Yet another failure to understand the purpose of mining. The energy is NOT being wasted. In fact, the energy spent mining is the exact thing that makes the Bitcoin network function. The energy is being converted into trust. The more energy that is spent on mining, the more difficult it will be for a well-capitalized entity to perform an attack on the network.<p>Aaron Greenspan, repeat after me: Mining energy is not wasted. Mining energy is not wasted. Mining energy is not wasted.<p>Now, it <i>is</i> an open question as to whether the cost of running the Bitcoin network is worthwhile. However, for the moment, it clearly is. The fact that some miners can turn even a small profit on the Bitcoins they're rewarded with demonstrates that the utility they provide has positive market value.<p>Of course at some point it may be that it costs substantially more to mine new Bitcoins than they are worth on the market. If this happens soon, Bitcoin will likely fail. If it happens later, it's possible that transaction fees could prop up the network, but that's purely speculative.<p>Another thing to consider when assessing the energy efficiency of the Bitcoin network is how it compares to the efficiency of existing currencies. Cash has a physical component and must be manufactured. Electronic fiat is backed by huge, complex, and expensive networks. Visa's datacenters are not free. Keep in mind that credit card transactions typically have a transaction cost of 3%, which in some way represents the cost of operating the Visa network. 3% is kind of a staggeringly huge number, and off the cuff I expect that's actually quite a bit higher than the total Bitcoin network cost to volume ratio...
He's trying to tie the value of bitcoin to the forced syncing process - "bitcoin represents spent electricity." That's just not right. In reality, bitcoin represents agreement by parties to honor debts in its ledger. Bitcoin's backing is the information system, not the resources that go into it. The value is tied to people's faith in the currency and ledger system.<p>EDIT - other criticisms:<p>- He criticizes energy waste, but doesn't compare it to the energy use of existing financial systems.<p>- He points at the risk of owning wallets without recognizing that this should be a diminishing risk as better software develops.
> <i>Yet this is exactly how Bitcoin works: you are rewarded with new coins once your computer has consumed a certain amount of electricity (measured by the complexity of computing hashes of data, which takes time). Worse yet, the amount of electricity required to be wasted to earn a reward predictably increases, which means that the more Bitcoins one wants, the more one has to waste.</i><p>Couldn't the same be said of gold? Mining and extraction are resource (energy) intensive and yield a result (gold) that is less than it's practical intrinsic value (eg. for industrial purposes).
It seems that most comments posts are either pro bit-coin or anti bit-coin, but both sides seems to make wrong arguments based on a flawed thinking of mining.<p>A fixed amount of bit coins are mined (on average) per unit time. Thus, how much work it takes to mine a coin depends solely on the number of miners. Econ 101 theory tells us that the aggregate costs of the miners will equal their aggregate rewards. So, the total cost of mining (hardware, electricity, people's time who work on it) will equal the reward.<p>That's all that's happening with mining. No for either side to complicate it and make it seem like more is there.
The author seems pretty hung up on the fact that mining consumes electricity, but let's look at the numbers.<p>Miners consume an estimated 108,619 megawatt hours per day (according to <a href="https://blockchain.info/stats" rel="nofollow">https://blockchain.info/stats</a>). This is actually a very high estimate as most miners have switched to ASICs and are consuming orders of magnitude less power, but let's use it anyway. This would add up to about $16m spent per day on electricity.<p>In 2011, the United States alone consumed 367 million gallons of gasoline daily (according to <a href="http://www.eia.gov/tools/faqs/faq.cfm?id=23&t=10" rel="nofollow">http://www.eia.gov/tools/faqs/faq.cfm?id=23&t=10</a>). At an average gas price of $3.576 / gallon (<a href="http://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm" rel="nofollow">http://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm</a>), this would be $1.3b spent per day on gas.<p>Pretty much everything on Earth is going to consume power, but I don't think Bitcoin mining consumes enough to worry about.