Jump to content

Cryptocoins: who pays the huge energy?


Recommended Posts

1 hour ago, martillo said:

Seems to me now that Bitcoin came to stay but as an "informal" coin.

For "formal" business we already have the proper dollar stablished as the main international money the same as English is stablished as the main international language.

Perhaps… but TBH I’m not really willing to accept your speculations on this topic as valid given the consistency of misunderstandings you’ve demonstrated throughout this thread.

Your position (while well intentioned, I’m sure) seems confused and uninformed.

https://www.ft.com/content/eec2ffb3-73f4-4397-b6bf-58c60fc8a8a7

Quote

Citigroup has become the latest banking giant to look into crypto <…>
Bank of New York Mellon and State Street are among the large institutions that have recently announced plans to become active in different areas of the cryptocurrency market.

Goldman Sachs executed its first cryptocurrency trades and formalised the set-up of its bitcoin desk on Friday, two months after the US bank announced that it would re-enter the market.

 

Link to post
Share on other sites
  • Replies 121
  • Created
  • Last Reply

Top Posters In This Topic

Top Posters In This Topic

Popular Posts

It's not just that China as a whole controls the vast majority of the mining. It's also that the top four Chinese mining pools control over 60% of the bitcoin hashrate, and have done so ever since I s

And another just for fun:

I don't know well how cryptocoins work. It is said they spend so much energy as an entire country. The question is who pays such energy?

Posted Images

Posted (edited)
45 minutes ago, iNow said:

Your position (while well intentioned, I’m sure) seems confused and uninformed.

Of course. I opened the thread asking for answers and admiting "I don't know well how cryptocoins work."

My misinformation and confusion was already clarified now, I think. That was the aim of the thread. Useful for me and for otherones I think.

Thanks for your contribution.

Edited by martillo
Link to post
Share on other sites

And thank you for the opportunity to discuss and interact. I suspect we’re not the only ones who learned and benefited from this exchange. 

Link to post
Share on other sites
On 5/18/2021 at 3:18 AM, martillo said:

So, they someway will pass the cost to the users of the coin, those making business with it, or not? If not they will simply lose the money of the cost of the energy something I don't think they want in any way. Then, that cost is passed to the buyers of the coin and what does this mean? Means the rising of price of the coin and as the coin get more expensive I guess a drop in the demand. Final users of the coin would have to pay more for it.

No, no, this is not the way it works. Say you are mining real, physical gold. That also costs a lot of energy (and labour). If you can't earn those costs back with the gold you are selling on the market, you would consider to close the mine.

With Bitcoin it is the same: your mining costs energy, infrastructure (especially powerful computers). But then, if you have created a new Bitcoin, you go to the market with it. If your costs were $15'000, and the Bitcoin is worth $20'000 at the moment you have earned $5'000. But if the Bitcoin is $10'000, you have to accept a loss. And you might consider to 'close the mine', i.e. do not 'calculate' Bitcoins anymore.

Or did you clear that point up already? I did not read every posting.

Link to post
Share on other sites
Posted (edited)
3 hours ago, Eise said:

No, no, this is not the way it works. Say you are mining real, physical gold. That also costs a lot of energy (and labour). If you can't earn those costs back with the gold you are selling on the market, you would consider to close the mine.

With Bitcoin it is the same: your mining costs energy, infrastructure (especially powerful computers). But then, if you have created a new Bitcoin, you go to the market with it. If your costs were $15'000, and the Bitcoin is worth $20'000 at the moment you have earned $5'000. But if the Bitcoin is $10'000, you have to accept a loss. And you might consider to 'close the mine', i.e. do not 'calculate' Bitcoins anymore.

Or did you clear that point up already? I did not read every posting.

Yes, iNow and StringJUnky have just clarified me that point but thanks anyway for your this and some previous contribution in the thread. Everybody helped to clarify confusions and misconceptions about cryptocoins.

Actually I  don't know if the price of the coin and the energy consumption are totally independent but the energy cost does not affect directly the price and the demand as I initially thought. I got it now. May be for instance the energy consumption sets, in average with time, a minimum in the price of the coin because in average all the miners, banks, platforms, etc must win isn't it? And the price would not strongly affect the demand of the coin. Am I wrong in something now?

Edited by martillo
Link to post
Share on other sites
Posted (edited)

I mean, the average price of the coin would not strongly affect its demand as its volatility, for instance, would.

Edited by martillo
Link to post
Share on other sites
1 hour ago, martillo said:

I mean, the average price of the coin would not strongly affect its demand as its volatility, for instance, would.

The average price of the coin, is roughly equivalent to it's value... 

What you don't get, is the value of the other two side's. 

Link to post
Share on other sites
Posted (edited)
52 minutes ago, dimreepr said:

What you don't get, is the value of the other two side's. 

You like to leave people thinking...

What that would be?

Edited by martillo
Link to post
Share on other sites
2 hours ago, exchemist said:

Whereas one of principal jobs of a currency is to be a "stable store of value", if I recall correctly.  

That rules out the Dollar, the Euro and Sterling... and all the others.

Link to post
Share on other sites
1 hour ago, John Cuthber said:

That rules out the Dollar, the Euro and Sterling... and all the others.

Joking apart, those don't change in value by 50% in a matter of days. I have had some hundreds of thousands of pounds in Sterling savings for over 20 years now and I am not concerned that they may suddenly halve in value. Ditto USD and € savings. 

Link to post
Share on other sites
35 minutes ago, exchemist said:

Joking apart, those don't change in value by 50% in a matter of days. I have had some hundreds of thousands of pounds in Sterling savings for over 20 years now and I am not concerned that they may suddenly halve in value. Ditto USD and € savings. 

It's not a joke, value can change in a matter of moment's, depending on how thirsty you are... 

Link to post
Share on other sites

I don't think it's valid or even helpful to compare global reserve currencies like the dollar and the pound... which are governed by the Federal Reserve and Bank of England... and which also allow those nation states to print and push more currency into circulation and to qualitatively ease the markets with the stroke of a pen... with cryptocurrencies which are limited in supply by design and not associated with any country or government. 

Is perhaps easier to think about it more like a stock that one can transfer easily through platforms like PayPal and Venmo

Link to post
Share on other sites
4 hours ago, exchemist said:

I am not concerned that they may suddenly halve in value. 

Nor were the people of Germany in 1923- until it happened.
 

Link to post
Share on other sites
15 hours ago, iNow said:

I don't think it's valid or even helpful to compare global reserve currencies like the dollar and the pound... which are governed by the Federal Reserve and Bank of England... and which also allow those nation states to print and push more currency into circulation and to qualitatively ease the markets with the stroke of a pen... with cryptocurrencies which are limited in supply by design and not associated with any country or government. 

Is perhaps easier to think about it more like a stock that one can transfer easily through platforms like PayPal and Venmo

Agreed. They don’t really behave like currencies - or not like good ones.

Link to post
Share on other sites
13 hours ago, John Cuthber said:

Nor were the people of Germany in 1923- until it happened.
 

That's the most famous example of a currency that failed to do its job as a currency, certainly. 

Link to post
Share on other sites

I found this update interesting. The problem is definitely known, and some are working to resolve it.

https://www.bloomberg.com/news/articles/2021-05-23/ethereum-closes-in-on-long-sought-fix-to-cut-energy-use-over-99

Quote

Ethereum and better-known-rival Bitcoin both operate using a proof-of-work system that requires a global network of computers running around the clock. Software developers at Ethereum have been working for years to transition the blockchain to what’s known as a proof-of-stake system — which uses a totally different approach to secure the network that also eliminates the carbon emissions issue.

<...>

Bitcoin’s network currently uses more power per year than Pakistan or the United Arab Emirates, according to the Cambridge Bitcoin Electricity Consumption Index. 

<...>

Ethereum’s proof of work uses 45,000 gigawatt hours per year. With proof of stake, “you can verify a blockchain with a consumer laptop,” he said. “My estimates is that you’d see 1/10,000th of the energy than the current Ethereum network.”

 

And separate, but related: 

hashrate.jpeg

Link to post
Share on other sites
11 minutes ago, iNow said:

I found this update interesting. The problem is definitely known, and some are working to resolve it.

https://www.bloomberg.com/news/articles/2021-05-23/ethereum-closes-in-on-long-sought-fix-to-cut-energy-use-over-99

 

And separate, but related: 

hashrate.jpeg

Doesn't that just suggest, it's based on what we think will be valuable tomorrow?

We can't live our lives, based on a bet; unless we have more than we need...

Link to post
Share on other sites
Posted (edited)
On 5/25/2021 at 6:03 AM, iNow said:

I found this update interesting.

It's not just that China as a whole controls the vast majority of the mining. It's also that the top four Chinese mining pools control over 60% of the bitcoin hashrate, and have done so ever since I started tracking it several years ago.

https://btc.com/stats/pool

Basically, the conditions for a so-called 51% attack already exist and have always existed. These mining pools can wake up any morning they like and steal everyone's bitcoin. The only reason it hasn't happened yet is that they haven't done it. Not because they can't.

ps -- Just to clarify what a 51% attack is, the idea is that the bitcoin protocol works by consensus. If most miners verify a block, the the block is good. If a bad actor inserts a bad block (containing, say, a transaction to transfer a thousand of your bitcoins to me), the majority of legitimate miners will reject that block and the bad transaction will fail.

Now if bad actors take over more than half of the hashrate, they can collude to verify bad blocks and verify fraudulent transactions. Satoshi's original idea was that mining would be done by millions of individuals running PCs in their spare bedrooms, making collusion difficult and control of more than half of the network by bad actors, impossible.

What Satoshi did not foresee was the processor arms race in which individuals with PCs have no hope of competing with huge miners who own highly specialized mining rigs. Only the big players can mine bitcoin now, and this has led to centralization. Remember that the entire mythos of bitcoin is that there is no central control. Well as it's turned out in real life, bitcoin is highly centralized after all, and collusion among bad actors is a real possibility. 

Finally I should mention that mining pools are associations of many independent miners, and it's not clear what kind of centralized control the operators of a pool have over their individual miner participants. So things are not quite as dire as I'm describing, but far more dire than you'd know if you only listened to the claims that bitcoin is decentralized. The publicly available hashrate distribution statistics bear that out. 

 

Edited by wtf
Link to post
Share on other sites
43 minutes ago, wtf said:

if bad actors take over more than half of the hashrate, they can collude to verify bad blocks and verify fraudulent transactions.

That was very well explained. Thanks for the insight and informative post 

Link to post
Share on other sites
  • 3 weeks later...

https://news.bitcoin.com/elon-musk-tesla-resume-accepting-bitcoin-miners-confirm-clean-energy-usage

Quote

Tesla CEO Elon Musk has announced that when there is “confirmation of reasonable (about 50%) clean energy usage by miners with positive future trend,” his electric car company will start accepting bitcoin for payments again.

 

Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.