Partnered With:

Misunderstood PoW, it is efficient

Read this article in 27 Minutes

In fact, everything is energy, and currency is also energy. The evaluation of energy is subjective. Finally, how does the energy consumption of PoW compare with the existing control system?

Original title: "Viewpoint | Is Bitcoin Mining Really a Waste of Energy?" No, PoW is efficient"

Original source: Ethereum enthusiasts

Many people think that Bitcoin's workload proof mechanism (PoW ) "wasting power". I am trying to explain to you: In fact, everything is energy, currency is also energy, and the evaluation of energy is subjective. Finally, how does the energy consumption of PoW compare with the existing control system. This article is a mix of original thoughts from many people in the circle - all I have done is aggregate, distill and combine these claims.

Work is energy

"Work" is regarded as energy The units are taken from the French mathematician Gaspard-Gustave de Coriolis Speaking of which: he defines energy as "work done".

A long time ago, the work done in economic activities came entirely from manpower, and the energy came from food.

Around 1 million years ago, humans learned to use fire by accident. As a result, humans have more energy to mobilize, since we can not only maintain our temperature by eating, but also keep warm by warming ourselves. So, this extra energy expenditure improves our standard of living.

Thousands of years ago, our energy expenditure increased further as we started raising livestock. Animals can replace human labor, provided that these labor forces also have something to eat. We need a lot of food to meet this energy demand, but our life is more prosperous.

Over the last few hundred years we have invented large machines that do work themselves. In the beginning, energy came from water, wind, then cheaper things like coal and natural gas, and now nuclear (nuclear fusion/fission). Whether mechanical or biological, work is done by consuming energy.

Our economic life is not based on money, but on work and energy. Everything in our life is closely related to the price of energy. It takes energy to purify water; it takes energy to transport goods; it takes energy to manufacture products; it takes energy to cook; even refrigerators and freezers need energy. In a free market, the unit cost of each commodity reflects the energy consumed to manufacture a unit of that product. Because the free market encourages people to produce high-quality and low-cost commodities, the energy consumption of each commodity in the production and manufacturing is minimized. Money is a proxy for the work required to produce goods and services, and thus can also be thought of as stored energy.

In the first half of the 20th century, industrial leaders such as Henry Ford and Thomas Edison aspired to use "Energy Dollars" or "Energy Units" (commodity money/energy money) to replace gold and dollars. The concept was popular at the time because they shared some of the characteristics of sound money, including: precisely defined statistical units, easy to measure/difficult to counterfeit, divisible into smaller units, and homogeneous (that is, each unit is identical to the Another unit makes no difference). However, energy currency also has flaws: it is difficult to transfer, and it is difficult to store.

"To get men and women to covet something, simply make it hard to get." - Mark Twain

Fast forward to October 31, 2008, when Satoshi Nakamoto published the Bitcoin white paper. Proof of Work (Translator's Note: According to the above, it can also be translated as "Proof of Work") used by Bitcoin was originally invented as a Means of defense against email attacks. It was only later that Satoshi Nakamoto used it in digital currency. PoW mining, in a nutshell, is the use of specialized machines (such as ASICs) to convert electricity (via block rewards) into bitcoins. The machine repeatedly performs hashing (guessing and voting) until it solves a cryptographic puzzle and receives bitcoins (block rewards). The proof of this cryptographic puzzle proves that the miner expended a lot of energy (in the form of ASICs as well as electricity), proving that the miner did work. Bitcoin has a voting mechanism similar to capitalism," Take risks with real money to get voting rights", consume energy and use ASICs to produce hash values (votes). —— Hugo Nguyen

When Satoshi Nakamoto designed PoW, he fundamentally changed the formation mechanism of human consensus, turning political voting into non-political voting (hash value), relying on the transformation of energy. Proof of work is also proof of consumption, or verification that energy has been consumed. So why is it important? The point is that this is the easiest and fairest way to verify things in the physical world in the digital world. PoW is about physics, not code. Bitcoin is a super commodity, minted from energy, the foundation of the entire universeproduct. PoW melts electrical energy into digital gold.

Bitcoin's ledger is/is immutable if and only if it is hard to make. Proof-of-work is "very expensive", yes, but that's a feature, not a drawback. To this day, the word "defend" still means to build a thick physical wall around that valuable thing. The new world of cryptocurrencies is less intuitive, with no tangible walls to protect our money, nor doors and locks. Bitcoin's public ledger relies on its assembled hash power, which is Total energy spent building the wall, for protection. This design is expensive and transparent, meaning that it would take as much energy to tear down the wall (No falsified luxury). (Translator's Note: This is actually imprecise. To remove the walls of PoW, you only need to pay the same number of hash times, not necessarily the same amount of energy, because the computing efficiency of the machine (the hash generated by unit energy input The number of times) will be higher and higher.)

Energy Consumption

Criticism of Cryptocurrencies Reviewers always say: Bitcoin’s PoW is rubbish, and within a few years (such as 2020), the world will be destroyed by Bitcoin! You may have also noticed that most of the "end of the world" articles are based on an analysis by Alex De Vries. This person is a "financial economist and blockchain expert" for PwC Netherlands and is a Digiconomist website. His estimates have received a fair amount of criticism, centered on their poor formula for calculating energy consumption. His choice of key indicator "average power consumption per transaction" is also intentionally misleading for the following reasons:

Energy consumption is measured in blocks The number is the unit, and the number of transactions in a block is uncertain. Packing more transactions does not mean more energy consumption
The economic density (economic density, or can be translated as "economic value") of a single Bitcoin transaction is also increasing (with batch transactions , Segwit technology, Lightning Network, etc.). Because Bitcoin is increasingly becoming a settlement network, the economic value protected by each unit of energy is also growing exponentially
The average energy consumption of a single transaction is not enough to measure the efficiency of Bitcoin's PoW mechanism, it should Defined in terms of economic history of security. Energy consumption protects the bitcoins that have been mined, and as the inflation rate falls, this ratio will get lower and lower The ratio of the number of bitcoins to its theoretical maximum number should be constantly increasing). A bitcoin "accumulates" the energy spent in mining all the blocks. A researcher LaurentMT via Empirical research proves: Bitcoin’s PoW will become more and more efficient, because the increased cost will be protected by the system Greater growth offset in total value.

Now we know what the correct KPI should be for the ROI (Return on Investment) of energy consumption. Let's take a look at the trend of the energy cost of Bitcoin's PoW.

ASIC efficiency gains are slowing. Because efficiency increases slowly, we rely on manufacturers to become more competitive because profits are shrinking.

-UCSD.edu-

-bloomberg.com-

Total mining Costs will continue to shift from the upfront acquisition cost of ASIC equipment (capex) to ongoing energy expenditures (opex). Because the physical location of a mining center is irrelevant to the Bitcoin network (farms can be relocated), miners will migrate to regions where they can generate additional electricity at the lowest marginal cost. In the long run, this has the potential to create more efficient world energy markets, as bitcoin miners arbitrage electricity prices around the world. The cost of Bitcoin mining becomes the minimum value of excess electricity. This is also expected to address renewable energy (like hydrogen and biogas ) problem: power is predictable and is wasted if not used immediately. In the future, bitcoin mining could help renewable energy sources with variable output power — energy producers could turn on miners on demand and convert the extra power into bitcoins.

Aluminum used to be in countries with surplus renewable energy (such as Iceland) “export” common means of electricity. Smelting bauxite (that is, aluminum ore) requires a huge amount of energy, and this transformation is one-way (is it similar to a hash function?). The same concerns have persisted for 40 years around aluminum's "perverse" energy consumption, from 1979 just started (also including concerns about centralization). But all such businesses are constantly on the planet looking for cheap energy and favorable policies. Because the aluminum manufacturing industry has been developed for decades, the number of degrees of electricity consumed per kilogram of aluminum is also decreasing.

-energy.gov-

“This global energy network frees up idled assets , and enable new assets to emerge. Imagine a 3D-printed map of the world, where places where energy is cheap are low and places where energy is expensive are high. In my opinion, Bitcoin mining is like Pour a glass of water over the surface of this map, and the water will flow in the valleys and crevices until everything is level." - Nic Carter

Bitcoin is the buyer of last resort for all electricity, creating a platform that incentivizes new ways to use untapped energy ; these energies, without Bitcoin, would not have been exploited themselves.

"When will the energy used to produce PoW stop growing? To be precise, that is when enough energy producers start producing PoW directly , and the marginal return per kWh of running PoW = the marginal revenue of selling a kWh of electricity to the grid—that is, when the 'premium' of PoW drops to 0. I call this equilibrium point the 'Satoshi' point. I estimate , when the power consumption of PoW accounts for 1-10% of the world, this equilibrium point will come.” —— Dhruv Bansal

Some people complain that Bitcoin mining does not "do something useful", such as finding prime numbers. While it sounds like a good idea to include a secondary reward program for doing good work, the introduction of A security risk. Splitting up rewards can lead to a situation where "work for a secondary feature is worth more than working for a primary feature" (Dergigi). Even if the secondary function is harmless (such as heat), the expectation of getting not only $100 per X number of hash operations, but also an extra $5 (because you provide the heat), this "mining heater" is not bad. It improves the hardware efficiency, leading to an increase in the difficulty of producing blocks and an increase in the energy used per unit block. Fortunately, Bitcoin will never have this problem because its security is protected by a pure proof-of-work algorithm.

Note: Bitcoin is already providing very useful things to this society (if not, then mining will not make money), It is also irrational to require miners to mine out of altruism.

Relative cost

No matter what you do, you will consume energy (thermodynamics No. a law). You are completely presumptuous to say that a certain use of energy is more or less wasteful, because all users pay the same price to use the electricity. < a href="https://medium.com/u/becf6824fd89" target="_blank" rel="noopener nofollow">Saifedean Ammous

From the perspective of thermodynamics, the entire universe is an ultimate closed system. The additional power consumption caused by Bitcoin is much less than that consumed by the existing fiat currency system; the fiat currency system requires not only banking infrastructure, but also violent and political machines. The use of electricity to protect the backbone of the financial system is a "positive sum" result. Below, I roughly compare existing financial, military, and political systems (notes at bottom of article).

Graph inspired by @hassmccook and his original article: "Economic and Environmental Costs of Bitcoin Mining".

Type I Civilization

On the way of chasing cheap energy, we will Create greater abundance for the world. Bitcoin, by harnessing these new, radically different energy sources, could not only bring us to a Kardeshev Type I economy, but even bring us closer to a Kardeshev Type I energy civilization (we've already achieved a Kardeshev index of about 0.72) Note from the author: Kardeshev is an astronomer in the former Soviet Union who proposed to evaluate the advanced level of civilization by the energy level that can be used. Type I civilization can use all the available energy of the home planet.) With Bitcoin mining as an incentive , the time we need to achieve a Type I civilization could be shortened from 200 years to a few decades. And once it reaches Phase I, there is no need to restrict the growth of energy consumption, and everyone can enjoy a higher standard of living.

The pressure to find cheap electricity will push people to build fusion reactors. Nature has pointed out the direction for us, and planets use the nuclear fusion of stars as their energy source. Humans are already on the road to building nuclear fusion reactors to imitate nature, and it is estimated that decades and $80 billion in research funding will be needed to unlock nuclear fusion technology. Fuel for nuclear fusion (mainly deuterium) is available everywhere in the sea, which can meet the energy needs of the earth for millions of years. Nuclear fusion has many characteristics of renewable energy, such as long-term energy supply without causing greenhouse effect and air pollution. Nuclear fusion can provide very high power density and uninterrupted power transmission. On the other hand, the production cost of nuclear fusion will not be constrained by diseconomies of scale< /a>. Both hydro and wind power must be gradually laid out in less ideal environments as they are exploited in the best locations. But even if fusion stations are built in large numbers, the production cost will not increase too much, because the raw material (sea water) is very abundant and available everywhere.

"Water, water, all water, and not a drop to drink." - Samuel Taylor Coleridge

Nuclear and other cheap energy It will solve many humanitarian problems such as shortage of clean water. We are surrounded by seawater, but desalination requires a huge amount of energy. The cost of desalinating seawater is now higher than using fresh water, groundwater, water recycling and water conservation technologies.

Human beings will not stop exploring, going up to the mountains, down to the bottom of the sea, as small as atoms, as broad as time and space; to grow, not to be bound by energy. We want to pick the stars and the moon.

A yearly settles $1.38 trillion in payments and brings us all cheaper energy to spend $4.5 billion on mining? I think the answer is yes.

(End)