November 30th, 2017


On Bitcoin, electricity usage, and economic incentives

Bitcoin mining produces one new block every ten minutes. (Give or take - the difficulty of mining is adjusted to get it reasonably close to every 10 minutes).

That gives you six new blocks per hour. Or 144 per day.

Looking at the cost of the transaction fees (which go to the miners), there's another 200-odd per day on average.

So miners are getting paid, between all of them, 344 bitcoins per day. Let's round it to 350.

The price of a bitcoin is varying a lot right now, but it's definitely been at least $10,000 a fair bit of the last few days. And that gives us a nice round number.

So that means that three and a half million dollars per day is going to bitcoin miners.

Basic economics would dictate that if people are making a lot of profit at mining then others will move in to the market, spending more until the cost of making bitcoins is similar to the cost they can sell them for.

This means that people are going to use three and a half million dollars of electricity per day to generate bitcoins, in the hope of making a sliver of profit. Or more than that, if they think the value is going to go up.

And this will carry on until the reward next halves, in 2020. At which point those base 144 bitcoins per day will become 72 per day. And if various projects come off the transactions will also be a lot cheaper. Which, between them, will reduce the incentive to mine, and reduce the amount of electricity being used by a lot.

Unless, of course, Bitcoin is worth a lot more by then. In which case the incentive will still be sky high, and it'll take several of the four-yearly halvings to bring it back the electricity back down to the level of a small country, rather than the same amount as Ireland.

If anyone is interested in how Bitcoin actually works, by the way, then I recommend this explanation, from a few years ago.

Original post on Dreamwidth - there are comment count unavailable comments there.

Interesting Links for 30-11-2017

"It’s a Dead Issue”: Fantastic Beasts Director Defends Johnny Depp
(tags: abuse johnnydepp movies harrypotter jkrowling )
Belief in our moral superiority is the most irrational self-enhancing bias of all
(tags: bias morality psychology )
Here's the thing about "just joking."
(tags: humour society psychology racism )
White men facing money trouble tend to cling to guns for power, identity
(tags: guns usa psychology identity )
Brexit bill: Will we ever know a precise figure?
(tags: UK europe money )
Trailer for Marvel Studios' Avengers: Infinity War
(tags: Trailer marvel movies )
London suburbs set for housing boom as Sadiq Khan relaxes rules
(tags: Labour London housing GoodNews )
Stress during pregnancy affects the size of the baby
(tags: babies stress )
Low vitamin D levels at birth linked to higher autism risk
(tags: autism vitaminD )
Why you’re more likely to remember something if you read it to yourself out loud
(tags: reading memory sound )
Mulan: Disney casts Chinese actress Liu Yifei in lead role
(tags: Disney china )
One-third of UK dieters have used slimming pills bought online - many of them dangerous
(tags: diet drugs safety uk web )
First electric train runs full Edinburgh-Glasgow line
(tags: Scotland trains transport )
Terrorists 'certain' to get killer robots, says defence giant
(tags: robots automation weaponry military thefuture )
'Evil racist': how the UK reacted to Trump's Theresa May Twitter attack
(tags: twitter politics racism usa uk )
As Meghan Markle Chooses To Become A British Citizen I Just Wait For My Wife To Be Able To Come Home
(tags: immigration UK OhForFucksSake )

Original post on Dreamwidth - there are comment count unavailable comments there.