US government tracking the energy implications of booming bitcoin mining in US.
This is a classic case of “tech journalism”… If you follow the sources the source of the data and it’s methodology uses the CBECI which the latest update lists a range of 75-384 TWh. (Note that the “2%” listed in the parent article is the global power consumption of the Bitcoin network compared to the US electrical network, aka a bad faith comparison). It explicitly states:
The upper-bound estimate corresponds to the absolute maximum power demand of the Bitcoin network. While useful for providing a quantifiable maximum, it is a purely hypothetical value that is non-viable for various reasons…
Which of course is the estimate that the journalists use for this peice.
There’s also a bunch of likely issues within the methodology as it’s estimate is largely based on the number of ASICs produced; the assumption that “mining nodes (‘miners’) are rational economic agents that only use profitable hardware.” and that any amount profit is sufficient to keep a mining operation ongoing; and many others. It actually does a pretty good job of disclosing a lot of the methodology flaws within the link above.
My goal is just to call out bad/lazy journalism and what I assume is oil/gas distractionary tactics. Electricity is ~38% of US energy consumption and even that maximum bound of 2% when comparing it to the global Bitcoin network is practically negligible when contextualized.
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If you follow the sources the source of the data and it’s methodology uses the CBECI which the latest update lists a range of 75-384 TWh. (Note that the “2%” listed in the parent article is the global power consumption of the Bitcoin network compared to the US electrical network, aka a bad faith comparison)
This is Incorrect. The source for the 2 percent is https://www.eia.gov/todayinenergy/detail.php?id=61364. Which is a government study giving a rage from .6 to 2.3. They arrived at this number by extrapolating the CBECI data to the US, and by investigating individual bitcoin mining facilities.
Electricity is ~38% of US energy consumption
38% is a lot. Also, electricity consumption is 100% of the load on our power grid, so its worth looking into whether the use of electricity is pro-social or anti-social. From my perspective, even the 0.6% figure is far too much electricity to devote to mining bitcoin. We are talking about power use at the order of magnitude of a small state whose sole purpose is to generate profits for a few people.
Its sole purpose is to be a global currency you can send from A to B effortlessly and without relying on trusted intermediaries. It has done that for 15 years, every day, every hour, without a single hour of downtime or hack.
Even if these statistics are perfect, it’s nonsense framing to not put them in context. How does that electrical compare to the electrical burden caused by SWIFT? Western Union? etc. https://endthefud.org has a number of great sources for that
Its sole purpose is to be a global currency you can send from A to B effortlessly and without relying on trusted intermediaries.
Perhaps that was the design goal, but it seems that speculation is also a significant (perhaps the larger) use case. I agree that crypto has been great for international money transfer, but it is far more expensive than traditional banks for domestic transfers. It seems that
it’s nonsense framing to not put them in context.
I checked a few of those links, and wasn’t completely convinced. It was full of peoples blogs comparing the costs of running all the brick and mortar banks to crypto. Of course, banks provide more services than saving and transferring money. Perhaps a better comparison would be to the energy use per dollar of the EFT system, or to a proof of stake crypto.
On its face, spending a measurable amount of energy guessing random numbers to satisfy an algorithm is wasteful. This is especially problematic since society subsidizes energy costs with the assumption that people will use it to create value.
As far as I can tell, (please let me know if I’m mistaken) mining Bitcoin does not create very much value since marginal increases in mining does not have a commiserate increase in Bitcoin trade efficiency or security. Marginal increases in mining does put money into the pocket of people doing the mining.
agree that crypto has been great for international money transfer, but it is far more expensive than traditional banks for domestic transfers.
For most of Bitcoin’s history, average tx has been around $1. This means some txes went through for 25c, some took 1.50 depending on how fast you wanted them to go. For buying a coffee, that didn’t make sense, but it made sense for payments once you got past around $10. That fee increases with time, but Lightning solves this for most every use case. It is fairly recent in Bitcoin’s development. Fees are in the pennies, transactions settle instantly. Fees are often under a single cent. And there’s no reason to think they’ll increase over time the same way chain fees do, since there’s not a direct relationship between the two. A single on-chain tx can result in billions of lightning transactions flowing through the network. It’s really incredible stuff.
On its face, spending a measurable amount of energy guessing random numbers to satisfy an algorithm is wasteful. This is especially problematic since society subsidizes energy costs with the assumption that people will use it to create value.
The base assumption you are making is that we are solving puzzles for puzzle’s sake and that it creates no value. No matter what your “cost” is, if you assume no value comes out of it, it’s always a waste. Being able to send transactions internationally, which confirm in under a second, and cost pennies in fees, through a network that is available to anybody with a cell phone and a halfway reliable internet connection, that’s the value. Those puzzles secure that entire process. There are other systems you can use, other puzzles, they all have their pros and cons. For every design decision like this, Bitcoin has chosen decentralization and security.
As far as I can tell, (please let me know if I’m mistaken) mining Bitcoin does not create very much value since marginal increases in mining does not have a commiserate increase in Bitcoin trade efficiency or security. Marginal increases in mining does put money into the pocket of people doing the mining.
You are right and wrong here. A marginal increase in mining doesn’t increase bitcoin trade efficiency, but it does increase security. This is because the higher the hashrate (the more puzzles that have been solved recently and the more complex those puzzles are), the more difficult it is to attack the network and perform a double-spend/51% attack. In a sense, you can think of hashrate as a % of the economic network’s value which is sunk into the underlying operation of the network, just like banks now siphon off fees and value for their continued operation. And spend energy. But they perform a useful thing, so we are ok with that trade-off.
Marginal increases in mining does put money into the pocket of people doing the mining.
How much miners are making on Bitcoin or other cryptos is mostly speculation, their books generally aren’t public. What can be said though is that because you need to invest in equipment and energy, you do need to recoup those costs. And the network doesn’t care how much you spent on those things, it will buy hashpower from the most competitive seller. This results in a situation where most mined coins are immediately put onto the market and sold at the cost the market can sustain. Some sellers have low or no costs due to being in areas with abundant electricity with low rates, and some re-use it for heating. So my guess is that while some of the biggest, most efficient miners are making some money I don’t think it’s much and the only way it makes sense is to do it at massive scale. Most miners are mining at breakeven or “speculatively mining”. Some people mine as a way to “DCA with more steps” and obtain non-KYC BTC. Those people probably aren’t making money either. And every miner, big or small, must compete with them. The system is self-balancing, as mining becomes “unprofitable”, people stop mining, as it becomes “profitable”, people flock to mining. This means, that, on average, mining is neither profitable or unprofitable, it’s basically a break-even for the miners.
It’s intrinsically designed to be wasteful of energy. A foundational requirement is ‘proof of waste’
