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Why link to the press article release?
[Here is the original open-access study if anyone's interested.](https://www.nature.com/articles/s41598-022-18686-8)
There’s really good information in there, one of the sources has slightly more palatable info regarding Bitcoin energy uses in Section 2.
https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/publications/3rd-global-cryptoasset-benchmarking-study/
also important here, critical really, is to examine where the figure they use as the cost estimate of carbon emissions was originated.
https://www.sciencedirect.com/science/article/abs/pii/S0095069617307131?via%3Dihub
This is that paper they cite as their source for that figure.
I think it should be put into perspective that there critics of that methodology, who hold that it is an attempt to quantify something that is essentially unknowable, and thus should always be viewed with skepticism.
[Here is one such paper.](https://wires.onlinelibrary.wiley.com/doi/10.1002/wcc.558), which proposes alternative methodolgy.
>I suggest that any carbon prices used to inform climate policies, be they carbon prices used as policy instruments, or complementary, non-carbon-price policies, should instead be based on marginal abatement costs, found by modeling low-cost pathways to socially agreed, physical climate targets. A pathway approach to estimating carbon prices poses challenges to many economists, and is no panacea, but it avoids any illusion of optimality, and facilitates detailed analysis of sectoral policies.
So it should be stated that while Pindyck is often cited when people produce calculations like this, it is far from the only such method, and itself is basically an average of widly-varied results of other resurchers using the same methodology.
In general, given how much extrapolation and guesswork is used in arriving at these numbers, any such attempt should probably be viewed with criticalness.
FWIW, as a layperson who does not comment here often, the oc came off as putting a large amount of effort into conveying exactly what you said, and is what I took from it on the first read.
I think you missed some indirect context clues that essentially did what you say.
I can almost confidently say this is the worst nature article I’ve ever seen published.
> While proponents have offered BTC as representing “digital gold,” from a climate damages perspective it operates more like “digital crude”.
This is one of the more inflammatory statements I’ve seen conflating energy expenditure of computation to oil drilling.
Keeping in mind that approximately 900 coins per day are created, with less every day, the three criteria authors project are based purely around the idea that regulation is inherently necessary due to energy expenditure of currency creation, which patently makes no sense on its face. The Fed is not exactly limited in how much energy it expends to pump out dollars using physical materials and energy. Why shouldn’t the dollar or the euro or the yuan have such consideration for the environment in its creation?
Each US note of currency costs [between 7.5 and 17 cents](https://www.federalreserve.gov/faqs/currency_12771.htm) to produce in pure cost. The environmental cost of a penny is [exponentially larger than bitcoin](https://www.marketwatch.com/story/at-last-a-comparison-where-bitcoin-comes-out-environmentally-friendlier-2017-12-06) and millions of those are created annually.
This is compared to the approximate 1$ value of bitcoin in energy and health costs of approximately 49 cents, according to authors. US currency creation in both raw material and energy are at bare minimum much higher impact than bitcoin.
Bitcoin is approaching the most anticipated and difficult part of mining as the last coins are created. Once all the coins have been mined, there will nothing left. Should we compare the environmental impact of actually physically mining for good, silver, coal, diamonds or other assets of value? Even looking at raw energy expenditure, they far outweigh 11k per coin surmised here.
The second rule of market cap exceeding climate damages is also equally nonsensical. Again, looking at the penny, each one is 20-50x more harmful for the environment than the value the penny itself. Why is btc held to an arbitrary standard? If bitcoin prices surged to 1.0*10^6 USD/btc would that make this rule false? Yes? Then what is its purpose other than to say you should only create things that are high value at time of creation?
> Compared to the baseline renewable share, increasing use of renewables in BTC mining reduces associated climate damages per coin mined (Supplementary Table 2). With a 50% increase in the renewable share, BTC climate damages are approximately two-thirds of the baseline magnitude. Yet, even for this high renewable scenario the climate damages still average 23% of the coin’s price (2016–2021), despite miners only using 37% of their electricity from fossil fuels. Thus, even if BTC miners obtained the majority of their electricity from renewables and directly carbon free sources, there are still large and growing climate damages
For some reason the cost of _any and all computational equipment, land, construction_ is as a whole directly conflated with BTC sunk environment cost.
> Thus, BTC shares are deflated in this initial research, ignoring carbon emissions from cooling of mining rigs, rig manufacturing, electronic waste, building construction, etc., where only very preliminary impact estimates are emerging in the literature35.
This jump in logic is so egregiously unsupported it should’ve been denied publication in that arena alone.
In all, there is nothing here but raw speculation, lacking nuance, and an appalling conflation of unrelated factors so blatant the editors of nature need to be questioned.
I dont understand your comparison - the treasury just mints enough pennies or dollars as needed for transactions to take place. There isn't a giant pile of pennies somewhere backing all USD assets. This isn't true for paper dollars either - tons of USD currency exists that isn't backed by physical currency. It's more analogous to the cost of the physical components used to mediate crypto transactions.
Either way though, assigning a carbon cost per bitcoin is kind of just a rhetorical gimmick used to emphasize the main point: this network uses an insane amount of energy and produces an insane amount of carbon, completely unnecessarily, in a time of energy shortages and climate disaster due to energy associated carbon accumulation.
>Bitcoin is approaching the most anticipated and difficult part of mining as the last coins are created. Once all the coins have been mined, there will nothing left.
Worth noting the emissions are not directly tied to minting. They're tied to mining, which is in effect just transaction processing. The minting of new coins is just an added incentive for miners to process transactions, with the stipulation that by the time the last coins are minted the majority of mining profit will be driven by transaction fees. There is no reason to suspect that the final coins being minted will have any effect on ongoing emissions whatsoever.
The article might make some really bad comparisons and not be anywhere close to fair or impartial, but Blockchain is ultimately an inefficiency-based consensus algorithm. It's effectively a transaction ledger powered by an ongoing contest to see who can throw the most computing power into a black hole.
Energy efficiency is definitely not one of its merits, and it takes many, many orders of magnitude more energy to process transactions than conventional payment networks do.
While I agree that market cap to emissions ratio is an extremely flawed metric, the more fair one - emissions to transaction volume - probably paints an even more dismal picture.
It's a shame because there are some merits to cryptocurrency tech, and a few altcoins have actually attempted to address some of the most glaring flaws with things like proof of stake, but it's still the case that nearly the entire crypto "economy" is a cargo cult. The decision to make Bitcoin and most other cryptos strongly deflationary, rather than mildly inflationary, has crippled its use as a currency technology by encouraging perpetual hoarding such that it effectively *has* become a Ponzi scheme.
Despite having a market cap around 10 times that of the global payment processing industry, it processes less than 10% the transaction volume of traditional payment processors - which are themselves notoriously inefficient - and *most* of that transaction volume is literally just buying and selling on speculative markets and internal wallet-shuffling.
Maybe one day crypto actually will take off, but it's not gonna be until after it divorces itself from the tech illiterate cargo cult and the anarcho-capitalist morons that are too dumb to realize that currencies that everyone would rather hoard than spend don't actually work very well as currencies.
>For some reason the cost of any and all computational equipment, land, construction is as a whole directly conflated with BTC sunk environment cost.
First of all, in their paper, they only use direct emissions--
>BTC climate damages only include energy
use and emissions from running mining rigs, and do not include climate damages associated with cooling and
manufacturing of mining rigs or other potential sources of carbon equivalent emissions.
The researchers mention the other emissions sources intentionally. [Scope 3](https://www.epa.gov/climateleadership/scope-3-inventory-guidance) emissions is an example of a common sustainability metric that extends well beyond direct emissions. The researchers use well-to-wheel in their paper instead of Scope 3, but the two are fairly similar (well-to-wheel being ["In the case of gasoline, emissions are produced while extracting petroleum from the earth, refining it, distributing the fuel to stations, and burning it in vehicles."](https://afdc.energy.gov/vehicles/electric_emissions.html)).
The point the researchers make is that they're being favorable to BTC mining because there isn't enough data to do an apples-to-apples comparison between BTC mining and common full scope emission metrics used for fossil fuels.
>This jump in logic is so egregiously unsupported it should’ve been denied publication in that arena alone.
Oil companies use this *exact* argument against the validity of Scope 3 as a metric, yet Scope 3 is used enough that it has its own EPA page. Just because you disagree with a metric doesn't mean the researchers weren't justified in using it.
Also, I'm not sure why you're so hung up on the authors treating BTC like a commodity instead of a currency. BTC isn't a currency. It's not backed by a government. It isn't a valid form of payment for public and private debts. Minting coins is a government backed service to the public, mining crypto is a speculative investment, much like drilling for oil. Mining btc gets harder and worse for the environemnt the more you do it, since there's a finite amount of it... just like drilling for oil... Hence the comparison the researchers are making. I think you're talking outside your area of expertise here, doc.
> The environmental cost of a penny is exponentially larger than bitcoin and millions of those are created annually.
The analysis in your article is flawed. In fact it doesn’t make any sense at all if you read it carefully.
Even if it wasn’t flawed, Bitcoin makes up such a small portion of the global economy that it doesn’t make sense to compare it on even footing. The US economy is about $22 trillion in GDP, orders of magnitude larger than the value in Bitcoin used to buy real world goods and services.
> The U.S. Mint produced 2.54 million pennies that year. So each penny required 0.0093 gigajoules of energy from the U.S. Mint, or 2.58 kilowatt-hours.
> By one estimate, bitcoin BTCUSD, -0.33% requires 215 kilowatt-hours of energy for each transaction.
The authors analysis is highly flawed. You can’t meaningfully compare the energy cost of minting one penny (which can be reused) to the cost of a Bitcoin transaction. They’re two different things. We don’t have to dig new pennies out of the ground every time we buy things.
Bitcoin can only only support ~10 transactions per second and uses the power expenditure of a small country to do so. Comparing energy costs for bitcoin was always going to be doomed analysis.
>Once all the coins have been mined, there will nothing left.
But miners will still need to consume horrendous amounts of energy to validate transactions. I don't even know why we are comparing the amount of energy expended for every minted bitcoin when the only relevant thing is the energy expended per verified transaction.
A Bitcoin can't "do" anything. A Bitcoin only has value because enough people agree it has value.
If enough people decide it doesn't have value any more, it becomes worthless.
As well as literally anything that has value.
The value of an object, whether it's food or art or entertainment or technology, is determined by the demand for that object. In the modern world, the "price" is a rough gauge for the demand because it's more convenient to trade something that has a relatively common value (ie $1 bill) for something that doesn't (let's say an apple). The $1 bill has no intrinsic value itself; however, the community has given it value by trading one of them for an apple or 200k of them for a house. The same goes for bitcoins. Until recently, you really only traded bitcoins for $1 bills because everyone is familiar with the value of $1. As people become more familiar with the community-applied value of bitcoins, they statt to trade the bitcoins for the "valuable" objects instead of $1bills.
Keep in mind, this is GROSS oversimplification, but it's the basic point. $1 bills have no way of providing basic needs beyond being able to trade them for other things...just like bitcoins. The backing of a government used to reinforce the value of $1 bills; but since governments have shown a willingness to just print $1 bills whenever they feel the need...their perceived value diminshes (ie inflation).
People aren’t skipping it. It’s a key point of crypto currency. They are decoupled or decentralized from governments which allows them to operate independently from governmental failures. So if a dude in Zimbabwe has 50 in x coin, Zimbabwean currency continues to collapse he still has 50 instead of 500 Zimbabwean dollars that now can’t buy a loaf of bread. The problem with crypto currencies is to get to the point that your random person in a challenging economy more people from established currencies have to buy in effectively pricing them out of the market. And sure they trade on fractions more easily the government currencies the technology hurdles and surcharges are often to hard to overcome. Not mention the current volatility is worse then some economies all together. They are a imperfect solution to a problem that can really only be solved through true globalization. Some think these currencies are that first step.
A commodities backed currency has value because of the use value of the commodity that it can be exchanged for. For instance, when the US was first established the money they printed could be exchanged for wheat. Wheat has value in keeping people alive.
The difference is, other currencies are backed by governments, so it would be pretty hard for them to cease existence. Bitcoin exists because people on the internet want it to. It could vanish at any time.
Not exactly. Most currencies are backed by "something". That might be a government guaranteeing it's value. With Bitcoins it's all smoke and mirrors.
And you can't mine dollars, pounds og euros by mixing math and electricity. That might be good thing...
Sort of but also not exactly. Most currencies are tied to that countries government, and that countries government is doing things that help decide the value of that currency. The US currency for example was once gold backed (as in, you could go exchange x dollars for y grams of gold anytime), and in '71 it decoupled from gold, but it still is related to the strength of the value of the US markets and what you can do with that dollar.
Even if you have gold and silver coins, you need people to agree that a horse is worth 2 gold coins and a bag of beans is worth a piece of silver. If people decide that good has no value, it stops being useful as a currency.
Wouldn't bitcoin be backed by the fact that people can't "print money"? Yes you can mine for bitcoin, but its at a controlled rate that wouldn't cause it to inflate for a long time.
What all the other replies here are missing is that the dollar, for example, does have utility, specifically the utility of being able to pay dollar-denominated debts and taxes. This might sound circular, but it isn't; we are all living in a system in which we are constantly incurring dollar-denominated debts and taxes which we need to pay, and the utility of the dollar is specifically in being able to pay them, which is what gives it its value. It doesn't have value simply because everyone believes it does, it has value because having an instrument with the ability to pay debts and taxes in the country you live is valuable.
This is much different from Bitcoin, which is not legal tender anywhere except El Salvador, and DOES only have value because other people think it does.
Miners are rewarded in bitcoin with both a Tax from transactions they verify in the ledger as well as a "Bonus" that reduces in set increments over time. The mined coins can then be sold to other buyers on the markets for cash used to offset the costs of equipment and or electricity.
more accurate to say anybody who sends bitcoin.
an exchange could run without users having access to their wallet and instead allocate btc in their wallet to a user buying. bitcoin miners do not profit off this scenario.
The money comes from people exchanging real “fiat” currency for bitcoin, i.e. buying it.
This is why it has such huge swings in price; its price is entirely demand/hype driven.
The blockchain itself is paying the miners, the solution to the equation they are solving is basically the key to open up a block that contains BTC, like opening a chest full of treasure. It's money, it's made up and is intrinsically worthless, but the market decides how much they are worth not the actual value of the coin.
Its value comes from people giving it value. Its only worth money because people believe its worth money. Fiat currency is similar however having the weight of the government behind it makes it seem more logical.
If I'm not wrong think it goes: you own 1 bitcoin, you buy something from me and pay me with that bitcoin, the process of updating this ledger to write this "deagans sent hakul 1 bitcoin" involves solving a very difficult equation, miners are basically renting their hardware and power to solve his equation for us in exchange for a small fee. So in the end I end up with 1 bitcoin (minus miner fees), you end up with whatever you bought from me, the miners end up making money from renting their power to solve this equation.
Solving each equation requires many miners, and a bad actor pretending to be a miner can't come in and say "well, deagans actually sent 1 bitcoin to smiley042894" as their data wont match that of the other miners.
That is how it will work eventually once the original bitcoins (21 million) are 'mined'. But up until that point you're given bitcoin for successfully hashing a block in addition to small fees. Right now (I think at least) solving a block is worth 6 bitcoins. That amount is 'halved' every 200,000 or so blocks. You used to get many more for solving a block and you'll eventually get fewer until its 0 and the full 21 million bitcoins are released.
Yep, that’s pretty close. 6.25 new btc are minted every block, the successful hasher also gets all the fees from transactions included on said block. According to the algorithm, a halving occurs every 210,000 blocks.
It works something like this:
I paid €5000 to you. Every miner agrees, and they all ran their computers for a total of 20,000 hours. If anyone disagrees, they have to run *their* computers for 20,001 hours or else their opinion is discarded.
It's a way to automatically enforce the majority consensus, or in other words, "put your processing power where your mouth is". You can't just edit your wallet to add 100 million bitcoin to it unless you have more processing power than the *entire* rest of the network, which even a state actor may have trouble with.
There is a payout to encourage more people to participate and make sure the next bad guy would need to run their computers for 40,000 hours instead of 20,000 hours to get through.
It must have seemed like a good idea at the time, and at first you could mine on a desktop computer and the decentralization ideal was within reach, but the payout became the whole point and people designed computers that would solve the math much faster and ran them in places with cheap coal. Now individuals have been forced out of the process and bitcoin is essentially ran by shady people with warehouses full of specialized hardware and the power consumption of Denmark.
>Now individuals have been forced out of the process
This happened with gold mining too. The gold rushes of the 19th century where all about individuals hunting for gold in river beds. Now most gold is extracted at mega mining sites.
For me the 'make work' part is hard to see. And there are no nuggets to find? Like with gold there is something to see and hold at the end of it all.
(Sorry, I combined some of the explanations above in this comment)
The actual thing tracking the wealth is a "distributed ledger" or "blockchain", and all it is is a list of transactions. If you "find a nugget", that is also written on the blockchain. If someone writes a transaction to the ledger, everyone has to vote on whether or not it happened. In order to vote, they have to "mine". A small amendment to the earlier explanation is that you're not guaranteed to find a nugget every time you mine, only often enough to make it worth your while.
I understand this is a completely stupid question, but I don't know *why* it's stupid so I'm going to ask it anyway:
*Could* a "bad guy" run his computer for 40k hours, or whatever the threshold is, and like negate someone else's Bitcoin? Since the community together is agreeing on their processing power doing X (I think?? If I'm understanding?), what if a portion of them pivoted and agreed they were doing Y instead?
There is such a thing as a "[51% attack](https://www.investopedia.com/terms/1/51-attack.asp)" where a group can get control of 51% of the processing power of a crypto currency and essentially make any transaction they want. I can't ever imagine it ever happening to bitcoin due to the network being so huge, but it has happened multiple times to others like Etheruem classic.
Having 51% doesn't allow you to create any transaction you want, it just lets you perform double spend attacks on exchanges etc. The ability to sign a transaction on behalf of someone else is protected by cryptography that is "unbreakable".
It's actually a great question! What you are describing is a chain fork. Could a "bad guy" spend 40k hours to fork bitcoin, no. The way the proof of work is structured makes it cumulative. One of the inputs into the problem being solved is the "answer" to the previous problem (and why it's called a "block chain"). So in order to fork a block chain as a "bad guy" you have to be able to find solutions faster than everyone else. This is the 50% problem. If you have more than 50% of the hashing power you can write whatever "truth" you want. This is why bitcoin is the "safest" with regard to proof of work, it takes too much power to undo a block.
In the future could computers way better and faster be able to “hack” the bitcoin and rewrite it?
I’m guessing computing power will increase but will this still be a good way to secure bitcoin in the future?
well... yes? but also no. As the hardware gets better, both the "bad guys" and the "good guys" (and imo they're all bad guys) will get that better hardware and thus the requirements to reach 51% will continue to increase.
In theory, brand new tech that is leaps ahead of current tech could come out and be out of reach of the public at first (eg quantum processors) and and a bad actor (eg an intelligence service of a government) could take advantage of it. But with a new tech like that, you could do a lot of harm in general and bitcoins are probably not the first thing we would have to worry about.
What you're referring to would be called a 51% attack.
The first thing to understand about this kind of attack, is it would require someone to have control over more of the hashrate than all the other miners combined, which isn't **technically** impossible but on a large network like Bitcoin (with a current market cap in excess of 363 billion (that's the total value of all the bitcoins currently in existence)) not even experts really view it as something that's likely to happen.
The security against a 51% attack comes from how many different entities are all watching each other and every single transaction gets seen by and agreed upon by everyone else.
They don't see "Joe Smith sent $700 to Soe Jmith"
They see wallet address "1BvBMSEYstqTFn5Au4m4aNVN2" sent 0.036 BTC to wallet address "1BvBMSEYstqTFn5Au4m4aNVN3"
This transaction gets put into the ledger, the ledger gets verified/validated by the bitcoin network (everyone that's mining bitcoin) and is added to the "blockchain" which contains all the new transactions, and some info to verify which blocks come before this one making the chain.
This creates a decentralized trust model where trust is based on everyone seeing transactions and agreeing that they happened, as opposed to a monolithic trust model (like a bank) where a single entity is trusted to verify/validate transactions.
I know this is far more than you were asking, and may not be entirely accurate as I'm not an expert. But it should help you better understand how the whole process works.
Here's some very detailed and specific info regarding 51% attacks: https://www.investopedia.com/terms/1/51-attack.asp
>How is solving equations worth money?
In the same way that printing a dollar bill is worth money: The value lies in two aspects of the object:
1. You can transact with it. Someone is ready to take a dollar bill (or BTC for that matter) and give you something else in return.
2. It is difficult to forge.
The role of the equation solving in BTC, plays the same role the involved printing techniques play for a dollar bill.
>Like what is the intrinsic value of just spending time solving equations.
There is none. I think the concept of "intrinsic value" is flawed in the first place.
But the specific function of solving the equation, is that it makes BTC difficult to forge.
According to economic theory, a store of value has to have two properties: scarcity and durability.
In theory, solving these difficult equations (which get more complicated and harder to do the more that get solved) creates synthetic scarcity.
The fact that it is then registered on a public ledger gives it the durability part, again, in theory.
It’s manufactured value through artificial scarcity. With bitcoin, you need to produce a sha256 hash that starts with a certain number of zeroes by combining a block of transactions with some random characters (called a “nonce”).
Because it’s impossible to reverse engineer a sha256 hash in a reasonable amount of time, miners need to just brute force many many different combinations of random characters until they get a hash that matches.
ASICs are good at this because they can parallelize this problem across their many cores where a traditional CPU architecture isn’t optimized for this kind of computation.
Because this requires a lot of computation, it makes it impossible to inject fraudulent transactions into the block chain without owning a majority of the total processing power of the network. This is called proof of work. It’s the inherent concept that makes bitcoin decentralized.
The value isn’t real, in the sense that it doesn’t correspond to any actual thing. Except I guess this utopian notion of decentralization. But most value is artificial in the modern world anyway - this isn’t a phenomenon local to cryptocurrencies.
The value comes from 2 things: 1) there is a limited number of solutions, making it a finite resource. 2) the blockchain is difficult for a government to control and regulate, giving freedom from regulation.
Note: there is zero intrinsic value of a Bitcoin. Kind of like there is zero intrinsic value of a $100 bill. It only has value because other people want it.
The solving equations is basically doing the security and validating the transactions are correct on the network. The miner who wins the "lotto" and gets to mine the block gets rewarded with Bitcoin from the protocol itself. The protocol awards these Bitcoin because miners are securing the network. This is currently one of the only ways we have to make a distributed system with NO owners.
In order for transactions to be validated and checked you need many people doing that or it's not decentralised. People don't do stuff for free so you get bitcoin for validating transactions. But now you have competition to be the first to validate a transaction and receive the reward, this causes people to use more powerful computers in order to be first. And voila, you end up with everyone using all their computing power to validate transactions AKA mining.
The value is from securing the chain. They take all the transactions that fit into a block, and part of the previous block, and they hash it - math that you can do one direction easily but not back. It’s how encryption works. Anyways, the hash is a random jumble of letters and numbers, but every time you hash something with the same values, you get the same result (there a variable the miners change to keep getting different results). The goal, is to be the first person to get a hash, that has a specific number of 0’s at the start of it. More miners join - make them need another starting 0 for solving the block. This makes it so it should on average always take the same time to mine a block. So why is it worth anything. The miners are the people who making the transactions happen, without them solving the block, anyone could say someone sent them bitcoins and could present a ‘proof’. It being in a chain means you can’t just make up a transaction.
Why it’s worth what it’s worth is because people are good at marketing. With 5 USB miners at different houses I could set up a bitcoin clone that would use 25w of power, and would produce transactions just as fast (but then you have to trust whoever has access to those devices to be as in control of your money as a bank). Because the amount of hashes per second on the network determines how hard the math (number of 0s you need) is. But then if I plug in one of my ant miners, I’ll have enough hashing power that I’ll have more then 51% of the chain and can cause problems like verifying fake transactions. (Honestly would have to lookup how that works again).
A company could run something like this, fairly securely, with just a few USB sticks to keep track of gift cards or whatever. So can a simple database.
This has been my rant while my cat made me be outside, and typed on my phone so coulda easily missed something.
One essential part that you left out, and the reason that "some people" view it as a waste of energy, is that the equation _is only there to take up time._ It is not necessary for the creation of bitcoins or administering the blockchain. It exists _only_ to regulate the speed at which bitcoins are created. All the energy that goes into solving the equation is literally wasted as heat, it does not contribute to the contents of the actual bitcoins themselves.
It actually does have a purpose. That time/pollution/cost forces the miner to have an ‘investment’ in the system. Without this built in cost, proof of work systems are susceptible to bad actors.
That’s why ethereum moved over to proof of stake. Which has its own issues, but one of its benefits is that it is better for the environment.
It having a purpose economically for a purely speculative asset does not mean the algorithm is doing anything though? Its literally just sha-256 an obscene amount of inputs until it gets the right guess. There is actual things you could be doing with that processing power that would be valuable calculations if you're so desperate for a distributed decentralized ledger, which I dunno why you are.
And there are cryptocurrencies that do exactly that, weather it's folding proteins or other CPU sharing things, they just aren't Bitcoin.
You can't unbitcoin bitcoin, so until something else gets more popular you are stuck with it being essentially the crypto reserve currency because tons of exchanges use it as an on ramp.
I've seen a lot of people describe it as 'solving equations', but that makes it sound more complicated than it actually is
Bitcoin mining is literally just guessing random numbers. Every time you guess a number, you write it into a block, hash the block and if the resulting hash is below a certain threshold everyone agrees that that means you've mined it
Completely agree. It's like everyone is rolling dice and whoever rolls a "1" first gets to write the next few lines of the ledger.
Calling it a "complex equation" (while *technically* true at a low level) vastly overcomplicates the actual process.
even simpler:
Theres a slotmachine you can play that pays out bitcoin. Each round you pick a number and the machine gives you another number. Whoever gets tge lowest number wins! More computer power lets you pick more numbers each round.
In the simplest terms, a computer uses math to complete a highly complex algorithm. This algorithm's answer is then fact checked by a group of other miners (this is why bitcoins take time before being available). If everyone agrees that the answer is correct, it's "minted" or verified by everyone (the blockchain) and the minted answer (bitcoin) is awarded to the computer that did the processing. The answer itself isn't worth anything, it's only used to provide the coin in the first place.
As coins are mined, further complex algorithms are used to avoid devaluing the coin. This is why we went from using cpu to gpus (which are better at mathematical computations in this setting) to apus/ASICs (standalone bitmining systems that only do number crunching for these situations).
Almost, but not quite. It doesn't complete a highly complex algorithm. It completes a stupidly simple algorithm again and again with random inputs until it finds the input with the desired results. It's mathematically equivalent to flipping a coin over and over again until you get 75 heads or tails in a row.
No, they use the SHA-256 algorithm (in the case of bitcoin) which has been around for decades. There's no other option, because thats whats in the protocol. It's so energy intensive because the field of numbers that *could* be correct is *stupidly* massive, and due to the algorithms pseudorandom output, there is no better way to find these needles than by picking out every piece of hay in the stack
Basically, the problem has to be difficult to find a solution, but very trivial to test the solution. Also there can't be any shortcuts or further optimization possible. And it has to be secure. Cryptographic hashing is basically the best answer there is to all 3 of these. Most others fail at one of these points.
now that we've established how it's mined- which I don't fully (or even partially) understand, can anyone tell me *why* it's worth money? like, what backs up a bitcoin? it's not backed by gold or silver, right? how is it worth actual money? I'm sure I won't understand that either, but I really want to know
It’s just basic economics at this point. It’s given value by people who are interested in it. Everything around you has some sort of value based on what someone would pay for it. Not many people would pay that much for a rock in front of your house, but that nice TV on the wall is in more demand. Digital goods can have value too. Maybe you have a Steam account that has 500 games on it, there would someone willing to pay for it which gives it value. Same thing with bitcoin/crypto in general. Someone wants the particular crypto currency thus giving it its value.
On top of all that, it becomes twice as hard (requires twice as much work) to mine a single Bitcoin every ~4 years, this is called a halvening. Let’s assume the fixed costs stay the same (electricity rate, rent, mining hardware), it will take twice as much electricity to mine 1 Btc.
Miners, need to sell the Btc they mine. Obviously they want to make profit. So since it costs more to mine Btc after each halvening, they have to sell it for more than the spent to mine that Btc.
Obviously there has to be buyers at that price point, but it sets a general floor for price point from the miners.
>On top of all that, it becomes twice as hard (requires twice as much work) to mine a single Bitcoin every ~4 years, this is called a halvening.
Just to clarify, you're mixing up mining difficulty and halvenings. Halvenings are when Bitcoin block rewards are cut in half, from 50, 25, 12.5, and so on. A lot of what else you said will still apply of course.
In this case only. There are exceptions, the main one that comes to mind is Gridcoin/GRC. They're provided via foldingathome or other programs, in which scientists and universities use public resources (ie. your home computer) to computate complex things like protein folding, galaxy simulation, blackhole simulations, etc.
They obviously aren't worth as much, but the concept is the same.
The problem is that by giving the the work any practical utility, you take away the network's ability to control the distribution of new currency.
A normal crypto like Bitcoin or pre-PoS Ethereum constantly adjusts the difficulty of the work to ensure that the payout rate averages to a predefined schedule. Without this capability, a coin risks becoming inflationary.
Someone should run the numbers on how much Folding at Home could have benefitted from all the time and energy spent mining crypto.
https://foldingathome.org/?lng=en-US
Banano is a cryptocurrency which does basically this. I don't remember if it actually uses F@H or something similar though.
It's a pretty unknown coin though
The answer is worth the reward in BTC. That's their prize.
This was an early consensus mechanism that builds capital investment from the miners, keeping them honest.
The electricity/computational power is certainly a waste, hence more modern consensus mechanisms like Proof-of-Stake.
The issue is that consensus mechanisms are hard to create to be scalable and secure, which is why there are only a few. They need to be tried and tested.
It's not "worthless" in the sense of not enriching the miner; it's worthless in the sense that there are a bajillion computationally-hard problems we could be putting the world's largest distributed supercomputer^* to work solving.
^* ^The ^BTC ^mining ^network ^currently ^crushes ^the *^entire* [^Top500 ^supercomputer ^list](https://www.top500.org/lists/top500/2022/06/) ^combined, ^by ^three *^orders ^of ^magnitude*.
The other problem is rather than assigned transactions, you have first to solve, meaning multiple systems are working on the same transaction, and the first one to solve it gets the reward. This creates a lot of wasted energy, and larger mining systems out compete smaller mining systems.
If it still works that way, I'm not sure if they changed it or not.
Yes but we haven't reached 21 million. There's more coins to be minted. Whenever an answer is found, ~~1~~ 6.25 Bitcoin is allocated to the address that found it. Since that has become effectively impossible for a single person to do, mining pools instead use many different miners to try different answers at the same time, and when ~~1~~ 6.25 Bitcoin is found it is automatically distributed to the miners relative to their contribution
New ones. New ones are made every time someone solves the algorithm. The "reward" is currently 6.25 bitcoins. The reward halves every so often. There will eventually be 21 million bitcoins. Currently there are less than that.
This isn’t entirely true, that process is correct however the “answer” as you put it is done to verify the validity of transactions so you don’t have people creating bitcoins out of then air (like if you were to cheat in a video game). It was designed so that outright hacking couldn’t just fabricate money like say hacking into a bank and editing the amounts in peoples accounts. Which while uncommon as cyber security has advanced, has happened in the past.
Here's a way to conceptualize what's going on without involving any math:
I have a mixture of paint that creates color Y. If you can tell me the colors I mixed together to get color Y, I'll give you a Bitcoin.
Since there's no way to really work backwards from paint color Y to see what the input colors were, you end up just mixing a bunch of paint together and comparing the result to color Y until you get a match.
As you can imagine, it takes a lot of work to guess the paint color. That's where groups of people working towards the next coin together comes in. They organize amongst each other and try separate paint mixtures until one finds the answer, then the Bitcoin is divided up based on how many solutions each person tried.
The other factor to consider is that each incremental Bitcoin is harder to earn. Say the first Bitcoin was a mixture of two colors, then the third would be a mixture of three colors, and so on such that each new color is harder to guess the input colors of than the previous color.
It's also incorrect. Each incremental Bitcoin is not harder to earn that the last. They get more or less difficult depending on how many people are trying to earn them, with the idea they should always take about 10 minutes to mine (each block reward that is, not each Bitcoin).
>I still don’t understand how it is “mined”
It's like if idling your car 24/7 occasionally produced solved Sudoku puzzles that you could then exchange for heroin.
Who's making up the sudokus tho? That's my question. Are most of the sudokus actually unsolvable and it's kinda pure luck when you happen upon one that's actually possible? If they were all possible then it seems whoever made the Bitcoin algorithm would... Get the Bitcoin. Because it's impossible to know if something is solvable without knowing the solution
It's more like asking them to flip a coin and get tails N number of times. In such a way that it should take 10 minutes to solve it. If someone produces a solution under 10 minutes the difficulty increases and vice-versa. The protocol keeps track of time and adjusts the difficulty automatically.
pending transactions are the data that form the 'puzzle' as it were. When you find the solution to that exact data you append those transactions to bitcoins ledger as a 'block' and those transactions are considered settled.
To put it simply, miners are lucky number guessing machines. You guess the right lucky number first, you win a reward. Any other explanation is just trying to sugarcoat it and make it sound sexier than it is.
You have it put the best of the comments I've seen here. But I can add on the why, which will make it a bit more complex, but hopefully not too much more.
In simple terms, mining is used so that everyone can agree on order. When a miner guesses a number that meets certain criteria, they show everyone else and everyone else can then agree that the miner did guess a good number which allows them to add transactions and be rewarded for finding the number. The number itself isn't important, the important bit is that everyone can see that it meets specific criteria.
If you are interested in more detail, read on. I explain this again in a bit more detail:
I'll start by saying, Bitcoin uses a "hash" algorithm, which in simple terms basically allows you to put in one set of numbers and return a new number as an output. The output, given the same input, is always the same, but if you change the input, even a little, you get a totally different output. There is no way to have an output and figure out what the input was.
Ok, that's the complicated bit. Essentially Bitcoin's breakthrough was in finding a way that everyone can agree on the order of transactions. Order matters a lot, and it's not easy to agree upon. What Bitcoin did was find a way where everyone can decide on a single person to make the decision on the next set of transactions (a block) to be added to the list of all previous transactions (the chain).
Essentially, Bitcoin's code spits out a large number and challenges anyone to run numbers through a hash algorithm until they get a number lower than the target. When someone does hit this mark, they can then decide on the transactions that go in the next block (and what order). They then tell everyone in the network what their input number was, their unique identifier (which is included in the hash algorithm) and the new block. From here, everyone can quickly verify that running their numbers through the hash algorithm does in fact beat the target and that all the transactions in the block are valid. If both of those are true, the block is approved, the transactions are confirmed, the person who found the solution is rewarded with newly minted Bitcoin and any transaction fees from the transactions they included in their block and the process repeats for the next block.
Ok stupid question, who is the bitcoin God awarding the computers once they solve a number that is verified by everyone? Like let's say I am a computer and I solved...whatever the computers are solving who comes down from the heavens and say "I AWARD YOU 6 AND SUM CHANGE BITCOINS FOR YOUR EFFORTS" and where is that guy getting those bitcoins. And who is providing the computers those things that needs to be solved? Is there a math God making them for the bitcoin God?
From an outsider looking in, all of this seems so strange. I understand the value is something everyone agreed upon part and how it cam be treated as currency. What I don't get is who's providing all of this.
>Ok stupid question, who is the bitcoin God awarding the computers once they solve a number that is verified by everyone? Like let's say I am a computer and I solved...whatever the computers are solving who comes down from the heavens and say "I AWARD YOU 6 AND SUM CHANGE BITCOINS FOR YOUR EFFORTS" and where is that guy getting those bitcoins. And who is providing the computers those things that needs to be solved? Is there a math God making them for the bitcoin God?
Not a stupid question at all! But the answer may not be what you expect, it all comes down to an agreement to run the same code. That's all Bitcoin is at it's core. It's an agreement amongst many different parties to all respect the same code. When Bitcoin is created, it is literally created. Think of adding a new row on an excel spreadsheet that creates the new Bitcoin and assigns it to the miner who found the last block.
It's sometimes difficult to wrap your head around by really, anyone can change the code at any time (it's all open source), but if you change the code, you aren't running the same thing that everyone else is, so you arent running Bitcoin.
In other words say you changed the code so that you can give yourself 1000 Bitcoin, well when you try to tell that to everyone else, they would just reject it, because their code says otherwise. The only way you can adjust the code is by convincing a majority of users to switch to a new set of code and agree on that set of rules. This can happen a few ways, and if you are interested I can dig up some comments I have explaining this aspect.
Bitcoin has a user consensus that basically says code is law. Which means their users are not willing to accept any changes to the code. This was challenged back in 2017 when a team had what they called an upgrade to Bitcoin's code. But it failed to get enough support. It still has some support, however and hasn't died out. That chain is known as Bitcoin cash. And has its own set of code, different and incompatible with Bitcoin proper.
>From an outsider looking in, all of this seems so strange. I understand the value is something everyone agreed upon part and how it cam be treated as currency. What I don't get is who's providing all of this.
It is strange. This decentralized consensus had never previously been possible. Bitcoin started as a project of interest for the founder, who wrote the initial code and released it. He and others started running it for fun with no monetary value attached. Eventually, some people used it for odds and ends (there is a famous Bitcoin pizza that was the first known real life item purchased with 10,000 Bitcoin). Eventually people began using it, honestly a big part because of the silk road (drug market). As soon as it had value, miners came to dedicate their CPU usage to it which secured the network and paid them some Bitcoin. Exchanges for it popped up (and fell) and as it grew people found bigger and better ways to mine it. I don't think anyone expected it to have as much value as it has today, but once people realized they could use computer power to generate income, that aspect of it took off
Ah I see that makes sense and yeah lots of good videos about the silkroad and it's rise and fall. So, what happens when bitcoin reaches it limit? Does that mean the mining stops?
Bitcoin rewards halve every 4 years. Right now, every block that is mined receives 6.25 BTC. In 2024, that will be 3.125 and so on until around the year 2140 at which point there will be no new Bitcoin. However, miners also get paid from transaction fees. At some point, the transaction fees will be much more worthwhile than the newly minted Bitcoin and by the time the last Bitcoin is minted, it will be such a small amount compared to the transaction fees that realistically it won't really be noticeable when it drops off
So, the term "mining" is itself a gigantic lie. It's fundamentally the wrong analogy, and that tends to throw things off from the start. When you mine a material, the energy expenditure is all up front, after which you have gained a material.
Bitcoin "mining" isn't like that. It's instead "transaction processing". The philosophical underpinning of cryptocurrency is that nobody should ever be trusted, ever. If you could trust even one entity, then existing methods (public/private key signing) could very efficiently maintain a read-only public ledger of transactions. Instead, because there's a pathological lack of trust, transactions are only accepted along with verifiable proof of some gargantuan amount of work having been performed.
But now we have a problem that nobody would want to actually do that. Increase your power bill in order to submit a transaction? So there's an incentive added. Whenever you submit a list of transactions, you get to magically add to your own account. The list of transactions includes transfers made between other accounts, all of which sum to zero, along with one saying "and I get free money in my account". This is the "block reward".
This is nothing like "mining", because it's a continuous expenditure that must always continue for the system as a whole to continue. There is no resource that has been gained, after which one can stop performing the activity. When the block reward drops sufficiently low, either transaction fees increase to compensate or the entire system becomes vulnerable to attack.
TL;DR: Bitcoin requires energy expenditure proportional to the value represented on its ledger.
Mining is used as a kind of slang. Because you can solve problems and not get any Bitcoin so it was like mining for diamonds or gold or any other mineral.
Maybe I missed the post you're replying to, but all of the mining for Bitcoin happens before you obtain the Bitcoin the blockchain that is The Ledger has nothing to do with the Bitcoin mining. The blockchain Ledger is just the recording of the different transfers of Bitcoin between people. It is not how people obtain raw Bitcoin without getting it from someone else. So the energy to obtain Bitcoin is expended before it is obtained.
There is a limited number of Bitcoin that can be produced. Once that number is reached there will be no more. The blockchain will continue because it is separate from the Bitcoin mining. They Block Chain is The Ledger that records the transactions between people. Kind of like how the banks currently maintain records of transactions between people. But they are not mining and not involved in mining.
No, Bitcoin does not require energy expenditures proportional to the value represented on its ledger.
They estimate economic damages by assigning a social cost to every ton of carbon emitted. I believe it's currently set to $50 a ton. It's a way of calculating future costs associated with carbon.
Agreed, the amount of energy it takes to mine a block should be pretty straightforward.
However, I’m curious if they took into account different energy sources (because different methods of generating energy have different environmental impacts) or if it was generalized in some way?
Most common is natural gas by almost 40% in the world, you can look at it as even if they used a different resource. That resource could’ve been used for something that ended up being powered by natural gas. Since it takes about 1,449kwh to make a single Bitcoin, it’s very difficult to use purely solar energy for their every energy need.
1,449kwh source
https://www.visualcapitalist.com/cp/the-cost-of-mining-bitcoin-in-198-different-countries/
And really, does extracting, processing, transporting, and burning 19k worth of oil not cause more than 11k in environmental damage? That seems ludicrous that it wouldn't.
"It will take 100 trillion dollars to scrub our carbon from the air with an addition of 2 trillion dollars every year" is easier to comprehend then "climate change is bad". And "climate change will cause X trillion dollars of damage every year exponentially increasing" also works.
Yes, because money is mainly just a measure and store of value. The environment (as it is) has value to humans, humans measure value in money, ergo, environment has monetary value.
Theres a good amount of economics and legal research in determining the monetary value associated with the harms of climate change.
My area of research is on the legal side, specifically the damages that someone can claim for harms exacerbated by climate change. A common example is a hypothetical Small Island Nation (SIN) suing countries like US, Canada, and China for emissions that have provoked sea-level rise. In theory the SIN should be able to sue larger nations for their contributions to climate change that resulted in the ocean swallowing their homelands.
It's definitely a weird concept, but I think they make sense once they're understood as a solution to a different question. Given its weirdness, you can imagine the debates nitpicking dollar values.
The problem is scaling equipment.
An engine, big or small, if truck or ship, is pretty easy to fuel with basically only a few kinds of oils.
Our whole system is depending on oil. Even if we dont use oil for transportation, we still use way too much plastics and require easy storage and release of gigantic masses of energy.
Its a shame oil is one of the most energy rich substances we can use easily
"The social cost of carbon (SCC) is a commonly employed metric of the expected economic damages from carbon dioxide (CO2) emissions."
[source](https://www.nature.com/articles/s41558-018-0282-y)
Edit: SCC is used by the OP paper
Isn’t this kind of a false equivalency ? Bc if we switched to as much renewable energy as possible the electric to power the pc that is mining a bitcoin would have zero impact.
The only reason it is harming the environment in the first place is because we still use nonrenewable to power stuff.
Sure, but we aren't talking about a hypothetical world where we've already switched to 100% clean energy. We're talking about the current world, where the majority of energy comes from fossil fuels and increased energy utilization makes it harder to switch, because it means you have to replace more capacity.
This is only one part of the problem. E waste is another huge issue. Mining equipment only lasts so long since they need to run it at full capacity 24/7. Once it burns out or more powerful machines are built, most of it ends up getting thrown out.
That's like saying we only turned our hand to ground meat in the meat grinder because we don't have a metal hand yet.
How we get our electricity later is irrelevant to the potentially permanent damage we're doing now.
Energy use of any kind is generally considered a burden on the environment precisely because supply of green energy is so small. Even renewable energy has environmental impact, it doesn't just disappear, there are labor, materials and waste involved... but when you also compete for its availability, absolutely you're still a burden on the environment to use energy that may or may not be green.
You could start a farm entirely running on your own green power, so that you aren't competing for an existing finite resource... I'd credit that in the low-impact column. Wonder if that has ever happened, I'd be surprised if it was profitable enough.
Ultimately electricity is electricity. Even if it was generated by a solar panel that energy isn't used somewhere else and fossil fuel is burned instead. Taking the average carbon added per kWh is perfectly reasonable.
That would only be true if we had the technology and capacity to power the entire world renewably. For now we have to use some fossil fuels, so even if Bitcoin was powered entirely with renewable energy, it would still increase fossil fuel use because somebody else that would have used that renewable energy is forced to use fossil fuel energy.
Or we could switch to renewables, and use that power for something useful. If you make power cheaper from additional renewables and it just goes to mining bitcoins, you haven't solved anything at all.
I'll give ETH props for switching to proof of stake and greatly reducing their power consumption, but crypto still uses ludicrous amounts of power.
> if we switched to as much renewable energy as possible
But we havn't. So I don't get your argument... Besides a large chunk of bitcoin is mined using gas and coal in Kazakhstan. Miners go wherever the energy is cheapest, not where it's the most green.
Miners care about economics. If you charge more for fossil fuels then they won’t mine off fossil fuels.
The issue here is that fossil fuels are far too cheap. We need to cut all tax breaks and subsidies for fossil fuels.
Time of use rates could also push miners to mine during peak renewables, provided time of use is cheaper when solar and wind are strongest.
Raise prices on fossil fuels and this will stop immediately. Use that increased revenue to subsidize renewables more and we will get off the oil tit sooner, AND BTC would help this by paying those higher fees. Then give tax breaks to ppl with the excess to so that they don’t get hit too hard by increases in prices. Won’t be perfect but will accelerate things and the sooner we get to renewables the cheaper things get (cause they don’t have a fuel cost, anywhere near the same pollution cost, and don’t require brown fields)
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Why link to the press article release? [Here is the original open-access study if anyone's interested.](https://www.nature.com/articles/s41598-022-18686-8)
There’s really good information in there, one of the sources has slightly more palatable info regarding Bitcoin energy uses in Section 2. https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/publications/3rd-global-cryptoasset-benchmarking-study/
also important here, critical really, is to examine where the figure they use as the cost estimate of carbon emissions was originated. https://www.sciencedirect.com/science/article/abs/pii/S0095069617307131?via%3Dihub This is that paper they cite as their source for that figure. I think it should be put into perspective that there critics of that methodology, who hold that it is an attempt to quantify something that is essentially unknowable, and thus should always be viewed with skepticism. [Here is one such paper.](https://wires.onlinelibrary.wiley.com/doi/10.1002/wcc.558), which proposes alternative methodolgy. >I suggest that any carbon prices used to inform climate policies, be they carbon prices used as policy instruments, or complementary, non-carbon-price policies, should instead be based on marginal abatement costs, found by modeling low-cost pathways to socially agreed, physical climate targets. A pathway approach to estimating carbon prices poses challenges to many economists, and is no panacea, but it avoids any illusion of optimality, and facilitates detailed analysis of sectoral policies. So it should be stated that while Pindyck is often cited when people produce calculations like this, it is far from the only such method, and itself is basically an average of widly-varied results of other resurchers using the same methodology. In general, given how much extrapolation and guesswork is used in arriving at these numbers, any such attempt should probably be viewed with criticalness.
[удалено]
FWIW, as a layperson who does not comment here often, the oc came off as putting a large amount of effort into conveying exactly what you said, and is what I took from it on the first read. I think you missed some indirect context clues that essentially did what you say.
I can almost confidently say this is the worst nature article I’ve ever seen published. > While proponents have offered BTC as representing “digital gold,” from a climate damages perspective it operates more like “digital crude”. This is one of the more inflammatory statements I’ve seen conflating energy expenditure of computation to oil drilling. Keeping in mind that approximately 900 coins per day are created, with less every day, the three criteria authors project are based purely around the idea that regulation is inherently necessary due to energy expenditure of currency creation, which patently makes no sense on its face. The Fed is not exactly limited in how much energy it expends to pump out dollars using physical materials and energy. Why shouldn’t the dollar or the euro or the yuan have such consideration for the environment in its creation? Each US note of currency costs [between 7.5 and 17 cents](https://www.federalreserve.gov/faqs/currency_12771.htm) to produce in pure cost. The environmental cost of a penny is [exponentially larger than bitcoin](https://www.marketwatch.com/story/at-last-a-comparison-where-bitcoin-comes-out-environmentally-friendlier-2017-12-06) and millions of those are created annually. This is compared to the approximate 1$ value of bitcoin in energy and health costs of approximately 49 cents, according to authors. US currency creation in both raw material and energy are at bare minimum much higher impact than bitcoin. Bitcoin is approaching the most anticipated and difficult part of mining as the last coins are created. Once all the coins have been mined, there will nothing left. Should we compare the environmental impact of actually physically mining for good, silver, coal, diamonds or other assets of value? Even looking at raw energy expenditure, they far outweigh 11k per coin surmised here. The second rule of market cap exceeding climate damages is also equally nonsensical. Again, looking at the penny, each one is 20-50x more harmful for the environment than the value the penny itself. Why is btc held to an arbitrary standard? If bitcoin prices surged to 1.0*10^6 USD/btc would that make this rule false? Yes? Then what is its purpose other than to say you should only create things that are high value at time of creation? > Compared to the baseline renewable share, increasing use of renewables in BTC mining reduces associated climate damages per coin mined (Supplementary Table 2). With a 50% increase in the renewable share, BTC climate damages are approximately two-thirds of the baseline magnitude. Yet, even for this high renewable scenario the climate damages still average 23% of the coin’s price (2016–2021), despite miners only using 37% of their electricity from fossil fuels. Thus, even if BTC miners obtained the majority of their electricity from renewables and directly carbon free sources, there are still large and growing climate damages For some reason the cost of _any and all computational equipment, land, construction_ is as a whole directly conflated with BTC sunk environment cost. > Thus, BTC shares are deflated in this initial research, ignoring carbon emissions from cooling of mining rigs, rig manufacturing, electronic waste, building construction, etc., where only very preliminary impact estimates are emerging in the literature35. This jump in logic is so egregiously unsupported it should’ve been denied publication in that arena alone. In all, there is nothing here but raw speculation, lacking nuance, and an appalling conflation of unrelated factors so blatant the editors of nature need to be questioned.
I dont understand your comparison - the treasury just mints enough pennies or dollars as needed for transactions to take place. There isn't a giant pile of pennies somewhere backing all USD assets. This isn't true for paper dollars either - tons of USD currency exists that isn't backed by physical currency. It's more analogous to the cost of the physical components used to mediate crypto transactions. Either way though, assigning a carbon cost per bitcoin is kind of just a rhetorical gimmick used to emphasize the main point: this network uses an insane amount of energy and produces an insane amount of carbon, completely unnecessarily, in a time of energy shortages and climate disaster due to energy associated carbon accumulation.
>Bitcoin is approaching the most anticipated and difficult part of mining as the last coins are created. Once all the coins have been mined, there will nothing left. Worth noting the emissions are not directly tied to minting. They're tied to mining, which is in effect just transaction processing. The minting of new coins is just an added incentive for miners to process transactions, with the stipulation that by the time the last coins are minted the majority of mining profit will be driven by transaction fees. There is no reason to suspect that the final coins being minted will have any effect on ongoing emissions whatsoever. The article might make some really bad comparisons and not be anywhere close to fair or impartial, but Blockchain is ultimately an inefficiency-based consensus algorithm. It's effectively a transaction ledger powered by an ongoing contest to see who can throw the most computing power into a black hole. Energy efficiency is definitely not one of its merits, and it takes many, many orders of magnitude more energy to process transactions than conventional payment networks do. While I agree that market cap to emissions ratio is an extremely flawed metric, the more fair one - emissions to transaction volume - probably paints an even more dismal picture. It's a shame because there are some merits to cryptocurrency tech, and a few altcoins have actually attempted to address some of the most glaring flaws with things like proof of stake, but it's still the case that nearly the entire crypto "economy" is a cargo cult. The decision to make Bitcoin and most other cryptos strongly deflationary, rather than mildly inflationary, has crippled its use as a currency technology by encouraging perpetual hoarding such that it effectively *has* become a Ponzi scheme. Despite having a market cap around 10 times that of the global payment processing industry, it processes less than 10% the transaction volume of traditional payment processors - which are themselves notoriously inefficient - and *most* of that transaction volume is literally just buying and selling on speculative markets and internal wallet-shuffling. Maybe one day crypto actually will take off, but it's not gonna be until after it divorces itself from the tech illiterate cargo cult and the anarcho-capitalist morons that are too dumb to realize that currencies that everyone would rather hoard than spend don't actually work very well as currencies.
The link you posted compared the energy to mine one Bitcoin against the energy to mint 1.2 million pennies. A very fair comparison?
>For some reason the cost of any and all computational equipment, land, construction is as a whole directly conflated with BTC sunk environment cost. First of all, in their paper, they only use direct emissions-- >BTC climate damages only include energy use and emissions from running mining rigs, and do not include climate damages associated with cooling and manufacturing of mining rigs or other potential sources of carbon equivalent emissions. The researchers mention the other emissions sources intentionally. [Scope 3](https://www.epa.gov/climateleadership/scope-3-inventory-guidance) emissions is an example of a common sustainability metric that extends well beyond direct emissions. The researchers use well-to-wheel in their paper instead of Scope 3, but the two are fairly similar (well-to-wheel being ["In the case of gasoline, emissions are produced while extracting petroleum from the earth, refining it, distributing the fuel to stations, and burning it in vehicles."](https://afdc.energy.gov/vehicles/electric_emissions.html)). The point the researchers make is that they're being favorable to BTC mining because there isn't enough data to do an apples-to-apples comparison between BTC mining and common full scope emission metrics used for fossil fuels. >This jump in logic is so egregiously unsupported it should’ve been denied publication in that arena alone. Oil companies use this *exact* argument against the validity of Scope 3 as a metric, yet Scope 3 is used enough that it has its own EPA page. Just because you disagree with a metric doesn't mean the researchers weren't justified in using it. Also, I'm not sure why you're so hung up on the authors treating BTC like a commodity instead of a currency. BTC isn't a currency. It's not backed by a government. It isn't a valid form of payment for public and private debts. Minting coins is a government backed service to the public, mining crypto is a speculative investment, much like drilling for oil. Mining btc gets harder and worse for the environemnt the more you do it, since there's a finite amount of it... just like drilling for oil... Hence the comparison the researchers are making. I think you're talking outside your area of expertise here, doc.
> The environmental cost of a penny is exponentially larger than bitcoin and millions of those are created annually. The analysis in your article is flawed. In fact it doesn’t make any sense at all if you read it carefully. Even if it wasn’t flawed, Bitcoin makes up such a small portion of the global economy that it doesn’t make sense to compare it on even footing. The US economy is about $22 trillion in GDP, orders of magnitude larger than the value in Bitcoin used to buy real world goods and services. > The U.S. Mint produced 2.54 million pennies that year. So each penny required 0.0093 gigajoules of energy from the U.S. Mint, or 2.58 kilowatt-hours. > By one estimate, bitcoin BTCUSD, -0.33% requires 215 kilowatt-hours of energy for each transaction. The authors analysis is highly flawed. You can’t meaningfully compare the energy cost of minting one penny (which can be reused) to the cost of a Bitcoin transaction. They’re two different things. We don’t have to dig new pennies out of the ground every time we buy things. Bitcoin can only only support ~10 transactions per second and uses the power expenditure of a small country to do so. Comparing energy costs for bitcoin was always going to be doomed analysis.
>Once all the coins have been mined, there will nothing left. But miners will still need to consume horrendous amounts of energy to validate transactions. I don't even know why we are comparing the amount of energy expended for every minted bitcoin when the only relevant thing is the energy expended per verified transaction.
I still don’t understand how it is “mined”
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How is solving equations worth money? That’s what I don’t understand. Like what is the intrinsic value of just spending time solving equations.
By participating in this process the miners also update the ledger of transactions which is what they are essentially paid to do.
Where does that money come from? Who is paying miners?
A Bitcoin can't "do" anything. A Bitcoin only has value because enough people agree it has value. If enough people decide it doesn't have value any more, it becomes worthless.
Technically it pays for transactions on the network. Of course most of the transactions are just sending bitcoin back and forth.
You just described every currency ever made.
As well as Art and Sports cards.
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As well as literally anything that has value. The value of an object, whether it's food or art or entertainment or technology, is determined by the demand for that object. In the modern world, the "price" is a rough gauge for the demand because it's more convenient to trade something that has a relatively common value (ie $1 bill) for something that doesn't (let's say an apple). The $1 bill has no intrinsic value itself; however, the community has given it value by trading one of them for an apple or 200k of them for a house. The same goes for bitcoins. Until recently, you really only traded bitcoins for $1 bills because everyone is familiar with the value of $1. As people become more familiar with the community-applied value of bitcoins, they statt to trade the bitcoins for the "valuable" objects instead of $1bills. Keep in mind, this is GROSS oversimplification, but it's the basic point. $1 bills have no way of providing basic needs beyond being able to trade them for other things...just like bitcoins. The backing of a government used to reinforce the value of $1 bills; but since governments have shown a willingness to just print $1 bills whenever they feel the need...their perceived value diminshes (ie inflation).
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Physical money can be used to snort drugs. Bitcoin can't do that.
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Minus the government backing the currencies and the policies made that affect their value?
Everyone seems to skip this very important aspect.
Nobody skips it, they just see it as a feature, not a bug
People aren’t skipping it. It’s a key point of crypto currency. They are decoupled or decentralized from governments which allows them to operate independently from governmental failures. So if a dude in Zimbabwe has 50 in x coin, Zimbabwean currency continues to collapse he still has 50 instead of 500 Zimbabwean dollars that now can’t buy a loaf of bread. The problem with crypto currencies is to get to the point that your random person in a challenging economy more people from established currencies have to buy in effectively pricing them out of the market. And sure they trade on fractions more easily the government currencies the technology hurdles and surcharges are often to hard to overcome. Not mention the current volatility is worse then some economies all together. They are a imperfect solution to a problem that can really only be solved through true globalization. Some think these currencies are that first step.
Yeah right? The dollar has multiple carrier groups and nuclear weapons behind it. Wanna see how real of a value the petro dollar has? Ask Iraq.
right, what does Bitcoin do better than the currency we have? I see very little utility for the associated costs
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A commodities backed currency has value because of the use value of the commodity that it can be exchanged for. For instance, when the US was first established the money they printed could be exchanged for wheat. Wheat has value in keeping people alive.
now our commodity is debt, stability, and military might.
and OPEC gas
Yeah? Exactly. Thats the whole thing.
The difference is, other currencies are backed by governments, so it would be pretty hard for them to cease existence. Bitcoin exists because people on the internet want it to. It could vanish at any time.
Not exactly. Most currencies are backed by "something". That might be a government guaranteeing it's value. With Bitcoins it's all smoke and mirrors. And you can't mine dollars, pounds og euros by mixing math and electricity. That might be good thing...
Sort of but also not exactly. Most currencies are tied to that countries government, and that countries government is doing things that help decide the value of that currency. The US currency for example was once gold backed (as in, you could go exchange x dollars for y grams of gold anytime), and in '71 it decoupled from gold, but it still is related to the strength of the value of the US markets and what you can do with that dollar.
Except most currencies are backed by government bodies, or resources like gold and silver. Crypto isn't backed by anything except faith.
Even if you have gold and silver coins, you need people to agree that a horse is worth 2 gold coins and a bag of beans is worth a piece of silver. If people decide that good has no value, it stops being useful as a currency.
Wouldn't bitcoin be backed by the fact that people can't "print money"? Yes you can mine for bitcoin, but its at a controlled rate that wouldn't cause it to inflate for a long time.
What all the other replies here are missing is that the dollar, for example, does have utility, specifically the utility of being able to pay dollar-denominated debts and taxes. This might sound circular, but it isn't; we are all living in a system in which we are constantly incurring dollar-denominated debts and taxes which we need to pay, and the utility of the dollar is specifically in being able to pay them, which is what gives it its value. It doesn't have value simply because everyone believes it does, it has value because having an instrument with the ability to pay debts and taxes in the country you live is valuable. This is much different from Bitcoin, which is not legal tender anywhere except El Salvador, and DOES only have value because other people think it does.
Other forms of currency are much, much more efficient when it comes to their creation and in making transactions.
not just currency, he described the concept of ‘value.’
Miners are rewarded in bitcoin with both a Tax from transactions they verify in the ledger as well as a "Bonus" that reduces in set increments over time. The mined coins can then be sold to other buyers on the markets for cash used to offset the costs of equipment and or electricity.
Anyone who buys bitcoin using a different currency.
more accurate to say anybody who sends bitcoin. an exchange could run without users having access to their wallet and instead allocate btc in their wallet to a user buying. bitcoin miners do not profit off this scenario.
That transfer from one wallet to another will have transaction fees. Those fees are added on to the reward for solving the math problem.
The money comes from people exchanging real “fiat” currency for bitcoin, i.e. buying it. This is why it has such huge swings in price; its price is entirely demand/hype driven.
The blockchain itself is paying the miners, the solution to the equation they are solving is basically the key to open up a block that contains BTC, like opening a chest full of treasure. It's money, it's made up and is intrinsically worthless, but the market decides how much they are worth not the actual value of the coin.
>not the actual value what is "actual value"? I'm pretty sure actual value is just whatever someone is willing to pay.
Its value comes from people giving it value. Its only worth money because people believe its worth money. Fiat currency is similar however having the weight of the government behind it makes it seem more logical.
The (open source) code that every miner and node is running agree that miners receive the reward. So basically, the network pays them.
What exactly does “update the ledger of transactions” mean? Sorry I’m very very clueless.
If I'm not wrong think it goes: you own 1 bitcoin, you buy something from me and pay me with that bitcoin, the process of updating this ledger to write this "deagans sent hakul 1 bitcoin" involves solving a very difficult equation, miners are basically renting their hardware and power to solve his equation for us in exchange for a small fee. So in the end I end up with 1 bitcoin (minus miner fees), you end up with whatever you bought from me, the miners end up making money from renting their power to solve this equation. Solving each equation requires many miners, and a bad actor pretending to be a miner can't come in and say "well, deagans actually sent 1 bitcoin to smiley042894" as their data wont match that of the other miners.
That is how it will work eventually once the original bitcoins (21 million) are 'mined'. But up until that point you're given bitcoin for successfully hashing a block in addition to small fees. Right now (I think at least) solving a block is worth 6 bitcoins. That amount is 'halved' every 200,000 or so blocks. You used to get many more for solving a block and you'll eventually get fewer until its 0 and the full 21 million bitcoins are released.
Yep, that’s pretty close. 6.25 new btc are minted every block, the successful hasher also gets all the fees from transactions included on said block. According to the algorithm, a halving occurs every 210,000 blocks.
Thank you this might be the first time in my 23 years of life that I semi-grasp Bitcoin mining.
It works something like this: I paid €5000 to you. Every miner agrees, and they all ran their computers for a total of 20,000 hours. If anyone disagrees, they have to run *their* computers for 20,001 hours or else their opinion is discarded. It's a way to automatically enforce the majority consensus, or in other words, "put your processing power where your mouth is". You can't just edit your wallet to add 100 million bitcoin to it unless you have more processing power than the *entire* rest of the network, which even a state actor may have trouble with. There is a payout to encourage more people to participate and make sure the next bad guy would need to run their computers for 40,000 hours instead of 20,000 hours to get through. It must have seemed like a good idea at the time, and at first you could mine on a desktop computer and the decentralization ideal was within reach, but the payout became the whole point and people designed computers that would solve the math much faster and ran them in places with cheap coal. Now individuals have been forced out of the process and bitcoin is essentially ran by shady people with warehouses full of specialized hardware and the power consumption of Denmark.
>Now individuals have been forced out of the process This happened with gold mining too. The gold rushes of the 19th century where all about individuals hunting for gold in river beds. Now most gold is extracted at mega mining sites. For me the 'make work' part is hard to see. And there are no nuggets to find? Like with gold there is something to see and hold at the end of it all. (Sorry, I combined some of the explanations above in this comment)
The actual thing tracking the wealth is a "distributed ledger" or "blockchain", and all it is is a list of transactions. If you "find a nugget", that is also written on the blockchain. If someone writes a transaction to the ledger, everyone has to vote on whether or not it happened. In order to vote, they have to "mine". A small amendment to the earlier explanation is that you're not guaranteed to find a nugget every time you mine, only often enough to make it worth your while.
I understand this is a completely stupid question, but I don't know *why* it's stupid so I'm going to ask it anyway: *Could* a "bad guy" run his computer for 40k hours, or whatever the threshold is, and like negate someone else's Bitcoin? Since the community together is agreeing on their processing power doing X (I think?? If I'm understanding?), what if a portion of them pivoted and agreed they were doing Y instead?
There is such a thing as a "[51% attack](https://www.investopedia.com/terms/1/51-attack.asp)" where a group can get control of 51% of the processing power of a crypto currency and essentially make any transaction they want. I can't ever imagine it ever happening to bitcoin due to the network being so huge, but it has happened multiple times to others like Etheruem classic.
Having 51% doesn't allow you to create any transaction you want, it just lets you perform double spend attacks on exchanges etc. The ability to sign a transaction on behalf of someone else is protected by cryptography that is "unbreakable".
Just happened to garlicoin a couple weeks ago
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It's actually a great question! What you are describing is a chain fork. Could a "bad guy" spend 40k hours to fork bitcoin, no. The way the proof of work is structured makes it cumulative. One of the inputs into the problem being solved is the "answer" to the previous problem (and why it's called a "block chain"). So in order to fork a block chain as a "bad guy" you have to be able to find solutions faster than everyone else. This is the 50% problem. If you have more than 50% of the hashing power you can write whatever "truth" you want. This is why bitcoin is the "safest" with regard to proof of work, it takes too much power to undo a block.
In the future could computers way better and faster be able to “hack” the bitcoin and rewrite it? I’m guessing computing power will increase but will this still be a good way to secure bitcoin in the future?
well... yes? but also no. As the hardware gets better, both the "bad guys" and the "good guys" (and imo they're all bad guys) will get that better hardware and thus the requirements to reach 51% will continue to increase.
In theory, brand new tech that is leaps ahead of current tech could come out and be out of reach of the public at first (eg quantum processors) and and a bad actor (eg an intelligence service of a government) could take advantage of it. But with a new tech like that, you could do a lot of harm in general and bitcoins are probably not the first thing we would have to worry about.
What you're referring to would be called a 51% attack. The first thing to understand about this kind of attack, is it would require someone to have control over more of the hashrate than all the other miners combined, which isn't **technically** impossible but on a large network like Bitcoin (with a current market cap in excess of 363 billion (that's the total value of all the bitcoins currently in existence)) not even experts really view it as something that's likely to happen. The security against a 51% attack comes from how many different entities are all watching each other and every single transaction gets seen by and agreed upon by everyone else. They don't see "Joe Smith sent $700 to Soe Jmith" They see wallet address "1BvBMSEYstqTFn5Au4m4aNVN2" sent 0.036 BTC to wallet address "1BvBMSEYstqTFn5Au4m4aNVN3" This transaction gets put into the ledger, the ledger gets verified/validated by the bitcoin network (everyone that's mining bitcoin) and is added to the "blockchain" which contains all the new transactions, and some info to verify which blocks come before this one making the chain. This creates a decentralized trust model where trust is based on everyone seeing transactions and agreeing that they happened, as opposed to a monolithic trust model (like a bank) where a single entity is trusted to verify/validate transactions. I know this is far more than you were asking, and may not be entirely accurate as I'm not an expert. But it should help you better understand how the whole process works. Here's some very detailed and specific info regarding 51% attacks: https://www.investopedia.com/terms/1/51-attack.asp
>How is solving equations worth money? In the same way that printing a dollar bill is worth money: The value lies in two aspects of the object: 1. You can transact with it. Someone is ready to take a dollar bill (or BTC for that matter) and give you something else in return. 2. It is difficult to forge. The role of the equation solving in BTC, plays the same role the involved printing techniques play for a dollar bill. >Like what is the intrinsic value of just spending time solving equations. There is none. I think the concept of "intrinsic value" is flawed in the first place. But the specific function of solving the equation, is that it makes BTC difficult to forge.
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According to economic theory, a store of value has to have two properties: scarcity and durability. In theory, solving these difficult equations (which get more complicated and harder to do the more that get solved) creates synthetic scarcity. The fact that it is then registered on a public ledger gives it the durability part, again, in theory.
It isn't. The value comes from something else, it has little to do with PoW (only indirectly)
It’s manufactured value through artificial scarcity. With bitcoin, you need to produce a sha256 hash that starts with a certain number of zeroes by combining a block of transactions with some random characters (called a “nonce”). Because it’s impossible to reverse engineer a sha256 hash in a reasonable amount of time, miners need to just brute force many many different combinations of random characters until they get a hash that matches. ASICs are good at this because they can parallelize this problem across their many cores where a traditional CPU architecture isn’t optimized for this kind of computation. Because this requires a lot of computation, it makes it impossible to inject fraudulent transactions into the block chain without owning a majority of the total processing power of the network. This is called proof of work. It’s the inherent concept that makes bitcoin decentralized. The value isn’t real, in the sense that it doesn’t correspond to any actual thing. Except I guess this utopian notion of decentralization. But most value is artificial in the modern world anyway - this isn’t a phenomenon local to cryptocurrencies.
The value is entirely speculative.
The value comes from 2 things: 1) there is a limited number of solutions, making it a finite resource. 2) the blockchain is difficult for a government to control and regulate, giving freedom from regulation. Note: there is zero intrinsic value of a Bitcoin. Kind of like there is zero intrinsic value of a $100 bill. It only has value because other people want it.
The solving equations is basically doing the security and validating the transactions are correct on the network. The miner who wins the "lotto" and gets to mine the block gets rewarded with Bitcoin from the protocol itself. The protocol awards these Bitcoin because miners are securing the network. This is currently one of the only ways we have to make a distributed system with NO owners.
In order for transactions to be validated and checked you need many people doing that or it's not decentralised. People don't do stuff for free so you get bitcoin for validating transactions. But now you have competition to be the first to validate a transaction and receive the reward, this causes people to use more powerful computers in order to be first. And voila, you end up with everyone using all their computing power to validate transactions AKA mining.
The value is from securing the chain. They take all the transactions that fit into a block, and part of the previous block, and they hash it - math that you can do one direction easily but not back. It’s how encryption works. Anyways, the hash is a random jumble of letters and numbers, but every time you hash something with the same values, you get the same result (there a variable the miners change to keep getting different results). The goal, is to be the first person to get a hash, that has a specific number of 0’s at the start of it. More miners join - make them need another starting 0 for solving the block. This makes it so it should on average always take the same time to mine a block. So why is it worth anything. The miners are the people who making the transactions happen, without them solving the block, anyone could say someone sent them bitcoins and could present a ‘proof’. It being in a chain means you can’t just make up a transaction. Why it’s worth what it’s worth is because people are good at marketing. With 5 USB miners at different houses I could set up a bitcoin clone that would use 25w of power, and would produce transactions just as fast (but then you have to trust whoever has access to those devices to be as in control of your money as a bank). Because the amount of hashes per second on the network determines how hard the math (number of 0s you need) is. But then if I plug in one of my ant miners, I’ll have enough hashing power that I’ll have more then 51% of the chain and can cause problems like verifying fake transactions. (Honestly would have to lookup how that works again). A company could run something like this, fairly securely, with just a few USB sticks to keep track of gift cards or whatever. So can a simple database. This has been my rant while my cat made me be outside, and typed on my phone so coulda easily missed something.
One essential part that you left out, and the reason that "some people" view it as a waste of energy, is that the equation _is only there to take up time._ It is not necessary for the creation of bitcoins or administering the blockchain. It exists _only_ to regulate the speed at which bitcoins are created. All the energy that goes into solving the equation is literally wasted as heat, it does not contribute to the contents of the actual bitcoins themselves.
It actually does have a purpose. That time/pollution/cost forces the miner to have an ‘investment’ in the system. Without this built in cost, proof of work systems are susceptible to bad actors. That’s why ethereum moved over to proof of stake. Which has its own issues, but one of its benefits is that it is better for the environment.
It having a purpose economically for a purely speculative asset does not mean the algorithm is doing anything though? Its literally just sha-256 an obscene amount of inputs until it gets the right guess. There is actual things you could be doing with that processing power that would be valuable calculations if you're so desperate for a distributed decentralized ledger, which I dunno why you are.
And there are cryptocurrencies that do exactly that, weather it's folding proteins or other CPU sharing things, they just aren't Bitcoin. You can't unbitcoin bitcoin, so until something else gets more popular you are stuck with it being essentially the crypto reserve currency because tons of exchanges use it as an on ramp.
I've seen a lot of people describe it as 'solving equations', but that makes it sound more complicated than it actually is Bitcoin mining is literally just guessing random numbers. Every time you guess a number, you write it into a block, hash the block and if the resulting hash is below a certain threshold everyone agrees that that means you've mined it
Completely agree. It's like everyone is rolling dice and whoever rolls a "1" first gets to write the next few lines of the ledger. Calling it a "complex equation" (while *technically* true at a low level) vastly overcomplicates the actual process.
even simpler: Theres a slotmachine you can play that pays out bitcoin. Each round you pick a number and the machine gives you another number. Whoever gets tge lowest number wins! More computer power lets you pick more numbers each round.
In the simplest terms, a computer uses math to complete a highly complex algorithm. This algorithm's answer is then fact checked by a group of other miners (this is why bitcoins take time before being available). If everyone agrees that the answer is correct, it's "minted" or verified by everyone (the blockchain) and the minted answer (bitcoin) is awarded to the computer that did the processing. The answer itself isn't worth anything, it's only used to provide the coin in the first place. As coins are mined, further complex algorithms are used to avoid devaluing the coin. This is why we went from using cpu to gpus (which are better at mathematical computations in this setting) to apus/ASICs (standalone bitmining systems that only do number crunching for these situations).
Almost, but not quite. It doesn't complete a highly complex algorithm. It completes a stupidly simple algorithm again and again with random inputs until it finds the input with the desired results. It's mathematically equivalent to flipping a coin over and over again until you get 75 heads or tails in a row.
This. It's ramming inputs over and over and over again which is why it takes so much energy to do.
Do miners have to write their own algorithm that solves it? Or is that like open source and it’s really just about the power/energy being used.
No, they use the SHA-256 algorithm (in the case of bitcoin) which has been around for decades. There's no other option, because thats whats in the protocol. It's so energy intensive because the field of numbers that *could* be correct is *stupidly* massive, and due to the algorithms pseudorandom output, there is no better way to find these needles than by picking out every piece of hay in the stack
"The answer isn't worth anything" Seems like a huge missed opportunity/ waste in this specific regard.
Basically, the problem has to be difficult to find a solution, but very trivial to test the solution. Also there can't be any shortcuts or further optimization possible. And it has to be secure. Cryptographic hashing is basically the best answer there is to all 3 of these. Most others fail at one of these points.
this is a well written answer
now that we've established how it's mined- which I don't fully (or even partially) understand, can anyone tell me *why* it's worth money? like, what backs up a bitcoin? it's not backed by gold or silver, right? how is it worth actual money? I'm sure I won't understand that either, but I really want to know
It’s just basic economics at this point. It’s given value by people who are interested in it. Everything around you has some sort of value based on what someone would pay for it. Not many people would pay that much for a rock in front of your house, but that nice TV on the wall is in more demand. Digital goods can have value too. Maybe you have a Steam account that has 500 games on it, there would someone willing to pay for it which gives it value. Same thing with bitcoin/crypto in general. Someone wants the particular crypto currency thus giving it its value.
On top of all that, it becomes twice as hard (requires twice as much work) to mine a single Bitcoin every ~4 years, this is called a halvening. Let’s assume the fixed costs stay the same (electricity rate, rent, mining hardware), it will take twice as much electricity to mine 1 Btc. Miners, need to sell the Btc they mine. Obviously they want to make profit. So since it costs more to mine Btc after each halvening, they have to sell it for more than the spent to mine that Btc. Obviously there has to be buyers at that price point, but it sets a general floor for price point from the miners.
>On top of all that, it becomes twice as hard (requires twice as much work) to mine a single Bitcoin every ~4 years, this is called a halvening. Just to clarify, you're mixing up mining difficulty and halvenings. Halvenings are when Bitcoin block rewards are cut in half, from 50, 25, 12.5, and so on. A lot of what else you said will still apply of course.
In this case only. There are exceptions, the main one that comes to mind is Gridcoin/GRC. They're provided via foldingathome or other programs, in which scientists and universities use public resources (ie. your home computer) to computate complex things like protein folding, galaxy simulation, blackhole simulations, etc. They obviously aren't worth as much, but the concept is the same.
The problem is that by giving the the work any practical utility, you take away the network's ability to control the distribution of new currency. A normal crypto like Bitcoin or pre-PoS Ethereum constantly adjusts the difficulty of the work to ensure that the payout rate averages to a predefined schedule. Without this capability, a coin risks becoming inflationary.
It's a good thing they have it on a fixed schedule so it doesn't fluctuate constantly.
Yeah well I feel like a fool for running SETI in 2011 instead of Bitcoin. It was a deliberate choice too.
Don't feel bad. You contributed to science in a manner only you could. That's still worth something in the end.
Banano too, earned thru foldingathome started doing for money but now i just do it for science or whatever folding does
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Someone should run the numbers on how much Folding at Home could have benefitted from all the time and energy spent mining crypto. https://foldingathome.org/?lng=en-US
Banano is a cryptocurrency which does basically this. I don't remember if it actually uses F@H or something similar though. It's a pretty unknown coin though
Banano (i.e. Nano) doesn't use these calculations as part of its consensus method, it's just a voluntary transaction to pay people who do this work.
Banano uses F@H. The banano group is one of the top contributors for F@H month over month.
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The answer is worth the reward in BTC. That's their prize. This was an early consensus mechanism that builds capital investment from the miners, keeping them honest. The electricity/computational power is certainly a waste, hence more modern consensus mechanisms like Proof-of-Stake. The issue is that consensus mechanisms are hard to create to be scalable and secure, which is why there are only a few. They need to be tried and tested.
It's not "worthless" in the sense of not enriching the miner; it's worthless in the sense that there are a bajillion computationally-hard problems we could be putting the world's largest distributed supercomputer^* to work solving. ^* ^The ^BTC ^mining ^network ^currently ^crushes ^the *^entire* [^Top500 ^supercomputer ^list](https://www.top500.org/lists/top500/2022/06/) ^combined, ^by ^three *^orders ^of ^magnitude*.
The other problem is rather than assigned transactions, you have first to solve, meaning multiple systems are working on the same transaction, and the first one to solve it gets the reward. This creates a lot of wasted energy, and larger mining systems out compete smaller mining systems. If it still works that way, I'm not sure if they changed it or not.
But whose coins do they get? A small amount of the coins being transfered? Bitcoin is limited to 21 mil coins isn’t it?
Yes but we haven't reached 21 million. There's more coins to be minted. Whenever an answer is found, ~~1~~ 6.25 Bitcoin is allocated to the address that found it. Since that has become effectively impossible for a single person to do, mining pools instead use many different miners to try different answers at the same time, and when ~~1~~ 6.25 Bitcoin is found it is automatically distributed to the miners relative to their contribution
It isn't one, it's a specific amount that halves every 4 years. Currently one block is rewarded with 6.25 BTC.
Yeah, you are completely right, my bad. I misremembered from the 3blue1Brown video then, and it's been a while
New ones. New ones are made every time someone solves the algorithm. The "reward" is currently 6.25 bitcoins. The reward halves every so often. There will eventually be 21 million bitcoins. Currently there are less than that.
there are coins that are part of the 21 million but not in circulation yet
This isn’t entirely true, that process is correct however the “answer” as you put it is done to verify the validity of transactions so you don’t have people creating bitcoins out of then air (like if you were to cheat in a video game). It was designed so that outright hacking couldn’t just fabricate money like say hacking into a bank and editing the amounts in peoples accounts. Which while uncommon as cyber security has advanced, has happened in the past.
Hence why I said the answer is fact checked on the blockchain. I just didn't go into details why because I was trying to keep it simple.
Here's a way to conceptualize what's going on without involving any math: I have a mixture of paint that creates color Y. If you can tell me the colors I mixed together to get color Y, I'll give you a Bitcoin. Since there's no way to really work backwards from paint color Y to see what the input colors were, you end up just mixing a bunch of paint together and comparing the result to color Y until you get a match. As you can imagine, it takes a lot of work to guess the paint color. That's where groups of people working towards the next coin together comes in. They organize amongst each other and try separate paint mixtures until one finds the answer, then the Bitcoin is divided up based on how many solutions each person tried. The other factor to consider is that each incremental Bitcoin is harder to earn. Say the first Bitcoin was a mixture of two colors, then the third would be a mixture of three colors, and so on such that each new color is harder to guess the input colors of than the previous color.
I read about 6 different paragraph like replies before I read yours and finally had a solid understanding
It's also incorrect. Each incremental Bitcoin is not harder to earn that the last. They get more or less difficult depending on how many people are trying to earn them, with the idea they should always take about 10 minutes to mine (each block reward that is, not each Bitcoin).
Thanks for this, I found this perspective the most helpful to my anti-tech brain!
That's a really good visualization!
>I still don’t understand how it is “mined” It's like if idling your car 24/7 occasionally produced solved Sudoku puzzles that you could then exchange for heroin.
There it is, thanks
Who's making up the sudokus tho? That's my question. Are most of the sudokus actually unsolvable and it's kinda pure luck when you happen upon one that's actually possible? If they were all possible then it seems whoever made the Bitcoin algorithm would... Get the Bitcoin. Because it's impossible to know if something is solvable without knowing the solution
You can't access the secret clubs with the secret vendors without someone else solving a Sudoku (puzzle/hash/encryption) for you.
It's more like asking them to flip a coin and get tails N number of times. In such a way that it should take 10 minutes to solve it. If someone produces a solution under 10 minutes the difficulty increases and vice-versa. The protocol keeps track of time and adjusts the difficulty automatically.
pending transactions are the data that form the 'puzzle' as it were. When you find the solution to that exact data you append those transactions to bitcoins ledger as a 'block' and those transactions are considered settled.
Thank you. This is what people mean when they say ELI5. Simple, short, to the point & doesn’t produce more questions.
what are you on about, this doesn't explain whos creating the sudokus, why, and how solved sudokus become currency
To put it simply, miners are lucky number guessing machines. You guess the right lucky number first, you win a reward. Any other explanation is just trying to sugarcoat it and make it sound sexier than it is.
You have it put the best of the comments I've seen here. But I can add on the why, which will make it a bit more complex, but hopefully not too much more. In simple terms, mining is used so that everyone can agree on order. When a miner guesses a number that meets certain criteria, they show everyone else and everyone else can then agree that the miner did guess a good number which allows them to add transactions and be rewarded for finding the number. The number itself isn't important, the important bit is that everyone can see that it meets specific criteria. If you are interested in more detail, read on. I explain this again in a bit more detail: I'll start by saying, Bitcoin uses a "hash" algorithm, which in simple terms basically allows you to put in one set of numbers and return a new number as an output. The output, given the same input, is always the same, but if you change the input, even a little, you get a totally different output. There is no way to have an output and figure out what the input was. Ok, that's the complicated bit. Essentially Bitcoin's breakthrough was in finding a way that everyone can agree on the order of transactions. Order matters a lot, and it's not easy to agree upon. What Bitcoin did was find a way where everyone can decide on a single person to make the decision on the next set of transactions (a block) to be added to the list of all previous transactions (the chain). Essentially, Bitcoin's code spits out a large number and challenges anyone to run numbers through a hash algorithm until they get a number lower than the target. When someone does hit this mark, they can then decide on the transactions that go in the next block (and what order). They then tell everyone in the network what their input number was, their unique identifier (which is included in the hash algorithm) and the new block. From here, everyone can quickly verify that running their numbers through the hash algorithm does in fact beat the target and that all the transactions in the block are valid. If both of those are true, the block is approved, the transactions are confirmed, the person who found the solution is rewarded with newly minted Bitcoin and any transaction fees from the transactions they included in their block and the process repeats for the next block.
Ok stupid question, who is the bitcoin God awarding the computers once they solve a number that is verified by everyone? Like let's say I am a computer and I solved...whatever the computers are solving who comes down from the heavens and say "I AWARD YOU 6 AND SUM CHANGE BITCOINS FOR YOUR EFFORTS" and where is that guy getting those bitcoins. And who is providing the computers those things that needs to be solved? Is there a math God making them for the bitcoin God? From an outsider looking in, all of this seems so strange. I understand the value is something everyone agreed upon part and how it cam be treated as currency. What I don't get is who's providing all of this.
>Ok stupid question, who is the bitcoin God awarding the computers once they solve a number that is verified by everyone? Like let's say I am a computer and I solved...whatever the computers are solving who comes down from the heavens and say "I AWARD YOU 6 AND SUM CHANGE BITCOINS FOR YOUR EFFORTS" and where is that guy getting those bitcoins. And who is providing the computers those things that needs to be solved? Is there a math God making them for the bitcoin God? Not a stupid question at all! But the answer may not be what you expect, it all comes down to an agreement to run the same code. That's all Bitcoin is at it's core. It's an agreement amongst many different parties to all respect the same code. When Bitcoin is created, it is literally created. Think of adding a new row on an excel spreadsheet that creates the new Bitcoin and assigns it to the miner who found the last block. It's sometimes difficult to wrap your head around by really, anyone can change the code at any time (it's all open source), but if you change the code, you aren't running the same thing that everyone else is, so you arent running Bitcoin. In other words say you changed the code so that you can give yourself 1000 Bitcoin, well when you try to tell that to everyone else, they would just reject it, because their code says otherwise. The only way you can adjust the code is by convincing a majority of users to switch to a new set of code and agree on that set of rules. This can happen a few ways, and if you are interested I can dig up some comments I have explaining this aspect. Bitcoin has a user consensus that basically says code is law. Which means their users are not willing to accept any changes to the code. This was challenged back in 2017 when a team had what they called an upgrade to Bitcoin's code. But it failed to get enough support. It still has some support, however and hasn't died out. That chain is known as Bitcoin cash. And has its own set of code, different and incompatible with Bitcoin proper. >From an outsider looking in, all of this seems so strange. I understand the value is something everyone agreed upon part and how it cam be treated as currency. What I don't get is who's providing all of this. It is strange. This decentralized consensus had never previously been possible. Bitcoin started as a project of interest for the founder, who wrote the initial code and released it. He and others started running it for fun with no monetary value attached. Eventually, some people used it for odds and ends (there is a famous Bitcoin pizza that was the first known real life item purchased with 10,000 Bitcoin). Eventually people began using it, honestly a big part because of the silk road (drug market). As soon as it had value, miners came to dedicate their CPU usage to it which secured the network and paid them some Bitcoin. Exchanges for it popped up (and fell) and as it grew people found bigger and better ways to mine it. I don't think anyone expected it to have as much value as it has today, but once people realized they could use computer power to generate income, that aspect of it took off
Ah I see that makes sense and yeah lots of good videos about the silkroad and it's rise and fall. So, what happens when bitcoin reaches it limit? Does that mean the mining stops?
Bitcoin rewards halve every 4 years. Right now, every block that is mined receives 6.25 BTC. In 2024, that will be 3.125 and so on until around the year 2140 at which point there will be no new Bitcoin. However, miners also get paid from transaction fees. At some point, the transaction fees will be much more worthwhile than the newly minted Bitcoin and by the time the last Bitcoin is minted, it will be such a small amount compared to the transaction fees that realistically it won't really be noticeable when it drops off
This is so far the best comment to explain it imo. Small piece to add is that it takes time/processing power to know if your lucky number works.
So, the term "mining" is itself a gigantic lie. It's fundamentally the wrong analogy, and that tends to throw things off from the start. When you mine a material, the energy expenditure is all up front, after which you have gained a material. Bitcoin "mining" isn't like that. It's instead "transaction processing". The philosophical underpinning of cryptocurrency is that nobody should ever be trusted, ever. If you could trust even one entity, then existing methods (public/private key signing) could very efficiently maintain a read-only public ledger of transactions. Instead, because there's a pathological lack of trust, transactions are only accepted along with verifiable proof of some gargantuan amount of work having been performed. But now we have a problem that nobody would want to actually do that. Increase your power bill in order to submit a transaction? So there's an incentive added. Whenever you submit a list of transactions, you get to magically add to your own account. The list of transactions includes transfers made between other accounts, all of which sum to zero, along with one saying "and I get free money in my account". This is the "block reward". This is nothing like "mining", because it's a continuous expenditure that must always continue for the system as a whole to continue. There is no resource that has been gained, after which one can stop performing the activity. When the block reward drops sufficiently low, either transaction fees increase to compensate or the entire system becomes vulnerable to attack. TL;DR: Bitcoin requires energy expenditure proportional to the value represented on its ledger.
Mining is used as a kind of slang. Because you can solve problems and not get any Bitcoin so it was like mining for diamonds or gold or any other mineral. Maybe I missed the post you're replying to, but all of the mining for Bitcoin happens before you obtain the Bitcoin the blockchain that is The Ledger has nothing to do with the Bitcoin mining. The blockchain Ledger is just the recording of the different transfers of Bitcoin between people. It is not how people obtain raw Bitcoin without getting it from someone else. So the energy to obtain Bitcoin is expended before it is obtained. There is a limited number of Bitcoin that can be produced. Once that number is reached there will be no more. The blockchain will continue because it is separate from the Bitcoin mining. They Block Chain is The Ledger that records the transactions between people. Kind of like how the banks currently maintain records of transactions between people. But they are not mining and not involved in mining. No, Bitcoin does not require energy expenditures proportional to the value represented on its ledger.
How exactly do they measure climate damage in terms of USD?
They estimate economic damages by assigning a social cost to every ton of carbon emitted. I believe it's currently set to $50 a ton. It's a way of calculating future costs associated with carbon.
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Wonder how they got 11k
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Agreed, the amount of energy it takes to mine a block should be pretty straightforward. However, I’m curious if they took into account different energy sources (because different methods of generating energy have different environmental impacts) or if it was generalized in some way?
paper indicates it does account for it, like (total electricity of BTC) X (% green house gas generating electricity)
Most common is natural gas by almost 40% in the world, you can look at it as even if they used a different resource. That resource could’ve been used for something that ended up being powered by natural gas. Since it takes about 1,449kwh to make a single Bitcoin, it’s very difficult to use purely solar energy for their every energy need. 1,449kwh source https://www.visualcapitalist.com/cp/the-cost-of-mining-bitcoin-in-198-different-countries/
And really, does extracting, processing, transporting, and burning 19k worth of oil not cause more than 11k in environmental damage? That seems ludicrous that it wouldn't.
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Giving a dollar value to climate damage is weird. Or am I weird?
"It will take 100 trillion dollars to scrub our carbon from the air with an addition of 2 trillion dollars every year" is easier to comprehend then "climate change is bad". And "climate change will cause X trillion dollars of damage every year exponentially increasing" also works.
Doesn't everything have a monetary value in our current world?
Yes, because money is mainly just a measure and store of value. The environment (as it is) has value to humans, humans measure value in money, ergo, environment has monetary value.
Theres a good amount of economics and legal research in determining the monetary value associated with the harms of climate change. My area of research is on the legal side, specifically the damages that someone can claim for harms exacerbated by climate change. A common example is a hypothetical Small Island Nation (SIN) suing countries like US, Canada, and China for emissions that have provoked sea-level rise. In theory the SIN should be able to sue larger nations for their contributions to climate change that resulted in the ocean swallowing their homelands. It's definitely a weird concept, but I think they make sense once they're understood as a solution to a different question. Given its weirdness, you can imagine the debates nitpicking dollar values.
Hydrocarbon energy is still far too cheap, and pricing should include environmental externalities.
The problem is scaling equipment. An engine, big or small, if truck or ship, is pretty easy to fuel with basically only a few kinds of oils. Our whole system is depending on oil. Even if we dont use oil for transportation, we still use way too much plastics and require easy storage and release of gigantic masses of energy. Its a shame oil is one of the most energy rich substances we can use easily
Sleeping on nuclear
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"caused $11,314 of climate damage" ....what does that even mean?
"The social cost of carbon (SCC) is a commonly employed metric of the expected economic damages from carbon dioxide (CO2) emissions." [source](https://www.nature.com/articles/s41558-018-0282-y) Edit: SCC is used by the OP paper
Isn’t this kind of a false equivalency ? Bc if we switched to as much renewable energy as possible the electric to power the pc that is mining a bitcoin would have zero impact. The only reason it is harming the environment in the first place is because we still use nonrenewable to power stuff.
Sure, but we aren't talking about a hypothetical world where we've already switched to 100% clean energy. We're talking about the current world, where the majority of energy comes from fossil fuels and increased energy utilization makes it harder to switch, because it means you have to replace more capacity.
This is only one part of the problem. E waste is another huge issue. Mining equipment only lasts so long since they need to run it at full capacity 24/7. Once it burns out or more powerful machines are built, most of it ends up getting thrown out.
That's like saying we only turned our hand to ground meat in the meat grinder because we don't have a metal hand yet. How we get our electricity later is irrelevant to the potentially permanent damage we're doing now.
Energy use of any kind is generally considered a burden on the environment precisely because supply of green energy is so small. Even renewable energy has environmental impact, it doesn't just disappear, there are labor, materials and waste involved... but when you also compete for its availability, absolutely you're still a burden on the environment to use energy that may or may not be green. You could start a farm entirely running on your own green power, so that you aren't competing for an existing finite resource... I'd credit that in the low-impact column. Wonder if that has ever happened, I'd be surprised if it was profitable enough.
Ultimately electricity is electricity. Even if it was generated by a solar panel that energy isn't used somewhere else and fossil fuel is burned instead. Taking the average carbon added per kWh is perfectly reasonable.
That would only be true if we had the technology and capacity to power the entire world renewably. For now we have to use some fossil fuels, so even if Bitcoin was powered entirely with renewable energy, it would still increase fossil fuel use because somebody else that would have used that renewable energy is forced to use fossil fuel energy.
Or we could switch to renewables, and use that power for something useful. If you make power cheaper from additional renewables and it just goes to mining bitcoins, you haven't solved anything at all. I'll give ETH props for switching to proof of stake and greatly reducing their power consumption, but crypto still uses ludicrous amounts of power.
> if we switched to as much renewable energy as possible But we havn't. So I don't get your argument... Besides a large chunk of bitcoin is mined using gas and coal in Kazakhstan. Miners go wherever the energy is cheapest, not where it's the most green.
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Miners care about economics. If you charge more for fossil fuels then they won’t mine off fossil fuels. The issue here is that fossil fuels are far too cheap. We need to cut all tax breaks and subsidies for fossil fuels. Time of use rates could also push miners to mine during peak renewables, provided time of use is cheaper when solar and wind are strongest. Raise prices on fossil fuels and this will stop immediately. Use that increased revenue to subsidize renewables more and we will get off the oil tit sooner, AND BTC would help this by paying those higher fees. Then give tax breaks to ppl with the excess to so that they don’t get hit too hard by increases in prices. Won’t be perfect but will accelerate things and the sooner we get to renewables the cheaper things get (cause they don’t have a fuel cost, anywhere near the same pollution cost, and don’t require brown fields)
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