Topic: Estimating the energy/power consumption of the Bitcoin Network - page 2. (Read 6861 times)

I like.  So then, in addition to an estimate of how much the miners spend on energy versus equipment we would also need to estimate the amount of energy that goes into the NRE, manufacture and delivery of the finished equipment to the miners.

Then again it might be easier to "average this all out" into a single g factor of say 0.1

can't all hardware expenditure be estimated as energy?

I agree.  The model can be made more accurate if we get a better estimate or calculation for the system wide average value of g.

Then it could be made even more accurate if we could calculate or estimate g(t) or g(e).

Just a quick extension.

if we assume a churn on hardware to counter the decay of individual units your model can be reduced to two bounds

[edit] removed asymptotically, does not have to be that way

a) mining converges to 100% expenditure on hardware
b) mining  converges to 100% expenditure on energy.

The reality will be in between. I doubt there will be a fixed factor between both bounds (eg 0.5 spent on new miners, 0.5 on power)

Not at all, changing g statically changes the margin for everyone and every mining unit.
I am not trying to justify any other value for g. I am trying to point out that g in itself is not a constant over time for any one mining unit and mining all together.

Can you model the scenario of someone spending, say 250 million usd on the development of a new mining unit that has a g of 0.2 over the 0.1 of available units in your model? the mining rewards are an incentive to spend that much resources on mining all together, not necessarily just energy. Can you also model how the adaption of such new units reduces the g of other units? Eventually a single unit will be at g <0 and might have to be replaced by a more efficient one. The value generated by bitcoin mining is an incentive to spend almost as much in mining. It will be divided between energy and hardware.
You may want to try to add this advance in technology and hardware cost vs electricity for mining into the model

By the way my mentioned scenario, albeit with different values, must have happened at one stage for the transition from gpu's to dedicated asic machines to even take place.

raid_n:

Your entire argument is:  BurtW, your estimate for g of 0.1 is too low, I think the value of g is higher than that.

So, just change the value of g to what you estimate it should be.

What do you think it should be?  0.5?  0.6?

You don't have to write walls of text to tell us the value I picked out of the air in my example is wrong.  If you could calculate and justify an actual value for g - that would be interesting.

You are completely ignoring the argument I am making against your calculations.
I know it may seem like an elegant approach to correlate or otherwise analyze bitcoin prices solely on energy consumption but it is nevertheless a fundamentally flawed one.



As to your first example, what are you trying to prove to me here?
If a second generation miner produces more hashes per joule of energy than a predecessor its production cost can be higher for a rational miner to still consider purchasing one. The capital for new investments is coming from block rewards (lets ignore irrational mining for now)
Price discovery for bitcoin is linked with mining costs to some degree but clearly you cannot suggest that mining dictates price.
The fact that the protocol has an adaptive difficulty means that a lower price can and will ultimately cause a shrinking in the mining sector, attempting to converge on a moving stable point of cost vs. reward of mining.
Ultimately the valuation of bitcoin dictates the amount of new resources that will be poured into bitcoin mining (or are withdrawn). Once the value of block rewards is lower than the true production cost rational miners will cease and a new stable point with lowered energy and resource requirements is reached.

Now on to your second example and why it illustrates a flaw in the logic. Unless you assume zero technological innovation and zero environmental factors a stable state is never continuously reached. The discovery of a new lithographical process that makes chip design more efficient immediately would create a situation where a new unit can be built that is more efficient and hence has an economic advantage. That advantage dictates if and when new miners are actually commissioned as you expect a rational entity to only engage in upgrades if they will eventually amortize (or at least are expected to!) themselves. There is an almost infinite set of events that can lead to such a change.
You are essentially performing calculations with a static model that can't hold up beyond the hypothetical.


I have the feeling you are entertaining the concept of mining = energy cost because it fits into the current social and political context of our times. It is a grossly reduced model that, in my eyes, fails to adequately capture reality.

Of course you are free to use such a model for future predictions. I hope you are willing to revise it when reality does not conform, as am I willing to accept it if it Ultimately shows to be true.

The problem is that you obviously do not understand BurtW's calculations.

I will give you a real world analogy to think about:
Mining Gold is profitable but generally requires heavy machinery that runs mostly on fossil fuel.
The equivalent calculation would be to take the value of the global output of newly mined gold and say "Mining gold will consume that value divided by fuel prices of fuel because it is profitable"

You are ignoring the cost of mining equipment, the cost of labor, local conditions, changes in technological requirements that require research etc.

Do you see the issue? You have just reduced a complex problem into one dimension, in the above case fuel and in BurtW's case electricity.

Essentially his observation is not really how much energy the bitcoin network will "try to consume" (even that statement makes no sense. A miner has a limited amount of hashrate so for the network to consume more energy would mean you HAVE to increase the number of miners or their efficiency, both of which require an input of new money through both purchases and research and development)

The observation is: For x amount of money I can buy y amount of electricity.

Even with the current situation we see that calculations purely based on required energy make little sense.
If I buy a 1st generation block erupter it is pretty much useless unless I have very low energy costs. Its price, the cost of its development and ultimately, the fact that it will and is being replaced by new hardware that also requires new investments show that assuming 100% of rewards created by mining flow into energy makes little sense

I will even go as far as speculating that energy costs will become a smaller factor than today if prices ever do climb up significantly.
The limited capacity of producing efficient asic chips for everyone means that you will run into a global scarcity of hardware, driving the prices up for new machines. Furthermore if mining is indeed a billion dollar industry you will have RnD by manufacturers to try and get a competitive edge on both hashrate and energy efficiency. These costs need to be paid for somehow and that is where a portion of the block rewards of miners will go into.

People on these forums have made calculations on the energy cost of producing a bitcoin and arrive at quite low values.
Many blindly assume that that is the only cost for producing a bitcoin and consider them overvalued. What you are missing is
that a miner needs to be bought and that initial investment needs to be paid for. Because difficulty is increasing your miner is producing less and less money until it ultimately is no longer profitable and has become obsolete.

Hence again I will ask, what is the point in assuming a stable network where everyone already has hardware for no cost and technology does not change when that is clearly not the case?

This will help humanity create a market price for energy that will drive global economic efficiency, and at the next halving a quarter of the planets energy will be surplus.

Nice to dream but we're not there yet.

This

Unprofitable miners quitting have little impact on difficulty. asic's are a 1000 x more powerful than gpu's.

As long as the cost of production is lower than market price miners have a profit incentive.

Hardware costs are not a factor in revenue as they are fixed assets are a sunk costs.
The investment in new hardware is stimulated by large gaps between production cost and market price.

As the profit shrinks, risk in investing in more efficient hardware increase.

Yet, in the last 12 days, more hardware was added than the total of all the hardware running in July, 2014, just 5 months ago. 

Too early to say it is stabilizing.

Obsolete technology is the byproduct of innovation. We are seeing progress.

I don't really see the point in using theoretical energy consumption as an indicator.

The value created with every block is going to give you a good indicator of the total monetary input into the bitcoin mining industry.
We are already in the ASIC era where first generation units are close to becoming worthless. In contrast to cpus or gpus these units have very few alternative uses.
Their production cost and the value created for the hardware seller as well as the energy expended needs to be contrasted to the total amount of coins created by it, not just the energy cost the miner had.

Sure you can assume a stable system and no hardware costs. But what exactly is that telling you?

Solar powered Bitcoin miners on the moon!  Then all those "too the moon" comments would become true.

Bitcoin heliosynchronous solar powered satellites would be expensive and inefficient, but v.kewl.

Usually surplus power is stored up in batteries... but yes... they only work in the day.

Does solar only work in the day?

they should start to use more clean energy for bitcoin mining, what about that that mega solar farm in arizona? they could rent it if possible

Or Antarctica, in the polar vortex zone.

Wind farm in Alaska and BTC mining could be a good combination.