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

[Benjamin Kreuter]

On Wed, 2017-11-08 at 00:25 +0000, Karl wrote:
> 
> I’m sorry, but this report of energy use is not the metric you are
> referring to.  Mining energy is used to secure the entire bitcoin
> network. It would be exactly the same if there were no transactions
> at all as if there were a quintillion transactions per second.

That is also wasteful.  Compare that to the energy needed to secure a
bank.  If the volume of transactions being processed grows, the energy
that is needed to secure the transactions will also grow; if the volume
shrinks, the energy needs shrink.

> Rather, this quantity should be compared to the combined energy usage
> of all the financial security systems of the world combined.  All the
> security cameras.  All the guards, bank tellers, and PoS
> machines.  All the armored trucks moving cash around: manufacturing,
> driving, fueling, and maintaining them.  All the 24/7 ATMs
> running.  All the constant financial infrastructure that you can
> think of, and all the energy involved in sourcing and processing the
> materials for it, running it, maintaining it, and repairing it.  Not
> just the transactions.

OK, but then for Bitcoin you would have to include all the Bitcoin
ATMs, exchanges and their energy needs, and the materials, energy, and
physical security surrounding the supply chain for mining hardware. 
Even then, you would still not have an apples-to-apples comparison if
you did not account for the scale at which Bitcoin operates versus that
of Visa or ACH or Swift.

> The energy used by bitcoin mining is directly related to the price of
> bitcoin divided by the price of electricity.

And the price of Bitcoin will approximately track the number of
transactions being processed, at least as Bitcoin currently works, as
demand will increase when transaction volume increases (maybe some
other technology will change things and we can revisit all this if and
when that happens).  So we should expect to see, and in practice have
seen, the mining effort increase as the transaction volume grows.

> As electricity becomes scarce, the energy requirements of the bitcoin
> network fall in synchrony.

Not entirely; the energy requirements of Bitcoin must at least equal
the effort attackers are willing to devote.  What if the reward for an
attacker exceeds the mining reward?  What if the attacker is willing to
steal electricity i.e. if the attacker does not actually pay for the
energy they use in their attack?

> They rise only when bitcoin has enough demand to warrant paying for
> them.  These things are not true of conventional financial systems.

Right, because for the conventional financial system, the incentive is
pretty consistent: banks will always have an incentive to *reduce*
their costs and become more efficient.  If Visa could halve the energy
it spends on security and still securely process the same volume of
payments, there is no doubt that they would do so.  On the other hand,
the existence of a newer, more energy-efficient mining technology would
not actually reduce the energy consumption of Bitcoin.

> Bitcoin does have a per-transaction energy cost, and this is
> unrelated to
> the hashrate.  It is the cost only of distributing the transaction
> data
> across the internet and storing it on hard drives.

Right, and yet again, Bitcoin is wasteful.  When you make an ACH
payment, the energy consumption is limited to you, your bank, the
recipient's bank, and the recipient.  With Bitcoin, enough energy must
be spent to broadcast the transaction all over the world.  Were it not
for checkpointing it would be even worse: the energy would have to
spent over and over as the chain is sent to newly installed clients.

Of course, compared to the mining cost, the broadcast cost of Bitcoin
is miniscule.  Likewise, compared to the effort devoted to fraud detect
ion and other security measures, the communication cost of ACH etc. is
negligible.

-- Ben
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