E=m*btc^2 ?

[mokimarket]

I may be wrong but is bitcoin the first example of a currency being directly related to energy consumption?

The currency value depends on a distributed network that depends on miners that depends on energy. Seems to me that as bitcoin becomes more accepted this relationship will become more important. Any others concur before I spill my guts on the possibilities?

[lerelerele]

When you need industrial power this will be a problem for you if you dont live in the cheapest area.

[mestar]

The currency value depends on a distributed network that depends on miners that depends on energy. Seems to me that as bitcoin becomes more accepted this relationship will become more important. Any others concur before I spill my guts on the possibilities?

You mean the relationship where the bitcoin price creates a direct target of miners' energy usage, and in reverse, energy usage creates downward pressure on the price because miners have to sell to pay for the same energy usage?

[bg002h]

Bitcoin cares nothing for energy. If computation cost next to nothing in terms of energy, the price of Bitcoin wouldn't go down. Bitcoin is useful because it has a payment network attached to a mint and a bank and the equivalent of a secret service agent validating that every transaction is not counterfeit. The more computational power securing this whole process, the better, regardless of the electric bill.

[mestar]

Bitcoin cares nothing for energy. If computation cost next to nothing in terms of energy,

You mean bitcoin can somehow suspend market forces?  No new miners will join until it is no longer profitable to do so?  How in the world is bitcoin going to do that, being a P2P network?

regardless of the electric bill.

So, when miners sell some bitcoins to pay for their electric bills, where does the money come from?

[wopwop]

bitcoin's value is directly linked to energy consumption.

this has been discussed pretty extensively here by now and is regarded as a 'public secret' to 'bitcoin believers' because it has not yet been solved. It is more desirable to bitcoiners to not have this be well known as it is a huge design error.

[mokimarket]

The currency value depends on a distributed network that depends on miners that depends on energy. Seems to me that as bitcoin becomes more accepted this relationship will become more important. Any others concur before I spill my guts on the possibilities?

You mean the relationship where the bitcoin price creates a direct target of miners' energy usage, and in reverse, energy usage creates downward pressure on the price because miners have to sell to pay for the same energy usage?

Yes.

[Elwar]

So, when miners sell some bitcoins to pay for their electric bills, where does the money come from?

Their paychecks. Which are paid in government currency.

[mokimarket]

I see a direct link between energy and currency pretty revolutionary.

Take the problem of negative pricing at certain power nodes, due to the power on the grid constraining the system, that generators will pay a counterparty to take the power the plant is generating.

Suppose you have setup next to each generator a ton of bitcoin mining rigs, that can create "x" amount of btc per MW of generation provided. Generators can optimize their excess power by generating bitcoins with them which can then be sold.

[virtualmaster]

I may be wrong but is bitcoin the first example of a currency being directly related to energy consumption?

The currency value depends on a distributed network that depends on miners that depends on energy. Seems to me that as bitcoin becomes more accepted this relationship will become more important. Any others concur before I spill my guts on the possibilities?

How much energy use banks for their luxurious buildings ?
How much energy is used to build a skyscraper where resides a bank ?
How much energy is used to print fiat money ?
Only if you know this values also can you say which one is more energy efficient.

[Kazimir]

I may be wrong but is bitcoin the first example of a currency being directly related to energy consumption?

No. You seem to confuse mining with the actual market value of Bitcoin.

It costs pretty much zero energy to have, store, use, or pay with Bitcoin. And in no way does Bitcoin somehow represent some amount of energy. Just like gold doesn't represent some amount of digging labor.

How much energy use banks for their luxurious buildings ?
How much energy is used to build a skyscraper where resides a bank ?
How much energy is used to print fiat money ?
Only if you know this values also can you say which one is more energy efficient.

Oh, I know this value: it's much, MUCH more.

[Remember remember the 5th of November]

It's not zero consumption, Bitcoin needs computers which means power, when loading up a wallet it can easily eat up one core of your CPU for a few minutes. As the blockchain gets bigger and bigger and more transactions flow in and out of your wallet, which also gets bigger, the more time it will take to verify it's balance and as such it will require more processing power. When syncing from Block 0 to latest block, Bitcoin will consume more I/O operations and CPU cycles that you would otherwise use in a few months.

As such, it isn't very wrong to think what OP is saying.

[Mausini]

Energy for computation is the underlying "asset" that gives bitcoin its scarce attributes. So, of course there is a relationship.

[mestar]

It is more desirable to bitcoiners to not have this be well known as it is a huge design error.

I wouldn't say that it is a design error.  It's simply how bitcoin is made to function.  The beauty of it that it will be a self correcting system where price adjust to the levels where the cost of energy used is comparable to the value created by the bitcoin network. 

This hidden cost can also be said to be a nice marketing for the whole system, because, hey, free transactions.

[mestar]

So, when miners sell some bitcoins to pay for their electric bills, where does the money come from?

Their paychecks. Which are paid in government currency.

So, when miners *sell some bitcoins*, it comes from their paychecks?

[mgio]

No, it will become LESS important as time goes on.

Presently people mine with GPUs and FPGAs. They are relatively inexpensive with the price of electricity being a not-insignificant portion of the cost of mining.

We are beginning to see a switch to custom ASICs. They are much faster and consume far less power but the price of the chips themselves are expensive.

As time goes on we will see hardware that is more expensive and consumes less electricity. The cost of the hardware will dominate over the cost of electricity.

[mestar]

No, it will become LESS important as time goes on.

Presently people mine with GPUs and FPGAs. They are relatively inexpensive with the price of electricity being a not-insignificant portion of the cost of mining.

Nice try, but that will not happen.  Today, all the fastest CPUs hit the power limit, the amount of heat generated limits how fast they can run.  Mining chips will have the same problems.

Currently, ASIC products are too expensive, but that will go down, the first batch is the most expensive. 

Even Google in its data centers switches processors every couple of years, not because they get more speed, but because how much they save on power usage.

And in bitcoin world, total awards and fees limit how much electric power you can spend, and no chip technology will change that.

[manfred]

Bitcoin cares nothing for energy. If computation cost next to nothing in terms of energy, the price of Bitcoin wouldn't go down. Bitcoin is useful because it has a payment network attached to a mint and a bank and the equivalent of a secret service agent validating that every transaction is not counterfeit. The more computational power securing this whole process, the better, regardless of the electric bill.

Here is a deal, you control as many bitcoins as u like, i control as much energy as i like.
Lets see who is emperor without clothes.

[brenzi]

bitcoin's value is directly linked to energy consumption.

this has been discussed pretty extensively here by now and is regarded as a 'public secret' to 'bitcoin believers' because it has not yet been solved. It is more desirable to bitcoiners to not have this be well known as it is a huge design error.

Very true. Thanks for pointing this out.

How much energy use banks for their luxurious buildings ?
How much energy is used to build a skyscraper where resides a bank ?
How much energy is used to print fiat money ?
Only if you know this values also can you say which one is more energy efficient.

Here's my estimation: https://bitcointalk.org/index.php?topic=181759.msg1913572#msg1913572
Bitcoin has the potential to use a lot more energy than the whole banking sector of the world.

Energy consumption for mining has a high correlation with bitcoin exchange rate to fiat currency. Because variable costs of mining are dominated by electricity price, the economic equilibrium for the mining rate is reached when global electricity costs for mining approximate the value of mining reward plus transaction fees.

This fundamental rule is unfortunately not yet widely understood.

And there's more conclusions directly following:

• more efficient mining gear does not reduce energy use of the bitcoin network. It will only raise the network difficulty
• cheaper energy linearly increases mining energy use of the bitcoin network
• the same conclusions apply to all proof-of-work based currencies (i.e. Litecoin).

[luke.watson]

bitcoin's value is directly linked to energy consumption.

this has been discussed pretty extensively here by now and is regarded as a 'public secret' to 'bitcoin believers' because it has not yet been solved. It is more desirable to bitcoiners to not have this be well known as it is a huge design error.

I'm sure people are aware that every second they run their lights/computer/dishwasher/fridge/car/television/lawn mower etc that they are using electricity and fuel I wouldnt call it a design error, it's how it functions, and how it works. Bitcoin is introduced as a peer to peer electric currency, it's not something swept under the rug, just not something of utmost importance, we dont rank the value of the internet based on how much power it takes to run, nor a currency based on how much the trees cost to make the paper