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Author Topic: Future: Bitcoin Mining = 6% of global energy consumption  (Read 1629 times)
briguy37
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October 31, 2013, 06:14:02 PM
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Say that bitcoin was at a stable point and functioned as the sole currency of the world.  This means that all coins have been distributed, all financial transactions are done in bitcoins, and mining has reached a point of marginal profitability.  Using the numbers from 2012, we have the following:

The gross world product was $71,830,000,000,000
The global energy consumption was 12,500Mtoe=145,375,000,000,000kwh
If we assume that mining fees are 1%, that yields $710,000,000,000 as income for miners
If we convert the total mining income to energy at $.08/kwh (the cost ranges from $.08-$.41, but mining would centralize in lower-cost areas), that yields 8,875,000,000,000 kwh of electricity to mine at the break even point. 

BTC Mining would have consumed 6.1% of the world's energy last year BTC
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October 31, 2013, 10:12:57 PM
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Say that bitcoin was at a stable point and functioned as the sole currency of the world.  This means that all coins have been distributed, all financial transactions are done in bitcoins, and mining has reached a point of marginal profitability.  Using the numbers from 2012, we have the following:

The gross world product was $71,830,000,000,000
The global energy consumption was 12,500Mtoe=145,375,000,000,000kwh
If we assume that mining fees are 1%, that yields $710,000,000,000 as income for miners
If we convert the total mining income to energy at $.08/kwh (the cost ranges from $.08-$.41, but mining would centralize in lower-cost areas), that yields 8,875,000,000,000 kwh of electricity to mine at the break even point.  

BTC Mining would have consumed 6.1% of the world's energy last year BTC

Think about all the resources/energy being used to keep traditional currency systems alive.

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October 31, 2013, 10:16:05 PM
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Mining fees of 1% of the gross world product seems awfully high.
briguy37
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November 01, 2013, 04:00:15 PM
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Mining fees of 1% of the gross world product seems awfully high.

What do you think the average transaction fee will be once block rewards disappear?  Credit cards take an average of 2.5%, so 1% would actually be an improvement.

The gross world product is actually a low estimate if every transaction was done using the bitcoin network.  For example, going by http://www.gfmag.com/component/content/article/119-economic-data/12528-payments-volumes-worldwide-new.html#axzz2jPOAzDwW the transaction volume by non-banks in China alone in 2011 was well over $100 trillion, much more than the $71.8 trillion GWP.  Added to that, think of the transactions that are normally done in cash and not recorded. 

Note that I don't think it feasible that all transactions will be done through the bitcoin network in its current state (e.g. Giving coin to a bum on the street).  Instead, I think there would be 3rd party ledgers (i.e. banks) where you can transfer coin between other users without it ever actually hitting the Bitcoin network.  But now we've transferred power/control back to the few, so how do we get around that? 

Money has an auto-centralizing will of its own that is nearly impossible to kill.
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November 01, 2013, 04:10:51 PM
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Mining fees of 1% of the gross world product seems awfully high.

What do you think the average transaction fee will be once block rewards disappear?  Credit cards take an average of 2.5%, so 1% would actually be an improvement.

The gross world product is actually a low estimate if every transaction was done using the bitcoin network.  For example, going by http://www.gfmag.com/component/content/article/119-economic-data/12528-payments-volumes-worldwide-new.html#axzz2jPOAzDwW the transaction volume by non-banks in China alone in 2011 was well over $100 trillion, much more than the $71.8 trillion GWP.  Added to that, think of the transactions that are normally done in cash and not recorded. 

Note that I don't think it feasible that all transactions will be done through the bitcoin network in its current state (e.g. Giving coin to a bum on the street).  Instead, I think there would be 3rd party ledgers (i.e. banks) where you can transfer coin between other users without it ever actually hitting the Bitcoin network.  But now we've transferred power/control back to the few, so how do we get around that? 

Money has an auto-centralizing will of its own that is nearly impossible to kill.

I agree with all of your conclusions, but the 1%fee does seem awfully high.  Comparing it to CC fees is unreasonable since CCs take risks & offer services (such as chargeback) which the miners do not.
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November 01, 2013, 08:13:59 PM
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.. the 1%fee does seem awfully high.  Comparing it to CC fees is unreasonable since CCs take risks & offer services (such as chargeback) which the miners do not.

Good point.  The fees at that point are really to secure the network, meaning that no one party should control 50% of the hashing power.  If the fees were set too low, theoretically the richest entity could eventually take control of the network by shifting all their resources to mining.  If you look at Corporation's income in a year, the highest in 2012 was Exxon Mobil at $41 billion, and they would actually be in a perfect place to mine since they could get energy at cost.  Thus, mining fees would have to be over $82 billion as a floor estimate and to be safe probably twice that at least, so $164 billion.  That would put Bitcoin at about 1.4% of the world's energy consumption.
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November 01, 2013, 09:32:26 PM
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.. the 1%fee does seem awfully high.  Comparing it to CC fees is unreasonable since CCs take risks & offer services (such as chargeback) which the miners do not.

Good point.  The fees at that point are really to secure the network, meaning that no one party should control 50% of the hashing power.  If the fees were set too low, theoretically the richest entity could eventually take control of the network by shifting all their resources to mining.  If you look at Corporation's income in a year, the highest in 2012 was Exxon Mobil at $41 billion, and they would actually be in a perfect place to mine since they could get energy at cost.  Thus, mining fees would have to be over $82 billion as a floor estimate and to be safe probably twice that at least, so $164 billion.  That would put Bitcoin at about 1.4% of the world's energy consumption.

The problem with this reasoning is bitcoin is not a planned economy.  The mining fees will not be determined by what's good for the network but by profitability of mining.  There is no central authority which controls these things.

Bitcoin's transition from inflationary to non-inflationary currency is going to be pretty interesting.
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November 02, 2013, 12:38:58 AM
 #8

We can produce more clean energy more efficient by then so that is not a problem.


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November 02, 2013, 12:49:20 AM
 #9

1% is insanely high and a pipedream.   Fees will be per tx not as a % of the tx value, bitcoin has no mechanism of even knowing the tx amount.  Even when looking at the aggregate fees as a % of tx volume it won't be anywhere near 1%.  Bitcoin isn't just competing with credit cards but also with high value money transfers like bank wires and ACH.  An ACH tx costs about <$0.20. Bitcoin tx will probably average 1/10th that or less.

Also miners gross revenue =/= electrical consumption.   Amortized hardware will be a portion.  How much is subject to some speculation but I could see 30%/70% life-cycle cost split between capital (hardware) and operating (primarily electrical).  Miners will also eke out some small commodity profit margin (say 3% to 5%).   

Mining is a nearly perfect "economy".  If miners demand too much other miners will do the exact same job just as well for less.  

Gross miner revenue = amortized hardware + operating costs + risk/profit margin
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November 02, 2013, 01:06:37 AM
 #10

BTC Mining would have consumed 6.1% of the world's energy last year BTC

This should not be a concern. A future generation of ASICs could be made with reversible gates which means that electricity use becomes far smaller as heat dissipation becomes negligible. (Note that the application suggested here is classical CMOS, not quantum computing).

http://www.ermt.net/docs/papers/Volume_2/issue_5_May2013/V2N5-129.pdf

http://web.cecs.pdx.edu/~mperkows/CLASS_VHDL_99/tran888/lecture003-reversible-logic.pdf
"Power dissipation of reversible circuit, under ideal physical circumstances, is zero."

Hopefully, Bitcoin mining is at the forefront of reversible gate technology in a few years.

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