The bitcoin phenomenon continues to fascinate. Somewhere on this thread back a few months, I commented on the energy costs incurred to calculate new bitcoins. This is becoming a bigger and bigger factor in its viability, as Douglas Heaven notes in NewScientist (15 December 2018, paywall):
The blockchain is kept going by miners, who run expensive, energy-hungry computers in exchange for the chance to be rewarded with bitcoins each time they update the ledger. In the boom times, mining operations sprang up in places with cheap sources of electricity, essentially as a licence to print money. But as bitcoin falls in value, miners are being paid less and less. Unable to cover electricity and hardware costs, many are packing up.
“You have to constantly explore to find cheap power,” says Idon Liu at Node Haven, a company that provides cloud computing services to miners. With bitcoin around the $4000 mark, you need to be buying electricity at no more than 5 cents per kilowatt-hour to break even, he says. But it is hard to find power that cheap. “Now we’re at $4000, people are getting nervous,” says Liu. “They are dumping hundreds of thousands of machines.” Last month, GigaWatt, a large mining operation near Seattle in Washington, went bankrupt. Pictures online show miners in China clearing out wheelbarrow-loads of servers.
The editors of NewScientist pile on in an editorial:
But here is the good news: we should be celebrating bitcoin’s downfall. What began as an interesting experiment has morphed into an environmental disaster. It is estimated that running the bitcoin network now consumes 45.5 terawatt-hours per year of electricity – enough to power more than 4 million homes in the US. As the world seeks to cut down on our energy use, shrinking bitcoin seems like an easy win.
It’s hard to argue. As I said previously, I don’t disagree that currencies controlled by governments are subject to abuses. Indeed, the recent controversy over President Trump’s alleged interest in removing Fed chair Jerome Powell has highlighted the acknowledged dangers of letting amateurs get their hands even near the levers of monetary policy, never mind the actual printing presses.
However, exposing currencies to open markets, inexperienced users, and speculators, and powering them using a technology which is, ultimately, endangering civilization, is beginning to appear to be a mistaken experiment. If most or all of our electrical grid were supplied from carbon-neutral sources, and there was plenty, it’d be worth leaving bitcoin in operation as a human experiment, and let the pieces fall where they may. But in the absence of an overwhelming advantage to bitcoin, its energy demands are making it a flawed approach to the problem of fiat currencies.
