Problem: Energy consumption by Bitcoins

3 pointsby netforayvor 13 Jahren3 comments

I am in favor of Bitcoin for various reasons related to freedom and economy(some gut feelings). But I have realized that there is one thing very wrong about Bitcoin.

All most all other currencies in the world we use are based on some guarantee of the value by some central bank. So for creating say $1000 all they need is a paper and little complex system to make it difficult for others to copy it. So real energy consumed in the process of making $1000 will be may be say $5 (that is max). Ofcourse when we talk about coins the cost may be much more. Some times it may reach the actual cost of metal in it. Let us consider that only 1% of coins are in circulation. So that is not significant.

But what does it cost to create 1000 Bitcoins? Bitcoins are created using electricity. So they consume last amounts of electric power to produce Bitcoins. And this energy is consumed in the process. It is lost, no one can recover anything from it. So for society, net result of creating Bitcoins is always -ve. As the price of Bitcoins are increased now from $1 some years back to $90 now, more and more people will start converting real power into some numbers.

I have not done any statistics on this but rough estimates is more than 10% of the value is already consumed.

As a person who does not much like waste of natural resources, I do not like this. The people who created it should have found some other way to limit the availability of them.

I may be wrong in lot of assumptions I made above. I have not found anyone talking about this issue. What do you think?

2 comments

mchannonvor 13 Jahren

A few observations:

Many of the bitcoin mining rigs out there are operating on either "borrowed" or idle equipment- at least part of the energy on these rigs would have been wasted anyway.

Creating any good, be it the next version of Warcraft, or mining real physical gold, has a natural resource consumption associated with it. Bitcoin comes out smelling like a rose compared to real gold mining- even a dirty Chinese coal power plant can't hold a candle to the scale of earth movers, decapitated mountains, and cyanide leach ponds, particularly per dollar equivalent of real gold generated.

(But mined gold has real-world physical uses besides stores of value, right? Well, not really. The amount of gold used to make jewelry (used in many cultures as a store of value) roughly equals the amount of gold mined in a given year. Everything else comes from existing stock, recycling and reuse.)

netforayvor 13 Jahren

I agree on your points. But Bitcoin seems like going back on Gold Standard(when considering costs of it).

rgsteelevor 13 Jahren

The Bitcoin FAQ does address the issue, albeit briefly:

https://en.bitcoin.it/wiki/FAQ#Is_it_not_a_waste_of_energy.3...

Bitcoins have value because they are useful and they are scarce. In order to keep them scarce, there must be some mechanism to keep supply and demand in balance.

If you can come up with a method for maintaining this balance which requires a lesser expenditure of energy, you could argue that a currency based on it would be more environmentally responsible. I suspect, however, that such a method does not exist. At least, I can't think of one. Can you?