Just took a quick look at this.
If you are located in the 'mining valley' of Washington where power is ~2c/kwh you are still getting healthy profits.
A computer with 7 GTX 1070 graphics cards should produce ~230 mh/s and draw 1 kw. This would cost approximately $30/month in power factoring in kw demand + cooling.
The above setup will currently generate $385/month in ETH.
So basically for miners who are in the right spot with the right facility, this is still profitable. The question is of course for how long. You also need to factor in the cost of equipment, datacenter, employees and difficulty/price.
But even if you dont have a facility in washington and just mine from your apartment, your power cost would probably be $100 a month. So its still 'profitable', just not nearly as much as it was in the run up.
Cliffnotes: 'professional' miners dont care. Even with the 'crash' today, they are making more per day than they were before the entire run up. For instance the 'worst' time for mining was December 2016 where you would only make $7.50 a day gross in ETH.
Call me naive, but am I the only one who looks at mining as one of the worst inventions for consuming energy possible?
Almost all of society functions on energy, some of the largest breakthroughs in society have been on sudden abundance of cheap energy and the machines, vehicles products they can create.
Entire economies can be crippled by rising costs in energy (oil shocks of the 70s) and boom by sudden drops in cost of energy.
So we've created an "industry" where you are essentially paid by comverting energy to waste. Paid to perform extremely intense difficult (ie wasteful) operations to back a useful technology (digital currency).
Assuming it catches on, energy will never be cheap, there will always be a higher floor now due to options for "mining". As we get better at it and it becomes less wasteful, the digital system will simply raise the reward so people are incentivised to once again waste it.
Ignore the short term for the moment, and which ever currency you're backing. We've created a long term societal motivation/reward to harvest every joule produce by the sun and use it to calculate hashes. I'm not talking about the next decade obviously, but we have incentivised that behavior.
If there is anything technologists should understand is that whatever your beautiful perfect technology is, it will instead be used based on whatever has been incentivised.
Regardless of the technology it powers, this is a terrible societal incentive - and one that will be around a lot longer than people are considering.
A cryptocurrency enthusiast would tell you that the energy consumed is not "wasted" because it is necessary to secure the block chain.
Personally I find this argument unconvincing and somewhat tautological. 1) Surely we can come up with a less wasteful solution to this and 2) why should we assume that securing the block chain is a actually good use for the energy spent?
Especially if you consider that the process of "mining" is literally computing hashes over and over again until you find the right nonce that meets some arbitrary criteria, it's hard to see this process as anything except wasting massive amounts of energy.
It is worth comparing this against the cost of minting money.
A brief search showed that the US mint used 694,462.4 gigajoules in 2011[1] (~0.2Twh). The US is ~25% of world GDP, so lets times this by 4 for a naive cost of minting across the whole world.
This gives a cost of ~1Twh annually for minting the entire world's supply of money, with a total Gross world product of ~$80 trillion[2].
Bitcoin is using ~1.3Twh[3] for a market cap of ~$35 billion[4].
Overall this means that bitcoins are ~3000x less efficient than physical money.
After writing this I've realised I should perhaps limit to the cash based economy.
The amount of US dollars in circulation is ~$1.3 trillion[5].
This gives a slightly better ratio of 222x less efficient.
Bitcoin is 222 times less efficient than a physical system of metal coins and paper/fabric/plastic.
This is not entirely true, as cash requires energy after it's been minted. Money transport, cashiers and gold old fashioned vaults all require energy. With that being said, PoW is definitely wasteful, and for crypto-currency to be taken serious on the world stage, another form of consensus algorithm is required. Personally I'm partial to Proof of Stake[0].
Depends on the cryptocurrency in question, but yes, a cryptocurrency working under a Proof-of-Work scheme like bitcoin, will use more energy than credit card systems. I'm not sure it'll ever be possible to outperform centralized, digital systems on an energy usage level. What I was critical of, was the comparison to physical money. Energy usage isn't really that important a metric for payment systems though, price is probably more relevant, where some innovations in cryptocurrency might come to be competitive with credit cards.
Your calculations are off by a large magnitude because you cited only energy consumption by the US Mint the US Mint only produces coins. Federal Reserve Notes (paper money) are printed by the US Bureau of Engraving and Printing.
And as sibling comments say, cash uses energy after it's produced.
Doesn't bitcoin compete more with electronic money than it does with cash?
That it is person to person makes it like cash, but moving a dollar with bitcoin isn't quite as convenient as moving a dollar with cash, whereas moving $5000 with bitcoin is vaguely comparable to moving $5000 using a bank transfer (the value has to be present at the bank/in bitcoin, etc).
US dollars are primarily created by banks using the fractional reserve system. So a better estimate, though harder to find, might be the total energy (including human calories) to create a loan.
Perhaps this is ignorance on my part, but my limited understanding of bitcoin suggests that new bitcoins cannot be created by creating a loan. It would be impossible to use a fractional reserve system with bitcoins by definition. This distinction is important since over 90% of US currency is created via loan using this fractional reserve mechanism.
Unless people decide that bitcoins are not fungible, then fractional reserve banking is absolutely possible with them. You give me Bitcoin, and I will lend them out at interest, keeping some on hand to give back to you as you need them. The process is identical to banking with a fiat currency, and results in the same money multiplier.
Where there is confusion is because economists accept that money is an abstract thing, backed by people's willingness to accept it, whereas Bitcoin enthusiasts see money as a tangible thing that must be backed by a concrete thing. Thus, when economists say that the supply of money changes with fractional reserve banking, they are referring to dollars in the abstract, not physical dollar bills. When Bitcoin enthusiasts say that the supply is limited, they are referring to the bitcoins themselves, not the abstract availability of bitcoins.
> This distinction is important since over 90% of US currency is created via loan using this fractional reserve mechanism.
No actual US currency is created this way, we just have a strong social convention of treating “the bank owes me $1 on demand” as equivalent to “I have $1”.
So if I make a “deposit” (which is, on point of fact, a loan) of $1, and the bank retains $0.10 in reserve and loans out $0.90 to someone else, we say that I have the equivalent of $1 and the borrower has $0.90, so it seems that $0.90 has been created. But there is really only $1.00 of currency, of which the bank has $0.10 and the borrower has $0.90. I don't have a currency, I have a right to demand (with certain conditions, depending on the kind of deposit) currency from the bank.
Most dollar-denominated trade is actually trade in future claims of dollars rather than actual dollars. Nothing [0] stops a parallel thing from happening with Bitcoin; obviously, such trade would be distinct from exchanges of Bitcoin recorded in the Bitcoin blockchain, just as trade in future claims of dollars are readily distinguishable from exchanges of physical greenbacks.
[0] Except the current immaturity of the Bitcoin ecosystem compared to the banking systems of any developed economy, but that's presumably something that would change were Bitcoin to achieve broad, durable acceptance.
1) No there is no other way. (An alternative, proof-of-stake, is still an active research area. Even Ethereum abandoned the idea of completely switching away from proof-of-work because they realized PoS isn't completely workable.)
2) Because a permission-less censorship-resistant decentralized financial system has the potential to truly improve society, hence worth spending energy on it.
I read your arguments and unfortunately most don't hold water.
> 1. Miners currently use approximately only 0.0012% of the energy consumed by the world.
This doesn't change the fact that you're using energy.
The second argument is basically the same, just extrapolating into the future.
> 3. Mining would be a waste if there was another more efficient way to implement a Bitcoin-like currency without proof-of-work.
This is a logical fallacy. Mining means wasting energy regardless if there are other ways of producing digital currencies or not.
Now, this one is actually interesting:
> 4. Bitcoin is already a net benefit to the economy. Venture capitalists invested more than $1 billion into at least 729 Bitcoin companies which created thousands of jobs. You may disregard the first three arguments, but the bottom line is that spending an estimated 150 megawatt in a system that so far created thousands of jobs is a valuable economic move, not a waste.
This example is a bit special because the jobs haven't been created by BCs themselves but by VCs spending their own money into BC-related companies.
I just hope most of these aren't BC mines, otherwise we'd have a vicious circle here...
>5. The energy cost per transaction is currently declining thanks to the transaction rate increasing faster than the network's energy consumption.
Again: this kind of argument is of "it's not as bad as it sounds" type, and does nothing to refute the claim that mining is wasteful.
> 4. Bitcoin is already a net benefit to the economy. Venture capitalists invested more than $1 billion into at least 729 Bitcoin companies which created thousands of jobs. You may disregard the first three arguments, but the bottom line is that spending an estimated 150 megawatt in a system that so far created thousands of jobs is a valuable economic move, not a waste.
We cannot decide if an activity is valuable or not based solely on if it creates jobs.
e.g. suppose the government spends $1b on some entirely useless activity, such as employing people to dig holes and fill them in again. From the metrics of job creation and GDP this program can be regarded as a success. But there is a big opportunity cost in that resources and peoples' time has been spent on something utterly pointless when they could have been focused on a less useless or indeed a genuinely useful activity.
The world still has many genuine problems that still need to be solved. The time and resources could be directed to: maintain infrastructure, better educate people, roll out family planning programs, eradicate disease vectors, draft and enforce environmental regulation, build low cost housing, refit systems to improve energy efficiency, ...
"We cannot decide if an activity is valuable or not based solely on if it creates jobs."
You are right. However Bitcoin is not pointless and comparable to digging holes and filling them up. The simple fact that this financial network is censorship-resistant is a huge benefit to society, already positively impacting many people.
I'd see that as a negative, rather than a positive. Being resistant to censorship means that it is also resistant to correction. With Bitcoin, there is no way to reverse a fraudulent transaction. If a debt is owed, one could not put a lien on bitcoins to prevent them from being spent, as one could with regular currency.
It depends on your application. You are thinking about this from the view of someone who spends money on common every day items with a credit card. Money is used for much more than that. One example is the ability to go to another country and take money out of an ATM with bitcoin. Suddenly cash and available money is more ubiquitous and you can use your money without permission.
Many people don't realize the value of these things until they experience a hiccup in their current routine.
Ubiquity and the inability to correct the record are two different properties. As it is, I already can take money out of an ATM in a different country, with my ATM card. Yes, there is a fee applied. No, I don't consider that a large downside, as currency exchanges are the price a society pays in order to avoid getting into Greece's current situation, where the currency can't be adjusted to help the economy.
> I already can take money out of an ATM in a different country, with my ATM card
With a fee applied AND if your bank lets you.
> No, I don't consider that a large downside, as currency exchanges are the price a society pays in order to avoid getting into Greece's current situation, where the currency can't be adjusted to help the economy.
Greece's government spent more money than they took in by a large margin for many decades. Not being able to print money is not the fundamental cause of their problems and has nothing to do with crypto-currencies.
As a back-of-the-envelope calculation, cryptocurrencies are [over]valued with a market cap of ~$70bn (from https://coinmarketcap.com/) of which BTC itself constitutes just under half.
World broad money supply is estimated around $80 trillion (not including many other stores of wealth and financial instruments which are not money). So the first conclusion one could draw is that cryptocurrency is also a surprisingly high proportion of currencies in circulation, at around 0.1% (treating cryptocurrencies as equivalent to broad money and exchange values as accurate)
A second would be that cryptocurrencies which apparently use 1% of their capital value in energy per annum to function even at low transaction volumes are unlikely to be a viable long term solution to the problem of exchange.
My off-the-cuff response is that cryptocoins behave more like a commodity more than a currency, so their value is always relative to cash, not part of global cash reserves.
1. See last paragraph in my post's argument 1. The point I raise is that it makes no sense for people to be so outraged and vocal about miner's energy use and apparently don't care about much bigger energy users/wasters by multiple orders of magnitude... At the very least this makes critics hypocrites as they themselves waste energy and don't to care about it (eg. driving a car with low fuel efficiency.)
3. It's not a fallacy. If X is worthwhile to society, and if the only one way to obtain X is to spend energy doing Y, and if alternative uses of this energy are not clearly superior (for example doing Z), then Y is not an energy waste. X = permission-less censorship-resistant decentralized financial network. Y = mining. Z = for example building desalination plants to provide clean water to third-world countries.
5. This argument shows that even if you are unconvinced by arguments 1-4 and holds the view that mining is wasteful, you should at least recognize that it is becoming less and less wasteful over time.
>Even Ethereum abandoned the idea of completely switching away from proof-of-work because they realized PoS isn't completely workable
No it didn't. I follow Ethereum development closely and I know for a fact that's absolutely untrue. I'm not sure why you're misleading people about this.
You are right, I should have said "temporarily" not "completely". They abandoned the idea of switching to 100% PoS right away, and instead are trying to work on a hybrid PoS/PoW. Source: https://twitter.com/vitalikbuterin/status/851503370250661889 (100% PoS remains the ideal goal, but they have been unable to work it out yet)
I think they didn't abandon the idea, but until they have a working prototype it's just a idea. Nobody is sure if it's possible to use in the real word, were many people will try to steal a few million dollars if they can.
> 2) Because a permission-less censorship-resistant decentralized financial system has the potential to truly improve society, hence worth spending energy on it.
The other side of the coin: a permission-less censorship-resistant decentralized financial system also re-introduces a substantial set of significant problems that societies have already long solved for themselves.
"People are using the contingent stupidity of our current government to replace lots of human interaction with mechanisms that cannot be coordinated even in principle. I totally understand why all these things are good right now when most of what our government does is stupid and unnecessary. But there is going to come a time when – after one too many bioweapon or nanotech or nuclear incidents – we, as a civilization, are going to wish we hadn’t established untraceable and unstoppable ways of selling products."
No and I take your point, but I guess the extrapolation is the anonymous nature of blockchain cryptocurrencies enable a class of crime that would be much more difficult with traditional currencies.
We're not that far yet, but the potential is there. The closest thing are the current bitcoin-powered dark markets, where people buy various kinds of drugs (of various levels of harm and legality), including custom-made chemicals.
I have news for you, people already buy custom made chemicals from China all the time. It doesn't take darknet markets. The potential is there for lots of horrific actions. They aren't avoided by a government making them impossible, people generally don't want to hurt other people, nor do they want to face the consequences of doing so.
You haven't done your research, because ETH did not abandon PoS, and permission-less distributed databases have existed since the 70s and failed then for the same reason all these will fail now - you simply cannot scale and keep it distributed, it all ends up getting centralized to a few key points because of the cost to maintain the exponentially-growing distributed infrastructure.
How are bitcoin and ethereum censorship-less and permission-less? Most cubans for instance don't have access to the internet without a permission. China could shut down the bitcoin easily by simply blocking bitcoin traffic.
This comment led me to compare crypto mining with the American Gold Rush in the 1800s.
An intriguing difference might at least some miners struck it big due after finding huge geographical deposits of gold. In cryptocoins, though, the flatter distribution of the space means people tend to get out what they put in.
There are various other ways, however many of them ditch the decentralised-trust nature of cryptocurrency. If this is not something important to you (which it isn't to that many people) then crypto-currency represents a huge waste of power for no appreciable gain.
PoS is perfectly workable, but one wouldn't switch overnight for a myriad of reasons. Ethereum will eventually be PoS for sure.
There's also systems without "mining" like iota, which has every sender verify other two transactions, so it's very scalable and has no fees. The drawback is that having no mining, all tokens were created on genesis.
It would be true in an ideal world, but in practice governments of different countries can and do regulate what can and cannot be done with bitcoins. Most of this is based on fear of losing control.
> in practice governments of different countries can and do regulate what can and cannot be done with bitcoins. Most of this is based on fear of losing control.
Most of the time people seem to say as if that was a bad thing. But consider what happens when government does ultimately lose control. You get Somalia.
As it is today, it seems governments worldwide agree cryptocurrencies are overhyped. They all seem to be saying basically: "it's cool you're having fun with new Internet points; just don't forget to fill in your tax form".
>A cryptocurrency enthusiast would tell you that the energy consumed is not "wasted" because it is necessary to secure the block chain.
Note that this is zero-sum.
If a device is invented tomorrow that is 100x more efficient per dollar/watt to mine, the cost to 'secure the blockchain' remains the same because people will just buy 100x more computing power for the same investment and the difficulty ramps up to compensate.
you're right about the detail of his point (people won't buy 100x just because a 100x increase in efficiency), but the point he was trying to make is correct. given a fixed global investment, a 100x increase in efficiency won't reduce costs. it will just increase the difficulty level to compensate.
But it does have an impact on the energy use. If the energy efficiency goes up 100x and people aren't using 100x as many machines then the overall energy usage drops.
>But it does have an impact on the energy use. If the energy efficiency goes up 100x and people aren't using 100x as many machines then the overall energy usage drops.
If there really was an overnight 100x improvement there would be a lot of lag, but in the long run the cost is mostly the energy. So if efficiency slowly goes up 100x people will generally use 100x the computing power, and use the same overall energy.
There's some difference because of the ratio of silicon investment to wattage cost over time, but that's the overall shape of it.
> 1) Surely we can come up with a less wasteful solution to this
10 years ago people would have told you there is no possible solution to this.
Proof-of-work cryptocurrency is a tremendous breakthrough. It will certainly be surpassed one day, but it's currently our best available option for a system of money.
What? Why isn't everyone using "our best available option"?
What are the benefits of thousands of different systems keeping a record of every single transaction, and how is this not a hindrance to widespread use of our best available option?
Crypto-currencies have utility and uses but they are rather niche and specialized. Crypto-currencies aren't a mass market system. And they're not structured in a way that they can be.
One benefit of having a distributed ledger (your thousands of different systems) is that it decentralizes trust. With fiat currency, you have to trust the government (or private company, in the case of the U.S.A.) that issues it, not to print so much that they debase it. I have no trust in my government, or fellow private corporations, given what I've been through. Bitcoin, on the other hand, well, at least I can read the source code and compile the executable myself.
Given a choice between trusting a person/corporation and trusting a mathematical equation, I would rather place my trust in the mathematics.
The internet is a mass market system, and it was designed with biological growth in mind. Bitcoin is built on top of the internet. So I don't see why you would think it couldn't see widespread adoption. It's just another program.
It's incredibly foolish to think you're only trusting mathematics.
All you've done is shift your trust to the authoring process of the Bitcoin clients and to the majority of the miners. Authoring and distributing the clients, and determining the majority of clients and the majority of mining power, is still a social and political problem driven by human greed.
>It's incredibly foolish to think you're only trusting mathematics.
Thanks for pointing that out. I suppose I'm guilty of "idealizing" my argument. Still, if the Bitcoin client could somehow be "written in stone", and everyone knew the protocols and source code could not be modified, I think it would be a safer bet to place my trust in a globally distributed network of selfish individuals, than to place it in a loose affiliation of millionaires and billionaires.
> Given a choice between trusting a person/corporation and trusting a mathematical equation, I would rather place my trust in the mathematics.
This comes across as incredibly naive. Just consider the whole Segwit2x controversy and think about exactly who controls the future of Bitcoin. You've just shifted your trust to a different group of people.
Trusting bitcoin you are trusting the Chinese miners that have the majority of the hashing power.
Bitcoin won't EVER be widespread if his whole network can process a mere 7 transactions per second (Wasting a huge amount of energy).
> Who is this "we" you speak of? The energy is being paid for and the market demand demonstrates that it is a good use.
This argument is nothing but an appeal to the majority. I could equivalently say that the existence of spam emails shows that spam emails are good for society. After all, spammers have paid for the electricity and bandwidth to send spam, and the market demand demonstrates that it is a good use.
Market demand is a useful tool for measuring the current state, not for predicting an ideal state.
> No one has found a solution yet that is as secure as proof of work, so this point is moot until then.
The point isn't moot. The point is that maybe we should stop pushing this tech forward until a less wasteful securing process can be developed.
> Who is this "we" you speak of?
This comes up often, and the answer is usually the same: that "we" are the people who consider the society they live in as something to contribute to and grow, and not as an exploitable resource to parasite on.
> The energy is being paid for and the market demand demonstrates that it is a good use.
Market demand only demonstrates that there are some people who are willing to pay money for this. Not that it's good or useful (see the spam example of sibling's comment). This is true especially if the thing is paying for itself.
"We" refers to society that you wish to convince to adopt Bitcoin as a currency. As has already been mentioned, the mere fact that people are willing to spend electricity on mining does not inherently demonstrate that it is a good use of such electricity.
Again, I find this defense to be incredibly tautological:
"This approach to securing a distributed ledger sure seems to waste a lot of electricity."
"But it's not wasteful because it secures the ledger..."
You could in theory create a centralised electronic currency with all the hashes computed. But then how would you distribute it? Chicken and the egg. How do you get people to use your currency if you have all of it? Do you just give it out to people? But what system. If you're giving it away it has no value. It cost you nothing to create it. etc.
Mining also solves the distribution and creation of value problem. People won't use your currency unless it has value. To have value it needs to have a market to use it. To have a market you need people using it. Mining creates an incentive to create it since it has some value. And mining means the currency is distributed to people who create value for the system.
I've had this thought too, but the counter argument is gold. Spending millions in fuel to dig up chunks of gold, just to go "re-bury" them in a bank vault somewhere is an equally appalling, use of the world's energy resources, but that hasn't stopped it from being a profitable venture for thousands of years.
> Especially if you consider that the process of "mining" is literally computing hashes over and over again until you find the right nonce that meets some arbitrary criteria, it's hard to see this process as anything except wasting massive amounts of energy.
I think this wording obscures why the mining process gives the network trustworthiness.
You are changing the nonce over and over again until the HASH of the block meets some criteria. For example, your hash is below some value (it starts with a certain number of zeroes). This is important.
It's important because you can't 'fake' the work. The only physically possible way to come up with a block that has a conforming hash is to change the nonce and run the hashing algorithm and repeat this until your hash matches the criteria. There's no way I can know the nonce I need to use without running the hashing algorithm. Hence, if I present a block that hashes to a conforming value (you don't just take my word for it, you run the hashing algorithm on the block yourself to independently verify the work), you know that I've invested time and electricity (tangible, real-world things) in the creation of that conforming block.
Alone this doesn't seem like much, but the time and energy limitations it imposes gives a blockchain properties that make data more 'immutable' the longer it is stored in the chain by making it computationally more expensive to change data further back in time from the most recent block in the chain and makes it computationally expensive for a single bad actor to change past data that nodes in the network have 'agreed' upon. This computational expense is important when combined with the other rules that a node uses when receiving a new block and trying to independently determine that the block is valid and should be treated by that node as 'truth'.
The trustworthiness of the blockchain is an emergent network effect. It's not provided or enabled by one single thing, but by many things all contributing at the same time. Proof-of-work is just one small piece of a much larger system. For example, you also need to consider what other rules make proof-of-work useful in the system, such as the rule that a node must accept a chain with more work in it as more truthful than one with less work (hopefully I'm wording that somewhat right!).
Saying 'the miners provide security by hashing' is a massive oversimplification of what's going on. It's very much a sum-of-all-the-parts thing.
I'm still really getting my head around blockchain itself, so if I'm way off base on anything in my understanding here I'm happy to be corrected :)
As I understand it, the challenging question is - is there something else we can use that's as independently verifiable as proof-of-work that's more energy efficient? What independent verification do we give up if we do choose something that's less energy consuming (but maybe less 'provable')?
> You are changing the nonce over and over again until the HASH of the block meets some criteria. For example, your hash is below some value (it starts with a certain number of zeroes). This is important.
Yes I am aware of this, I simplified a bit so the sentence would read less awkwardly.
There was a coin called Primecoin that looked for prime numbers rather than useless hashes. It also went up in the last few months and is going down now like the rest.
If you knew the technical details of blockchains, you would not think that. And yes, the process IS much more than wasing massive amounts of energy.
> 1) Surely we can come up with a less wasteful solution to this
You are welcome to try. If you do come up with a less waisful solution you will be able to create your own altcoin and will make billions worth of dollars on it. Some very smart people have tried in the past and are still trying.
Fiat money doesn't serve the same purpose as Bitcoin and in some ways is the opposite. Why are there so many trite unthoughtful comments being made about cryotocurrencies? I'm guessing people are turned off by all the scam coins and are throwing the baby out with the bathwater.
I'm turned off by watching a bunch of people who haven't learned basic lessons about banking trying to reinvent it, badly. Anyone who spent a few days learning about how banks do security could have understood that what these exchanges like Mt. Gox were doing was frightfully vulnerable, and anyone unwilling to spend at least a few days learning about banking security has no business running a currency exchange. But it's all handwaved away because fiat money is evil and cryptocurrency makes you feel like the hero in a Neal Stephenson novel so screw the man. So now we have a bunch of programmers and enthusiasts learning how the financial system works from first principles and making boneheaded mistakes as a result. And they have enough money swirling around thanks to Chinese capital flight that they can screw with the pricing for an entire market like GPUs. And then when you point out how much electricity this whole scheme wastes they say "well banks use electricity" as if that's the same thing. It's heedless, irresponsible and discouraging.
Do you realize that exchanges and cryptocurrencies are not even close to the same thing? In fact most exchanges deal in fiat as well, so you should also be shitting on fiat at the same time based on your logic.
So what? Bank of America is a company that provides banking services as a business model, they are not a necessary aspect of fiat currency any more than coinbase is a necessity of bitcoin.
Right. People are still going to have mortgages in a world where cryptocurrency replaces fiat money, assuming that we don't have much bigger concerns than electricity use. People are still going to need banking services. It's not like you can replace the whole banking sector with Bitcoin.
Because banks aren't setting themselves up in places based on the electricty cost. And shoving rackmount servers in close proximity and underventilating them. Even huge fintech operations aren't chasing cheap power at the exclusion of other concerns. Banks do not use the kind of electricity that cryptocurrency uses, when you control for the volume of usage of each.
> ... mining as one of the worst inventions for consuming energy possible?
It depends on what you're "mining." I've been mining Gridcoin[1] for a while, which basically pays crypto-currency for working on BOINC projects. I feel like I am at least contributing to something worthwhile, rather than simply wasting energy.
> So we've created an "industry" where you are essentially paid by comverting energy to waste.
But with Ethereum, it's not waste. The miners are providing storage and compute, a la Amazon Web Services. It's not like Bitcoin, where the hashing is just there to verify the blockchain.
In general, it's a valid concern... Do we really need to compute these things over and over to secure a fixed set of computations?
But in reality, the cryptocomputers that make more efficient use of miners will create more value and associated currencies will be more valuable. Bitcoin is essentially a proof of concept and therefore totally unoptimized.
Eventually the cryptographically verified computing market and the trustful computing market will find the sweet spots between efficiency and redundancy. I'm not generally trusting of the free market, but in this case the free market seems perfectly capable of solving this problem.
The proof of work part is separate from running the contracts. So it still stands that the mining is only because it allows us to measure in a provable way that someone has thrown X amount of Joules in the gutters.
Surely some of it is a waste. Even for the latest, hottest cryptocurrency. The question is: how much energy is wasted versus the alternative, and does the utility justify it?
Depending on speculatively large future-values of cryptocurrencies is probably not the right way to evaluate the externalities, here.
I'd call you principled. The people scrambling for free money are treating the cost to the rest of the world as an externality. They'll chime in here to say "But what about other terrible system X?", but that, I'm afraid, does not absolve them. You're all terrible!
Until we come up with a viable way to secure cryptocurrency without proof of work, such incentives are necessary.
If good people weren't incentivised to spend energy on securing the network, it would be easier for bad people to spend energy on cheating the network.
"Until we come up with a viable way to secure cryptocurrency without proof of work" -> Until we come up with a cheaper way to trust centralized entities in power.
Proof of work (mining) is needed to be able to come to consensus on the next block in the chain. A better and more efficient algorithm is being developed. Ethereum is switching from proof of work to proof of stake in the next year or two, so there will not be any mining any more, which should reduce the cost of deciding what the next block is. Read more about it here: https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ
I think mining should not be a way to profit. The rewards are so mining doesn't cost anything to miners. Bitcoin/Ethereum users should be compelled to mine because it means more security that no one controls the blockchain.
I wonder if there's an algorithm that could deter people from building mining farms?
Not that difficult.. you can always choose problems with constant difficulty level or gradually increasing ones adjusted for expected increase in computing power.
However all cryptocurrencies are pyramid schemes . I.e. earlier you get in more you make. That's fastest way to grow and make it viral. However like any pyramid scheme it is unsustainable after some point
This is not necessarily the price point we think it should be valued at though. I and am sure many ppl never expected bitcoin to have mcap of 30$ billion . As difficult it is think today It may even grow another say 30x again to 900 billion or even more. However it will crash eventually like all pyramid schemes when growth flattens and new money - in the form of money spent in mining - stops coming in at the expected rate.
Another way to look at it, for mining to be even marginally profitable price needs to keep increasing for bit coin style algorithms. Either ppl will abandon the coin or price __has__ to increase
Yeah it is not going anywhere and no large institutions will ever "mine" to protect their money or a blockchain. Currency mining is going to be part of a tech-anarchy-utopia dream.
Consensus ledgers are where real money is going to be transacted on.
isn't one of the main reasons that people like ethereum is because instead of solving random hashes, miners run programs that people want solved? or maybe I'm confusing it with another thing
I use "mining premium" to refer to the premium people are willing to pay to mine, i.e. as a hobby, research, or to evade taxes or capital controls. I think when considering efficiency, we can disregard these costs - i.e. energy spent evading taxes is really an inefficiency of taxes, not bitcoin.
The mining block reward will become 0 in the long run.
So really:
Energy used = transaction costs * (1 - mining profit margin) / unit cost of energy
So basically energy usage is being driven by the transaction costs the market is willing to pay, which will adjust accordingly as people are willing to move transactions off-chain.
This formula which I haven't gone through in detail enough to see if I completely agree, directly support the point of waste.
As society lowers the cost of energy, we would expect even more energy to be wasted with all other variables remaining equal.
Halve the cost of energy and now you've doubled the amount of energy spent.
If the cost all energy worldwide improved dropped by a factor of 100, society should explode with new technology. Instead this formula says we'll just spend 100x as much of it mining.
At least with mining gold as technology improves, you gain efficiency in gold extracted per joule. Crypto mining works exactly reverse. The better technology gets, the more wasteful it has to become to compensate.
What else do you suggest to waste to keep a competition? The effort must be entirely conflicting against anyone's interest besides the mining or else it will be an unfair competition.
The energy isn't wasted, it is converted. The closest analogy I can come up with is that gold used to back currency isn't wasted because it is stored in an underground vault rather than being used for jewelry or as a component in electronics.
If you are creating a currency, then it has to be backed by something: gold, silver the cost of electricity, people's faith that the currency is worth something. A currency not backed by something will keep deteriorating until it is worthless (assuming a free market, the dollar doesn't collapse because only the us mint can make them).
If I pan some dirt and it does not contain gold, I got the "answer" wrong. If I dig a hole and it contains no oil, I got the answer wrong. Seems pretty wasteful.
Scarecity is driven by an inability to readily harvest/create something.
If you pan for gold and don't find any, that energy is wasted, not converted. So what? The initial claim wasn't "This facet of mining cryptocurrency is like gold" it was "The energy used is converted". It's not. It's burned.
>> Scarecity is driven by an inability to readily harvest/create something.
Cryptocurrency scarcity is artificial, and not driven by anything other than predefined scarcity curves. Even if two guys with CPU-only miners were the entire BTC network, scarcity would be the same, but energy output would be vastly lower.
The busy-work that is done for (say) BTC is only necessary because of the aversion to central currency authority in certain subsections of society. It's an artifact of that ideology.
Don't know how it compares but for "classic" finance to work it needs many workers who use energy, who need buildings to cost energy, who need cooling etc.. The work being done by the miners is not apples to apples comparison with OracleDB sitting behind IBM Websphere server (or what ever) inside a banks data center / cloud.
I do hope that in the future somebody comes up with a better scheme..
This is only Visa's datacenter costs. What about all the employees working at banks to support all these credit card holders? What about all the physical snail mail being carried around by actual vehicles and driven by humans? What about the entire debt collection system?
All you've mentioned is secondary infrastructure that facilitates the use of financial system. If ever (God forbid) Bitcoin volume rises to the scale of Visa, it'll have all those costs too. Including the snail-mail shipping of wallet hashes.
But that's 385 / month revenue? On a setup that's what, $3400 to buy, for seven 1070s? Seems like asking for 10 months to cover capex is a bit thin, given the price instability.
Miners shouldn't be meaningfully exposed since they can sell off their ETH as soon as they mine it (deposit it to an exchange address and sell off every few minutes via an API, or something like that). And while ETH might crash enough to make it no longer profitable and risking your capex, you can switch your GPU to mine whatever is most profitable, so you're more diversified than it looks and insulated from the instability.
Resale value on the GPUs is also worth monitoring. While it remains high enough, you can discount much of the capital cost because you'll get a high fraction back if you decide to sell the cards.
Miners don't want to push their GPU's that hard, a hardcore gamer may overvolt their card to get a more stable overclock but a miner will undervolt it to run it cooler and increase the life of the card.
I'd rather buy a used Fury X off a miner than a gamer.
Buying ASICs is high risk and (probably) high reward - in event of crash you are left with worthless machines. GPUs will still have some value, even after all crypto currencies drop.
You forgot to tell people about risk of rising difficulty. It's not 385$ a month forever, if difficulty will go up (as it steady goes up every month) you will mine less.
And you can't get 230 MH/s with 7x GTX 1070 with 1kw of power draw. More like 215 MH/s and with around 1.2 kw. I know because I have mining rigs with 7x GTX 1070s.
People constantly seem to get into mining by looking at the calculator at CryptoCompare without reading the last bit which states that "Block reward is fixed at 5 ETH and future block reward reductions are not taken into account."
Using CryptoCompare and assuming your 230MH/s of mining ability will net you $470 a month (at current ETH of $165.47) people assume they make $5,640 a year. That sounds great!
If, however, you use something like MyCryptoBuddy's calculator, which takes into account pool fees and difficulty increase, you realize you're only going to make $1,553 in a year. Which is a rather paltry return if you shell out for 7 GTX 1070s.
Not the parent commenter but yes, Chelan and Douglas counties have fantastically inexpensive kwh due to their hydroelectric plants.
The dams are owned by a public entity and the cheap power and plants are meant to be a boon to the local economy. Last I heard (directly from a city council member last year) there is a moratorium on high load customers due in part to all the mining operations that sprung up. Realistically, for the Public Utility District it's been much more profitable to sell the power to other states than it is to allow more mining operations to eat the cheap power.
There were high hopes for the data centers that sprouted up in neighboring Grant county, but they didn't bring anywhere near the number of local jobs that were expected (leaving a bunch of empty houses in Quincy). That in combination with the closure of the Alcoa aluminum plant (which purchased the _entirety_ of one of the smaller dam's output) and you shouldn't expect the moratorium to be lifted any time soon.
Thanks for detailed response. So it sounds like the power arbitrage game is done in Washington(at least for now.) Although I imagine this is good news for those miners who are grandfathered in.
Average price paid for electricity in many regions is 20 cents/kwh. Just using your numbers that translates into $300/month in costs for under $400 in ETH.
At the national average it would be $200/month by rough math.
But the regions where people are hosting miners are between 2-4c per kWh. Those are the competition, and those are the people buying (and selling) these.
2 cents is what you're competing against -- very large mining farms located near cheap, under-utilized hydro plants. Many in China, due to the existence of many such plants. [0] Those are the mining operations that can remain (marginally) profitable when the small home miners are forced out because gross revenue is less than power costs.
lol, sorry, but how long until your landlord contacted you? What was the conversation like? I'd would have said, sorry running servers for my internet business.
> I'd would have said, sorry running servers for my internet business.
Why do you think that would have helped? The landlord cares about the fact that he/she is paying more money because power consumption is high, not about why power consumption is high.
The landlord will very much care if the reason you're using so much power in your residence is that you're running an energy-intensive business there. In many states this would give the landlord really solid grounds to toss you out immediately, especially compared to the situation where you're just suddenly using more power because you just like to set your AC to 60F in the summer, for instance.
Do many people live in units where electricity is provide as a gratis benefit? That was never my experience in California, Washington, D.C., nor in Virginia.
Not really uncommon if you're renting in a house that's been split up to several rental units. I've mostly seen it with water, but gas and electric service can be done that way too.
Yea, it's usually when things weren't set up properly to be a rental. It's painful for the landlord because then people don't pay attention to usage, and they're assuming extra liability for someone who might run up the bill and then skip.
it's common in college dorms. It is also usually against the law for a landlord to charge for electricity unless each unit has an individual meter. So if they are subdividing a house into multiple units it may not be economical to install per unit meters. In cases like that electricity is included.
One of my college apartments in California was like that. But I've never seen it anywhere else. On the other hand, I've never had to pay my own water bill in an apartment -- only power and gas.
Besides, there's no way it's really free -- it's accounted for in the monthly rent. If you use less power than average, you are probably better off paying for it yourself.
And your landlord would have said they're renting you living space, not office space. Of course, you could always offer to put a meter on the servers, and pay them the difference.
It's somewhat disheartening that you've founded two businesses, yet you're looking to the letter instead of the spirit of the agreement.
I've lived in a few house shares where power/bills are all included in rent, but the contract forbids running a business from the premises. I assume they wouldn't particularly care if I had a small software business or whatever, but if the servers were in the house and they were getting billed they most definitely would.
Wenatchee Valley. KWH are somewhere just above 2 cents. Lots of electric plants down the Columbia river, and Wenatchee has great 1 GBPS connectivity throughout.
All I can think of is the careless environmental impact of all that dirty electricity consumption. For, let's be honest, a mostly speculative activity.
One cryptocurrency crashes, another gets hyped up, and the computational cycle repeats. When will it end.
More like false equivalence. What makes the cryptocurrency carbon footprint particularly wasteful is that, if we're being honest, its primary use is currency speculation.
Primary use today, sure. But cryptocurrency has more practical application every year, and there are a lot of compelling reasons to believe that major economic players will switch to decentralized currency (not private blockchains, the public ones) in the next 10-20 years.
If during the dotcom bubble internet startups had required something similar (provable waste), people would have said the same thing you are. But here we see that the internet clearly was a trillion dollar industry, just that most dotcom startups were too early and poorly managed speculative vehicles.
Decentralized cryptocurrency will be a trillion dollar industry, and that's trillions in annual recurring revenue I'm talking about, not trillions in total market cap. It's just today we've seen the speculation get ahead of the technology.
Hmm... so let's try another (likely absurd) approach:
What about: the government promises bitcoins mined with solar energy will be free of tax. Solar panels bought for mining bitcoins will be half-subsidized by the govt. For the next two years, at least.
Huge solar farms spin up as everyone wants to mine as much as they can on cheap energy. Two years pass, govt says it's end of the Bitcoin subsidy; miners fold, cheap used solar panels flood the market...
Of course it's much less valuable. The crypto currencies are intentionally difficult to mine, wasting vast amounts of energy. A small mining company could probably process all of Visa's transactions which outnumber transactions on bitcoin by at least an order of magnitude.
That doesn't make sense; you are comparing the creation of a currency against the usage of other. The finance sector includes the creation of cash (its paper, price of counterfeit measures); the transportation of cash (think ATMs), the materials needed for creating debit and credit cards, including their chips, the equipment to protect banks from being robbed (think big steel security safes) along many other resources to make such industry work.
This is a common knee-jerk response that doesn't make any sense. None of that stops Bitcoin from being wasteful, and most of it is still necessary if Bitcoin is used more.
Are you claiming that Bitcoin replaces physical security? How would it do that? Why doesn't someone just walk in and take your computer?
And if you're concerned about the creation of small computer chips (why would you be concerned about this), I assure you that Bitcoin is using more of them.
>None of that stops Bitcoin from being wasteful, and most of it is still necessary if Bitcoin is used more
What? If used more we wouldn't even need to transform it to any other currency, its because is _not_ used more that it is usually needed to convert it to something else.
>"How would it do that? Why doesn't someone just walk in and take your computer?"
No, someone cannot walk in because he doesn't even know where to walk in, its the same reason Satoshi is extremely rich despite the curiosity of millions to know about him, but no-one even knows his real name or anything at all; we don't even know which country he lives in; so yeah it does replace physical security; at least to a significant extent.
>And if you're concerned about the creation of small computer chips (why would you be concerned about this), I assure you that Bitcoin is using more of them.
It was just an example of the millions of resources that are wasted by the finance industry, a lot that include transportation (gasoline/ fossil fuels which is way way worse than most sources of electricity gpus are using)
Data centers need security regardless of cryptocurrency, you can't say the same about money and banks; so your point is moot.
To install rootkits you need to know where the computers are or some way to get to them, and that's 100% impossible with bitcoins unless you reveal your own info some other way (e.g. a security mistake)
I certainly can say the same about money and banks. I am saying it. You want money and banks to run on cryptocurrency, right? Then you need security for it.
"Haha, you don't know which computer to steal" is the worst security-by-obscurity idea I've ever heard of.
That's like saying passwords are security-by-obscurity.
I never said I wanted banks to run on crypto.
Overall it is a bit sad your arguments reached this low quality; I was expecting some interesting counter-arguments instead of these slippery slopes, not to mention all the downvotes you poured onto me.
With general stocks though at least you're investing in companies which make products, hire people, and hopefully stimulate the overall economy. A few Chinese guys in an old apartment building wasting power and compute/GPU resources... Not so much.
That's like saying any small vertical in the stock market shouldn't be compared to the wntire rest of the economy. Well no, and that's not the comparison being made.
Jobs created is a complete misdirection. Productive jobs created is the correct measure. I could pay thousands of people to repeatedly dig holes and fill them in, and it would be an utter waste. I don't believe that Bitcoin serves a useful purpose, and so until convinced otherwise, I consider Bitcoin jobs as less useful than the hole-digging jobs. At least the hole-diggers don't waste electricity in the process.
Bitcoin does serve a useful purpose! It is perhaps not obvious to someone like you who don't seem to be a user. Or if you can't imagine how Bitcoin can help improve the world, you are probably only considering your little bubble, and not thinking about the other 7 billion human beings who are much less fortunate than you, economically, professionally, politically, financially.
Overall, Bitcoin reduces friction, enables transactions that would not otherwise take place, and protects people from losing their cash/savings in various situations. Here are just a few examples of problems of the existing financial system that Bitcoin solves:
- Credit card being denied while in a foreign country because the system accidentally tagged it as fraudulent
- Merchants unable to sell online and accept credit cards due to their market segment encountering high CC fraud
- Person unable to quickly and cheaply send remittance to family in foreign country
- Countries confiscating savings accounts of citizens (eg. Cyprus in 2014)
- Countries running their currency to the ground (Venezuela in 2017, Zimbabwe hyperinflation, USSR collapse, etc)
- Paypal freezing for months the account of someone asking for donations for an expensive medical treatment (quite a few news stories about similar situations)
The purpose (and only purpose) of the company is to increase shareholder value. That is done via dividend and stock price appreciation. Buying the stock of a company increases demand of that stock and hopefully share price.
Honestly, it isn't. Personally, I see all of those energy spending as upkeep - some amount you have to waste in order for the system to work.
The difference between regular money and crypto money is that the upkeep of the former is mostly tied to physical reality and doesn't influence the value of money itself. In case of the latter, however, all that energy waste is a) completely arbitrary, and b) directly tied into the value of money (the more power you burn, the more you earn, and one party burning hard means other have to do as well, for the blockchain to stay secure).
Or in TL;DR: cryptocurrencies directly incentivize wasting energy. Regular money does not.
On the bright side, this has been a great test of etheriums scalability. Which isn't great, but when this mining craze dies down I won't hesitate to run ethminer when I'm not home for a little extra dough.
What I would really expect is an overreaction to the price crash, which means the difficulty rate might drop a lot. At this point, doing what a lot of people do with bitcoin - mining small amounts for a long period of time and just holding it until it reaches all time highs to cash out - is probably really easy money.
Probably most relevantly is how crypto valuations are bound together. Bitcoin is also down about 20% from its ATH, and will certainly drop more as long as eth pulls it down. The entire market will rise and fall on the hype of just one blockchain. Coins nobody even cared about like peercoin saw 5x returns on miners during this eth bubble.
Proof-of-stake is coming to Ethereum later this year, so there isn't much point investing in a few more months of mining. Casper is the real reason everyone is selling their mining hardware.
Agree, to a point. Using proof of stake is an important objective for the Ethereum blockchain model. Vitalik has said as much in conferences worldwide since January of this year.
The drop in price helps potential stakeholders too.
But the real concern, and IMHO, the reason for the drop, may lie in the next big hurdle, which is creating applications based on blockchain contracts. It is a very different way of thinking about application development, and as such, may need more time for consideration.
More like hypertext and the world-wide web was in 1993 than it was in 1996 and '97.
If you had a rig, why would you sell before Casper though (as in, right now)? Even with reduced profit, it's still profit. The only reason I can think of is speculation that the resale value won't be worth it in a few months.
Its mostly RX series that are being sold off and the reason for that is the ever-increasing Ethereum DAG size. I dont know the specifics, but due to the DAG size the ETH hash rate on AMD RX400/500s is starting to slowly drop, and will be behind the performance of their Nvidia counter-parts in a few months time.
And then they'll buy back at horrendous prices when the Price goes up again? Seems like shortsighted people do this. At least they could play some tremendous video games in the mean time ;)
It's not just the price, but the rising difficulty[1]. Since last month the price of ETH dropped by more than 50% (from a record high bubble). In the same time span, difficulty - how much ETH you can expect to get per whatever your GPU's hashrate is - has nearly doubled.
A whole bunch of people bought in last month when mining profitability calculators were saying you could make $X per month per card, where X is a significant percentage of the card's retail price. Now it's $X/4, the difficulty continues its steady rise, and the fiat price of ETH is totally unpredictable but appears to be on a downward trend.
Unless the price of ETH returns to record highs, the cards people bought last month will never pay for themselves. That's why they're flooding eBay.
They can still profit off the GPU's at current rates, if a glut is coming. For personal use I bought some brand new R9 390's last year @$270. If I had wanted to sell them used about 2 weeks ago I could have sold them for about $700 pretty easily.
Lots of room for margin in selling them early and getting back in after the glut if you're looking long-term. Just take a few weeks out of mining.
It's a 21st century gold rush... the prices of shovels rocketed up that the money hungry-people now see selling used shovels is more profitable than digging up the gold.
Econ 101 obviously says the price of shovels will now go down...
I sold my hardware last week. GTX 1060s, a 1080, an AMD R9 290X, some other stuff.
Unless I'm missing something, there's no huge flood of video cards on ebay. There's maybe ~20% more than there was a week ago. All told, for the in demand mining hardware, you're only talking about a couple thousand cards.
Bitcoin is down 20% over past 7 days; Ethereum, 30-40%.
That said, I don't think people sell that fast. Back when I GPU mined Bitcoin (2011), when the price fell from $35 to $2, I turned my miners off and waited a few months before selling. (If only I had kept them going, but that's a sad and off-topic story ....)
The 2011 mining wave was great. I sold a couple 7950s I had for double the price of what I bought them for only about a month prior. Sadly I missed the Ethereum wave
Yeah I was just checking this myself, nothing great there. I did look to see what my 1070 was selling for recently at various online sites. Looks like they did spike in value starting in June, going from $380 to $500 and being sold at fewer places.
Interesting, looking at the price graph Ethereum's price seems to correlate with Bitcoin's, which lost about %20 of value ($500) recently. In case anyone's wondering, the crash seems mainly driven by anxiety of an upcoming blockchain fork splitting the currency in two next month.
An interesting comment there mentioned the need to control private keys (as opposed to leaving them with an exchange) to take advantage of a split by selling coins on both sides of the split.
The prices of all cryptocurrencies are strongly correlated with Bitcoin (ETH included). Partly because it is the most publicly known, but also because a lot of places still need to transfer fiat -> BTC -> othercoin
The graph shows a currency pair. So one currency is being sold in exchange for the other.
When you see currency pairs like this, ETH/USD, the first currency (ETH) is the one being bought, the second currency (USD) is the one being sold. If the chart is going up, the first currency is becoming stronger against the second. If the chart is going down, the first currency is becoming weaker against the second.
In that light it does make sense mathematically. The currency being sold is the denominator and the currency being bought is the numerator. The value of the currency being bought, the numerator is directly proportional to the exchange value of the pair. The value of the currency being sold, the denominator, is inversely proportional to the exchange value of the pair
EVE Online was built in Iceland. It is no coincidence that the "InterStellar Kredit" and the "ÍSlensk Króna" have the same currency symbol. Iceland at one time had great aspirations in the banking sector...
It comes from the currency markets. What you really care about is the relative value of the first currency. The last or bottom currency is the base currency which is what your using to gauge the value of the first relative to other pairs with the same base.
It depreciates to a point. An i7 2600 depreciated about half its value when the next generation came out, but 5 years later it still sells used for 40% of its MSRP. The era of older chips being downright worthless passed circa anything since ~2006.
The start of that era for GPUs was much more recent because they matured much more into recent times, but I would easily say anything from the AMD 4000 series or the Nvidia 400 series and up has held value long term.
There is also some "classic" rebound for parts once they drop off the retail market. If a specific component in a system from 2012 dies, be it the motherboard; processor; or ram, the supply of replacement parts will gradually dwindle over time as old hardware breaks down. It makes what you have all the more valuable.
I still have a near-complete Nehalem desktop with the original i7 920, which has a used retail price of around $30 (it depreciated a lot more than the aforementioned i7 2600k because there were still substantial IPC improvements between their generations) but my x58 deluxe motherboard can still be sold used for about $150-200. It has had a depreciation in 9 years of only about 30% from what I paid for it. Meanwhile the ram is almost worthless, mostly because DDR3 is still available in retail.
This is also why its usually recommended to either buy new or buy the immediate last generation hardware on the cheap. Anything older becomes a scarce resource for repair purposes and can maintain value as such.
Also, said depreciation is intensified by cryptocurrency mining. It's basically GPU torture and buyers in the used market are (rightly) distrustful of GPUs that appear to have been used for mining.
A friend of mine flipped a brand new GPU on eBay for ~twice its MSRP last month. It'd be hard to do that consistently though, as the limited availability in stores was temporary, caused by the surge in ETH mining. Also the fees and risks involved in selling on eBay quickly eat away at the profits.
Or maybe people will actually develop things that //require// generic algorithms, and multiple diversity of them so that it /forces/ generic hardware proliferation.
I think he just wants the video card to play games. Gamers have suffered from low supply of graphics cards because of the mining fad. With that dying down, they should be able to buy a card now.
Kinda, I needed a new card to power two 4k monitors for my office setup. Needed it that day, so amazon was out of the question. All the local stores had 1060s for basically what 1080s run at. Ended up just buying a 1080 for a few bucks more, because why not. Apparently the 1060s are really good for ethereum...
I dislike the idea of a crypto-currency that is biased towards specific configurations of silicon because it dis-proportionately assigns value and encourages cabals to form to amplify that distortion of value.
These cards also signify the use of electric generation towards 'mining' for virtual currency instead of more productive uses for society: even including entertainment. The mining raises the overall cost of electricity for everyone.
Sorry if this is a dumb question, but does a single party control the difficulty level of Ethereum and Bitcoin? If so, it seems like they have massive control over the market. If not, how does it work?
The target amount of time per block was set as a global constant (1 block every 10 minutes for bitcoin, 1 block every 15 seconds for ethereum). At fixed intervals, the difficulty is adjusted based on the actual rate of mining. The computation is deterministic, and agreed upon using the standard consensus mechanism. No individual controls it.
So does that mean the network is now demanding each ether be mined every 12 seconds (20% harder statistic mentioned in the linked article), or the difficulty has increased naturally? E.g. there has been a large spike in the number of ether miners lately, which has caused the network to naturally readjust the difficulty to maintain the 15s/ether mining rate? If so, these GPU miners leaving the field would readjust the difficulty back again towards the original levels, or is this difficulty change a more permanent thing due to some underlying change in the technology?
> So does that mean the network is now demanding each ether be mined every 12 seconds
You have it backwards. A 20% increase in difficulty would mean that a block was only being mined once every 18s. The intuition is that if there are fewer blocks, then it is harder to get one.
I think this change is due to the etherium difficulty bomb:
The network collectively determines the difficulty based on how much compute power is being used. Specifically, it adjusts the difficulty up or down based on whether blocks are being found (relative to a constant expected duration) too quickly or too slowly respectively, which ensures the time taken to find blocks stays within a small interval.
How does "the network" decide this? And what's stopping me from setting the constant to something lower in my own mining code? Does it follow that if most people in the network are duped into a ridiculously high difficulty, that it will be impossible to mine more BTC?
The difficulty calculation is built into the software.
Solutions to the meaningless problem that must be solved to "win" a block are rejected if they don't match the network difficulty, so setting it low on your computer just wastes your computation entirely.
> And what's stopping me from setting the constant to something lower in my own mining code?
The difficulty constant is determined by an algorithm that takes into account the average time that it currently takes for a new block to be mined. It tries to balance difficulty so one block is mined every 10 minutes, on average (if blocks are being mined too fast the difficulty increases, if blocks are taking too long to mine it decreases). This algorithm is part of the "bitcoin protocol" and you can't just change it in your own mining code because the other nodes in the network will not recognize your blocks as valid if you use the wrong difficulty constant
> Does it follow that if most people in the network are duped into a ridiculously high difficulty, that it will be impossible to mine more BTC?
This is kind of what has already happened. Nowadays there is specialized bitcoin mining hardware out there which is has driven the difficulty into the stratosphere. Bitcoin mining using CPUs and GPUs has become unprofitable, which is why the small miners have moved on to alternative cryptocurrencies where they won't need to compete with specialized hardware.
Thanks for the response. Out of interest, what are the smaller currencies that may still be profitable to mine with a 2012ish GPU, aside from Etherum? I've read that LTC is unprofitable, for example.
The value of the smaller currencies is tied to the value of bitcoin and bitcoin is down 30% this month so I doubt that there will be much profit to be made here today.
I don't know about Ethereum, but in Bitcoin the amount of time previous blocks took to be found is used as an indicator of hash rate, and the difficulty is automatically adjusted to keep block generation at about 10 minutes per block, so no, it's not centralized. There isn't really anything that is truly centralized in BTC.
In case anyone is not aware, there are user-friendly tools (that take their cut) which ensure maximum mining profitability for available hardware.
NiceHash, MinerGate, Awesome Miner and others - many have an affiliate program and fight against botnets (and antivirus often block the actual mining programs they download).
Thanks for the heads-up! I saw NiceHash and MinerGate mentioned off-hand in a random well-SEO'd article as easier alternatives instead of setting up everything manually[1] (before that I didn't even realize this was a thing!), and Awesome Miner came up recently as an option that appears to be freemium with a one-time purchase instead of a percentage.
I chose NiceHash personally because it is open source. It was literally download, click 'Benchmark', then after that finished, click 'Start'. They even transferred the ~$3 I had earned when the Bitcoin transaction fees dropped low enough to make it "worth it" even well below their normal minimum payout threshold.
Do you have time to provide a bit of context for your links? The first one doesn't even mention "MinerGate" on the first page of the 30 page discussion, and the second is just a yes/no list with no explanation of why things are where they are on the list or credentials for who made the list. There doesn't seem to be any recent or ongoing massive backlash against MinerGate anywhere online.
Yes, although my understanding is that the transition will be gradual. PoW rewards will gradually decrease while PoS rewards gradually increase, facilitating the tranisitioon without all miners jumping ship. Miners who are invested in Ethereum may choose to convert their mining profits into stake.
I see an ebay buy it now for four 8GB RX 480s for $360. $90 a piece seems pretty crazy low - does that mean there's a high likelyhood of hardware failure after these things were used for mining?
It works like a Ponzi scheme. The people who are buying now give their money to the people who got in earlier. As long as more and more people buy its great but eventually you run out of buyers - optimistically the price will level off but more realistically it'll crash.
There are many possible scenarios. IE people will hold the Ether under the assumption that it will be more valuable in the future. If the supply of "sellers" goes down and the number of "buyers" stays constant, the price will continue to go up (ignoring new ETH being created for simplicity).
As to how ETH could become valuable? Well if the network really does scale and the possibility for decentralized apps really does come to pass, then this is an incredibly transformative technology with a lot of potential, that runs on ETH.
Ponzi schemes are scams because there is no value created, and it is known to the scammers that there is no value being created. With crypto currencies the value is big "unknown" which is why it's speculative, but it certainly isn't a "scam" sense there is true potential there.
It seems likely that more advanced currencies will continue to be developed. Why would ETH continue to hold value when a more advanced currency comes around, just as ETH has eaten into BTC mcap? It may not be an intentional Ponzi scheme, but it seems like a bubble economy.
Same argument can be made for stocks in companies. Sure it could be a bubble. No one knows the value of this stuff it's still 100% speculative (not generating a known return). That's why there's so much potential for massive returns at this stage.
That said, don't put money that you can't afford to lose into cryptocurrencies or there's a good chance you could get hurt.
Also, it's a great way to get easy exposure to high risk investments as a part of your risk adjusted portfolio.
Stocks and crypto are both subject to speculation, but it's apples and oranges. The actual value of a stock is its discounted future value. When people speculate on stocks, they speculate on what its discounted future value is.
With crypto, the discounted future value is by that definition zero. People are instead speculating on what the consensus value will be, i.e. what they will be able to sell it for. It seems that in time the consensus will favor the currency with the best technology, not the one that was first.
(My personal bet is that all crypo will trend towards zero eventually, but that's besides my point here)
Sure, once there are fewer low hanging fruit improvements to be made on existing currencies, something will eventually reach sufficient network effect that it will be very very difficult to usurp
There is a point of view out there that Europe's higher than average reliance on renewables has bumped up electricity prices there and contributed in making the place less competitive for industries. You can see that argument in action when European miners are losing out to others due to high power costs.
Generally speaking, any slowdown in economic activity will lead to a slowdown in global warming. The question is always: is the new equilibrium better or worse for all involved? (Think of the unemployed)
I think a better metric would be $GDP / ton CO2 to see who's efficient and who's not. Unfortunately, GDP numbers are not really standardized, at least countrys' individual way of calculation GDP varies greatly.
That point of view seems rather uninformed, because industrial and residential pricing of electricity, gas etc. are virtually unrelated, and the former doesn't include new extra taxes for renewables in any country I know.
Worst place to ask this, I know, but... If I wanted to upgrade my old machine that currently has an HD 4770 (PCI Express 2.0 x16), where exactly could I find a worthwhile upgrade for less than $20?
This is the primary reason I bought NVIDIA cards, rather than AMD. Mining is still profitable now, but if it all went to nothing tomorrow I'd still have a pretty competent CUDA box to develop on.
If you really believe that, then put your money into a short position and profit handsomely. But I suspect you are just talking, and don't believe what you say enough to risk a dollar.
Maybe this is an incredibly uneducated comment, but won't they have to buy those GPUs back when the price of ETH inevitability goes up again? This is all just FUD from August 1st, ICO instability, and lack of Ethereum use cases. All of these issues have resolutions planned. So one would be stupid to think Ethereum stays at $150 for even a year.
> All of these issues have resolutions planned. So one would be stupid to think Ethereum stays at $150 for even a year.
Honestly, there is nothing anyone can do to convincingly predict the future price of something like Ethereum or Bitcoin, because they are purely speculative investments.
It certainly will. With a number of participants in EEA and attention from governments like Russia and Singapore. Plus, eventual Casper update that does facilitate ETH staking as a decent form of position in the crypto market that will only grow down the road. It’s a long term approach but one has to believe in tech itself of course.
Look at Tezos - they used the success of Bitcoin (and Ethereum) against itself, by the way they funded a totally competing blockchain. You can be bullish on the future of crypto and a bear on BTC and ETH prices, if you envision a future where dozens of tier 1 blockchains compete (and interoperate).
A computer with 7 GTX 1070 graphics cards should produce ~230 mh/s and draw 1 kw. This would cost approximately $30/month in power factoring in kw demand + cooling.
The above setup will currently generate $385/month in ETH.
So basically for miners who are in the right spot with the right facility, this is still profitable. The question is of course for how long. You also need to factor in the cost of equipment, datacenter, employees and difficulty/price.
But even if you dont have a facility in washington and just mine from your apartment, your power cost would probably be $100 a month. So its still 'profitable', just not nearly as much as it was in the run up.
Cliffnotes: 'professional' miners dont care. Even with the 'crash' today, they are making more per day than they were before the entire run up. For instance the 'worst' time for mining was December 2016 where you would only make $7.50 a day gross in ETH.