Estimating the energy/power consumption of the Bitcoin Network

[Oscilson]

they should start to use more clean energy for bitcoin mining, what about that that mega solar farm in arizona? they could rent it if possible

Does solar only work in the day?

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[btcrising]

they should start to use more clean energy for bitcoin mining, what about that that mega solar farm in arizona? they could rent it if possible

Does solar only work in the day?

Usually surplus power is stored up in batteries... but yes... they only work in the day.

[cbeast]

Bitcoin heliosynchronous solar powered satellites would be expensive and inefficient, but v.kewl.

[BurtW]

Bitcoin heliosynchronous solar powered satellites would be expensive and inefficient, but v.kewl.

Solar powered Bitcoin miners on the moon!  Then all those "too the moon" comments would become true.

[raid_n]

I don't really see the point in using theoretical energy consumption as an indicator.

The value created with every block is going to give you a good indicator of the total monetary input into the bitcoin mining industry.
We are already in the ASIC era where first generation units are close to becoming worthless. In contrast to cpus or gpus these units have very few alternative uses.
Their production cost and the value created for the hardware seller as well as the energy expended needs to be contrasted to the total amount of coins created by it, not just the energy cost the miner had.

Sure you can assume a stable system and no hardware costs. But what exactly is that telling you?

[cbeast]

I don't really see the point in using theoretical energy consumption as an indicator.

The value created with every block is going to give you a good indicator of the total monetary input into the bitcoin mining industry.
We are already in the ASIC era where first generation units are close to becoming worthless. In contrast to cpus or gpus these units have very few alternative uses.
Their production cost and the value created for the hardware seller as well as the energy expended needs to be contrasted to the total amount of coins created by it, not just the energy cost the miner had.

Sure you can assume a stable system and no hardware costs. But what exactly is that telling you?

Obsolete technology is the byproduct of innovation. We are seeing progress.

[mestar]

Right now it looks like the difficulty is stabilizing which means that some unprofitable miners are quitting the game.

Yet, in the last 12 days, more hardware was added than the total of all the hardware running in July, 2014, just 5 months ago. 

Too early to say it is stabilizing.

[Adrian-x]

Right now it looks like the difficulty is stabilizing which means that some unprofitable miners are quitting the game.

Yet, in the last 12 days, more hardware was added than the total of all the hardware running in July, 2014, just 5 months ago. 

Too early to say it is stabilizing.

This

Unprofitable miners quitting have little impact on difficulty. asic's are a 1000 x more powerful than gpu's.

As long as the cost of production is lower than market price miners have a profit incentive.

Hardware costs are not a factor in revenue as they are fixed assets are a sunk costs.
The investment in new hardware is stimulated by large gaps between production cost and market price.

As the profit shrinks, risk in investing in more efficient hardware increase.

[Adrian-x]

If Bitcoin "goes to the moon", it will consume half of the electricity produced on the planet.

This will help humanity create a market price for energy that will drive global economic efficiency, and at the next halving a quarter of the planets energy will be surplus.

Nice to dream but we're not there yet.

[raid_n]

(...)

It is telling us what is the energy cost of the Bitcoin network. Nothing less. Nothing more.

The energy that is burnt by the mining process is not used for something else.
If Bitcoin is a fad, nobody cares.
If Bitcoin "goes to the moon", it will consume half of the electricity produced on the planet.

Right now it looks like the difficulty is stabilizing which means that some unprofitable miners are quitting the game.
It is a bit sooner than what I expected, which means that either :
- the average price paid for electricity is higher than what I imagined, and/or
- there are "not enough" last generation ASICs on the market

The problem is that you obviously do not understand BurtW's calculations.

I will give you a real world analogy to think about:
Mining Gold is profitable but generally requires heavy machinery that runs mostly on fossil fuel.
The equivalent calculation would be to take the value of the global output of newly mined gold and say "Mining gold will consume that value divided by fuel prices of fuel because it is profitable"

You are ignoring the cost of mining equipment, the cost of labor, local conditions, changes in technological requirements that require research etc.

Do you see the issue? You have just reduced a complex problem into one dimension, in the above case fuel and in BurtW's case electricity.

Essentially his observation is not really how much energy the bitcoin network will "try to consume" (even that statement makes no sense. A miner has a limited amount of hashrate so for the network to consume more energy would mean you HAVE to increase the number of miners or their efficiency, both of which require an input of new money through both purchases and research and development)

The observation is: For x amount of money I can buy y amount of electricity.

Even with the current situation we see that calculations purely based on required energy make little sense.
If I buy a 1st generation block erupter it is pretty much useless unless I have very low energy costs. Its price, the cost of its development and ultimately, the fact that it will and is being replaced by new hardware that also requires new investments show that assuming 100% of rewards created by mining flow into energy makes little sense

I will even go as far as speculating that energy costs will become a smaller factor than today if prices ever do climb up significantly.
The limited capacity of producing efficient asic chips for everyone means that you will run into a global scarcity of hardware, driving the prices up for new machines. Furthermore if mining is indeed a billion dollar industry you will have RnD by manufacturers to try and get a competitive edge on both hashrate and energy efficiency. These costs need to be paid for somehow and that is where a portion of the block rewards of miners will go into.

People on these forums have made calculations on the energy cost of producing a bitcoin and arrive at quite low values.
Many blindly assume that that is the only cost for producing a bitcoin and consider them overvalued. What you are missing is
that a miner needs to be bought and that initial investment needs to be paid for. Because difficulty is increasing your miner is producing less and less money until it ultimately is no longer profitable and has become obsolete.

Hence again I will ask, what is the point in assuming a stable network where everyone already has hardware for no cost and technology does not change when that is clearly not the case?

[raid_n]

You are completely ignoring the argument I am making against your calculations.
I know it may seem like an elegant approach to correlate or otherwise analyze bitcoin prices solely on energy consumption but it is nevertheless a fundamentally flawed one.

Reverse calculation :
Current hashrate is 34e6 GH/s.
If the power of the network is really 600MW it means that the mining efficiency of the average miner is 17 J/GH (Joule per gigahash or Watt per Gigahash per second). This result is consistent with the efficiency of first generation ASICs. Once the network is only made of second or third generation ASICs (1 J/GH or less) we can expect that the difficulty will be at least one order of magnitude higher.


Guess what ? The difficulty is one order of magnitude higher now than when I wrote it. And the price has (almost) not moved.

The stable network is the point where my calculation and BurtW's (which are essentially the same) will be "right".
The unstable network that we see today is just an indication that we do not already spend enough electricity.

One day you will notice that convection heaters sold at Home Depot have an Ethernet plug that, if connected to your home router, will pay back a few cent per day to you. They will be sold at the same price as normal heaters, because the standard "resistor" will in fact be a sha256 chip.

Then, we will have a stable network.

As to your first example, what are you trying to prove to me here?
If a second generation miner produces more hashes per joule of energy than a predecessor its production cost can be higher for a rational miner to still consider purchasing one. The capital for new investments is coming from block rewards (lets ignore irrational mining for now)
Price discovery for bitcoin is linked with mining costs to some degree but clearly you cannot suggest that mining dictates price.
The fact that the protocol has an adaptive difficulty means that a lower price can and will ultimately cause a shrinking in the mining sector, attempting to converge on a moving stable point of cost vs. reward of mining.
Ultimately the valuation of bitcoin dictates the amount of new resources that will be poured into bitcoin mining (or are withdrawn). Once the value of block rewards is lower than the true production cost rational miners will cease and a new stable point with lowered energy and resource requirements is reached.

Now on to your second example and why it illustrates a flaw in the logic. Unless you assume zero technological innovation and zero environmental factors a stable state is never continuously reached. The discovery of a new lithographical process that makes chip design more efficient immediately would create a situation where a new unit can be built that is more efficient and hence has an economic advantage. That advantage dictates if and when new miners are actually commissioned as you expect a rational entity to only engage in upgrades if they will eventually amortize (or at least are expected to!) themselves. There is an almost infinite set of events that can lead to such a change.
You are essentially performing calculations with a static model that can't hold up beyond the hypothetical.


I have the feeling you are entertaining the concept of mining = energy cost because it fits into the current social and political context of our times. It is a grossly reduced model that, in my eyes, fails to adequately capture reality.

Of course you are free to use such a model for future predictions. I hope you are willing to revise it when reality does not conform, as am I willing to accept it if it Ultimately shows to be true.

[BurtW]

raid_n:

Your entire argument is:  BurtW, your estimate for g of 0.1 is too low, I think the value of g is higher than that.

So, just change the value of g to what you estimate it should be.

What do you think it should be?  0.5?  0.6?

You don't have to write walls of text to tell us the value I picked out of the air in my example is wrong.  If you could calculate and justify an actual value for g - that would be interesting.

[raid_n]

raid_n:

Your entire argument is:  BurtW, your estimate for g of 0.1 is too low, I think the value of g is higher than that.

So, just change the value of g to what you estimate it should be.

What do you think it should be?  0.5?  0.6?

You don't have to write walls of text to tell us the value I picked out of the air in my example is wrong.  If you could calculate and justify an actual value for g - that would be interesting.

Not at all, changing g statically changes the margin for everyone and every mining unit.
I am not trying to justify any other value for g. I am trying to point out that g in itself is not a constant over time for any one mining unit and mining all together.

Can you model the scenario of someone spending, say 250 million usd on the development of a new mining unit that has a g of 0.2 over the 0.1 of available units in your model? the mining rewards are an incentive to spend that much resources on mining all together, not necessarily just energy. Can you also model how the adaption of such new units reduces the g of other units? Eventually a single unit will be at g <0 and might have to be replaced by a more efficient one. The value generated by bitcoin mining is an incentive to spend almost as much in mining. It will be divided between energy and hardware.
You may want to try to add this advance in technology and hardware cost vs electricity for mining into the model

By the way my mentioned scenario, albeit with different values, must have happened at one stage for the transition from gpu's to dedicated asic machines to even take place.

[raid_n]

Just a quick extension.

if we assume a churn on hardware to counter the decay of individual units your model can be reduced to two bounds

[edit] removed asymptotically, does not have to be that way

a) mining converges to 100% expenditure on hardware
b) mining  converges to 100% expenditure on energy.

The reality will be in between. I doubt there will be a fixed factor between both bounds (eg 0.5 spent on new miners, 0.5 on power)

[BurtW]

Just a quick extension.

if we assume a churn on hardware to counter the decay of individual units your model can be reduced to two bounds

[edit] removed asymptotically, does not have to be that way

a) mining converges to 100% expenditure on hardware
b) mining  converges to 100% expenditure on energy.

The reality will be in between. I doubt there will be a fixed factor between both bounds (eg 0.5 spent on new miners, 0.5 on power)

I agree.  The model can be made more accurate if we get a better estimate or calculation for the system wide average value of g.

Then it could be made even more accurate if we could calculate or estimate g(t) or g(e).

[wilth1]

onverges to 100% expenditure on hardware
b) mining  converges to 100% expenditure on energy.

The reality will be in between. I doubt there will be a fixed factor between both bounds (eg 0.5 spent on new miners, 0.5 on power)

can't all hardware expenditure be estimated as energy?

[BurtW]

onverges to 100% expenditure on hardware
b) mining  converges to 100% expenditure on energy.

The reality will be in between. I doubt there will be a fixed factor between both bounds (eg 0.5 spent on new miners, 0.5 on power)

can't all hardware expenditure be estimated as energy?

I like.  So then, in addition to an estimate of how much the miners spend on energy versus equipment we would also need to estimate the amount of energy that goes into the NRE, manufacture and delivery of the finished equipment to the miners.

Then again it might be easier to "average this all out" into a single g factor of say 0.1

[vipgelsi]

they should start to use more clean energy for bitcoin mining, what about that that mega solar farm in arizona? they could rent it if possible

Does solar only work in the day?

Usually surplus power is stored up in batteries... but yes... they only work in the day.

Never thought of it like this good answer

[raid_n]

can't all hardware expenditure be estimated as energy?

I like.  So then, in addition to an estimate of how much the miners spend on energy versus equipment we would also need to estimate the amount of energy that goes into the NRE, manufacture and delivery of the finished equipment to the miners.

Then again it might be easier to "average this all out" into a single g factor of say 0.1

In principle you could express it as a total energy bill or reduction in entropy caused.
The point is saying "at value x per unit bitcoin mining will try consume y of the electricity produced" is a statement designed to fuel controversy and suggest to the uninformed reader that this is a fact and not the conclusion of a highly abstract system model.

Maybe we can agree on "resources" as the unit rather than electricity?
It is a better description of the multiple components that make up mining costs and less prone to be misused in the wrong context.

About the "NRE" : I agree that when you must make a decision whether starting a new mining unit or not, you have to include all setup costs. However, it does not apply when you need to stop it. Only electricity price should influence that decision. That's why the equilibrium point is reached when electricity spent == bitcoins mined.

What you are arguing is that this point will never be reached, because of NRE.

And I strongly disagree.

The incentive to spend money on NRE has been shown to be sufficient to develop ASICs when BTC was in the <$100 dollar range. Now most of the R&D has been done and only incremental improvements will be done. BTC is still >$300 so there is no reason to believe that people will stop buying miners. Miners complain about "this will never ROI", yet they buy everything even before it's produced.

That's why I believe that we will reach the equilibrium, unless the price of Bitcoin goes up so fast that chip manufacturers just cannot produce the chips fast enough (which was true in 2013 and most of 2014, but won't be any longer in 2015 if the price stays below $600).

I think you yourself are arguing a case for my critique in the second part. Any external factor (lowered supply of new miners) breaks your assumption and the model of a static equilibrium point. Technological progress is more or less fluid. Any miner that is not state of the art will eventually be replaced by one that is. Your hypothetical equilibrium lies exactly at 0.0. No profit is made, no loss either. The system does not change. Clearly any change, any modification that makes a bit more profit is going to be adapted. But not just by one miner. It will force the entire system to try and find a new equilibrium. This happens constantly as external factors change. Hence there cannot be a static stable state.

My complaint is that that churn of technology needs to be included in the resource cost, not just electricity. It is going to be much higher than anticipated.

[kl8847]

Power consumption?
why should we care power consumption?
people always did worst thing to nature. even a btc, couldnt it be a POS ? i would like to.
when speakings about economics widely i could say we didnt evaluate  solar energy, we didnt evaluate wind mills technology, but we were good at oil and nuclear power. were we good at nuclear power?? of course NOT We didnt evaluate Thorium.

What the fuck is Thorium?

Thorium's advantages start from the moment it is mined and purified, in that all but a trace of naturally occurring thorium is Th232, the isotope useful in nuclear reactors. That's a heck of a lot better than the 3 to 5% of uranium that comes in the form we need.

Then there's the safety side of thorium reactions. Unlike U235, thorium is not fissile. That means no matter how many thorium nuclei you pack together, they will not on their own start splitting apart and exploding. If you want to make thorium nuclei split apart, though, it's easy: you simply start throwing neutrons at them. Then, when you need the reaction to stop, simply turn off the source of neutrons and the whole process shuts down, simple as pie.

Here's how it works. When Th232 absorbs a neutron it becomes Th233, which is unstable and decays into protactinium-233 and then into U233. That's the same uranium isotope we use in reactors now as a nuclear fuel, the one that is fissile all on its own. Thankfully, it is also relatively long lived, which means at this point in the cycle the irradiated fuel can be unloaded from the reactor and the U233 separated from the remaining thorium. The uranium is then fed into another reactor all on its own, to generate energy.

The U233 does its thing, splitting apart and releasing high-energy neutrons. But there isn't a pile of U238 sitting by. Remember, with uranium reactors it's the U238, turned into U239 by absorbing some of those high-flying neutrons, that produces all the highly radioactive waste products. With thorium, the U233 is isolated and the result is far fewer highly radioactive, long-lived byproducts. Thorium nuclear waste only stays radioactive for 500 years, instead of 10,000, and there is 1,000 to 10,000 times less of it to start with.





We will have plenty of energy/power soon.

imagine a car - refuel, 100 years drive...  100 years.
Start engine, neutrons flow. drive forever !

If i were developer, i would create a Thorium Coin
TRC
energy for P2P power !

If i remember good, 9grams Thorium can run all USA for a year.
and it is everywhere, all around us. in the beaches and so on. we will never lack of energy again..
Thorium is as powerful as bitcoin