As you might have noticed there has been an explosion of mainstream media article about Bitcoin's energy consumption. I won't link these crap but here are the titles:
So what is the info? Where does it come from? How did they come up with it? Is it true? What is the info
- The guardian: "Bitcoin mining consumes more electricity a year than Ireland "
- Express.co.uk "SHOCK CLAIM: Bitcoin is DESTROYING the planet and uses as much energy as DENMARK"
- Vice: "Bitcoin Could Consume as Much Electricity as Denmark by 2020"
- Mashable: "How to fix Bitcoin's energy-consumption problem"
- CBS News:"Bitcoin mining consumes more energy than 159 countries"
- Newscientist : "Bitcoin mining uses more energy than Ecuador – but there’s a fix"
- CNN: "Bitcoin boom may be a disaster for the environment"
- Bloomberg: "Bitcoin's Exorbitant Energy Costs May Prove to Be Biggest Risk"
- The list goes on...
Wrapped in sensationalism, the info is the following:
energy consumption of the bitcoin network, which is responsible for verifying transactions made with the cryptocurrency, is 30.14TWh a year Where does it come from
Following direct links, or going through endless source circle of newspaper quoting one another, the source for absolutely all of these news article is the following website: https://digiconomist.net/bitcoin-energy-consumption
The about section contains the following:
Digiconomist is a platform that provides in-depth analysis, opinions and discussions with regard to Bitcoin and other cryptocurrencies. The goal of Digiconomist is to cover any relevant financial, economic or regulatory cryptocurrency-related topic.
Additionally a quick look at the website shows a few things: 1. The website only talks about ETH and BTC 2. Outside of the blog posts it almost only talks about energy consumption (there is an ETH obituaries) 3. Blog posts started in march 2014 4. The domain was registered the 2014-07-03 5. No address, no country, no name, no foundation, no agency... Who are they?
Disregarding the fact that it comes from a no name website the, info is right there with a nice graph and even a methodology explained with a pretty infochart. It almost looks to good for a blog about cryptos. How did the Bloomberg, ars technica and the like found this website? I do not know, but when they did a ready to use report for newspaper was there waiting for them. Also, the graph as an url embedded at the bottom: "bitcoinenergyconsumption.com" which interestingly enough is a redirect for Digiconomist.
Also the bottom of the page on consumption has a list of news articles referring to this website for their sensationalist claims. How did they come up with it
So as I said the methodology is there, and the result of it is there too:
Bitcoin's current estimated annual electricity consumption* (TWh) 32.53
So let's dive into the methodology on a step by step process, first of all, a further detailed methodology is shown here
- First, calculate the "Annualized global mining revenues (USD)", the website says: $13,487,831,695 As of this writing, on fork.lol, the reward for BTC is around r = 240 000 USD per block. r * 6 * 24 * 365 = 12 614 400 000. This is the same order of magnitude, but not good enough. Including the BCH reward as well (17 639 as we speak) gives : C = 13 541 505 840 USD. Seems about right.
- Calculate the mining operating cost "Annualized estimated global mining costs" : $1,626,480,051 This is easy, it is simply 60% of the previous number C * 0.6 = 8 124 903 504 USD ??? Ok this is weird, their number is not even 60%, it is more like 12%. So where is that number coming from?? Turns out this 60% assumption is not used at all in the calculation...
- Disregard the previous step
- Calculate the current total hashrate on the network: 14.12 ExaHashes/s at the time of these lines
- Assume the following:
Since the marginal product of mining is equal to the number of Bitcoins received per unit of mining effort, it would thus be expected that miners will either add more hashrate if the resulting revenue exceeds associated electricity costs, or reduce the hashrate once electricity costs start exceeding the revenue per hash. This also means that it is expected that the total network of Bitcoin miners is always mining at the calculate-able break-even efficiency. The break-even efficiency for Bitcoin mining can simply be calculated as:
W per GH/s=(price∙BTC/day)/(price per kWh ∙ 24hrday)
In layman terms, this means that they assume that the number of miners is always the exact amount for break even. This is a fair assumption. The formula that follows it make no sense without the context it came with in that working paper
. A quick look at this document shows concerning mathematical mistakes... I have tried for far too long, I cannot reproduce any of their numbers... So is it true? No
These numbers are not reproducible, they make no sense and calculated using a dubious paper by some professor of "social research". I assume he is also the owner of the website because his name appears way too often in there...The university where he studies has a nice wikipedia page:
The New School is a private non-profit research university centered in Manhattan, New York City, USA, located mostly in Greenwich Village. It was founded in 1919 as an institution dedicated to academic freedom and intellectual inquiry, serving as a home for progressive thinkers. The real estimation
This is actually pretty straight forward. The maximum ever reached in hash rate was 16.5 exahashes/s according to fork.lol.
This is equivalent to 1.18 million S9 ant miner at 14 TH/s. Assuming everyone suck and they all have old hardware with crappy PSU. Let's say each S9 consumes 2000W. This is a 17520000 Wh per year per miner, which yields 20.67 TWh.
So peak production with very negatives assumptions yields a number 40% lower... General critic
Deriving consumption from the mining revenue is purely ludicrous.
No including the fees in the mining revenue calculation is also ludicrous.
If your numbers are not reproducible, they are worthless.
This may be a long post but I wanted to get a few things off my chest. Some of you may not like what I'm saying but if that's the case at least take the time to discuss it rather than downvoting me. I think that's what communities on Reddit lack - discussion is how we progress and sometimes it feels like all Reddit does is downvote instead of actually talking up. Firstly - Bitcoin in the media.
It's no big news that Bitcoin was synonymous with Silk Road and the Deep Web for a while. You couldn't have one without the other. This lead to a lot of negative press for Bitcoin itself. I think it was handled quiet well, we showed the majority of people that Bitcoin was useable in a mainstream setting but I don't think we did enough. How often do we see the good features of Bitcoins like:
- Free / automatic fraud prevention. You can be sure that your payment won't be chargeback from fraudsters. *Very easy implementation with Coinbase and other merchants. Fees are very low compared to credit card processors.
- Accept payments worldwide. Anyone who can download the client can make a payment.
- Can be set up usually within 10 minutes.
How often do we see these features? I recently saw a sign in my local shop saying they couldn't accept credit card payments due to high fees. Imagine if they knew about Bitcoin, as long as they have a computer or even access to one they could attract a wider audience.
I think we can do a lot more to give out a clearer message about Bitcoin. I think a lot of the fear comes from the fact that people don't understand it. If we spend more time educating then we can get a more positive image out there. Secondly - Miners, their profitability and other issues.
Thirdly - exchanges and how they work.
- The next thing I'd like to bring up is the mining community. When people were using CPUs and GPUs to mine we all knew that there was very little chance of profit. BTC was no where near as popular as it is now and you could end up spending thousands on building a rig with hardly any chance of making profit - but people still did it for fun. It was a interesting concept how your computing time would make the network stronger and secure and in return you would be repaid in miner fees / generating blocks. Now it's all about profit. Yes, it's understandable that if you spend $5000 on a miner you want to make profit of it but people see it as a simple money in profit out scheme. That's now how you should see it. Your making an investement. If you look at ROI in terms of Bitcoin chances are you won't break even any time soon. This was the same with GPUs and it's the same with ASIC. However if you pay for something like a USB ASIC miner you shouldn't see it that way. You're paying a small amount for xGH/s (or MH/s) for a fraction of what it would actually cost you. When I brought my USB miner I spent about $20. If I were to buy that power with a GPU it'd cost me way more and even more to keep it running in terms of power costs. Another way of looking at it is if you were an early adopter. 50BTC rewards were nothing back in the day. If I hoarded all my coins and spend that 50BTC buying hardware it's not that bad because those 50BTC cost me nothing. Yes I could have sold it and gotten way more but if it means I'm securing hardware to mine even more coins to hoard then it could be very profitable. What if the hardware I brought mines me 25 coins now, I've done a good job imho.
- Companies themselves have let us down with the exception of one or two. BFL fucked up. Avalon pretty much cheated the whole community. KNC Miner and ASICMiner are the only ones I know that kept the promises as close as they could. As an investor, investing in any of the miners with my USD wouldn't be very appealing to me. It's all shambles and I would prefer to invest my USD in buying BTC and holding it rather than buying mining software. To me it sounds like all the companies are interesting in selling during the gold rush. "During the gold rush, sell shovels." Which seems to apply to most of the companies these days.
Bitcoin for devs and merchants.
- A lot of people seem to give MTGox shit because of their processing time. What you have to understand is that whenever fiat is involved there are regulations. Bitcoin is still a touchy subject in the US. This makes it dangerous to anyone in govt. who doesn't understand it. Their system works though.
- MTGox, BTC-e use something called an order book. Meaning BTC will only be worth what people are willing to pay for it. The highest bid price will raise the last price. Simple as that. It's good because it means they can't artificially raise the price..but it also means trading bots with the relevant APIs can change the price by making small orders. They take a small fee in BTC / USD which imho sounds fair.
- LocalBitcoins is failing. People are charging premiums way above even Gox but only paying below Bitstamp to buy the coins. It's all about being greedy. LocalBitcoins used to be cheaper for a while but now it's just being ruined by greed. Unless travel costs are included, most people use just UK Bank Transfer which costs you NOTHING. You could charge a .10p fee each way, keep it at Bitstamp prices and easily attract more customers but people choose to be greedy.
I think a lot of work needs to be done for Bitcoin devs. Unlike other documentation, I found Bitcoin very hard to follow when it comes to dev. I understand the basics of coding and a few languages - not a much but enough to say make a web page or a automated program in C#. Imagine if you had Bitcoin dev dedicated websites like w3schools does for languages (I know w3 schools is a very bad benchmark but whatever). If more people understood how dev works then more people would attempt to get into it.
I think a lot of work needs to be done within the BTC community itself before we even think of making it mainstream. Even if the last price reaches $1000 it's useless if people don't know as much as should do.
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