Bitcoin Will Eat the World

[odolvlobo]

There is an apocalyptic scenario in which Bitcoin eats the world. In this scenario, a bitcoin becomes so valuable that no other activity is worth more than mining bitcoins, and all the power and resources in the world are devoted solely to Bitcoin mining.

I am interested in exploring the ramifications of this scenario and the conditions necessary to reach it.

The economics of mining dictate that the cost of the electricity necessary to mine 1 bitcoin approaches the value of 1 bitcoin. Therefore, if 328500 BTC is mined each year (6.25/block) and 26 PWh of electricity is produced each year with a value of $2.6 trillion (at $0.10/kWh), then the cost of mining will approach the value of all the electricity produced in the world at about $8 million per bitcoin. That implies that at that price, all of the electricity in the world will be devoted to mining bitcoins.






Note: this is a moderated topic. Off-topic replies will be removed. I'm not interested in price speculation and unsupported claims.

[pixie85]

then the cost of mining will approach the value of all the electricity produced in the world at about $8 million per bitcoin.

Here's a flaw in your assumption: it took Bitcoin 8 years to barely touch 20 thousand dollars. How long do you think it will take before we reach 1 million and then 8 million. Maybe years, maybe decades. By that time there may be a large surplus of electricity in the world and the cost of it may be much lower.

10 years ago you could find solar panels on boats and RVs now they're on roofs of many private residences. 10 years ago I had a normal phone that did not even have a touch screen and now my phone has 8 core cpu and records hd movies. A lot can change in another 10 years.

[kaboler]

Love it!

It looks like madness but it isn't.

All those machines "working" all day and no work being done. Even when work is done (finding a block) it's not work work, it's virtual work.

[NeuroticFish]

The difficulty increases steadily. This means that some of the electricity may be needed to create new miner hardware.
Also not all the electricity in the world is sold at 0.10/kWh and the supply vs demand will kick into action big time when Bitcoin mining will want to take over electricity which is not surplus.
So imho in order to "eat the world" Bitcoin will have to become much more expensive than in your calculations.

[Lorence.xD]

It is possible somewhat, the cost overtime of power production is decreasing thanks to the revolutionary renewable energy sources and a more safe nuclear energy, I think that the power generated annually will not overtake everything that we do. With renewable energy, I think that the price of mining will go down, not to mention that the mines are getting closer to the sources which drastically change the amount of money spent on power. The only reason that it becomes possible scenario is that each blocks gets progressively harder to mine which could be solved via quantum computing.

[pooya87]

That implies that at that price, all of the electricity in the world will be devoted to mining bitcoins.

Necessity is the mother of invention.
There were electric companies that weren't producing as much electricity as today but now they've got contracts with mining farms to produce and provide them with agreed upon amount of electricity every day.
If the incentive keeps growing, there will also be a lot more innovation in production of electricity and more efficient and green ways of producing it will emerge or the existing ones will grow. The same way different ASICs emerged throughout the years (SHA256, scrypt, Keccak).
Also if we are producing 26-27 PWh of electricity today, that's because the world needs this much not more.

[lepbagong]

It's amazing what friend say about mining and the use of electricity for mining is of course very special if that happens, but we know that not all will be interested in bitcoin mining. because maybe also the risk of mining is not easy and it must be taken into account in all aspects before you really want to mine.

[odolvlobo]

The difficulty increases steadily. This means that some of the electricity may be needed to create new miner hardware.
Also not all the electricity in the world is sold at 0.10/kWh and the supply vs demand will kick into action big time when Bitcoin mining will want to take over electricity which is not surplus.
So imho in order to "eat the world" Bitcoin will have to become much more expensive than in your calculations.

If the value of the bitcoins being mined is X, then the value of the energy used to mine them will approach X, regardless of the difficulty or the cost of the energy. I agree that the price will probably have to be much higher because people will probably value other things (like food).

But, that also means that everything will become more expensive because you would have compete with miners for the energy to produce other things.

How would you determine that price?

[odolvlobo]

It is possible somewhat, the cost overtime of power production is decreasing thanks to the revolutionary renewable energy sources and a more safe nuclear energy, I think that the power generated annually will not overtake everything that we do. With renewable energy, I think that the price of mining will go down, not to mention that the mines are getting closer to the sources which drastically change the amount of money spent on power. The only reason that it becomes possible scenario is that each blocks gets progressively harder to mine which could be solved via quantum computing.

The cost of mining approaches the value of the mined bitcoins, regardless of the efficiency of the miners or the cost of the energy generation. That's just the economics of mining due to the self-adjusting difficulty and the incentives. So, when the value of a bitcoin goes up, so will the cost of mining it.

[odolvlobo]

That implies that at that price, all of the electricity in the world will be devoted to mining bitcoins.

Necessity is the mother of invention.
There were electric companies that weren't producing as much electricity as today but now they've got contracts with mining farms to produce and provide them with agreed upon amount of electricity every day.
If the incentive keeps growing, there will also be a lot more innovation in production of electricity and more efficient and green ways of producing it will emerge or the existing ones will grow. The same way different ASICs emerged throughout the years (SHA256, scrypt, Keccak).
Also if we are producing 26-27 PWh of electricity today, that's because the world needs this much not more.

It seems that the only way out is to increase energy production faster than the value of a bitcoin.

[Lorence.xD]

The cost of mining approaches the value of the mined bitcoins, regardless of the efficiency of the miners or the cost of the energy generation. That's just the economics of mining due to the self-adjusting difficulty and the incentives. So, when the value of a bitcoin goes up, so will the cost of mining it.

So what you are saying is that no matter how affordable the energy for mining is, it will not affect the cost of mining. I do agree with you regarding the difficulty of mining as the blocks gets more hard to mine and we are also reaching a computing plateau.

[odolvlobo]

It's amazing what friend say about mining and the use of electricity for mining is of course very special if that happens, but we know that not all will be interested in bitcoin mining. because maybe also the risk of mining is not easy and it must be taken into account in all aspects before you really want to mine.

It doesn't matter who mines the bitcoins. As long as the value of the bitcoins being mined is greater than the value of the energy used to mine them, miners will increase their energy usage.

So what you are saying is that no matter how affordable the energy for mining is, it will not affect the cost of mining. I do agree with you regarding the difficulty of mining as the blocks gets more hard to mine and we are also reaching a computing plateau.

That is correct.

[Lorence.xD]

~

That is correct.

If we can't fight the apocalypse scenario energy wise, do you think that we can defeat it by breaking through the computing plateau, one promising future technology is quantum computing. Having a faster computing speed means that blocks are mined faster.

[NeuroticFish]

If the value of the bitcoins being mined is X, then the value of the energy used to mine them will approach X, regardless of the difficulty or the cost of the energy. I agree that the price will probably have to be much higher because people will probably value other things (like food).

But, that also means that everything will become more expensive because you would have compete with miners for the energy to produce other things.

How would you determine that price?

With Bitcoin price rising (and falling) in cycles, there will be moments miners go out of business. It has happened before too (in 2015, I think).
All in all I expect that starting with some point there will be a balance between miners, bitcoin price and electricity (consumption and price) and the chance will be bigger that miners shut down than Bitcoin price rise more.

The price will be decided by free market, more or less. Food and important things may have special prices decided by the governments.

[stompix]

Therefore, if 328500 BTC is mined each year (6.25/block) and 26 PWh of electricity is produced each year with a value of $2.6 trillion (at $0.10/kWh), then the cost of mining will approach the value of all the electricity produced in the world at about $8 million per bitcoin. That implies that at that price, all of the electricity in the world will be devoted to mining bitcoins.

The halving will take care of that, it will be nearly impossible for it to reach that level before 2024, at which point it will need to grow again by 2x and 2x every 4 years. But since you're talking in a hypothetical scenario there is something else to be noted, not only is this energy consumption depends on the price but also on the available gear that could mine.

Assuming last month's numbers, and rounding them pretty good we were doing around 125 exahash at 10k/coin, taking the best gear available on the market and you need 1.1 million of them.  Now for 8 million a piece, you would need around 1 billion in mining gear, which will take ages to manufacture, and as the profitability goes down so will the incentive to produce gear to the limit, again not doable in this small interval.

It seems that the only way out is to increase energy production faster than the value of a bitcoin.

And again theoretically over a long period, it can be done.
According to IEA, the increased production of electricity in non-OECD averaged 5% per year, and we're talking about 80% of the world population here, with China, India , Russia , Brazil, and many more, who have enough potential to drive the growth up.  

If we can't fight the apocalypse scenario energy wise, do you think that we can defeat it by breaking through the computing plateau, one promising future technology is quantum computing. Having a faster computing speed means that blocks are mined faster.

It doesn't matter with what you mine or how energy efficient that is!!!
It's a matter of what you can afford to pay in electricity regarding what you get in profit.
An S19pro does 110th/s while an S3 had 0.4 Th/s , that's a 300x increase in hashing power with just barely 10x in power consumption, from around  0.8J/GH to 0.03J/GH. Did overall power consumption drop? No!

 

[odolvlobo]

Therefore, if 328500 BTC is mined each year (6.25/block) and 26 PWh of electricity is produced each year with a value of $2.6 trillion (at $0.10/kWh), then the cost of mining will approach the value of all the electricity produced in the world at about $8 million per bitcoin. That implies that at that price, all of the electricity in the world will be devoted to mining bitcoins.

The halving will take care of that, it will be nearly impossible for it to reach that level before 2024, at which point it will need to grow again by 2x and 2x every 4 years. But since you're talking in a hypothetical scenario there is something else to be noted, not only is this energy consumption depends on the price but also on the available gear that could mine.

Assuming last month's numbers, and rounding them pretty good we were doing around 125 exahash at 10k/coin, taking the best gear available on the market and you need 1.1 million of them.  Now for 8 million a piece, you would need around 1 billion in mining gear, which will take ages to manufacture, and as the profitability goes down so will the incentive to produce gear to the limit, again not doable in this small interval.

Possibly, however the price has been rising much faster than the subsidy has been halving. That's a good point about the equipment. It could take a long time to manufacture all of that mining equipment. But, lets assume it is achievable in a shorter time span.

[stompix]

But, lets assume it is achievable in a shorter time span.

Hihi, if we assume that everything that needs to happen in order for the scenario to take place will, of course, the outcome will be that, but there are some more points of fault for it to become reality and two of them are based on money.

If bitcoin does reach 8 million in this 4 year period, then we're looking at a needed influx of nearly 8 billion a day that needs to be bought from the markets in order for miners to pay their bills, will that be possible? It's an enormous sum of money! But let's say even this is possible. Then something better kicks in, the law of offer and demand.

Once mining becomes so profitable that it starts burning GWs of energy, we're going to see the usual outcome of it, the rise in prices, just as it happened with oil! High demand, high prices, low demand, cheap oil. Consumers might be able to cope with a 25-30 increase in electric energy costs (only electric, not oil/gas/etc) but for miners, this will mean a 25% hit in their spending budget so just with an adjustment of prices we've shed 25% of the possible consumption and saved the world, yet again!

And there is one more thing, a lot of people are angry when they read on their bill all the sums for cogeneration, green certificates, etc, think what will happen if the prices double because of bitcoin mining! Not quite the thing I want to see happening!

[hatshepsut93]

The government won't allow anything close to this to happen. I remember reading news a few years ago about some place (NYC?) kicking out the miners, because they were disrupting the local electricity grid. If we will somehow get to the point were Bitcoin mining would start negatively affect the entire population, even by simply causing a noticeable increase in people's electric bills, no government will have a problem with simply banning Bitcoin. And I know that Bitcoin "can not be banned because it's decentralized", but if Bitcoin is illegal, there's no way it will ever cost $8 million, so the problem will solve itself.

[stompix]

I remember reading news a few years ago about some place (NYC?) kicking out the miners, because they were disrupting the local electricity grid.

Not a singular case and it is highly possible more will start even now, well before 100k as a doubling in price means a doubling in income and finally a breath of fresh air for miners. Even with the last rise in diff and the current one (approx 9%) we will still be below the middle October hashrate when we were at 10k.

But there is also a different thing happening in the US, where a lot of energy is produced by private entities, you can't force them to stop supplying miners, if miners want to build their own powerplants, solar panels fields, or wind turbines there is little you can do , and this will once more push the doomsday scenario a few steps back.

If we will somehow get to the point were Bitcoin mining would start negatively affect the entire population, even by simply causing a noticeable increase in people's electric bills, no government will have a problem with simply banning Bitcoin.

They don't need to ban bitcoin itself, nor do they have to ban mining.

It's way simpler to avoid all the drama by simply hitting large to medium facilities with extra tariffs, in the EU for example, we had this in some countries for decades, it taxes extra energy depending on what you're using it for (heavy industry, retail commerce, transportation)  so they could simply slap taxes on them rather than hunting them down which will have the same effect. Let others deal with it.

Banning them would also lead to cases like this, where people hide their gear in their own homes:
Russian Hospitalized After Bitcoin Mining Farm Sets Apartment on Fire

[bandungan]

This is a broad thought about bicoin, maybe this could have happened if this bitcoin made many new miners do this, because in terms of mining the biggest problem is electricity and must have a large electric power. We know that electricity comes from nature and this is true if bitcoin can eat the world. this is not nonsense but reality