Bitcoin Q&A: Energy consumption

[AUDIENCE] I want to ask you about
the energy consumption in mining. [ANDREAS] Yes?
[AUDIENCE] What is the solution for it? [ANDREAS] Well, energy consumption in mining is
— I think — misrepresented very often in two ways. [Cryptocurrency] mining is one of the few industries that is completely geographically independent, meaning that it doesn’t matter where you are if you are mining, as long as you have inexpensive electricity. What that allows you to do, is choose the
location of your mining system based entirely on the local cost of electricity, which means that mining is doing market arbitrage for
the cheapest sources of electricity. In many cases, the reason the source
of electricity is cheap, is because it does not match the demand at that location, [especially] in countries where there aren’t broadly deployed, efficient distribution networks for electricity. One of the challenges with rapidly deploying and developing energy, is that you build a power plant not for the demand that it has today, but for the demand that you’re going to have over the next 15 years. You have to make that investment now and grow into it,
because you can’t simply move energy across a massive country when you don’t have a distribution
network. I’m speaking of China, if you didn’t figure it out. That’s one of the fundamental problems they have. This problem is replicated across not just China but
developing nations, as well as many developed nations. The places where electricity is needed,
and the times when electricity is needed, are almost always not the places and
times where electricity is available. What happens when you build a 50-megawatt plant in a
place where they only have 15 megawatts of demand? If it’s alternative energy like wind, solar, or hydro,
you can’t turn it off or turn it down. You’ve built it, it will produce, and then what?
You’re basically wasting energy. What if, in that environment, you could find a way to turn that energy into an alternative store of value? Then instead of paying off the electricity plant
in five years, you pay off in one year, by using electricity that would otherwise be wasted. Bitcoin is an environmental subsidy to
alternative energy all around the world, because it’s causing these projects to be
amortized over a year instead of five. Oh, you’re telling me we were running a green coin
all this time and I didn’t even notice? One problem is that… You’ve got to understand
it from the perspective of balancing supply and demand on a global scale without distribution networks. The decentralization of Bitcoin is driving the decentralization of energy production, which is one of the most
important trends in human history. One of the other things you’ve got to keep in mind is that
Bitcoin is easy to criticise for its energy consumption because it’s obvious. There are a lot more
wasteful things that are far less obvious. Every time you pull out that little plastic card
and you use it to do a transaction, you’re not aware of the hundred-thousand square foot data center, churning
a hundred thousand servers to do fraud detection. Or clearing. You’re not aware of the tower offices
that are lit twenty-four hours a day; the trading floors, the bank vaults,
the armored cars, the diesel trucks, etc. All of those costs are mostly hidden and
they’re enormous. Are you telling me… that perhaps Bitcoin ends up being the most efficient way to do transactions on a global scale? You’ve got to remember:
the level of security we have for Bitcoin today, is a level of security that can handle
global attacks, by colluding nation-states. That’s the level of security needed for
this system to remain censorship-resistant. But if the system was ten times bigger with ten times
more users, it doesn’t need ten times more mining. It already has globally-secure mining. What we have
is enough. There’s a profit motive that drives it. It’s a mistake to think that if we go global,
that cost will also multiply. Quite the opposite, in fact. Over time, the reward from mining decreases; as a result it’s more likely we’ll see that
gradually taper off and plateau. This is a long game. The implications and complexity of
how cost is allocated, how energy is consumed, is huge. I don’t think we can afford two proof-of-work systems
on this planet; I think we might only need one. Maybe everything else could be proof-of-stake and anchor into the only proof-of-work system we have. We need one planetary-scale proof-of-work system to offer us true energy-dependent immutability, but maybe we can only afford one.
Turns out, that might be Bitcoin’s killer app!

100 thoughts on “Bitcoin Q&A: Energy consumption”

  1. Andreas downplays the amount of electricity used. Do your own research and you will see that it is huge, huge, huge and a growing monster. This will have serious consequences both for Bitcoin and the environment a few years down the road.

    If Bitcoin is using a massive amount of energy in its infancy stage, can you imagine how much it will be using were it to become mainstream processing billions of transactions per day? A few months ago, Germany became the first state where over 50% of its electricity is produced by wind generators. Germany realized that it could not sustain electrical demand with a growing population and industry while at the same time reducing its carbon footprint, so it took the steps to reverse the course it was on. So now, along comes a gluttonous computer program and does the opposite and sucks the planet's energy resources while many nations are making efforts to provide alternative forms to keep their economies running. Moving these mining farms to northern locations might save on electrical costs, but you would still have to provide the infrastructure in those locations to provide enough power to sustain an exponentially growing mining landscape.

    As much as I support the blockchain technology, I can't see it becoming mainstream in global usage for buying everything from your Starbucks coffee to booking an Uber cab unless the issue of power consumption is resolved.

    EDIT: Here is a really good article just published that lays out the gory math behind the energy consumption of Bitcoin:

    Bitcoin Energy Consumption Index

    The Hard Math Behind Bitcoin's Global Warming Problem

  2. Bitcoin Jesus. Take it to the house!!! PREACH!!! Bring it home!!! Breaking it down so well. Tell them they don't even have to take your word for it. You know, using BTC mining as the anchor tenant/use case for rapid development of critical infrastructure and communications in the developing parts of the world. It's going to happen. Why? Because it is such a better and more attractive way to do things. And because BTC is PROFOUNDLY more important than a new online account balance interface. You don't even have to understand it. Just wait. And HODL. It will happen." – I am available for service 🙂

  3. This is why I love Envion, they use excess solar and wind energy to deploy Mobile Mining Units wherever there is a slack to use.

  4. I am more convinced than ever that is the guy is more impressed with hearing himself talk than dealing with the logical inconsistencies of his arguments. That little credit card that person is using that triggers fraud detection servers is also BUYING THE LABOR OF A WORKER WHO IS GETTING PAID TO MAKE THE MERCHANDISE THAT CUSTOMER IS BUYING. Its known as COMMERCE. Why would you want to put power in a location where nothing else is done but crunch numbers? Some large group of Bitcoin owners are probably waiting for the CME to open bitcoin futures so that they can short them to protect their positions. I hope this guy understands this before he becomes roundly embarrassed. At least in that way, bitcoin will be somewhat liquid as long as the transactions can be cleared in cash.

  5. Interesting perspective I had never considered, Mr. Andreas. Very valid points in regards to energy consumption. Though, I am not sure we can call it exactly 'electrical-arbitrage' today. But I can see that effect taking place in time and at some level, true. Thank you for sharing and thank you for all your service to crypto.

  6. We love you andreas, and you deserve all the btc that were donated your way. (I made a small but symbolic contribution myself)

    Your mastering bitcoin book was the first I bought in 2015 (too complex at the time), but it was all your tireless and passionate work that made me see why bitcoin was important, and why price is actually the most boring aspect of bitcoin

    Hope to meet you someday in the future

  7. andreas classic – btfo of my mind over here… Thought this would have been a little more complex an issue to solve, turns out things are just a little more abstract//maybe simpler if you can just take a step back. Thank fren.

  8. Thanks Andreas good timing! I've been seeing and being sent essentially the same article published in many different news outlets that project bitcoin's energy demand to grow to today's global energy demand 🙂 makes tons of sense doesn't it?

    I would however like to know what today's global system of financial transactions "costs" in electricity, fuel, space, human effort, etc. and its carbon footprint.
    Then add in to that an estimate of energy use for things that can only be paid for in a national bank driven financial system. Like perpetual war.
    And then put that in relation to all the potential benefit bitcoin and related networks can bring to the world.

    Nobody is portraying the big picture here. Just FUD and hype. You make some interesting points about arbitrage in the energy market. I also suspect bitcoin mining might actually be a big boost to renewable energy facility installation. The timing couldn't be better! Solar pv and wind are now universally regarded as the cheaper option as opposed to fossil fuel/nuclear alternatives. And, as you point out, they can be decentral, just like bitcoin mining.

    I'd like to see more solid numbers though, although I know how hard it is to produce solid LCA numbers.

  9. 200kWh per transaction, Adreas is soo dazzled in his own vision, and these puppets are listening without even thinking why is that so broken. There are already free alternatives of supporting the network by staking but no, let's promote something centralized based on electricity cost, so inefficient that any payment made onchain is worth one month of electricity of the whole house. And let's call it "the cost of freedom". Cause we can't just admit that everything moved forward in crypto but Bitcoin, we need to push that old broken system which didn't change since 2014 cause we are chained by miners. POW is already a past. And people sitting in Bitcoin will realise that when it will be too late.

  10. This is a completely specious argument, IMO. You make it sound like Joe's electric company is out there somewhere with more energy than they know what to do with. Electric grids in most places are designed to be able to produce exactly as much as will be consumed and waste as little as possible. Modern people need energy to live their daily lives, so delivering it more efficiently is a priority with or without Bitcoin, just as energy technology developed for decades before Bitcoin came along. Bitcoin may be a fine currency or asset, but it is not environmentally friendly and it would be wise to stop trying to spin it as such, at the risk of sounding dogmatic or dishonest.

  11. I wish he would elaborate one why only 1 proof of work coin can exist. Im a big fan of dash which is hybrid POW and POS coin.

  12. I want to argue your ending statement the there can only be 1 POW coin, doesn't this go against the whole competing currency, free market concept you also talk of. That there will be millions potentially billions of different coins one day…

  13. Interesting arguments, but hydroelectric dams are not sustainable or decentralized. I'm a crypto early adopter who majored in electrical engineering, and while I believe strongly in the decentralization of sustainable energy production, that is not what we see powering BTC mining. I grew up paddling Canada's rivers and live in BC, one of the world's major hydroelectric production regions (we get almost all our energy from hydroelectric).

    I've seen much environmental damage caused by hydroelectric plants — and this is in Canada, where we claim to care about the environment and there is much red tape to get projects approved.

    China's approach of building mega-dams is anything but decentralized or sustainable. Decentralized energy production does not involve damming up remote rivers to build mega dams near ghost cities in the hopes that people may move there in 15 years.

    Decentralized energy is implemented as needed, in smaller scale, near where it is needed to reduce transmission losses. China's energy infrastructure is anything but decentralized or sustainable.

    Now one might dream of a future where everyone's roof is covered with photovoltaics that produce enough excess energy for BTC mining… but if that future exists, it's a long way off. The energy costs for an immutable PoW blockchain are absolutely MASSIVE. Our decentralized sustainable energy technology is no where near able to handle this, and even if it was, it would take many years for that technology to be adopted on mass scale.

    In the meantime, we have unsustainable, largely centralized infrastructure running PoW mining, and with the rapidly increasing energy demands it will get a lot worse before it gets any better.

    Andreas, this is one topic where you're clearly naive (or in denial).

  14. The problem is, you need smart power meters to implement demand-based electricity pricing, and places where electricity is cheap are unlikely to bother buying and installing them.

    I much rather see a global power grid being built so "waste" electricity can be sent to places that need it instead of being burnt off in coin mining.

  15. Every time I hear this guy, he says one thing and then says the opposite right after. On Joe Rogan he makes statements like "Countries have replaced their fiat currency with crypto currency" and then Rogan says "oh yeah, what countries?" and then he goes "well, they haven't but they soon will". In this video, the first question about energy consumption he says "It doesn't matter where you mine" and then says "as long as you have inexpensive electricity" well duh, it does matter. It's one thing to be an enthusiast and evangelist, it's another to talk from both ends of your mouth.

  16. loveeeeee your videos, finally someone that trully makes sense and explains in a very logic and common sense perspective!

  17. Very Curious to see what does Andreas think about hashgraph technology it looks way more promissing, scalable, fair and energy efficient.

  18. Hi Andreas! It was nice meeting you the other day in Chicago! I like the way you explain bitcoin in general! and I would like to invite you to join the weekly DeepOnion airdrop! DeepOnion has total anonymity, untraceable, using the TOR network, Hibryd, DeepVault available already, DeepSend soon, Votecentral. It would be very nice if you also make a video and talk about this coin in your presentations! Big community!

  19. well Bitcoin will drive the need to switch over to renewable energy, we have had the tech for over 30 years, but where is it? a few solar panels here and there, some small wind farms… why is it not every where, solar on every house? Oil, fiat and system of control from government and banking

  20. Wow! 1k upvotes, 37 downvotes – if you are part of that 37 you are are not listening with open ears to what Andreas is saying. I encourage those of you who are against this movement to make your opinions heard, just realize that there is a much bigger picture here. Something only has value if others agree it has value. You don't have to use cryptocurrency, you can stick with your inflationary credit, or whatever the fuck you use.

  21. Interesting view of to use surplus of produced energy to do computation that adds value. However i don't know if Bitcoin (or other crypto currency) mining is the best option.

  22. Just scrolled through all the commentary. PoW could be one of BTC's downfall as PoS moves in, where you are validating transactions as a stakeholder. Not with asics or scypts. Everyone needs to start paying attention to the evolution of blockchain, and potentially tangle now. Also, organizations like Golem and Siacoin are deivising the distribution of CPU power, further distributing the electrical grid. Have fun arguing while the tech continues to evolve and this video becomes an antiquated.

  23. 1) Bitcoin MUST have an energy consumptive proof of work algorithm; 2) mining is a new use case for energy production industry 3) Miners are industry 4) Miners care most about bitcoin, because they invested in hardware and cannot switch to other coin 5) Miners enforce the rules 6) Only Miners really need full nodes 7) Welcome competition in mining 8) Blocksize potential is one discipline in the miner competition. You can view your miner as your money internet provider. Would you ask your money internet provider to reduce capacity? Do you care that internet users constantly use the internet to its absolute maximum limit when you want to transact = watch a streaming TV.

  24. Does make some sense that in some way bitcoin is helping fund green energy solutions, even while being attacked as an energy hog.

  25. Not to mention avoiding constantly running printing presses, barrels of ink, treasury secretaries, the fed, inflation, shipping costs to central banks, etc…

  26. If Bitcion does become the reserve currency of the world, wouldn't countries naturally start racing each other to get the most hashing power? If a country achieves more than 50% of the hashing power, wouldn't it be able to block transactions at will? Just like tech companies have given backdoors to the government, miners would probably be coerced into giving backdoors to their governments too. I'd expect world powers to invest ridiculous amounts of resources into building mining farms to gain influence over the network. It would be like an arms race. They'd also probably use the cheapest means to produce electricity not the greenest.

  27. I happen to mine in the us and in a state that has some of the highest prices for electricity in the entire county. BUT I use so much that I was pretty much forced to go and try to find a supplier with the cheapest rates and it turns out that im now paying even less for all my other electic I use in my house and my work shop. But Im still makeing such a good profit on every kw I consume that its still really efficant use of power and not have to pull up stakes and move to some other location to be able to get my electic cheaper and save a few $100 a month in power bills. That would end up being off set by the higher costs of everything else such as renting or leasing space as well as would end up useing more energy in cooling if I moved out of the cold of up state ny. Were we only get few weeks of warm weather per year.. So in the end its still one of them 6 to one or a 1/2 dozzen to another type things. and whats even sort of funny is I have become much more of an energy mizer then I ever was before. now when I see a light on in my house in a room in not useing. I think oh no that electric being waisted and costing me a few fractions of a penny thats not even makeing me money and so turn it off. lol

  28. That was an incredible response to that question, Andreas. I had been struggling with that myself, just getting into crypto currency. Thanks for everything.

  29. So cutting through the hero worship, the real answer was right at the end:

    "I don't think we can afford two proof of work systems on the planet."

  30. I think what he's talking about is plausible in the future, but I don't see China or the US investing in the necessary tech and infrastructure to meet the need in time before ecological disaster. That's not really BitCoins fault though.

  31. there are solutions happening now re: sustainable green energy & mining..there are even opportunities re: individuals investing in crypto-coins and/or tokens and services that support these endeavors..actual affordable ones that don't require someone to be wealthy to get in.

    a lot of people forget this is still fairly early days for the space..and that's a reason to stay on top of related news – as new information is bring reported on daily..choose at least a few websites dedicated to this overall topic and visit them regularly..and don't be afraid to do searches on the crypto-coin issues you care about.

  32. That's the biggest train of evasive arguments I've heard in a while…
    1. How does the market price of electricity across the globe say anything about the sustainability of it? You could argue that lower prices are even worse for the environment.
    2. Did he just say that the energy that is used in mining would otherwise be wasted? Really?? Don't you think the energy producers are adjusting their production based on estimated usage? And don't you think increased usage would result in higher capacity (and thus production).
    3. I agree with the point that normal transaction usage (banking system) uses tremendous energy as well. But he hides the fact that mining is so incredibly inefficient compared to the usual ways of handling transactions (banks) or things like PoS. It will not get better over time because if adoption of the currency increases, the fees will only go up in value and so will the mining.

  33. Why use a mining currency when there are countless low energy currencies that function as well or better than bitcoin. I think we all just see the $$ and money bug in our brain overrides rationality. Sure they maybe setting up Renewables to mine BTC but its all material, energy, being wasted that could be used for useful purposes. So yes it IS possible to waste renewables. Dont let greed cloud your judgement.

  34. Yeah this is the answer of a child has when you ask “Why are you eating ice cream when you’re not supposed to?” And the child says, “But he’s eating ice cream too.” I get what he’s saying but his answer is predicated upon the idea that Bitcoin’s and thereby blockchain technology use is worthy of the power it uses. I think the jury is still out on that.

    He’s absolutely right we don’t have enough energy on Earth for more than one proof of work system. And he’s right that there’s an end game on mining for Bitcoin. But if we extend this power-hogging technology beyond currency we’re in trouble.
    The fact is that blockchain technology is intentionally written to be a power hog. It’s bad design. It could have been designed a different way but it isn’t. And it was fine for a few geeks playing coin God’s on their CPUs but now it’s I the real world and people are actually trying to find use cases for it we’ve got a problem. It’s not enough to say Blockchain soaks up wasted energy; it can and it does but I have a problem with the way that energy is generetated. His “green coin,” comment is particularly aggregious. Energy is usually cheap because it’s exploitive. The costs to humanity are great. I’m not saying blockchain technology started this problem my gripe is that it needlessly and without true value adds to it.

    The real opportunity is in redesigning the proof of work system in a way that doesn’t require untold energy amounts.
    What does a redesigned blockchain technology look like with actual value embedded in proof of work look like. How might we reengineer blockchain technology to provide value that data exceeds its costs?
    Also not sure I buy the Visa argument. I’ll have to look at the real data. But if you want to put it in those terms the only real value in Bitcoin is to miners. That’s the way it’s designed where as Visa has a value arc that crosses many.

  35. Andreas is not saying we should plan energy (blah blah) based on bitcoin needs. Rather the opposite, he says plants are built for future people's demands, so there is always initial excess capacity. Bitcoin can use this temporarily, helping pay back the investment on the plant, and moving alsewhere when people's demands increase and local energy prices rise.

  36. We could use some convoluted solution to sort of solve some of Bitcoin's huge list of shortcomings, or we could just use RaiBlocks which was built with these solutions from the ground up. No mining, no transaction fees, instant transactions. There's literally no practical reason to use Bitcoin or one of its thousands of clones over RaiBlocks. The only people hanging on to 1st generation cryptocurrencies are those that are heavily invested in them, either via the market, or mining equipment. It's time to move on to the future. Bitcoin is the 28k modem of crypto.

  37. Well that was full of incorrect conclusions. Just saying something doesn't make it real. For one, how is it driving decentralization of energy production? And if it would be, that would be wasted energy production, because it's used for bitcoin. Cheap electricity prices aren't a result of overproduction, negative electricity prices would be.

  38. Just wondering, what you say about one thing, that usually is in everybodies head, when thinking about entering:
    Why should I now just get minor mining results, while a 12 year old, who just heard about it and just simply did it out of pure lack of safety awreness, just started his program back in the day and is now millionaire or even billionaire?
    What did he make, what did he actually performed getting so much money for doing nothing? Sure: you can compare that with some lucky and highly profitable startups involving people, who also had no clue and suddenly were millionaires.
    But why should I do so and why should I live in a society, where there are people around me buying stuff with just having had their computer on for several months back in the beginning of a bitcoin?
    And what is this currency jumping tell you. I just see hippsters trying to find another upcoming currency, who does perform similarly and make them millionaires out of thin air? Why should someone earn millions with such a stupid stuff, while people are dieing from hunger everywhere.
    I know: Comparing it to banking systems, someone would paint me the picture of it being absolutely the same, but we are just anaware of the crimes. But how does an anonymous currency is better than a currency controlled buy institutes, that are largely depending on their countries society and their money and for getting that money, they have to be better than others….having resulted in some policies, that prevent, that the banks now simply go on rage mode and officially call for child molestation. Sure, bank and companies (economy in general) are in total responsible for such fucked up things as well, but doesnt on kryptocurrncy just happen more and more shit? Why is noone seriously accepting bitcoin as a trading currency for their goods? Why is there hardly anyone serious to really use it instead of just shifting it from hand to hand over exchange/buy back/exchange, etc… Why should we involve the absolute downside of stock markets (that are ruining the world already) to our earning…..One day I have 600 dollars, the next day it is 1 dollar and 2 days further it is 2800 dollars again? Sorry, but in the end it is even more fucked than anything else as any second, someone in this network got screwed over and lost nearly anything.

  39. Yes, miners seek cheapest sources of electricity and that gives entities with an abundance of energy significant power – particularly those with cold climates. I wonder if this pursuit of cheap energy lead to a concentration of miners, which then makes them vulnerable to influence and also attack?

  40. Nobody is talking about the energy being saved from settlements on the CC networks, the buildings needed to house this data, the people driving to work to settle transactions / involve in the process. Bitcoin is a replacement to many things, time for a comparison on the consumption.

  41. I have a question on the text to the video "misrepresented very often in two ways" – what are the two ways of misrepresented?

  42. Come on guys, solar is getting cheaper and more efficient. Not to mention other alternative energy production methods. In some years it won't be an issue…

  43. So bitcoin is digital coal.. not a greencoin, it's waste of fossil fuel. You can convert coal to bitcoin, but it's impossible to convert it back. This entire exercise is ludicrous. Let's take tangible energy and turn it into nothing.

  44. This guy has no freaking idea how the electrical grid works. I would also be surprised if he ever had a course in physics.

  45. If bitcoin was really this efficient the banks would have taken it over a long time ago. And know bitcoiners begin to talk about becoming the world bank by providing a centralised mining operation on which everyone else is piggybacking? But that would be equivalent to a takeover by the old banking system.

  46. "Bitcoin is easy to criticize for its energy consumption, because it's obvious". Yes indeed Andreas. I feel like you've danced around the question, there is a fundamental issue with a proof of work system. Surely Bitcoin must work to resolve this

  47. Usually you say good things Andreas, but if you just answered: Yes Bitcoin and PoW is awfully wasteful of energy and we need to solve that.
    I would have kept you to higher standards. Cardano and their Ouroboros algo will run more decentralized then any other blockchain the world has seen by end of 2019. In addition it will be 100x faster and all this can run on a low energy computer similar to a RasberryPi. And we will all know it in a few months time. BTC will never solve its energy problems. And with todays knowledge of our planets climate issues… Sorry.

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