledger.”

What do you guys thing? is this barrier being solved by the improvements in the blockchain technology?

Maybe in the future, the power usage per transaction will be to high for what miners get paid. But not now.

Very true. Miners wouldn't mine if they weren't earning money. So the power to earning ratio is good.

[russian_pete]

http://motherboard.vice.com/pt_br/read/bitcoin-insustentavel

Bitcoin’s power usage per transaction isn’t remotely sustainable as a wholesale replacement for the conventional financial system.

The year is 2018. After a rough Greek exit from the eurozone, economic malaise has spread to Italy, Portugal, Spain, and France. Nervous citizens across Europe look for a way to get their money out as currency traders hammer the weakening euro, banks impose withdrawal limits, and their purchasing power plummets.

Enter Bitcoin.

Compared to the euro, the peer-to-peer decentralized electronic currency has now become a relatively stable digital asset. Fiendish buyers trade their euros en masse online for Bitcoin, and soon, depositors worldwide join them. The price of Bitcoin rises, prompting more user adoption by spenders and speculators, and recognition from governments and populations alike.

The above scenario sounds like a nice piece of prepper-bait from conspiracy site infowars.com. But could (or should) Bitcoin actually take over? Some of the more enthusiastic Bitcoin advocates argue that the currency is ready for prime time—in other words, ready to replace national currencies, or perhaps replace global banking’s creaking clearinghouses. Would this be good for the world?

From an environmental point of view, it certainly wouldn’t be good news. Unfortunately for Bitcoin advocates, the currency uses too much electricity right now—way too much: According to my calculation, a single Bitcoin transaction uses roughly enough electricity to power 1.57 American households for a day.

All that energy expenditure has an important purpose: it secures Bitcoin from attacks by speculators, criminals, and other evil-doers by raising the price of the computer power needed to gain control of all transactions on the network. The computers that make up the Bitcoin economy’s backbone are constantly ensuring security and verifiability for the network by solving cryptographic puzzles. This process is called “mining.” Those who participate in this network maintenance are rewarded in Bitcoin, incentivizing them to bulk up their machines so they can mine more efficiently.

There is potential for Bitcoin to become more efficient by stuffing more transactions into the mining process. But at the end of the day, if Bitcoin sees increased adoption and price and many more useful transactions, power consumption is almost guaranteed to grow.

Motherboard has previously covered how big Bitcoin mining operations can get. So how much electricity are we talking about?

Let’s take this Bitcoin mine in China as an example of the scale of today’s operations. It is supposedly running at 6 PH (quadrillion hashes) per second, according to a Chinese Bitcoin company CEO posting in a Bitcoin forum, with the aim to scale up to 12 PH per second. That would give it about 3.3 percent of the total power on the Bitcoin network. Because the Bitcoin network is set up to dole out around 3,600 BTC per day to miners, this mine would rake in about 118.8 BTC per day, or more than $30,000USD at the time of writing. That’s not a bad haul when your electricity costs are among the lowest in the world at 3 to 6 cents per kw/h, about a third of US prices.

Bitcoin’s power usage per transaction isn’t remotely sustainable as a wholesale replacement for the conventional financial system

Computer cooling firm Allied Control estimates the total power consumption of the Bitcoin network at 250 to 500 Megawatts. Looking at the total hashrate, which is the number of calculations the network can perform per second, and applying a generous miner efficiency of 0.6 watts per gigahash, we can estimate our own back-of-the-envelope Bitcoin network constant power draw at just under 215 MW, although this figure is always in flux (it’s important to note that many of the variables in my calculation are constantly changing slightly). That’s around enough zap to power 173,000 average American households’ daily electricity usage.

With about 110,000 transactions per day, that works out to 1.57 households daily usage of electricity per Bitcoin transaction. Yes, every time you buy something in Bitcoin, you could be using as much electricity as 1.57 American families do in a day.

“The actual figure is likely worse, given that a large number of transactions are exchanges and miners moving bitcoins around and other low-value ‘dust’ transactions,” said Matthew Green, a cryptography expert at Johns Hopkins University. “So each transaction where there’s an exchange of goods or services happening is really representing even more electricity.”

As climate change becomes a more pressing concern for humanity every day, this huge level of energy use is difficult to justify for a currency wanting to improve on the current arrangement.

“It appears there are significant challenges to ensuring that Bitcoin’s growth minimizes environmental impacts,” offered Jeremy McDaniels, a financial system sustainability expert with the UNEP. “Energy footprints could be an issue of major scale-up is achieved.”

There is hope that Bitcoin may be able to reduce its footprint, however.

One important thing to understand is that the electricity demands of Bitcoin mining won’t scale up linearly with increased usage or transactions. Bitcoin miners use special hardware to guess over and over at solutions to computational problems for each “block,” which records transactions into a permanent ledger. The first problem-solver “wins” the block and the reward: brand new bitcoins.

Bitcoin can currently handle up to 360,000 transactions per day given current limitations built into the technology, according to Jorge Stolfi, a computer science professor from Campinas University in Brazil, so there’s some headroom left before things bog down.

It would be possible to bring down the average power cost of each transaction by modifying the underlying Bitcoin protocol, but that’s no easy feat. The Bitcoin community is currently debating a big change that would mean the network could theoretically handle about 7.2 million transactions a day on a comparable level of electricity consumption, according to Stolfi. That would require a majority of the people mining Bitcoin to agree to the change, however.

Keeping power consumption high in general also makes the network more secure by making it harder for any one entity to gain control. “The right way to think about this is that the energy expenditure provides a level of protection against attacks—it establishes a price floor, currently in the many millions, to launch a 34 percent or 51 percent attack [where an attacker can block transactions and double spend bitcoins as they please],” Emin Gun Sirer, a Cornell professor and blogger at Hacking Distributed, explained in an email.

However, that same level of security could be maintained while allowing for more transactions, he said, shrinking the cost per transaction.

All that needs to happen, then, is to expand the userbase so we have more transactions, right?

Unfortunately for Bitcoin, if user adoption spikes, so will price—and so must power consumption. Bitcoin mining leads to an arms race among miners to grab a slice of the fixed rewards doled out by the network, Stolfi said. The higher the financial rewards, the more miners will invest in powerful equipment to keep up with the competition. The Bitcoin protocol will continue to increase the difficulty of the cryptopuzzles to keep rewards constant, continuing the arms race until the last block is mined.

That makes Bitcoin about 5,033 times more energy intensive, per transaction, than VISA

The bottom line? Price = energy. “The total revenue of the mining industry is Bitcoin price times BTC revenue in USD/day, independently of anything else; and the electricity consumption, also in USD/day, is some large fraction of that,” concludes Stolfi.

Green agrees: “Almost everything in Bitcoin is flexible, but that dynamic isn’t. Miners always have the incentive to throw as many hashes [requiring power] at the job as the price dictates.”

Of course, it wouldn’t be fair to knock Bitcoin’s electricity consumption without comparing it to payment systems most people use today. Let’s take VISA as an example.

According to Network Computing, the VISA network can process more than 80 billion transactions per year or 2,537 transactions per second, using two mirrored data centers, each capable of running the entire network. The larger data center is currently pulling enough power for 25,000 households’ daily electricity, so we’ll double that to account for VISA’s total draw. In 2013, VISA’s investor reports say the company processed 58.5 billion transactions.

Working off these (admittedly imperfect) figures, each VISA transaction consumes around 0.0003 household’s daily electricity use. That makes Bitcoin about 5,033 times more energy intensive, per transaction, than VISA, at current usage levels.



Both networks use a lot of houses worth of daily juice, but one of them processes millions more transactions. Image: Motherboard
Of course, VISA runs call centers, offices, and a whole lot else on electricity as well, which isn’t counted in this comparison. But those hardly matter due to the extreme difference between the two figures.

In a rosy 2014 Bitcoin sustainability study, Bitcoin analyst Hass McCook concluded that “Bitcoin has 99.8% fewer [carbon] emissions than the banking system,” which we can treat as a rough proxy for energy use. The study neglects to account for the vast size difference between the Bitcoin economy and the conventional money system, however—the world banking system’s market capitalization in 2010 alone was over 1,989 times bigger than today’s total Bitcoin valuation.

In light of the above analysis, Bitcoin’s power usage per transaction isn’t remotely sustainable as a wholesale replacement for the conventional financial system. In the future, Bitcoin could massively gain popularity, pile on millions more transactions, and still be unsustainable due to the arms race between miners.

In an email, Bitcoin expert Piotr Piasecki added some context to the comparison: “With the increase of the block size, there will be more transactions included in the block, so the cost per transaction should go down. While it might not reach such low levels as Visa, we are talking about two somewhat different systems. One is a database entry in a single system, another one is an immutable record of history in a decentralized ledger.”

What do you guys thing? is this barrier being solved by the improvements in the blockchain technology?

Maybe in the future, the power usage per transaction will be to high for what miners get paid. But not now.

Very true. Miners wouldn't mine if they weren't earning money. So the power to earning ratio is good.

It is indeed good, specially if you're looking at a wider time range. As history proved, btc price tend to go up (since there's a limited supply). hence the earnings are even bigger. The appreciation of the coin through time is usually unconsidered from such calculations.

[sandal]

How many $$ does it take for the bnanking institution to pen-test their systems?

Probably a lot more t han the cumulative power costs to run Bitcoin.

[ATguy]

It's so much greener to put a check in the mail so that it can be driven to the recipient. The recipient can then drive it to the bank and the bank can fire up their computer and enter the data.   

Actually yeah, by far.  Let me break it down for you:
An average block contains 2.7 * (takes 600 seconds to mine a block) = 1620 transactions. At most (some blocks are mined empty, as in "no* transactions).
For this, miners receive 25 BTC, which, at current rate, is roughly 12,000 dollars.
Meaning ~$7.40 PER TX.
Assuming that 1/3 of that is electrical cost (let's be generous), that's about $2.50 in energy cost, PER TRANSACTION.

Unless you think US Post Office is spending $2.50 in gas alone to deliver a check...

Hmmm. That is interesting. I would have thought actual delivery would be much more inefficient. But $2.50 per Tx is a lot. I wonder how miners can be profitable charging only pennies per Tx?

Because their costs have nothing to do with the number of transactions they are processing but rather the blocks they solve.

This. The actual cost of Bitcoin transactions are pennies, and only orphan increase determine the cost of Bitcoin transaction for rational miner.

Because they get paid 25BTC for each block they solve. The few pennies they charge per tx are almost irrelevant. Many miners chose to mine *empty blocks* -- blocks containing *no* transactions.
That's why Bitcoin has 10% yearly base money inflation

The 25 BTC for each block is a fair way to distribute 21 million Bitcoins over time, and has nothing to do with cost of transaction.

BTW if miners are allowed to include more than about 1000 transactions into the block, these  pennies they charge per tx would definitively sum up, and as long as the tx fees are worth more than loses from orphan risk, it is win-win situation to include many more txs (both for user waiting for 1st confirmation  and miner getting more fees).

[CuntChocula]

...
The 25 BTC for each block is a fair way to distribute 21 million Bitcoins over time, and has nothing to do with cost of transaction.

BTW if miners are allowed to include more than about 1000 transactions into the block, these  pennies they charge per tx would definitively sum up, and as long as the tx fees are worth more than loses from orphan risk, it is win-win situation to include many more txs (both for user waiting for 1st confirmation  and miner getting more fees).

"If miners are allowed"?!
Friend, miners are allowed, they don't wanna. Arguments are being made that Bitcoin doesn't need more tps, that it's not for sexual microtransactions (or, rather, anything but major transactions, as in B2B settlement network, not P2P cash).
Impasse. For over a year. Devs are quitting. Devs are calling each other poopy-head.
See blocksize drama.
Good luck.

[BurtW]

Also, with better ASIC for mining ... electricity usage for bitcoin transaction will be much more efficient that now.

Not true.  The total power/energy consumption of the Bitcoin mining system is independent of miner efficiency.  You do have a point concerning the number of transactions.  Larger blocks with more transactions per block will lower the ratio of Total Energy per Transaction.

There is a whole thread about it here:

https://bitcointalk.org/index.php?topic=694401.0

Basically, for a given price per BTC, a given era (BTC per block) and a given fee rate (BTC/hour) the miners together can "afford" and will spend most of the block reward + fees on energy.  This is by design.  If equipment gets more efficient then the miners will just buy more equipment until they are consuming as much energy as they can afford.

The formula I previously derived for the amount of power, P, consumed by the Bitcoin mining network is:

P = (6(50/2^e) + f)(x)(1 - g)/c [kW]

where:

x = exchange rate [USD/BTC]
e = era [0..32] (we are currently in era 1)
f = average fees per hour [BTC/hour]
c = cost of energy [USD/kWh]
g = average gross profit margin [unitless ratio]

Note that the total power consumption is not dependent on efficiency.

[johnyj]

This article shows that we are still in the very very early stage of adoption. When people eventually realize that money without free entry of production and a production cost will worth nothing, they will not question bitcoin's production costs

In principle, anything without a production cost will worth nothing, so should fiat money. But why fiat money still have some value is totally a historical phenomenon that is inherited from the gold standard, where each piece of fiat money was a presentation of corresponding amount of gold. Now fiat money is backed by nothing so it should worth nothing

Or you can say like this, if the fiat money that costs almost nothing to produce can worth so much, then bitcoin which costs magnitudes higher than fiat money to produce will worth at least magnitudes more

[jonald_fyookball]

This article shows that we are still in the very very early stage of adoption. When people eventually realize that money without free entry of production and a production cost will worth nothing, they will not question bitcoin's production costs

In principle, anything without a production cost will worth nothing, so should fiat money. But why fiat money still have some value is totally a historical phenomenon that is inherited from the gold standard, where each piece of fiat money was a presentation of corresponding amount of gold. Now fiat money is backed by nothing so it should worth nothing

Or you can say like this, if the fiat money that costs almost nothing to produce can worth so much, then bitcoin which costs magnitudes higher than fiat money to produce will worth at least magnitudes more

philosophically i disagree. its not the cost of production that makes it valuable...its the scarcity and utility.

Gold didn't cost anything to mankind, it was already on the planet.
Whether it got here by nuclear fusion or from a magic genie is
irrelevant.

Fiat currency is created out of thin air but people use it (has utility)
and its (somewhat) scarce, therefore it has value.

However, a cryptocurrency that costs energy is perceived as more fair.
IF proof of stake currencies like NxT were widely used, perceived as
fair in distribution, and as secure as Bitcoin, they would be as valuable.

[johnyj]

This article shows that we are still in the very very early stage of adoption. When people eventually realize that money without free entry of production and a production cost will worth nothing, they will not question bitcoin's production costs

In principle, anything without a production cost will worth nothing, so should fiat money. But why fiat money still have some value is totally a historical phenomenon that is inherited from the gold standard, where each piece of fiat money was a presentation of corresponding amount of gold. Now fiat money is backed by nothing so it should worth nothing

Or you can say like this, if the fiat money that costs almost nothing to produce can worth so much, then bitcoin which costs magnitudes higher than fiat money to produce will worth at least magnitudes more

philosophically i disagree. its not the cost of production that makes it valuable...its the scarcity and utility.

Gold didn't cost anything to mankind, it was already on the planet.
Whether it got here by nuclear fusion or from a magic genie is
irrelevant.

Fiat currency is created out of thin air but people use it (has utility)
and its (somewhat) scarce, therefore it has value.

However, a cryptocurrency that costs energy is perceived as more fair.
IF proof of stake currencies like NxT were widely used, perceived as
fair in distribution, and as secure as Bitcoin, they would be as valuable.

If it cost nothing to dig out gold, then it will worth nothing. Scarcity is only a means to increase the cost of production. But if the cost of production is zero then even it is very scarce it will not command any value, because the arbitraging will make sure the value will always equal to its cost: If it costs $0.1 to produce a POS coin while the market price is $100, everyone will mine coin and immediately sell, to pocket a 1000x profit, or to borrow lots of POS coins to sell, and mine them back to return the loan, to pocket a 1000x profit

Another reason why cost-less fiat money would still have some value is because people are forced to use them to pay tax, so even if everyone uses bitcoin all the time and never touch USD, when the time comes that you need to pay the tax, you would still need to purchase USD, that gives it some value

[virtualdn]

There are so many people attacking Bitcoin, one of the clear signs that this coin is set to succeed... watch for the signs folks.

[StevenS]

Basically, for a given price per BTC and a given era (BTC per block) the miners together can "afford" and will spend most of the block reward + fees on energy.  This is by design.  If equipment gets more efficient then the miners will just buy more equipment until they are consuming as much energy as they can afford.

Why most on energy? There are other costs to mine, including amortization of equipment, maintenance, rent, network connection, etc. Why is energy the dominant cost?