Is Bitcoin viable, energy wise?

[myrkul]

If a miner can increase his profit by adding more capacity, he will do so. And this arms race has a very easily predictable result.

Yep: That 51% attack is nigh impossible, and the bitcoin network will always have as many miners as can be supported by the fees. (and very rarely - if ever - more)

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[johnyj]

Why should they do that when no one is competing with them? Suppose the rest of the network is 6TH now, I could mine with 6TH with a daily profit of 1800 coins and a power consumption of 200 coins; or I could mine with 60TH, 3273 coins, but 10 times the power consumption of 2000 coins. Is there any motivation for the later? Well you need a chart to find out the optimum hashing power, but it is definitely not higher the better

Once you have majority of the hashing power, there is no point in increasing it, because you are basically competing against yourself. (Also, if you are the only miner you could do it all on one CPU.)

However, no miner is in this position.  You could argue that all the miners could make a pact about the maximum capacity, but, there is simply no way to enforce this on a P2P network.

If a miner can increase his profit by adding more capacity, he will do so. And this arms race has a very easily predictable result.

Take Avalon for example, this time they can deliver 100TH which is 4x the original network hashing power, if bitcoin price is very high they have enough motivation to keep mining for themselves with a little blow a certain fraction of total network hashing power and maximize their profit

Of course this time they sell the ASIC mining rigs to everyone, but there are also companies like ASICminer, they never sell the equipment to public and do not want to expand the capacity, just check their thread

Again, your estimation is based on a situation that most of the miner have access to the latest mining technology. In my opinion this is just a temporary situation in early stage of bitcoin adoption. When bitcoin has reached mainstream acceptance and high valuation, mining might require highly specialized hardware, thus become not feasible for normal users, and several large mining corporations might form some kind of aliance to not expand the capacity to hurt each other's profit and save energy, just like OPEC. Hopefully we are not going to see this day too soon

[mestar]

Take Avalon for example, this time they can deliver 100TH which is 4x the original network hashing power, if bitcoin price is very high they have enough motivation to keep mining for themselves with a little blow a certain fraction of total network hashing power and maximize their profit

Of course this time they sell the ASIC mining rigs to everyone, but there are also companies like ASICminer, they never sell the equipment to public and do not want to expand the capacity, just check their thread

Again, your estimation is based on a situation that most of the miner have access to the latest mining technology. In my opinion this is just a temporary situation in early stage of bitcoin adoption. When bitcoin has reached mainstream acceptance and high valuation, mining might require highly specialized hardware, thus become not feasible for normal users, and several large mining corporations might form some kind of aliance to not expand the capacity to hurt each other's profit and save energy, just like OPEC. Hopefully we are not going to see this day too soon

Your line of thinking kind of indirectly acknowledges that mining will be a low margin business.  Are you still thinking that running costs will not get close to (as in 50% of) total mining income?

As for tech availability,  those chips have a high cost for the masks and tooling and the low costs per unit.  So, once the first batch is done, they get much cheaper.  That means that the will soon be easily available.

[justusranvier]

Shouldn't shilling for PPCon be in the "Alternate Cryptocurencies" area?

[Adrian-x]

I haven't read all the arguments as I thought I knew the answer until I watched this:

http://www.youtube.com/watch?v=xHGFWWOylJM

If I understood it correctly Paper Money consumes just less than 1% of total GDP energy consumption. (coins obviously more) and HFT's data centers even more.

Some criticism on the video:
1) you can't scale the BTC network transactions at its current energy efficiency to that of a big states current transactions to make the claim.
2) You can't assume Moore's law doesn't apply to Bitcoin hashing (Asics won't replace GPU's and Asics won't become more efficient in the future)
3) you can't not account for the future number of transaction per block increasing. (we will always be limited to 250K or whatever it is)
4) you can't amortise your mining rig as E-waist every year - (my mining rigs only lose fans so my e-waist is a lot less than the example given.)
5) you can't assume the latent wasted heat is not used by the miners, ( this winter my heating bill was $0 as my rigs kept me warm - I have seen setups where Bitcoin rigs are used to power under flour heating.) so 50% of excess energy is not wasted just repurposed.

[Adrian-x]

A civilizations capabilities, is according to Kardashev scale, based upon power consumption/production. To reach a lvl 2 civilization we need to pull all the energy from our sun. I doubt Bitcoin is the "expensive" part

I liked this, posted elsewhere, a measure for evaluating efficiency, power consumption/production, with an Austrian style free market economy with a fixed money supply, I would tend to think we would be more efficient than we are in our perpetual growth economy.   

[mobodick]

I haven't read all the arguments as I thought I knew the answer until I watched this:

http://www.youtube.com/watch?v=xHGFWWOylJM

If I understood it correctly Paper Money consumes just less than 1% of total GDP energy consumption. (coins obviously more) and HFT's data centers even more.

Much less in fact, according to the video.
He is comparing 5TWh of the whole EURO ecosystem to the 600TWh that is consumed only in germany. So it probably is at least 5 times less than 1%.

[Phenomenon]

How much energy consumption does FIAT currency take when you account for all energy consumed by banks and all other companies that are necessary for our current use of FIAT? (Visa, mastercard, etc)?

[nkspace]

The word 'green' is too political for me. I'd say i want to know the energy footprint of bitcoin.
Imagine a large part of the world is using bitcoin.
How much network traffic will it take for everybody to be up to date with everybody elses transactions?

According to http://blockchain.info/charts/blocks-size we're aproaching 6 gigabytes for the blockchain.
According to http://torrentfreak.com/bittorrent-and-netflix-dominate-americas-internet-traffic-111027/ Netflix is 34% of total...

I can't find numbers on exact transfer rate of the internet. But lets say ~1 exabyte per day (someone got a source to the real data?) so we're looking at netflix transfering 333,000 terabytes per day. This means that even if you had 55,500,000 bitcoiners downloading the entire blockchain every single day... you'd still be consuming less than netflix does on a daily basis.

For real numbers, number of tx * number of nodes * time = transfer rate of bitcoin network  ... feel free to include an estimation of non-current blocks being transfered to out of sync clients.

The difficult seems to be that when bitcoin grows the potential for transactions also grows. The more people there are in the bitcoin economy the more there is to transact in the bitcoin economy.
It's related to the problems you get with interprocess communication in networked processing.
I can see that the number of transactions will rise at some exponential number compared to a linera rise in number of nodes.
So the ammounts of transactions wil grow faster than the ammounts of nodes.
If bitcoin becomes anything like important in society then you will pay for your groceries with it, you'll pay for gas with it, you'll pay for the ticket to dysneyland with it. So there will be a lot more transactions per user to be done.
And all these transactions also add up to the block chain, so everyone will need to get the blockchain which includes all the transactions of everyone else in the world.
I can easliy predict that the 6G of chain we have now will be meaningless once bitcoin represents some substantial part of the economy.
The 6Gig will be a daily download for every user at best. It won't take long before you will need to get a gig per minute to be up to date.
We all think the blockchain has been growing pretty fast lately, right?
Well, right now the size is related to about 55000 transactions daily. You need to get up to date with 55000 transactions per day.
Now imagine 1/10th of the world uses bitcoin to pay for their usual things.
We get 1/10th of 7x10^9 = 7x10^8 people participating.
Let's take an average of 5 transactions per user per day. You need to buy gas, you get an icecream, you pay the rent, etc.
(i'm just using some ballpark figures here to see where we get)
This gives us 1.4x10^9 transactions daily. 1.400.000.000 transactions per day.
That means the blockchain will grow about 25000 times faster than it does now.

Lets make an estimate of how much the blockchain grows right now.

In the last 1.2 months the blockchain grew by about a gigabyte.
On average that is about 0.0269 gigabyte per day. This gives us about 27.5 MB per day.
Ok, so now let's multiply this by our projected change in magnitude.
We get 27.5 x 25000 = 672 gigabyte per day !!

So in the situation where 1/10 of the world population does 5 bitcoin transactions per day on average everyone will need to download 672 gigabytes of new blockchain per day to keep up. If you didn't update for 2 days you'll need to download over 1TB . If you didn't touch your wallet for a month you'll be pumping 20TB to get up to date. And all this to be able to use bitcoin as a currency.
After only a year of hoarding blockchain everyone would have about 240TB of blockchain stored locally.

I think this will be problematic from an energy point of view even before the practical problems of storage become too devastating.

that means bitcoin is fundamentally flawed? why does noone care about this??

[Jackin Jill]

If each btc has the potential to be valued at $1M and it reaches that value long before the inflation of electrical costs match, then yes.

But you see, I used the word 'potential'. If you're looking for market viability then you're seeing it as an investment. Otherwise you would see it and use terms that would describe it as a necessity.

Sounds more like you are unsure of yourself and your investment strategy. If so, how can any of us advise you? We don't know your hashing power. Your maintenance costs. Your Investment goals.

Fishing in a mud puddle won't get you much for dinner.

[Jackin Jill]

I'm noticing a fundamental flaw in most of the last couple pages of posts. Not necessarily the posts, but the posters.

You're crunching numbers to find that crux where it's no longer profitable to mine, with whatever mythical unicorn hardware you can imagine. But it seems you're missing the entire point to bitcoin.

Being completely wrapped up in profits was the reason that all the other currencies failed. Your short sighted view of how btc can change the world is the flaw, in your logic, or lack thereof.

Would it not be advisable to continue to hash away to keep your investment alive?

You sound like a bunch of drunks at the bar who certainly love to drink, but then hate to have to take yourself away from the eye candy to take a leak.

You'll need to see both sides of the bitcoin before you fully understand where this could take humanity. And for crying out loud, leave the last 5,000 years of currency trading at the door. This is a whole new era.

[mobodick]

If each btc has the potential to be valued at $1M and it reaches that value long before the inflation of electrical costs match, then yes.

But you see, I used the word 'potential'. If you're looking for market viability then you're seeing it as an investment. Otherwise you would see it and use terms that would describe it as a necessity.

Sounds more like you are unsure of yourself and your investment strategy. If so, how can any of us advise you? We don't know your hashing power. Your maintenance costs. Your Investment goals.

Fishing in a mud puddle won't get you much for dinner.

Nothing like that.
I'm pretty sure that energy will put a cap on bitcoin one way or another.
What i'm mostly interested in is how much of the potential can be realized in our energy economy.

I don't think that there is a more expensive money currently in use than bitcoin.
So i'm wondering how big bitcoin could realistically become before the growth is dampened by costs.

[mobodick]

I'm noticing a fundamental flaw in most of the last couple pages of posts. Not necessarily the posts, but the posters.

You're crunching numbers to find that crux where it's no longer profitable to mine, with whatever mythical unicorn hardware you can imagine. But it seems you're missing the entire point to bitcoin.

Being completely wrapped up in profits was the reason that all the other currencies failed. Your short sighted view of how btc can change the world is the flaw, in your logic, or lack thereof.

Would it not be advisable to continue to hash away to keep your investment alive?

You sound like a bunch of drunks at the bar who certainly love to drink, but then hate to have to take yourself away from the eye candy to take a leak.

You'll need to see both sides of the bitcoin before you fully understand where this could take humanity. And for crying out loud, leave the last 5,000 years of currency trading at the door. This is a whole new era.

Just to be clear, my side of the story is that i want to look at bitcoin as a system. It is not about profits. It is about how accepted bitcoin can become while using this much energy. It becomes clear, for instance, that if bitcoin doesn't change it has no future as a currency. Currencyness is, however, one of the main reasons for the existance of bitcoin.
It is the very first thing people read when they visit http://bitcoin.org/en/.

[Jackin Jill]

Then how are you able to honestly say that btc uses more energy than any other currency?

That's completely BS. Look at all those countries that have gotten rid of small denominations in their currencies because they are not cost effective to continue to implement. Jeez, how did we ever go from copper, silver and gold to paper?

Can you think for even a moment in how much time, and money goes into just planning and designing paper money? The transportation and green house gases that are emitted just to truck that heavy crap around?

You can't honestly be serious with this analysis... Can you?

[wrenchmonkey]

It costs you very little energy to carry cash or a bank card. Bitcoin requires multiple computers and a whole lot of actual computation to even do one transaction. It is much more expensive energy wise than any other form of common currency.

Uh... How do you think your credit card works? [Hint: It requires multiple computers and a whole lot of actual computation to even do one transaction.]

[Jackin Jill]

It costs you very little energy to carry cash or a bank card. Bitcoin requires multiple computers and a whole lot of actual computation to even do one transaction. It is much more expensive energy wise than any other form of common currency.

Uh... How do you think your credit card works? [Hint: It requires multiple computers and a whole lot of actual computation to even do one transaction.]

Bazinga

[mobodick]

Then how are you able to honestly say that btc uses more energy than any other currency?

That's completely BS. Look at all those countries that have gotten rid of small denominations in their currencies because they are not cost effective to continue to implement. Jeez, how did we ever go from copper, silver and gold to paper?

Can you think for even a moment in how much time, and money goes into just planning and designing paper money? The transportation and green house gases that are emitted just to truck that heavy crap around?

You can't honestly be serious with this analysis... Can you?

It's not bullshit at all.
All currency has a cost.
You can't compare bitcoin to paper money because bitcoin is not in use like paper money.
The fact that some countries get rid of the smaller denominations is completely unrelated to the cost of bitcoin.
Moreover, bitcoin does't have denominations of value. It is a broken comparison, whatever you may have wanted to tell with it.

Another reason why you can't compare fiat to bitcoin is the mechanics of making it work.
Money is re-usable while bitcoins are not.

Planning and designing paper money is something you do once (or once in a while). After that you can use the design as many times as you like.
The main costs of paper money are in the accounting and the energy of transporting it, not in its design or production.
To print a single dollar note of any value costs less than $0.1
After the printing the note can be used may times.
But you have the cars that are transporting them from place to place every day. But even then the transportation costs for these bulk transfers are fractions of percents of the total value transported so its still not much, relatively.

Compare that to bitcoin.
In bitcoin you have to pay every time you transfer value. Right now the client asks for 0.01 bitcoin which is about $1.56 per transaction. And then you still need to wait some time before the transaction happens.
So this is already quite a barrier for use as a currency and this is only the beginning.

And that is besides the fact that there are miners pissing away heaps of energy just to make it all work. The $1.56 doesn't actually cover the network because the fees are nothing compared to the block rewards. In other words, in the future when all income would need to come from fees the $1.56 will not be nearly enough to cover the costs of miners.

I think someone figured that mining a block of 25 bitcoin costs about $40 worth of energy at the moment.
That's about 1% of its current dollar value.
You could argue that a single bitcoin will be worth much more in the future and then the production costs will be relatively smaller.
But this is not true. Bitcoin value follows hashing power. The more energy expended the higher the price goes.
So to make bitcoin more valuable we first need to expend more energy on mining.

Think about these things and expand them to a substantial part of our economy and you may start to see my point.

[mobodick]

It costs you very little energy to carry cash or a bank card. Bitcoin requires multiple computers and a whole lot of actual computation to even do one transaction. It is much more expensive energy wise than any other form of common currency.

Uh... How do you think your credit card works? [Hint: It requires multiple computers and a whole lot of actual computation to even do one transaction.]

I'm pretty sure it doesn't work by sending every person that has that type of credit card a receipt of every single transaction happening with those cards.
Also, i'm pretty sure credit card companies don't need to mine their credits before they become usefull entities in the system.
And finally, i'm also pretty sure that any calculations the cc comapny makes does not involve brute force solving a cryptographic puzzle. It would make credit cards prohibitively expensive.
[Hint: way ahead of you.]

[Peter Lambert]

I'd like to start a discussion about the viability of bitcoin in the future on basis of energy.

Bitcoin is set on a path that requires increasing amounts of computation to function.
Moreover, it requires the internet (or some other high speed network) to operate.
All this computing and communicating costs energy.
Growth of the bitcoin network implies more nodes communicating with more nodes. The posibility space for transactions will grow faster than the number of nodes.

Energy spent on mining will dwarf all other costs.  Also, this energy is easy to predict, because energy spent on mining is a simple function of Bitcoin price and total block award.  This is because mining has very low barrier of entry, and this ensures that as long as it is profitable, new miners will join, until the most inefficient miners are at the break-even point.  And the most profitable miners will try to expand their operation.


This makes it that each block costs somewhere around  (0.5 * block award * price) to (0.75 * block award * price).  And since awards are paid in Bitcoins and electricity is paid in local currencies, this makes the situation that all mining costs hit the exchanges every day, and push the price down.


This can currently be estimated to be $150.000 to $250.000 each day (using price of $90), and this amount of fresh money must enter the exchanges every day, or the price will go down. 


At this point we have a temporary delay in the "mining difficulty follows price" process , because of the change in technology and delays in deliveries of ASIC miners, so mining is very profitable at this point, and this reduces the selling pressure on exchanges.  This, plus block award halving is why we have this current Bitcoin bubble.

Very nice analysis.

I would like to point out that the block reward drops in the future, and so in the distant future it would be accurate to write 

(cost/block) = ((0.5 to 0.75) * transaction fees * price)

My prediction is that in the future the price will be relatively stable, so the cost per block will be determined by the transaction fees. Essentially, we (the bitcoin users) will set how much energy is used by setting our transaction fee amounts.

[mobodick]

It costs you very little energy to carry cash or a bank card. Bitcoin requires multiple computers and a whole lot of actual computation to even do one transaction. It is much more expensive energy wise than any other form of common currency.

Uh... How do you think your credit card works? [Hint: It requires multiple computers and a whole lot of actual computation to even do one transaction.]

I'm pretty sure it doesn't work by sending every person that has that type of credit card a receipt of every single transaction happening with those cards.
Also, i'm pretty sure credit card companies don't need to mine their credits before they become usefull entities in the system.
And finally, i'm also pretty sure that any calculations the cc comapny makes does not involve brute force solving a cryptographic puzzle. It would make credit cards prohibitively expensive.
[Hint: way ahead of you.]

You're right. Those credits are "mined" through the entirety of the operation of the tiered monetary system, from Fed operations, to U.S. Treasury markets, all the way down. And the entirety of the world's military might and legal infrastructure to secure that system.

(edit)
[Hint: you are surrounded.]

I realize that. But that does not in any way justify a new currency that uses even more energy.
Besides, the military operations are not to protect any particular form of currency.
They are there to protect the value the currency represents. It is irrelevant what the storage medium is.
I can predict that if any big entity will use bitcoin they will protect their wallet with the same fierceness.
[Hint:Surrounded? A walk in the park ]