Bitcoin Mining Not That Wasteful In Comparison
Usually when reading the news we get the idea that bitcoins proof of work is a massive waste of energy. Certainly there is much potential for improvements that we should explore all options, but putting things into perspective bitcoin is not nearly as bad as often suggested
Bitcoin does need big amounts of electricity, but that is true for gold and other rare metals as well. Yet we do not hear every day how wasteful gold mining is and nobody has asked me if I dont care for the environment because of my gold ring.
A few fun facts:
- Mining one bitcoin uses as much energy as bringing 30.000 litres water to boil; or filling your bathtub with hot water roughly thousand times.
- Aluminium mining is a far more energy hungry process using 122MJ per dollar, or six times more than bitcoin.
- ASIC resistance seems to make mining cheaper since you do not need to commit and can do something else with your computational power.
In the long run, there are some very interesting questions to be answered that will have big impact on the energy consumption. Can we use a mostly POS that is secured with a little POW to make old transactions immutable? Can we find a mining algorithm that not only is ASIC resistant, but also computer resistant. Can we find a better algorithm than POW?
If bitcoin is at the verge of profitability (by design) against energy costs, how can aluminium even be profitable?
That is a very good question. In the numbers above the data for bitcoin was integrated over two years to smooth out the fluctuations. This means that there is a lot of 2016 pre boom data in there when the hash rate was low and that nowadays seems like extremely profitable mining. I guess when you take the current efficiency past boom with still high hash rate it should be comparable to aluminium.
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The worst misconception is that if mass adoption occurs energy consumption would grow exponentially. Many journalists seem to believe this.
It certainly will grow though. If PoW is used to secure the global financial system than a certain non negligible fraction of that has to be put into PoW. Otherwise it will not be secure enough. But since security grows with more confirmed blocks this fraction can probably be a small fraction of the global economy.
It is also very interesting to study the impact of ASIC resistance on this. If the algorithm is resistant almost everyone could commit some power in case of an attack which is a great deterrent for attackers. If the hash is not asic resistant, then in case of an attack little can be done. But now there is a different option. Just fork the chain before the attack and switch the hash algorithm. Now the attackers are completely ruined, but a lot of chaos was still caused and probably thousands of transactions will be double-spent.
It is hard to see what will be cheaper and more secure.
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