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ghdp
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March 18, 2014, 02:08:22 PM
Last edit: December 19, 2016, 09:57:06 PM by ghdp
 #1

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March 19, 2014, 07:26:39 PM
 #2

Thank you for this very interesting calculation. It's a nice addon to a thread I started quite a while ago that led to a fruitful discussion. See https://bitcointalk.org/index.php?topic=181759.msg1897702#msg1897702

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March 19, 2014, 07:59:59 PM
Last edit: March 19, 2014, 09:57:56 PM by Pente
 #3

I use your calculations to figure the upper boundary on electricity usage. However, I suspect the lower boundary on cost per KWH is about $0.03.

Over 50% are paying less than $.10 per KWH: https://bitcointalk.org/index.php?topic=333720.0

I remember some Indonesian miner guy that was paying $0.03 per KWH.

Cost in Iceland per KWH according to google is $0.043.

I can buy solar panels at $1000 per KW. Assuming a 5 year effective life span at 10 hours of direct sunshine per day = 365 * 5 * 10 = 18,250 KWH. Divide that into $1000 ($1000/18250) and we get $0.054 per KWH.

Personally, I would just use $0.05 per KWH. At around $600 per BTC and assuming 3600 BTC per day, we get:

$600*3600/$.05/KWHR= 43.2*10^6 KWHR for an <b>UPPER BOUND</b> on power usage.

Remember, as BTC usage goes up world wide, power usage will stay about the same. I suspect the cost of using Fiat (especially when factoring in both the hidden and apparent cost of inflation) is much much higher.


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March 19, 2014, 08:35:33 PM
 #4

Very nice "rule of thumb"!  As an "absolute lower limit" you could use $0.015 / kWh:

Price of electricity = 0.015 USD/kWh = 15 USD/MWh

So we have 3600*X = P*24*15 or P/10=X

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March 19, 2014, 09:42:05 PM
 #5

I can buy solar panels at $1000 per KWH.
first, you can only buy panels by peak power [kW], not by energy [kWh].

second: would you really invest on expensive mining gear and then run it only when the sun shines? Your gear is outdated quickly, so amortisation time is short.

Quote
Remember, as BTC usage goes up world wide, power usage will stay about the same.
This is just wrong. Power usage rises with the valuation of BTC:

GlobalEnergyConsumptionForMining ~= (MiningReward + TransactionFees) * bitcoinValueInUSD / EnergyCostInUSDperkWh

Quote
I suspect the cost of using Fiat (especially when factoring in both the hidden and apparent cost of inflation) is much much higher.
most certainly wrong.

please read my thread carefully where you will find your arguments proven wrong (see signature)


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March 19, 2014, 11:08:16 PM
 #6

Quote
Quote
I can buy solar panels at $1000 per KWH.
first, you can only buy panels by peak power [kW], not by energy [kWh].
I fixed my typo

Quote
second: would you really invest on expensive mining gear and then run it only when the sun shines? Your gear is outdated quickly, so amortisation time is short.
True, but power in Iceland is still $0.043 per KWHR

Quote
Quote
Remember, as BTC usage goes up world wide, power usage will stay about the same.
This is just wrong. Power usage rises with the valuation of BTC:

GlobalEnergyConsumptionForMining ~= (MiningReward + TransactionFees) * bitcoinValueInUSD / EnergyCostInUSDperkWh
Value of BTC may go up, but mining reward is definitely going down every 4 years.

Quote
Quote
I suspect the cost of using Fiat (especially when factoring in both the hidden and apparent cost of inflation) is much much higher.
most certainly wrong.

please read my thread carefully where you will find your arguments proven wrong (see signature)
What is the cost of using fiat? I see inflation as a hidden tax equivalent to the amount of money being printed. I lean toward Austrian economics though. If you have a different economic philosophy, we will probably never agree on the cost of using fiat. But here is my take on it: If the USA prints 10^12 dollars per year, then this would be equivalent to 10^13 KWHR (at $0.10/KWHR) per year. This is certainly more than:
Quote
equivalent energy: 1.39E12 kWh/y
from your OP statement thread in your signature.

I read part of that thread and my assuptions could actually make things worse. Mining would be done in the areas of the world where energy is the cheapest. At $0.05 per KWHR, then your 7% would become closer to 14%. But that would decrease over the years as the mining reward keeps halving. But even at 14% of world wide energy usage, it seems to me that the cost of Bitcoin would still be less than the cost of using fiat currency.

BTW, I don't think that Bitcoin (or any other cryptocurrency) will ever completely replace fiat currency. I spend a lot of time in Kenya with my youngest wife who uses M-Pesa. M-Pesa is everywhere, you can't walk a block on a business street without seeing a couple signs. She uses it to send money to her parents via text on her phone. She uses it to pay her electric bill. We were in a matatu going past the electric company main office and she was making fun of all the old people (younger than me...but beside the point  Cheesy ) queing up to pay their electric bill instead of using M-Pesa. And everyone in Kenya (even if they sleep in a cardboard box) has at least one cell phone. One day, she wanted to stop for a coke and I mentioned that I hadn't brought my wallet and she had no money. No problem she said, stopped at the next M-Pesa sign and converted some of her M-Pesa on her phone to 500 shillings. The point being is that Kenyans are already using an ecurrency for all sorts of things, but they don't use it for small transactions. Fiat currency is simply faster and easier.

What I do think that Bitcoin will do for fiat currency is force governments to stop inflating it so much. There will be a balance between slightly deflationary Bitcoin and slightly inflationary fiat currency. When a government starts inflating fiat to much, people will just use less of it (and at a much higher velocity) and switch to using cryptocurrency more. This will accelerate inflation and force the government to print less fiat(or find themselves unable to operate effectively).



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March 20, 2014, 12:02:11 AM
Last edit: March 20, 2014, 06:39:08 PM by BurtW
 #7

I spend a lot of time in Kenya with my youngest wife...
Just curious.  How many do you have?  One is more than enough for me.

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March 20, 2014, 12:24:31 AM
Last edit: March 20, 2014, 04:43:39 AM by Pente
 #8

I spend a lot of time in Kenya with my youngest wife... [/quote
Just curious.  How many do you have?  One is more than enough for me.

Just Two.

An old cougar that caught me when I was young and naive. As I got older and my SMV went up, I negotiated the right to take a second wife. All three of us lived together in Nairobi for a short time, that was a total disaster. Feminism vs. Femininity...some day I might write an article on it.

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March 20, 2014, 02:55:32 PM
 #9

Still you can create more green solution. But consumption is still not high enough to worry about

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March 20, 2014, 08:14:18 PM
 #10

Quote
Quote
I can buy solar panels at $1000 per KWH.
first, you can only buy panels by peak power [kW], not by energy [kWh].
I fixed my typo
If it was a typo, then the number is wrong. It's not done by buying a PV module. I guess Germany is a good place to look at for PV. http://www.photovoltaik-guide.de/pv-preisindex says they're at 2$ per Wp.
And it's still not done because you need some kind of power management. If you run in island mode (off-grid, to avoid paying grid fees) you need a battery to get most out of your gear, add another >2$ per Wp.

Or - of course - you let the german public pay: Feed your PV into the grid, get a subsidized price, and then buy coal power to run your rig ;-)

Quote
True, but power in Iceland is still $0.043 per KWHR
OK. But iceland cannot supply the 7% (or 14%?) of global electricity.

Quote
What is the cost of using fiat? I see inflation as a hidden tax equivalent to the amount of money being printed. I lean toward Austrian economics though. If you have a different economic philosophy, we will probably never agree on the cost of using fiat. But here is my take on it: If the USA prints 10^12 dollars per year, then this would be equivalent to 10^13 KWHR (at $0.10/KWHR) per year. This is certainly more than:
Quote
equivalent energy: 1.39E12 kWh/y
from your OP statement thread in your signature.
Well, you're right, that's not what I was talking about. I only estimated the energy used for the financial sector.
But if your point is to equal fiat with spent energy, how would bitcoin make things different?


Quote
I read part of that thread and my assuptions could actually make things worse. Mining would be done in the areas of the world where energy is the cheapest. At $0.05 per KWHR, then your 7% would become closer to 14%. But that would decrease over the years as the mining reward keeps halving.
The decrease in mining rewards will followed by increasing gains by fees. Or bitcoin security will weaken.

Quote
But even at 14% of world wide energy usage, it seems to me that the cost of Bitcoin would still be less than the cost of using fiat currency.
We can only agree to disagree on this point. Especially, because there are alternatives to PoW.


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April 03, 2014, 03:30:36 PM
 #11

The OP is nonsense. Here is why.

Risto (and all),

Where do you think we will find the 100GW of electricity that we will need in order to sustain a 100k$ bitcoin ?

1. The price of electricity would rise long before we reached 100GW, thus no problem. Price always solves the problem.

2. That article assumes the genre and capital cost of the mining equipment is irrelevant. Thus with cpu-only mining, this problem will be much improved, as the both the home electricity cost per KWH and the cost of the equipment per Watt consumed are higher than for Bitcoin's specialized ASIC mining. For example, Butterfly lab's shipping 10GH/s consumes 50W and costs $349. The Intel i7 costs $329 and consumes 87W, but to build an entire system costs about double that. Also Intel has just begun focusing on power consumption reduction so this will improve at a faster rate than ASICs will.

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April 03, 2014, 04:46:55 PM
 #12

The amount of energy consumed will be much less than the current banking system consumes which, hopefully, bitcoin will replace. Smiley This doesn't even take into account the millions of lives (and productivity) saved when nation states can no longer print money at will to finance their endless wars.

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April 04, 2014, 12:53:43 AM
Last edit: April 04, 2014, 01:05:47 AM by AnonyMint
 #13

I don't know how electricity is priced in your place of residency, but in mine, the price of electricity for home users is mostly fixed and can change once or twice a year only. It will be difficult to adjust it if we see another x100 in bitcoin price within a year or two. If the client is a company it is "worst" because a lot of them have long term contracts with fixed prices.

If price doesn't increase consumers break down the doors of the electric company and City Hall. Price will increase damn fast when people don't have electricity. I am here in Davao, Mindanao and we are having rotating brownouts. The people and businesses are ready to strangle the necks of the politicians and so yes the price has risen and the new coal powerplants are being built (200MW to come online next year and more coming).

I agree price may not rise if the damn socialists who want subsidies are in control.

I agree that a higher price (of electricity) could solve the problem in the long term (5+ years). In the short term I except that the most polluting plants will just run at maximum capacity to deliver the required power.

Man-made climate and global environmental change is the most irrational thought a person could have. Start here on the definition of the scientific method.

2. That article assumes the genre and capital cost of the mining equipment is irrelevant. Thus with cpu-only mining, this problem will be much improved (...)

Yes it is (irrelevant). No it won't (be improved). Read the OP.

I assume you are referring to this point:

Hypothesis :
1. Miners are rational actors. Therefore once they have bought a mining rig, they will not stop it unless the cost of running it is higher than the price of the mined bitcoins. However if the price drops or if the difficulty grows too high they should stop mining.

You must have flunked Economics 101 because you forgot opportunity cost.

They can sell the hardware. Factor that in and you see my point was relevant.

Obviously for ASICs you are correct, but general purpose computers you would not be. That is another reason a cpu-only coin is needed.

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April 04, 2014, 04:50:38 AM
 #14

I agree that a higher price (of electricity) could solve the problem in the long term (5+ years). In the short term I except that the most polluting plants will just run at maximum capacity to deliver the required power.

Man-made climate and global environmental change is the most irrational thought a person could have. Start here on the definition of the scientific method.

Death rate due to coal burning is mostly cancer and respiratory illness.  Mercury toxicity from coal causes neural damage, especially damaging in early development.  A survivable and humane environment is a green environment, AGW notwithstanding.  When economic development is low, you've got bigger fish to fry, but as soon as you can afford intelligent cancer-free children, you're likely to want to spend your developed income on that.

Economic incentives aside, there's really no reason why miners can't be restricted to renewable energy as available.  The network is global, and the Earth turns.  There would always be mining occurring somewhere.  It's only the compulsion to amortize the plant, and to maximize earnings, that compel miners to operate 24x7.

EDIT:  But there is a novel technique for burning coal with iron oxide that essentially eliminates fly ash, if I recall correctly.  It was a research press release, so it might be overblown, and I don't recall much detail -- it was about 2 years ago.

Give a man a fish and he eats for a day.  Give a man a Poisson distribution and he eats at random times independent of one another, at a constant known rate.
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April 04, 2014, 12:02:12 PM
 #15

The assumption that the rational actor mines whether or not they can make today's profit and only today's profit via electricity is somewhat flawed.  That would be true in a certain controlled environment and to some extent many miners do wake up and make this decision each day, but.....

In the long term a rational miner makes plans over the course of months including the price of the miner and the price of electricity in relationship to the price of bitcoin.  Excluding the price of miners from your equation would only be true if no new miners came into play ever.  That simply isn't the case.  New miners have constantly and are constantly coming into play.

A person can't just make a theory saying that electricity is the only cost that factors into the price of bitcoin.  That simply isn't the case.  Big companies take into consideration electricity prices, but small home miners are locked into their electricity supply so it is irrelevant to them.  But a large amount of miners are driven into and out of mining much more so by the price of miners, than the price of electricity.  Clever and experienced miners carefully time what miners they buy and when to maximize their advantage.  


---

otherwise I appreciate your insight and thinking this out.  it is a very cool idea

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April 04, 2014, 09:51:46 PM
 #16

The OP is nonsense. Here is why.


+1

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April 04, 2014, 10:13:30 PM
 #17

Add 50% to that price/kWh assumption:


Bitcoin: 1Cxi8BLvScSm1mW6kjb5MNeJZPrvAiYL6B
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April 06, 2014, 03:15:21 PM
 #18

Shouldn't this be then, our long awaited intrinsic value of BTC ?

Also, is everything correct with units ? It looks like they're not cancelling right.

Your equation is (assuming rational miners / no free electricity / continuous network hash) :

N * X = P * Q

N - number of mined bitcoins per day having unit of [ BTC / day ]

X - exchange rate having unit [ $ / BTC ]

P - total network electricity consumption measured in [ MWday ]

Q - price of electricity measured in [ $ / MWday ]

So:

N = block_reward * number_of_blocks_per_day ~ 25 * 24 * 6 (because roughly 10min per block) = 3600   BTC / day

Q ~ 150 $ / MWh  = 3600   $ / MWday

So:

3600  [BTC / day]    *    X  [$ / BTC]  = P [ MWday ]  *    3600 [ $ / MWday ]

Right side units cancel to $, but left side units don't cancel to $. but to $/day ?! Is something missing ?
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April 06, 2014, 08:28:39 PM
Last edit: April 06, 2014, 09:20:38 PM by solex
 #19

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

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

As the Bitcoin fx rate climbs the incentive to push the envelope in chip design is ever stronger. A SHA-256 hashing circuit is far simpler than a general purpose CPU. Hopefully, Bitcoin mining will be at the forefront of reversible gate technology in a few years making the whole mining network orders of magnitude more energy efficient.

(Mentioned this elsewhere, but had no feedback on how the tech is progressing...)

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April 07, 2014, 12:13:56 PM
 #20

Price of electric is different around the world. Not to mention all kind of ways to optimize it.
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