[Cryptography] One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week

[Jameson Lopp]

On Sun, Nov 5, 2017 at 6:03 AM, Henry Baker <hbaker1 at pipeline.com> wrote:

> FYI --
>
> https://motherboard.vice.com/en_us/article/ywbbpm/bitcoin-
> mining-electricity-consumption-ethereum-energy-climate-change
>
> One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week
>
> Bitcoin's surge in price has sent its electricity consumption soaring.
>
> Christopher Malmo   Nov 1 2017, 12:20pm
>
> Bitcoin's incredible price run to break over $7,000 this year has sent
> its overall electricity consumption soaring, as people worldwide bring
> more energy-hungry computers online to mine the digital currency.
>
> An index from cryptocurrency analyst Alex de Vries, aka Digiconomist,
> estimates that with prices the way they are now, it would be
> profitable for Bitcoin miners to burn through over 24 terawatt-hours
> of electricity annually as they compete to solve increasingly
> difficult cryptographic puzzles to "mine" more Bitcoins.  That's about
> as much as Nigeria, a country of 186 million people, uses in a year.
>
> This averages out to a shocking 215 kilowatt-hours (KWh) of juice used
> by miners for each Bitcoin transaction (there are currently about
> 300,000 transactions per day).  Since the average American household
> consumes 901 KWh per month, each Bitcoin transfer represents enough
> energy to run a comfortable house, and everything in it, for nearly a
> week.  On a larger scale, De Vries' index shows that bitcoin miners
> worldwide could be using enough electricity to at any given time to
> power about 2.26 million American homes.
>
> Expressing Bitcoin's energy use on a per-transaction basis is a useful
> abstraction.  Bitcoin uses x energy in total, and this energy
> verifies/secures roughly 300k transactions per day.  So this measure
> shows the value we get for all that electricity, since the verified
> transaction (and our confidence in it) is ultimately the end product.
>
>
I don't think it's a useful abstraction, but rather a distraction.
Transactions don't "use" mining energy - this is a skewed perspective of
how Bitcoin's thermodynamic security operates.

If you really want to approach this from a "per transaction" standpoint
then it's only fair to realize that with payment channel tech, orders of
magnitude more transactions can be occurring that are not measurable on the
blockchain. I expect that as payment channel tech proliferates, the "per
transaction" energy usage will drop significantly... but we won't be able
to calculate it.

You could even take a more naive view with current centralized custodial
providers and realize that they perform a huge number of "off chain"
transactions each day between their own customers by simply updating their
internal databases.

In short, this skewed "per transaction energy use" perspective is used in
order to make Bitcoin sound incredibly wasteful. You can massage the
numbers to make it seem wasteful or not, but the reality is that the
Bitcoin ecosystem has decided that it is willing to pay this cost in order
to secure itself against computational attack.


> Since 2015, Bitcoin's electricity consumption has been very high
> compared to conventional digital payment methods.  This is because the
> dollar price of Bitcoin is directly proportional to the amount of
> electricity that can profitably be used to mine it.  As the price
> rises, miners add more computing power to chase new Bitcoins and
> transaction fees.
>
>
We hear this claim a lot, yet I've yet to see a credible analysis of what
the infrastructure running traditional digital payment records actually
costs to operate.


> It's impossible to know exactly how much electricity the Bitcoin
> network uses.  But we can run a quick calculation of the minimum
> energy Bitcoin could be using, assuming that all miners are running
> the most efficient hardware with no efficiency losses due to waste
> heat.  To do this, we'll use a simple methodology laid out in previous
> coverage on Motherboard.  This would give us a constant total mining
> draw of just over one gigawatt.
>
> That means that, at a minimum, worldwide Bitcoin mining could power
> the daily needs of 821,940 average American homes.
>
> Put another way, global Bitcoin mining represents a minimum of 77KWh
> of energy consumed per Bitcoin transaction.  Even as an unrealistic
> lower boundary, this figure is high: As senior economist Teunis
> Brosens from Dutch bank ING wrote, it's enough to power his own home
> in the Netherlands for nearly two weeks.
>
> Digiconomist's less optimistic estimate for per-transaction energy
> costs now sits at around 215 KWh of electricity.  That's more than
> enough to fill two Tesla batteries, run an efficient fridge/freezer
> for a full year, or boil 1872 litres of water in a kettle.
>
> It's important to remember that de Vries' model isn't exact.  It makes
> assumptions about the economic incentives available to miners at a
> given price level, and presents a forward-looking prediction for where
> mining electricity consumption could go.  Despite this, it's quite
> clear that even at the minimum level of 77 KWh per transaction, we
> have a problem.  At 215 KWh, we have an even bigger problem.
>
> That problem is carbon emissions.  De Vries has come up with some
> estimates by diving into data made available on a coal-powered Bitcoin
> mine in Mongolia.  He concluded that this single mine is responsible
> for 8,000 to 13,000 kg CO2 emissions per Bitcoin it mines, and 24,000
> - 40,000 kg of CO2 per hour.
>
> As Twitter user Matthias Bartosik noted in some similar estimates, the
> average European car emits 0.1181 kg of CO2 per kilometer driven.  So
> for every hour the Mongolian Bitcoin mine operates, it's responsible
> for (at least) the CO2 equivalent of over 203,000 car kilometers
> travelled.
>
> As goes the Bitcoin price, so goes its electricity consumption, and
> therefore its overall carbon emissions.  I asked de Vries whether it
> was possible for Bitcoin to scale its way out of this problem.
>
> "Blockchain is inefficient tech by design, as we create trust by
> building a system based on distrust.  If you only trust yourself and a
> set of rules (the software), then you have to validate everything that
> happens against these rules yourself.  That is the life of a
> blockchain node," he said via direct message.
>
> This gets to the heart of Bitcoin's core innovation, and also its core
> compromise.  In order to achieve a functional, trustworthy
> decentralized payment system, Bitcoin imposes some very costly
> inefficiencies on participants, for example voracious electricity
> consumption and low transaction capacity.  Proposed improvements, like
> SegWit2x, do promise to increase the number of transactions Bitcoin
> can handle by at least double, and decrease network congestion.  But
> since Bitcoin is thousands of times less efficient per transaction
> than a credit card network, it will need to get thousands of times
> better.
>
> In the context of climate change, raging wildfires, and
> record-breaking hurricanes, it's worth asking ourselves hard questions
> about Bitcoin's environmental footprint, and what we want to use it
> for.  Do most transactions actually need to bypass trusted third
> parties like banks and credit card companies, which can operate much
> more efficiently than Bitcoin's decentralized network? Imperfect as
> these financial institutions are, for most of us, the answer is very
> likely no.
>
> Update: The piece has been updated to include the fact that Bitcoin's
> price reached over $7,000 on November 2.
>
> Correction: Because of a typo, this piece originally stated that the
> coal-powered mine is responsible for 8,000 to 13,0000 kg CO2 emissions
> per Bitcoin it mines.  The number is in fact 13,000 kg.  The piece has
> been updated.
>
> ---
> An obvious example of Herb Stein's Law:
>
> "If something cannot go on forever, it will stop."
>
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