Some will take this as proof that the system of Bitcoin shouldn’t exist, even that we should attempt to close it down. For it is, according to these calculations, using vast amounts of energy:
Just one Bitcoin transaction uses the same amount of electricity as a British household for nearly two months, new figures have shown.
The amount of energy needed to run the cryptocurrency has soared to record annual highs of 77.78 terawatt hours the same as the entire electrical consumption of Chile.
The carbon footprint of a single transaction is the same as 780,650 Visa transactions or spending 52,043 hours watching YouTube, according to calculations by Alex de Vries, a blockchain specialist, at PWC.
“People react with disbelief, but the figures are true,” said Mr de Vries who founded the Digiconomist blog to highlight the impact.
All those calculations are over here.
Now, let’s not quibble about them, instead let us just assume that they’re correct. So, what should be done about this?
Nothing, obviously. No one’s found a free source of electricity – if they had then we’d all be worrying about this rather less, wouldn’t we? Therefore everyone is paying the costs of running the system. Those in the system are paying those costs that is. There’s no leakage of the direct costs from bitcoin users and miners to non-users and non-miners of Bitcoin, whatever might be happening with externalities. Those externalities being, of course no different from those from any other use of electricity and to be treated in the same manner.
So, what we’ve really got here is that some people like to allocate their resources to playing around with Bitcoin. As others prefer to do similarly obscene things such as peruse Readers’ Ewes from Llanelli and contemplate the artistry of Simon Cowell. All of which are things which, however absurd of even vile, people have every right to do. For we’re a liberal polity which means that consenting adults get to be consenting adults. As long as they’re covering the costs of their activities themselves then that’s just what peeps like to do – Shrug.
It also implies that the value of Bitcoin is tied to the cost of electricity. That is it is based on something humans can only influence with difficulty. That should help stabilise the currency.
Yes, indeed, electricity exists to serve us, not we it.
Bitcoin uses so much electricity because the need to make complex computations in order to “mine” new Bitcoin is touted as a credible promise against inflation.
The Federal Reserve, clearly ready to deviate from its stated policy to offset everything from coronavirus to Trump’s next tweet, has no such credibility.
Government uses vast amounts of electricity and it should certainly be closed down.
These numbers don’t smell right. The average household uses 4MWh a year of ‘leccy, so they’re say 600kWh for each bitcoin transaction, which means each such transaction is costing someone £30 (assuming a very favourable 5p tariff). This is actually the energy cost of ‘mining’ a new bitcoin (currently worth ~£6,700). The actual energy cost of carrying out a transaction, once the bitcoin has been mined, is (like a Visa transaction) pennies at most.
Agree. But numbers that don’t smell right equal mouse clicks.
“No one’s found a free source of electricity” Well, not exactly, but what bitcoin miners have done is gone where the electricity is super, super cheap. Some of this is bad: mosques in Iran that get free power, Caracas where people can turn cheap Venezuelan oil into a more valuable currency. That’s oil being burned to create bitcoins. But most of it is about excess green power. Bitcoin miners in China go to provinces where it’s rainy season because there’s more hydro than the area needs. There’s bitcoin mining with the glut of geothermal electricity in Iceland. Rural Swiss areas… Read more »
Something I can’t quite get my head around is that there are long complicated calculations to “mine” a bitcoin. But those bitcoins are just a number isn’t it? As with people losing electronic wallets containing bitcoins, that electronic wallet is simply a filesystem containing a sequence of numbers.
So, what’s to stop me just generating the numbers rather than mining them?
Ok, not every possible number is an actual bitcoin, but what’s to stop me doing:
for (a=0, a<infinity) {
if is_a_bitcoin(a) { bingo(); }
}
and just print myself a load of bitcoins?
The same thing that stops me from generating a number and asserting it’s my savings account balance: the fact that my bank’s books don’t agree.
Bitcoin’s other innovation is the fact that its “books” are not in any one place; they are a blockchain, of which there are many copies, occasionally resynchronizing with one another, so that each contains all the transactions posted to any of them, and can prove they do.
True, but ultimately ‘owning’ a bitcoin is just owning a file containing a long string of bits. If you generate enough random numbers, some of them will be valid bitcoins, but you’d have to generate a lot of random numbers. In the same way, you can generate random numbers in the hope that one of them will turn out to be a valid DVD of The Magnificent Seven. It’s not mathematically impossible; just very, very unlikely.
It doesn’t have to be random numbers, just start at zero and keep going.
Again, true, but you’ll still need to keep going for a very long time (more than the age of the universe).
It’s not generating a number and asserting it’s my bank balance, but more like generating a number and asserting it’s my bank account. Who’s to stop me asserting that 12-23-45-98765432 is my bank account, gimmie all the money in it?
More pertinent, a credit card transaction just needs a string of digits, and the physical human is only checked if the physical human is present.
for (a=’0000000000000000′, ‘9999999999999999’) {
attempt_transaction(a);
}
Because the person who accepts your supposed bitcoin, like your physical bank, has records to check to verify that you are the owner; namely, access to one of the blockchains, which includes every transaction that bitcoin has undergone, and I believe an encrypted form of your email address. The system has obvious safeguards to prevent not just counterfeiting but spending the same bitcoin twice in hopes that the accounting won’t catch up.