I provided this statement to some journalists who contacted me to get another viewpoint on Alex de Vries's paper:<p>His findings are not completely accurate, but also not completely wrong either. My own formal well-documented estimate is that Bitcoin used 0.09% of the world's electricity as of January 11th, 2018 (<a href="http://blog.zorinaq.com/bitcoin-electricity-consumption/" rel="nofollow">http://blog.zorinaq.com/bitcoin-electricity-consumption/</a>). After 4 months of growth I estimate we are around 0.15-0.20% today. Therefore reaching 0.50% by the end of 2018 is plausible; not likely but plausible. That said, overall I think Alex de Vries's figures are rather inflated because he makes two errors. Firstly, his model assumes that manufacturers sell at cost and make zero profits, which allows miners to spend more on electricity. In reality we've seen Bitmain, the largest manufacturer, make billions of dollars over the last few years. No one expects them to make zero profits by the end of 2018. Secondly, de Vries makes the mistake of assuming that all cryptocurrency mining chips produced by TSMC on behalf of Bitmain end up in Bitcoin mining machines. In reality many chips are fabricated for cryptocurrencies other than Bitcoin. This altcoin sector is rapidly growing. It wouldn't be unreasonable to assume that Bitcoin mining machines will represent less than half of Bitmain's sales by the end of 2018.
<i>PoW isn't "Proof of Work", it's "proof of money spent". The "work" is only here to make crypto look sophisticated. We could replace "work" with videos of miners burning stacks of cash, & crypto would work just the same, without killing polar bears. Downside: it would look stupid.</i><p><a href="https://twitter.com/Tr0llyTr0llFace/status/996075438538723329" rel="nofollow">https://twitter.com/Tr0llyTr0llFace/status/99607543853872332...</a>
Isn't there an argument that a lot of the mining is done in places where energy is cheap because it is in abundance and would be unused otherwise? Near hydroelectric sources?
A thought experiment: how much energy <i>should</i> Bitcoin use?<p>Bitcoin's mkt cap is ~$140B [0]. The world's GDP is ~$127T [1]. If we assume:
1) BTC market cap is representative of its economic output in accounting terms, or is at least an upper limit
2) Energy use by product should be proportional to its output<p>Then at 0.11% of world output, Bitcoin is at least ~5x more energy intensive per unit of value than the average product.<p>(This is obviously not wholly accurate. For one, market cap != annual value. If accounted for, that might make Bitcoin several orders of magnitude less efficient. And assumption 2 is probably a linear approximation to a highly nonlinear relationship. But I propose this as a fun thought experiment that questions the energy-value relationship.)<p>[0] <a href="https://coinmarketcap.com/currencies/bitcoin/" rel="nofollow">https://coinmarketcap.com/currencies/bitcoin/</a>
[1] <a href="https://www.cia.gov/library/publications/the-world-factbook/geos/xx.html" rel="nofollow">https://www.cia.gov/library/publications/the-world-factbook/...</a>
I have hypothesized that long-term, crypto currency will be made illegal to some degree eventually for one of two reasons or both:
1. Governments use fiat currency as a lever for it's monetary policy and cool/heat the economy and job market. If crypto use becomes widespread enough to weaken this lever, I could see pushback from governments.
2. This, environmental concerns. Crypto has to be the least-green modern technology by ALOT. Once the public catches on, I think there will be significant push back. This is of course largely dependent on the population deciding to side with the environment, which history has shown us has to be a mixed bag.
Bitcoin should be made illegal. I don't want the ability to anonymously and irreversibly pay someone. If I have this ability, then bad actors have an incentive to try to <i>force</i> me to do so. We've seen this in the wild already - both kidnappers and computer virus writers have included "send BTC to this address" as a demand.<p>Not every ability and option is positive-value to have. Cryptocurrencies are not only a negative-value option, but also waste vast amounts of electricity and computer hardware in order to provide it.
At human civilization's scale, the energy production/consumption market is not a zero-sum-game. I would be curious to know how much extra energy production the crypto-currency world has caused/incentivized to be established (e.g. increased capacity factors of underutilized hydro-power, etc.). It's not as if consumption will grow until there is no energy left for anything else. We will just produce more (which can also be a problem - e.g. CO2 and such).
What most people that keep repeating the energy consumption meme fail to realize is that the amount of electricity spent to secure the network is highly correlated with the block reward. Currently the reward is 12.5 BTC/10mins or close to $100k and it will keep getting halved every 4 years. Right now the fast rate of adoption drives the price up but in the long run the price will hit a plateau and the energy consumption will start to decline.
He say it takes 2.55 GW now and "potentially 7.67 gigawatts in the future" because "Economic models tell us that Bitcoin's electricity consumption will gravitate toward the latter number"<p>I'm not sure what 'economic model' makes him able to predict that mining will triple from where it is now.<p>This would also imply 6.7 Billion dollars per year just to buy the btc that the miners generate and around 6 million mining rigs running at 1300W.
If the economic reasoning behind this is correct...<p><a href="http://www.truthcoin.info/blog/pow-cheapest/" rel="nofollow">http://www.truthcoin.info/blog/pow-cheapest/</a><p>... than fiat must according to the same line of reasoning also consume resources when it is placed in circulation. That's because if new money $X has value Y, then players in the economy will spend up to Y in resources to be first in line to get $X when it is issued.<p>One way this may occur is via wasteful government spending (proof of waste?) since the usual path involves the purchase of government debt with newly issued currency and then its entry into circulation via government spending. Another mechanism might be complex financial shenanigans to extract small gains from the cascade of economic transactions (HFT, etc.) that occur as $X is initially lent by banks.<p>All these activities consume vast amounts of energy. I'd like to see someone calculate the energy consumption of the entire fiat currency system including central banks, the financial industry, and government enforcement for starters.<p>Furthermore according to the reasoning put forward in the above essay this activity must be "useless," or its usefulness would be priced into it and X more of it would be done where X is the value of its utility. How useful is high frequency trading? How useful is government spending on weapons we will never use? These activities are as useless as Bitcoin mining and may be more harmful in other ways. Warfare kills people.<p>In other words if the reasoning in the above article is correct then money may be intrinsically expensive. Gold is issued via gold mining, etc.<p>Tangent: if this is true then this explains the apparent political and economic impossibility of small government under current regimes. We need a monstrous, bloated government to burn the work required to issue money.
Have we ever had a Ponzi scheme that consumed this much of the world's resources (relatively speaking)?<p>And I'm not talking about money going in, just resources used to maintain it.<p>Tangentially, it's really interesting and fun to read about real historical bubbles and scams. For example:<p><a href="https://en.wikipedia.org/wiki/South_Sea_Company" rel="nofollow">https://en.wikipedia.org/wiki/South_Sea_Company</a><p><a href="https://en.wikipedia.org/wiki/Gregor_MacGregor#Poyais_scheme" rel="nofollow">https://en.wikipedia.org/wiki/Gregor_MacGregor#Poyais_scheme</a>