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Is Bitcoin Mining a Real-World Environmental Problem?

samzenpus posted about a year and a half ago | from the ready-set-panic dept.

Earth 595

First time accepted submitter HeadOffice writes "Mark Gimein points out that Bitcoing mining uses a lot of power, enough that it is a real world problem: 'About 982 megawatt hours a day, to be exact. That’s enough to power roughly 31,000 US homes, or about half a Large Hadron Collider. If the dreams of Bitcoin proponents are realized, and the currency is adopted for widespread commerce, the power demands of bitcoin mines would rise dramatically. If that makes you think of the vast efforts devoted to the mining of precious metals in the centuries of gold- and silver-based economies, it should. One of the strangest aspects of the Bitcoin frenzy is that the Bitcoin economy replicates some of the most archaic features of the gold standard. Real-world mining of precious metals for currency was a resource-hungry and value-destroying process. Bitcoin mining is too.' However, not everyone is convinced that virtual mining is as bad for the environment as the real thing."

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Conversion (3, Informative)

hugg (22953) | about a year and a half ago | (#43448339)

"About 982 megawatt hours a day, to be exact"

982 MWh/day / 24 = ~41 megawatts

Come on reporters, convert brain-dead units into normal units.

Re:Conversion (5, Funny)

Shavano (2541114) | about a year and a half ago | (#43448355)

"About 982 megawatt hours a day, to be exact"

982 MWh/day / 24 = ~41 megawatts

Come on reporters, convert brain-dead units into normal units.

MWH is a unit of energy. It's also readily convertible to money.

Re:Conversion (5, Insightful)

Anonymous Coward | about a year and a half ago | (#43448777)

So people are paying real money for electricity to then convert it to fake currency?

Re:Conversion (-1)

Anonymous Coward | about a year and a half ago | (#43448877)

Linus rhymes with anus.

Re:Conversion (5, Informative)

Anonymous Coward | about a year and a half ago | (#43448393)

Considering that most people pay for their electricity by the kilowatt hour, the megawatt hour is not a bad unit to be using. It lets me say, for example, that it's about 200,000 times my average daily electricity usage (5 kWh on my last bill, probably because of the air conditioning). Much easier to compare scales.

Mind you, megawatts aren't bad either ... they're just not as intuitively transformable to real-world scenarios for most people.

Re:Conversion (-1)

Anonymous Coward | about a year and a half ago | (#43448503)

Air conditioning? With this weather?

What kind of fool are you, you probably stand upside down and flush the water in your toilet backwards.

Re:Conversion (2)

flargleblarg (685368) | about a year and a half ago | (#43448505)

"About 982 megawatt hours a day, to be exact"
982 MWh/day / 24 = ~41 megawatts
Come on reporters, convert brain-dead units into normal units.

Yeah, we want it 1.21 GW/day units, e.g., how many bolts of lighting per day.

Re:Conversion (2)

JustOK (667959) | about a year and a half ago | (#43448605)

Or how many Loc could be powered.

Re:Conversion (1, Funny)

PvtVoid (1252388) | about a year and a half ago | (#43448773)

"About 982 megawatt hours a day, to be exact" 982 MWh/day / 24 = ~41 megawatts Come on reporters, convert brain-dead units into normal units.

Yeah, we want it 1.21 GW/day units, e.g., how many bolts of lighting per day.

What's that in Libraries of Congress?

Re:Conversion (1)

Anonymous Coward | about a year and a half ago | (#43448771)

982 MWh/day / 24 = ~41 megawatts

My physics teacher would laugh you out of the room. Watch your units. You might get a correct result but your solution is half-assed.

982MWh : 1d = 982MWh : 24h = 982/24 MW.

Re:Conversion (1)

Guppy06 (410832) | about a year and a half ago | (#43448839)

That might mean something if the energy was consumed at a uniform rate over the course of 86,400 s. That is true of neither homes nor LHCs.

I guess it depends (3, Interesting)

p00kiethebear (569781) | about a year and a half ago | (#43448341)

On where the power is coming from. Wind Powered bittcoin mining wouldn't be so bad right?

Re:I guess it depends (5, Insightful)

ShanghaiBill (739463) | about a year and a half ago | (#43448613)

On where the power is coming from. Wind Powered bittcoin mining wouldn't be so bad right?

No. Electrical energy is fungible. So if you use wind power, there is less wind power available for others, so they have to use more coal power (or whatever). The result is the same as if you had just used the coal power directly. The only way it would make a difference is if the wind power was otherwise going unused (unlikely).

Re:I guess it depends (3, Interesting)

jcr (53032) | about a year and a half ago | (#43448657)

if you use wind power, there is less wind power available for others,

Nope.

You need to develop a sense of proportion.

-jcr

Re:I guess it depends (5, Funny)

haruchai (17472) | about a year and a half ago | (#43448759)

He simply wanted to say "fungible"

Re:I guess it depends (0)

Anonymous Coward | about a year and a half ago | (#43448781)

No, your parent is correct. If I use up the wind power in Saudi Arabia to heatup a few hundred sand dunes, oil will have to be burnt to cater to demand that wind power could have satisfied.

Similarly, Bitcoin is basically 'day trading for computer geeks' -- work of no inherent value, done in the hope of turning a profit.

Re:I guess it depends (1, Informative)

Hentes (2461350) | about a year and a half ago | (#43448691)

Electricity is not something we can efficiently transport from places where it's abundant to places where it's needed. Unused excess electricity is a waste.

Re:I guess it depends (2)

fustakrakich (1673220) | about a year and a half ago | (#43448769)

I get my power by incinerating unicorns and leprechauns. Then I melt down my bitcoins so they can't be traced.

Or an economic drain? (3, Informative)

Shavano (2541114) | about a year and a half ago | (#43448343)

982 MWH/day costs approximately $100,000 per day. Is the marginal utility of mining bitcoins worth more than $100,000 per day to the world economy? If so, carry on. If not, everybody please stop.

Re:Or an economic drain? (3, Interesting)

Anonymous Coward | about a year and a half ago | (#43448435)

I believe right now 3600 btc are mined per day. At 100$ each that's 360k per day. I wouldn't mine those profit margins.

Re:Or an economic drain? (1)

Naedst (1313869) | about a year and a half ago | (#43448573)

That's not a profit margin though. That's one of the variable costs going into your operation. Add in any other variable costs and your overhead (not to mention your CAPEX), factor in the ridiculous variability in the bitcoin prices and pretty soon it's hard to see why anyone would seriously consider bitcoin mining for profit unless they have (free) access to many idle machines.

Re:Or an economic drain? (3, Interesting)

Mashiki (184564) | about a year and a half ago | (#43448549)

Kinda funny, but the windmills here in Ontario have a negative profit margin of roughly the same daily.

Re:Or an economic drain? (1)

Anonymous Coward | about a year and a half ago | (#43448617)

People will spend their money the way they want to, and they will waste their money the way they want to. So don't tell them to stop unless you tell everyone else to stop with their own money-sink hobbies and other projects.

Hard to say (2, Interesting)

phantomfive (622387) | about a year and a half ago | (#43448345)

Hard to say how bitcoin compares to mining gold and silver when you don't even know how much bitcoin is worth. If bitcoin gains enough value, they might be better for the environment than printed paper money.

How much is bitcoin worth? There was an interview recently with some 'bitcoin millionaires', people who had a million dollars worth of bitcoin. That of course raises the question: if they sold their bitcoin, would there be enough buyers to actually get them a million dollars? Or would such a large sale cause the market to collapse?

Re:Hard to say (0)

Anonymous Coward | about a year and a half ago | (#43448377)

Hard to say how bitcoin compares to mining gold and silver when you don't even know how much bitcoin is worth. If bitcoin gains enough value, they might be better for the environment than printed paper money.

How much is bitcoin worth? There was an interview recently with some 'bitcoin millionaires', people who had a million dollars worth of bitcoin. That of course raises the question: if they sold their bitcoin, would there be enough buyers to actually get them a million dollars? Or would such a large sale cause the market to collapse?

This whole bitcoin thing reminds me of the southpark spacecash episode

Re:Hard to say (0, Redundant)

Anonymous Coward | about a year and a half ago | (#43448415)

Well, the key question - as with anything that operates on a stock market type setup - is, "what's the market depth?"

So few bitcoins change hands, relative to the total number out there, that a fast dump would see the value crash. This is part of the reason that the bitcoin market is so volatile: because relatively few people are selling or buying, the "value" changes very easily. All it takes is one relatively large buy order, and the price will spike; alternatively, one relatively large sell order, and the price will plunge.

In short, my considered advice to anybody looking at bitcoins as a way to get rich quick: it's a pyramid scheme, or a very close relative thereof. Steer clear. It simply isn't worth the risks.

Re:Hard to say (4, Informative)

phantomfive (622387) | about a year and a half ago | (#43448459)

In short, my considered advice to anybody looking at bitcoins as a way to get rich quick:....steer clear.

That's good advice for pretty near any way to get rich quick. Especially if someone is trying to sell it to you.

Re:Hard to say (3, Interesting)

cryptizard (2629853) | about a year and a half ago | (#43448639)

The other thing is that bitcoins have a finite shelf life, as opposed to precious metals which we know last almost indefinitely. Once a break is found for SHA-256 or Elliptic Curve DSA (the two cryptography primitives used by the bitcoin protocol), bitcoins will be worthless. It's not likely that this will happen any time soon, but 20 or 30 years from now? Definitely plausible. At that point, all the money spend on mining will essentially evaporate.

Re:Hard to say (4, Interesting)

doublebackslash (702979) | about a year and a half ago | (#43448737)

IANABP (I am not a Bitcoin Proponent, I own exactly 0BC and will not in the forseeable future), but I am interested in the idea and mechanisms involved.

If a break is ever found, suspected, or even slightly likely an orderly migration to better cryptographic primitives can be performed. If you are interested in knowing more the wiki [bitcoin.it] enumerates all the known possible attacks.

Here we go again. (-1)

Anonymous Coward | about a year and a half ago | (#43448351)

Let the flame war begin.

"About 982 megawatt hours a day" (2, Interesting)

Chris Mattern (191822) | about a year and a half ago | (#43448357)

That's "41 megawatts" for those of you who prefer it in non-retarded units. In case you were wondering, that's 0.003% of the US's electrical generation capacity. Yeah, that's a real environmental disaster, there. It's not a problem, it's a rounding error.

Re:"About 982 megawatt hours a day" (0)

Anonymous Coward | about a year and a half ago | (#43448587)

That's "41 megawatts" for those of you who prefer it in non-retarded units.

What??

41MW is a finite amount of electricity, not a measure of consumption which requires a time factor.

Bitcoin 'cost' 41MW is far more 'retarded' than the OP because it's 100% meaningless."New" bitcoins "cost" 41MW PER HOUR (if you prefer that to 982MWh/d)

Re:"About 982 megawatt hours a day" (2, Informative)

TCM (130219) | about a year and a half ago | (#43448795)

"New" bitcoins "cost" 41MW PER HOUR

Wrong. Wrong. Wrong. If anyone says "Watts per time" again, I personally hunt you down and smack your uneducated hipster face.

It "costs" 41MWh per hour. Period.

Re:"About 982 megawatt hours a day" (1)

Rob the Bold (788862) | about a year and a half ago | (#43448855)

41MW is a finite amount of electricity, not a measure of consumption which requires a time factor.

You don't really know what a Watt is, do you? That's OK, no one knows everything. But now that it's been pointed out, please look it up before posting again.

Re:"About 982 megawatt hours a day" (4, Insightful)

BitZtream (692029) | about a year and a half ago | (#43448625)

it's a rounding error.

So is every car on the planet, but that doesn't mean we don't consider the output of those cars, does it?

Little things tend to add up quickly when you're paying absolutely no attention to efficiency.

Irrelevant comparison (1)

SigmundFloyd (994648) | about a year and a half ago | (#43448361)

Bitcoin mining does not replace traditional mining. So, the fact that bitcoin mining has a smaller impact on the environment is irrelevant. It still counts as added impact.

Re:Irrelevant comparison (0)

Anonymous Coward | about a year and a half ago | (#43448487)

Not only that, but bitcoin mining indirectly relies on traditional mining. The added usage of computers very likely requires MORE computers, the parts of which require traditional mining.

Re:Irrelevant comparison (2)

WWJohnBrowningDo (2792397) | about a year and a half ago | (#43448527)

The type of people who evangelize bitcoin are the same type of people who thinks the 79th element is magical.

Demand for bitcoins displaces demand for gold; lower demand drives the price of gold down; lower prices means lower profit margins and thus less gold mining.

Re:Irrelevant comparison (2)

CrimsonAvenger (580665) | about a year and a half ago | (#43448803)

Demand for bitcoins displaces demand for gold

Umm, no.

Gold has other uses than as money - jewelry, for instance. Or a superb conductor.

ASIC power requirements (0)

Anonymous Coward | about a year and a half ago | (#43448363)

ASIC miners are the near future of bitcoin mining and they have drastically reduced power requirements for drastically higher Gh/s mining rates.

Difficulty increase (1)

tepples (727027) | about a year and a half ago | (#43448535)

But as more Bitcoin fans adopt mining ASICs, the Bitcoin network will increase the difficulty toward the point where the power needed to run all the ASICs is close to the power needed to run all the current GPU miners.

Re:ASIC power requirements (1)

Anonymous Coward | about a year and a half ago | (#43448633)

Largely irrelevant. The new chips will allow people to mine coins 'faster', so the cost of production WILL rise to compensate. It's the artificial scarcity of bitcoin that is the fundemental principal of how it works. Once you build rigs that can produce 10x the number of coins in a given time / power input, by that time the rate of coin production will have been adjusted to make it take 10x longer to produce. 10x longer on a rig that uses 1/10th of the power - nett result zero gain.

Re:ASIC power requirements (0)

Anonymous Coward | about a year and a half ago | (#43448869)

No. The rate of coin generation is fixed. The difficulty, however, is not. It increases.

Seriously? (3, Insightful)

OhANameWhatName (2688401) | about a year and a half ago | (#43448365)

So we take a controlled monetary system and try to create a better monetary system and then spend effort analyzing how it fails?

The problem with the existing monetary system isn't that it's controlled by a small group of people, it's that those people are corrupt and are manipulating the system. Bitcoin has the same problem, it's just obscured because the people 'mining' the system aren't a central group, they're a distributed group.

This is crowd sourced corruption, nothing more. If you didn't expect there to be costs related to tens of thousands of people running resource intensive software to game a system designed to protect people from responsibility .. you're kidding yourself. Quit wasting time analyzing why bitcoin isn't going to get anywhere and just accept it.

If you're able to game the monetary system, then it's lost it's value.

Re:Seriously? (0)

Anonymous Coward | about a year and a half ago | (#43448585)

I'm glad somebody said it, it seems that if you even ENGAGE in critical thinking on Slashdot when it comes to Bitcoin you get modded straight into the dirt.

You simply can't argue with the reasoning -- the CPU (and in all likelihood multiple GPU) usage required for generating Bitcoin uses a hell of a lot of power. That power doesn't come out of thin air, more has to be generated to facilitate it.

If people expect Bitcoin to catch on then that means there's going to be a lot more people mining...and a lot more electricity wasted on what you correctly identified ultimately as a waste of time. Or worse, as you perhaps alluded to, a system exploiting people's naivety and justified hatred of the big banks in order to facilitate large-scale money laundering.

At the end of the day it's all a meaningless exercise anyway. Unless I can use Bitcoin to buy food, the necessities of life, it's not much good to me. For that matter, if the power company won't accept Bitcoin as payment for the power I used generating it, it's also no good to me.

Re:Seriously? (2)

ancientt (569920) | about a year and a half ago | (#43448791)

I'm curious about your reasoning. I can buy bitcoin with dollars and sell bitcoin for dollars and use dollars to purchase goods and services. Bitcoin in itself may not replace dollars but offers an alternative exchange method which may be more convenient than dollars in some instances. For example, I might do some web design work for a company in Greece, and I'd gladly take payment in bitcoins which I'd then sell immediately to get dollars. I'd declare the value of the dollars as part of my income for tax purposes and be able to buy groceries and pay my bills with the result.

At the end of my day, I'd have used bitcoin because it was more convenient than going through banks and doing wire transfers and end up with payment that would probably be slightly higher since the cost of international wire transfers wouldn't need to be deducted from the exchange.

I have no intention of mining bitcoins because I don't believe that my computers are efficient enough to produce value at less than the cost I pay for electricity, but lack of mining has almost no effect on my interest in using bitcoins as a payment system. The environmental and computational cost of me using bitcoins as an exchange medium is almost not worth counting.

So how is it not useful to me to have bitcoin catch on?

Moore's Law? (2)

Bananatree3 (872975) | about a year and a half ago | (#43448395)

Digital mining has one massive advantage over real-world mining - Moore's Law. In 5 years when FPGAs and GPUs are churning out 2-3x the current bitcoin rate at far less power requirements per bitcoin less power will be required to do the same work.

Re:Moore's Law? (4, Insightful)

Attila Dimedici (1036002) | about a year and a half ago | (#43448521)

Sorry, but there is a mechanism built in to the algorithm to prevent that from happening.

Re:Moore's Law? (0)

Anonymous Coward | about a year and a half ago | (#43448765)

In the real world, you have this thing called "greed". People develop new technology so they can dig the gold out of the ground faster and more efficiently (For example... using a computer to research new deposits). Meanwhile, bitcoin was designed so that it gets harder to generate bitcoins as the number of mined bitcoins increases.

So, wrong on both accounts.

Re:Moore's Law? (4, Interesting)

Wizarth (785742) | about a year and a half ago | (#43448825)

Actually they already use GPUs - and there are companies making ASICs now. Dedicated Bitcoin mining boxes. The people who purchased GPUs specifically with mining in mind are apparently already annoyed, because the new computational power coming online means they are seeing less return, due to the increasing requirements as the number of mined bitcoins increases.

In another unit (5, Funny)

Guspaz (556486) | about a year and a half ago | (#43448411)

Continuing my tradition of using Hydro-Québec's installed capacity as a unit of measurement, this "environmental problem" is only consuming 0.0011 Hydro-Québecs.

Re:In another unit (0)

Anonymous Coward | about a year and a half ago | (#43448799)

Hydro-Quebec Master Race reporting in!

Re:In another unit (0)

Anonymous Coward | about a year and a half ago | (#43448827)

How many Milli-Wheatons is that?

seriously? (1)

Anonymous Coward | about a year and a half ago | (#43448439)

"enough to power roughly 31,000 US homes, or about half a Large Hadron Collider."

Holy cow the LHC uses a ton of electricity! What a waste!

Until they hit the max number of bitcoins (2)

transporter_ii (986545) | about a year and a half ago | (#43448451)

One thing I don't really understand is this:

> The number of bitcoins in existence will never exceed 21 million.

So once 21 million is hit...no more power is needed, because you can't generate more?

When I read that, I thought 21 million is not a lot of coins for the whole world to use. It seems screwy to me. You run into the issue that you run into with gold, if that is the case. You can't buy a loaf of bread with gold because it is worth so much.

> While the number of bitcoins in existence will never exceed 21 million, the money supply of bitcoins can exceed 21 million due to Fractional-reserve Banking.

I've tried and tried to wrap my head around this, but it makes no sense to me. How can you have fractional-reserve banking if the coins have to match a digital signature? Fractional-reserve banking creates money out of thin air. How can you create bitcoins out of thin air? And if they are just used as backing for a fiat currency, who is to say that someone kept enough bitcoins in stock to cover the fiat money?

Re:Until they hit the max number of bitcoins (4, Insightful)

Will_Malverson (105796) | about a year and a half ago | (#43448493)

It's not quite that simple. Fractional-reserve banking creates promises of money out of thin air. You can do fractional-reserve banking with gold coins, barrels of oil, strawberries, or any other commodity.

Even that's not quite fair to say, because every promise of money created is created at the same time as a right to future money, so the total net amount of money isn't changed.

Many people get f-r banking and fiat currency confused.

Re:Until they hit the max number of bitcoins (0)

BitZtream (692029) | about a year and a half ago | (#43448647)

You can do fractional-reserve banking with gold coins, barrels of oil, strawberries, or any other commodity.

No, actually you can't.

Fractional reserve banking, much like bitcoin, requires extensive use of imaginary things in order for it to even pretend to appear good on paper.

You can not do fractional reserve banking with real physical items by definition.

Re:Until they hit the max number of bitcoins (1)

Anonymous Coward | about a year and a half ago | (#43448815)

Why not? You take 100 strawberries to the bank, they take them and give you an IOU for 100 strawberries. With a 5% reserve, they can lend out 95 of those strawberries to other people.

Re:Until they hit the max number of bitcoins (1)

the eric conspiracy (20178) | about a year and a half ago | (#43448823)

Fractional reserve banking can be done with a physically backed currency.

So for example MtGox could start issuing the BitBuck which contains a promise that it can be exchanged for 1.0e-8 bitcoins on presentation.

This currency can then become the basis of a fractional reserve banking system.

This will work until enough bitibucks are in circulation to scare folks into all demanding an exchange at once.

Re:Until they hit the max number of bitcoins (0)

Anonymous Coward | about a year and a half ago | (#43448845)

Fractional reserve banking has been working splendidly for the last 40 years. How do you think all the wealth driving the S&P up tenfold came to be? Unicorns?

You have no clue what you're talking about, numbnuts. Please don't act like you do.

Re:Until they hit the max number of bitcoins (1)

muphin (842524) | about a year and a half ago | (#43448517)

pretty much you can sell fractals of 1, i can sell 0.01 of 1 bitcoin for $20, i will now have 0.99 of a bitcoin
although there are 21 million bitcoins there is an endless fractal 0.00000001 of a bitcoin....

1e-8 BTC == satoshi == ash (1, Informative)

tepples (727027) | about a year and a half ago | (#43448619)

although there are 21 million bitcoins there is an endless fractal 0.00000001 of a bitcoin

1e-8 BTC is nicknamed a "satoshi" after the pseudonym of Bitcoin's creator [bitcoin.it] . Why not call it an "ash" outside Japan? It'd make sense on two levels: an "ash" is a very small particle, and Ash is the name for the Pokemon character Satoshi [bulbagarden.net] outside Japan.

Re:Until they hit the max number of bitcoins (1)

Phizital1ty (1755648) | about a year and a half ago | (#43448561)

> So once 21 million is hit...no more power is needed, because you can't generate more? Power will still be needed because the miners do the transaction checking. When generating blocks the miners get transaction fees added to their block for performing work on checking transactions.

Transaction fees (3, Informative)

tepples (727027) | about a year and a half ago | (#43448571)

So once 21 million is hit...no more power is needed, because you can't generate more?

The 21 million BTC figure is asymptotic. The reward for a successful hash halves every so often as the total minted value approaches 21 million. But each Bitcoin transaction can include a voluntary "transaction fee", a tip paid to the miner who includes the transaction in the next block. After that point, miners will seek tips rather than newly minted bitcoins.

Re:Until they hit the max number of bitcoins (2)

Goaway (82658) | about a year and a half ago | (#43448589)

So once 21 million is hit...no more power is needed, because you can't generate more?

"Mining" actually means maintaining the Bitcoin public ledger. So it will still be needed once all coins have been mined. Profits will come from transaction fees instead of minting new coins, and power will still be used.

Re:Until they hit the max number of bitcoins (1)

VortexCortex (1117377) | about a year and a half ago | (#43448735)

One thing I don't really understand is this:

> The number of bitcoins in existence will never exceed 21 million.

So once 21 million is hit...no more power is needed, because you can't generate more?

Power will still be consumed in order to create and sign transactions after the 21 million is reached. Transactions will have fees to support the power demands rather than awarding the miners with bitcoin.

I would rather have currency limited in such a way than to have banks and governments print money whenever they please -- That is no different than the slavery of working to be paid in tokens redeemable only at the company store.

Re:Until they hit the max number of bitcoins (1)

murdocj (543661) | about a year and a half ago | (#43448873)

So I can either pay a bitcoin transaction fee, or I can pay (via slightly higher prices) a credit card fee? So why bother with bitcoin? So I can evade "the Man"?

Re:Until they hit the max number of bitcoins (3, Informative)

Kjella (173770) | about a year and a half ago | (#43448751)

When I read that, I thought 21 million is not a lot of coins for the whole world to use. It seems screwy to me. You run into the issue that you run into with gold, if that is the case. You can't buy a loaf of bread with gold because it is worth so much.

They can be divided into something like 0.0000000001 BTC so that is not an issue, if the economy got huge you'd price stuff in milli-BTCs or micro-BTCs. But you're getting close to why people think it's a pyramid scheme, to fit a trillion dollar economy in 21m BTC the exchange rate would have to rise to almost $50k/BTC. Actually $100/BTC already seems crazy, it'd put the total value at $2100 millon - until anyone big tries to cash out anyway.

I've tried and tried to wrap my head around this, but it makes no sense to me. How can you have fractional-reserve banking if the coins have to match a digital signature? Fractional-reserve banking creates money out of thin air. How can you create bitcoins out of thin air?

Let's say people deposit 100 BTC in the bank, now the bank lends 90 BTC to others while keeping 10 BTC as a fractional reserve, that might appear as 190 BTC (100 deposits + 90 loaned out) but it is only an illusion. If the people wanted to withdraw their 100 BTC the bank would be bankrupt because it only has 10 BTC in reserves, it is waiting for the other 90 BTC to be paid back with interest. In reality you'd probably secure yourself against bank runs like that by offering fixed interest rates so people can't withdraw all at once and cause a cash shortage and the bank could lend somewhere else with the loan portfolio as security. As long as none of the loans are defaulting, there's no real problem with this.

The problem is when they are defaulting, like we saw now in the financial crisis, if those "90 BTC + interest" is full of rotten loans and only 80 BTC will ever be paid back then 80 + 10 (the reserve) = 90 BTC is less than the 100 BTC the bank owes people, the bank is bankrupt and the account holders lose part of their money. Really nothing of this is specific to Bitcoin, you can replace it with USD throughout and that is how fractional reserve banking works. Normal banks (that is, not the national bank) doesn't actually print any money, they just make it seem more if you count deposits and loans many times (since those money loaned can be deposited.to be loaned out to be deposited to be loan just minus the fraction in each round).

Re:Until they hit the max number of bitcoins (0)

Anonymous Coward | about a year and a half ago | (#43448817)

Another thing is that as far as my uninformed person knows, it get harder and harder to get the bitcoins as it approaches the 21 million mark. As I understand it, it would therefor take more and more energy to get close to the mark. I'm not sure if the mark can easily be reached, but I can see it as an energy problem to even get close to it. Imangine wasting ever more energy for less return (similar to mining I guess). It really might be a serious environmental issue.

Re:Until they hit the max number of bitcoins (1)

reanjr (588767) | about a year and a half ago | (#43448853)

I don't know how fractional reserve banking would ever apply to BTC, but bitcoins can be broken up down to 0.00000001 BTC (sometimes known as a Satoshi). So, this isn't really much of a problem.

The equivalent divisible size in USD would be $2.1 trillion. This may be a bit small someday, but that day is a long way off. There is only $1.18 trillion in circulation today.

Re:Until they hit the max number of bitcoins (1)

CastrTroy (595695) | about a year and a half ago | (#43448867)

I was wondering about this as well. If there isn't even enough bitcoins for each person in Canada to own one, then how is it to act as a widespread currency? Are things going to cost 0.0000000000001 bitcoins? think about this logically, if only 21 million bitcoins exist, and I wanted to sell a a house (which may be worth 1 million USD, and a gummy bear which may be worth 1 cent US, then there is either going to need to be a lot more than 21 million bitcoins or things are going to have to sold at very small fractions of a bitcoin.

For a fair analysis (2)

KramberryKoncerto (2552046) | about a year and a half ago | (#43448453)

You'll need to look at the economic value of mining, and also compare the numbers to the cost of the infrastructure those of current currency/payment systems. I have no substantial information on both, but let's not pretend cash and credit cards are cheap to maintain...

Re:For a fair analysis (1)

MaxToTheMax (1389399) | about a year and a half ago | (#43448479)

Exactly what I was going to say. How much does it take to run the IRS and its international equivalents, the US Mint and its equivalents, and the conventional banking system? It isn't nothing, that's for sure.

As bad as the real thing??? Really?? (1)

retroworks (652802) | about a year and a half ago | (#43448499)

45% of all toxics released by all USA industry come from hard rock metal mining. 14 of the 15 largest Superfund Sites are hard rock mines. Mining of tanatalum for electronics (coltan) is responsible for the disappearance of half of the lowland gorillas. It kind of bothers me when "environmentalists" have zero depth perception, no ability at all to prioritize risks.

Uh-huh (1)

FuzzNugget (2840687) | about a year and a half ago | (#43448509)

And how much energy does it take to make, say, minted currencies? Surely many orders of magnitude more...

Re:Uh-huh (1)

the eric conspiracy (20178) | about a year and a half ago | (#43448763)

A good reason for going away from metal coins.

Why is this getting pushed out in the press? (0)

Anonymous Coward | about a year and a half ago | (#43448513)

The cost to mint a penny is 0.02 USD. The cost to mint a nickel is 0.10 USD. The total loss in value from printing those pennies and nickels in 2012 was a whopping 109 million USD. That's about 298,000 USD per day that it costs the US Treasury in losses to issue pennies and nickels into the market.

Is bitcoin economical from a cost perspective? In comparison to pennies and nickels obviously yes.

Re:Why is this getting pushed out in the press? (1)

Anonymous Coward | about a year and a half ago | (#43448593)

Don't be silly. Pennies and nickles are an insignificant part of the dollar economy. Make money minting them, lose money minting them, either way it's such a trivial value compared to the value of bills that it doesn't matter. Stop minting them both and it won't make any noticeable difference to the government spending levels.

Bitcoins, on the other hand, are 100% of the value of the bitcoin economy.

Re:Why is this getting pushed out in the press? (1)

Anonymous Coward | about a year and a half ago | (#43448857)

The value of a penny isn't derived from creating arguments and spinning it out into copper wire. It is a valuable trick used for tracking theft at a cash register. For example, the number of sales of cash items ending in $0.99 is statistically tied to the number of pennies being consumed at a checkout. A significant movement in any register's use of pennies sparks an investigation into a theft problem.

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It's all about the numbers... (2)

Alwin Henseler (640539) | about a year and a half ago | (#43448529)

If washing your hands takes 2 liters of water, isn't that an environmental problem if it could be done using just 1/10th that amount?

Perhaps, but is that a problem? If that amount of water costs $100: probably. If that amount of water costs $0.01: probably not.

I know so-called externalities [wikipedia.org] can blur the picture, but in general the cost of things reflects how much effort was needed to produce them. So if Bitcoin mining is profitable, that probably means a produced Bitcoin is worth more than the effort it took to produce the required energy. No doubt Bitcoin market developments, and efficiency improvements (FPGA / ASICs) will change the actual numbers here.

Problem much, why? There are so many human activities that require energy, and (often) don't produce results that would be considered useful or valueable. So if you spend (for example) $10 worth of energy to find (is that the correct description?) $100 worth of Bitcoins, you could have spent that energy worse.

Btw: article would do good to report how many/what worth of Bitcoins were mined using the stated amount of energy.

Re:It's all about the numbers... (1)

OhANameWhatName (2688401) | about a year and a half ago | (#43448865)

Bitcoin is worth more than the effort it took to produce the required energy

Worth? In what? Food?

So if you spend (for example) $10 worth of energy to find (is that the correct description?) $100 worth of Bitcoins

What if you spent 10 bitcoins worth of energy to find 100 bitcoins worth of bitcoins? Now that would be a bargain

That's just a demonstration of how valueless bitcoin really is. It's no more valuable than the current 'floating' currencies which are floating on a sea of perception. As long as the currency isn't backed by anything (ie. gold, wheat, copper, horse poo .. whatever) then it's not actually worth anything.

That's the problem with the current monetary system. Historicaly, currency was worth it's weight. It was made out of silver, gold, copper, bronze. It didn't matter what was stamped on the currency or whether it was issues by Rome or Carthage, it was still worth it's weight in gold. Then governments started printing paper currency and storing big piles of gold in fortresses saying "Don't worry! It's still valuable because we have the gold to back it". This allowed currencies to grow without the need to for the absolute value in gold. It allowed the countries to print more currency than they had gold. Then, the private bankers came into the picture and the government gave them the right to print the money. After that .. the governments sold the gold.

Modern currency is only as valuable as it's perceived to be. This is the core of the problem and bitcoin is no more immune to this than any other un-backed currency. As long as it's not backed by something of value, it's irrelevant.

This is slowly resolving itself (1)

Phizital1ty (1755648) | about a year and a half ago | (#43448531)

With the advent of specially design ASICs to perform bitcoin mining, the new miners will mine 100 fold better than conventional GPU and FPGA methods currently used. The new ASICs use a fractional amount of power compared to current mining. Once the new ASICs are on the network, they will push the GPUs and FPGA miners off the network because the proportion of mining work being done will be low enough to make it not worth mining with these devices. Multiple manufacturers such as Butterfly labs and Avalon are scheduled to ship in a couple months.

And the network will unresolve it (1)

tepples (727027) | about a year and a half ago | (#43448697)

With the advent of specially design ASICs to perform bitcoin mining, the new miners will mine 100 fold better

You appear to make the same mistake as Anonymous Coward [slashdot.org] and Bananatree3 [slashdot.org] . Please read replies to their comments.

Security fees (2)

hugg (22953) | about a year and a half ago | (#43448569)

I don't think many critics actually understand the dual purpose of mining. It's not only to govern the supply of new money, but also to protect the block chain. Many attacks require that the attacker control more computational power than 50% of the network, which is a lot of hardware.

Eventually mining slows down and transaction fees become the dominant reward for mining new blocks. So transaction fees will essentially be the "security cost" for protecting the network against a centralized attack. It's anyone's guess where they'll eventually stabilize.

Completely by design (2, Informative)

dbIII (701233) | about a year and a half ago | (#43448627)

It's so it's much harder for those that join in the pyramid late and to give the early adopters a deliberately designed very major advantage so long as the pyramid grows.

Re:Completely by design (1)

the eric conspiracy (20178) | about a year and a half ago | (#43448721)

So you are saying this is a pyramid scheme?

21 million Bitcoin Pyramid (0)

tepples (727027) | about a year and a half ago | (#43448829)

So you are saying this is a pyramid scheme?

It's the 21 million Bitcoin Pyramid [youtube.com] . Can "Tuning Up Again" be the theme song of Bitcoin? Pretty please?

The answer is simple (1)

freman (843586) | about a year and a half ago | (#43448637)

Shut down antiquated banks.

I'm sure we can save a fair wack of power by pissing them off.

Summary is completely false. (0)

Anonymous Coward | about a year and a half ago | (#43448651)

" If the dreams of Bitcoin proponents are realized, and the currency is adopted for widespread commerce, the power demands of bitcoin mines would rise dramatically"

No, because there is only a set limit to the number of bitcoins that can ever exist and there is a point where the marginal mined coin will be worth less than the price of mining it.

Can we please just try to avoid the most blatant, egregious errors of fact in submissions here?

Miners gonna mine (1)

tepples (727027) | about a year and a half ago | (#43448849)

there is a point where the marginal mined coin will be worth less than the price of mining it.

After newly minted coins stop being the primary reward for mining, transaction fees will [slashdot.org] . Miners gonna mine, be it in Minecraft or Bitcoin.

I suspect all electronic money 'costs' something (1)

gelfling (6534) | about a year and a half ago | (#43448683)

There's several trillion with a T dollars flowing through electronic systems every hour all over the world. I suspect there's a carrying cost of 'making' that. Are these tools suggesting we end all electronic trading systems and revert to what? Pebbles? Ruuuuhhhhhhhtards.

Has Slashdot Become The Bitcoin News Network? (-1)

Anonymous Coward | about a year and a half ago | (#43448703)

I am tired of Bitcoin articles. What has there been, six in the last week?

No power for the dollar? (1)

Joreallean (969424) | about a year and a half ago | (#43448717)

It's not like the existing currencies don't take any power to produce, maintain, transaction, ect... Just saying that mining costs power is just a means of cutting down the idea of digital mining. The same could be said about SETI@Home and a hundred other distributed computing projects.

Mine The Sun! (0)

VortexCortex (1117377) | about a year and a half ago | (#43448755)

It would be interesting to see what it would take to run a bitcoin mining server farm with solar power.

Of course, even if you did there would be stories like this about how much power could be used for other purposes. Cue the helpless children and scandalized women praying for someone to think of them.

People Magazine (0)

Baldrson (78598) | about a year and a half ago | (#43448757)

Slashdot has become People Magazine.

Re:People Magazine (2)

turkeydance (1266624) | about a year and a half ago | (#43448789)

People Mag's intent is more honest.

I wonder... (1)

EETech1 (1179269) | about a year and a half ago | (#43448811)

I wonder how much power the millions of Visa and Mastercard point of sale card swipers consume in comparison?

Anyone have access to one they can plug into a Kill-A-Watt for a few minutes?

Cheers!

31000 homes? (1)

haruchai (17472) | about a year and a half ago | (#43448819)

That 982 MWh or 41 MW sounds impressive or 31000 homes sounds impressive until you realize that 5 - 7 million homes are built in the US alone every year.
I'm all for finding more efficient ways to do things but we can likely realize much greater benefit from the traditional financial institutions cleaninp up their act than from halting the wasteful mining of bitcoins.

If it'll make you happy, perhaps Bitcoin mining can be done only when power is cheapest.

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