2015 Was Do or Die for Bitcoin Miners But Promise Lies Ahead
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Posted October 06, Vast amounts of electricity go into feeding the Bitcoin delusion. Fortunately, it's unlikely that the digital currency will survive long enough to generate the environmental disaster that would arise if it became a major part of the financial system, writes John Quiggin.
The digital currency Bitcoin has been seen by many as a source of threats, as potentially facilitating terrorism, money launderingand drug dealing; undermining taxation systems ; and rendering monetary policy unworkable. While these threats have raised concerns, it appears that all can be managed with appropriate regulatory and law enforcement strategies.
By contrast, only a handful of insiders most notably Guy Lane of BitCarbon have noticed a threat inherent in the very design of the Bitcoin system: Even more striking, this same design feature ensures that Bitcoin cannot, in the end, provide a stable store of value.
In essence, the creation of a how long to mine a bitcoin 2015 Bitcoin requires the performance of a complex calculation that has no value except to show that it has been done. The crucial feature, as is common in cryptography, is that the calculation in question is very difficult to perform, but, once done, is easy to verify. In the early days of Bitcoin, the computations in question could be performed on ordinary personal computers.
Nowadays, however, 'miners' use special purpose machines optimised for the particular algorithms used by Bitcoin. With these machines, the primary cost of the system is the electricity used to run it. That means, of course, that the only way to be profitable as a miner is to have access to the cheapest possible sources of electricity. Most of the time that means electricity generated by burning cheap coal in old plants, where the capital costs have long been written off.
Even in a large grid, with multiple sources of electricity, Bitcoin mining effectively adds to the demand for coal-fired power. Bitcoin computers run continuously, so they constitute a 'baseload' demand, which matches the supply characteristics of coal and nuclear. More generally, in the process of decarbonising the energy supply system, any increase in electricity demand at the margin may be regarded as slowing the pace at which fossil fuels can be phased out.
That corresponds, in turn, to about three tons of carbon dioxide for coal-fired electricity. Switching even a small part of a typical household's financial transactions to Bitcoins must therefore entail a massive increase in electricity use. Fortunately, it's unlikely that Bitcoin will survive long enough to generate the environmental disaster that would arise if it became a major part of how long to mine a bitcoin 2015 financial system.
The same design feature that requires the use of so much electricity is the fatal flaw in Bitcoin as a currency. The creation of a Bitcoin requires costly calculations. But these calculations are of no use to anyone. If they were valuable, then they would be performed for their own sake, with Bitcoins as a free by-product.
That would undermine the whole system. By contrast, all viable currencies are underpinned by the fact that the currency has a use outside its role as a medium of exchange. This is obvious in the case of metallic currencies such as gold and silver coins, and of paper currencies that are convertible into gold. But it is also true of 'fiat' currencies, not convertible into precious metals the case with the US dollar since The external value of fiat money is more subtle than that of a metal coin.
It is inherent in the fact that the government issuing the currency is willing to accept it in payment of taxes and other obligations. If the US government ceased to exist, people might choose to go on using US dollars as a medium of exchange for a while.
Ultimately, however, all currencies without an external source of value must share the fate of the Confederate dollar and similar former currencies, becoming, at best, collectors' items. In the end, Bitcoins will attain their true economic value of how long to mine a bitcoin 2015. But as long as Bitcoin, and similar 'crypto-currencies' persist, the mining process will continue to damage the environment by wasting energy to no purpose.
He was being sincere while Mark is being facetious. Gold star for you. How many resources are consumed around the world to mine gold - an essentially useless metal. I'm not exactly sure how much of a science background you have, Gary, but gold is far how long to mine a bitcoin 2015 useless. Its nominal value is inflated by its use in jewellery, but its material properties have significant industrial uses.
There's gold in almost every modern electronic device, for starters! Gold is used in jewellery, investment and industry. Its use in jewellery is well-known, of course, both as the pure metal and as alloys. As an investment, it's widely recognised as one of the how long to mine a bitcoin 2015 secure. In industry, they're all over the place.
Your smartphone, for example, probably contains about 50mg of gold about 50c worth as corrosion-resistant coatings for electrical connectors. They're also widely used in expensive or mission-critical computer components, or for use in corrosive-atmospheres.
Gold is also a good reflector of electro-magnetic radiation, making it useful as a protective coating for artificial satellites, astronaut's helmets and electronic-warfare aircraft.
This property also makes it useful in the preparation of specimens for scanning electron microscopy. When I see comments such as Rob's, I'm how long to mine a bitcoin 2015 of the statement by an eminent economist many decades ago. They just have to convince 6 billion people that their belief in gold is wrong. It's not too much of a stretch to call gold mining functionally useless. Gold is a fantastic metal. How long to mine a bitcoin 2015 resistant to corrosion and many chemical reactions, is ductile, malleable and highly conductive.
It has excellent applications in electronics. However on top of that, it is also shiny. From a functional point of view, the world has a massive oversupply of gold, and what we do use is spent on trivial vanity applications. We don't need more gold, but to better use what we already have. Additional gold mines are essentially like bitcoin mining, because they are mining gold for the commodity value, not to fulfil an industrial demand.
Diamonds are another good example. About 30 milligrams for each phone iPhone 4s contain 34milligrams. Even so, with the total mass of mined gold 1. About devices for every person on Earth. So gold's "value" is utterly unrelated to its utility. Indeed gold is only used because it is cheap: But there are equally as good, albeit more expensive alternatives. Of course, gold isn't completely useless. A better and more focused question would be, how many resources are consumed around the world to mine gold that is used for money.
Gary Actually gold has a number of uses and that is set to increase rapidly as we make increasing use of nanoscale materials while continuing other uses in which gold's properties make it simply too hard to replace for how long to mine a bitcoin 2015 foreseeable future. Sure a lot of gold is used in jewelry, though some may say that this has artistic or social meaning enough, but it's also used in electronics - including phones, gps systems and pretty much any sophisticated electronic device as well as computers.
Gold alloys are used how long to mine a bitcoin 2015 dentistry and in medicine gold compounds are injected to treat certain kinds of arthritis, radioactive gold isotopes are used as implants to treat cancers and in diagnosis. Again gold finds uses in surgical instruments and medical electronics too. Gold is used as a lubricant for use in aerospace applications where organic lubricants would volatilize or be ruined by radiation - applications such as satellites which are vital to the modern world.
Gold also is useful to make glass that creates great insulation - protecting against extremes of heat and cold very efficiently and saving a great deal of energy in larger buildings. It also is used in glass that needs to block radiation - such as astronauts helmets. In addition gold is increasingly useful as a catalyst in organic chemistry - new how long to mine a bitcoin 2015 are being found every year in this role and will continue to be due to gold's low toxicity and ability to assist in reactions to create complex chemical architectures.
That's without even mentioning that as a commodity it promotes stability in the markets - allowing investors to feel confident in the value of gold when everything how long to mine a bitcoin 2015 is how long to mine a bitcoin 2015 a state of flux. This image as a safe place to invest actually helps buffer the market from economic shocks and helps lessen their impact, preserving jobs and preventing market panics.
Bitcoins do none of these things - in fact they promote instability in markets, provide a perfect tool for money laundering and use in illegal transactions, undermines taxation systems and monetary policy as well as waste huge amounts of energy for no real world gain.
Worse still it encourages that most pathetic of web denizens - internet libertarians. But the point of those systems is that they use no more energy than is necessary, whereas bitcoin is incredibly wasteful by design.
One of the multitude failures of this article is to adress the fact that there are an unlimited number of "potential" bitcoins, but each one is slightly harder to mine than the last. The value of a bitcoin mined using renewable energy is identical to one mined with energy from fossil fuels.
Bitcoins decentralise the global financial system, which scares the absolute pants off the oligarchs who currently hold the purse strings of the world. Alex - So what if the complexity in calculation increases per bitcoin?
The article has already addressed this by saying "In essence, the creation of a new Bitcoin requires the performance of a complex calculation that has no value except to show that it has been done.
The only difference between this analogy and bitcoin mining is that the CO2 will be coming from your car instead of a power station. Gold on the otherhand is tangible and has many uses as a number of other commentators have already how long to mine a bitcoin 2015 out, such as its high conductivity for use in electronics, corrosion resistance, and its recognised status as being a trusted financial investment for centuries. Bitcoins probably aren't even going to last a decade.
Not to mention the electric motors that power industrial equipment used to make the base materials, the printing presses used to turn those base materials into "folding money", the trucks used to distribute the "folding money" to the banks, and the computer systems that handle all electronic funds transfers actually run on fresh air and happy thoughts Then there are the electronic cash registers in the shops and ATMs.
All of which also run on fresh air and happy thoughts. This article read as an opinion looking for a supporting argument. Unfortunately the selected argument implied a comparison with fiat currencies but did not examine the equivalent cost for the existing alternatives. The implication that bit coin miners and only bit coin miners use cheap power severely weakens the rest of the article. While there is some overhead to bit coin transactions, it is such a minor part of the existing economy, the extra load on the electricity network is invisible compared to the load caused by domestic IT equipment, TVs or domestic air-conditioners.
By the time it becomes a significant part of the economy a big ifthe effect described by Moore's law will reduce the power required per transaction to the point where it will remain largely unnoticeable.
The author should have contrasted the calculated current power per transaction for bit coin to the power per transaction for the big credit card transaction clearing houses for example: Where X is the total power consumption including the air-conditioning, Y is the number of transactions handled per year and DF is factor to account for the duplicated IT and staff used for security and how long to mine a bitcoin 2015 systems by the banks either side of the clearing house.
Bit coin uses a far flatter structure and generally doesn't need these to the same degree.
