It’s a simple equation:
So long as there is more money in mining BTC than there is cost in energy to mine it, mining will proceed.
No entity in the world can control the price of crypto. But, we can and already do regulate energy production.
I think we need a carbon tax, that is specifically a financial disincentive towards any means of energy production that directly pollutes the atmosphere.
Seriously, what are the current best arguments against levying such a disincentive?
Moreover, if energy were priced correctly (its toll on the climate priced in) would BTC become higher in value? That is, we have a supply, increasing at a rate fixed between the arbitrage of energy and mining efficiency. If energy were to become more expensive, the growth in supply would slow. Assuming demand remains constant or continues to grow as well, the only way for price to go is up.
To me it seems like Bitcoin (and other pow cryptocurrencies) are almost like the climate change scapegoat for a number of social and economic issues that have seemingly come to a head recently to facilitate their rise.
People mine because it is expensive, it isn't the other way around, so the real questions we should be asking in good faith are things like "Why it is profitable in the first place?" and I think it is probably related to other questions like why have the greater financial markets become so wonky, why has the behavior of investors changed so radically (GME et al), why have politicians been unable to be effective policymakers for decades, and why many institutions, both social and political in nature, appear to have become less trustworthy in the eye of the greater public? These are some of the questions among others which I think probably provide a better understanding of what is happening than the overly simplistic 'ponzi scam' explanation that has been repeated ad nauseam since its inception.
Bitcoin is just one of many things (pretty much everything) that have been able to use energy profitably, while subsidizing the costs by externalizing them via climate change, that part isn't new. People get too caught up on bitcoin because it is new and nobody understands it (not just from a technical perspective), so it is really easy to dismiss. Singling it out in that manner seems silly.
I don't think the criticism is exactly wrong, but it's more like Bitcoin mining is the reductio ad absurdum exposing the waste of resources that goes into gold mining (yes, there's some industrial uses, but that is a rounding error compared to the quantities that are dug up, purified, cast into bars, shipped around the world and buried back underground in vaults).
I think Bitcoin (and crypto in general) has prooven to be disruptive in many areas (in a negative way) and has yet to deliver any tangible positives that would outweight the negatives.
It's basically becoming a unregulated comodity that big money institutions get to gamble with because there is just nowhere to put the money on the market right now. If bitcoin and crypto (ETH, etc.) was just a money dumping speculation comodities I wouldn't even bother thinking about it - but it's causing realworld problems (eg. hardware disruptions) and it's going to get worse and worse.
So I'm in favor of preventing institutional investors in crypto in some form, but unfortunately it's not going to happen - too many individual interests behind it at this point and nobody gives a fuck about the overall stability.
> People mine because it is expensive, it isn't the other way around, so the real questions we should be asking in good faith are things like "Why it is profitable in the first place?"
FOMO, mining lotteries, and the guise of financial innovation are typical cover stories here. But all stocks and other publicly traded investments are basically making a bet that others will buy in after you do, raising the price higher. Most stock owners hope this very thing, though some stocks actually pay dividends on profits. The same is true with BTC with the added benefit of that novel mining lottery thing going for it.
> These are some of the questions among others which I think probably provide a better understanding of what is happening than the overly simplistic 'ponzi scam' explanation that has been repeated ad nauseam since its inception.
So what if the rich have too much money? That would explain a lot. It would explain why GME stock was shorted %140 of float.
It would also explain why politicians are so ineffective at regulation. If you were rich, would you want effective politicians? No. You would put your money behind the least effective politicians.
It would also explain why most institutions have become less trustworthy in the eye of the public, as big money has corrupted the system.
And finally it would explain the gold rush on BTC. Because they need new investment vehicles.
Yes. Cryptocurrencies are used because they're the only market that hasn't yet been regulated to death. People come to Bitcoin for 2 reasons, mainly:
1. It's a practical way to store value without the government destroying it by monetary emission.
2. People are free to speculate.
The solution to the first point is that governments should stop pulling the rug from under people's feet. Monetary emission should be predictable in the short, medium, and long term, or be tied to some real world indicator, like the cost of consumer goods. Just stop with this inflationary nonsense.
Problem 2 will be partially solved by time. Relative price changes in Bitcoin are reduced each cycle, so by the year 2030 the incentive to speculate in the short term will be much smaller. We will see it more as a long term investment. Another solution is to deregulate other markets so that we can freely speculate in them and stop putting as much attention to Bitcoin, but I don't think politicians are very eager to do that, and it could also have some negative consequences.
> why have the greater financial markets become so wonky, why has the behavior of investors changed so radically
Since the global saving glut (1), the best question to ask of crazy asset valuations is not "does it reflect the fundamental value?", but "does the money have anywhere else to go?"
Loss of trust. Trust in society creates enormous efficiencies. We're seeing the loss of those efficiencies as society splits apart into more and more tribes.
Bitcoin, in part, is a marker for loss of trust in governments. Trust in their motives and/or ability to responsibly steward currencies.
I think the problem with the whole economy right now is wealth inequality. You have a lot of people really struggling, which keeps overall prices low, but the top 10% or so of earners have more money than they know what to do with. The pandemic cut my expenses by probably $1000/mo in addition to the huge bonus I got last year, I literally have money burning a hole in my pocket.
Where do I invest that cash? Equities are obviously overvalued as an asset class, and treasuries return basically zero, so people are buying up real estate and crypto instead, and using some cash on the side to gamble in the options market. But this really only exacerbates the wealth inequality problem.
> "why many institutions, both social and political in nature, appear to have become less trustworthy in the eye of the greater public?"
It sounds like you're saying that bitcoin is like a hedge against trust in government. A sort of financial measurement of conspiracy theorism. This is a fascinating perspective, but I'm not sure who is financially exposed to that form of risk. It seems like a great vehicle for speculation ("do I think people will trust institutions more or less in the near future?") but not much else. I'm sure there's someone who stands to lose money if public faith in government erodes. but its difficult to imagine that investor
"People get too caught up on bitcoin because it is new and nobody understands it"
We understand it quite well thank you (and it's not new!) - far far more often than not, it's the BTC proponents who don't really grasp what it is, and it's not the 'technical aspects' that are the most salient factors.
Bitcoin creates no value.
It's 'profitable' to an individual, but not the system as a whole - and because it has negative externalizations in the form of CO2 emissions etc. - it's actually a net negative.
Making magic digital baseball cards and trading them does not help us make roads, bridges, iPhones, software, drugs, vaccines, clothing, homes - it just makes all of that a little bit harder actually.
Much like residents of Easter Island using all their resources competing to make Giant Heads. Those heads may have mad some people very powerful, they did not help them grow food, make boats.
If all BTC mining stopped right now, not a single thing would change, other than the price of electricity would be a little cheaper in some places.
BTC isn't going to 'end the world' but the energy consumption is a really negative artifact of this purely speculative activity.
There's not so much wrong with people wanting to exchange digital baseball cards if they want to do that - fine - but with the externalizes it's a problem.
Since the cryptos electricity usage, at least that part which is generated by fossils, is a real problem (it is) - it would be nice to see this problem addressed with blockchain technologies.
Carbon offset tokens, or some token that will increase in value when cryptos global electricity usage goes up, and offsets with renewable projects. If it were funded by governments in billions of dollars it would make an impact, and everyone could participate in funding the token.
The problem must be addressed in altering the fossil/non-fossil energy mix. You are not going to control the financial incentive to mine, or kindly ask ppl to use less electricity please. Carbon taxes have been proposed but you would have to get that done globally, they are certainly working on that from a political perspective but you never know there are always resistance to a new tax.
Mining difficulty tends to be a lagging indicator of price, not the other way around. I doubt that a price increase in power would have much affect on the price of the currency itself.
We 100% need massive carbon taxes right now. It's really telling how the energy industry is trying to push blame to consumers, especially cryptocurrency miners, in order to distract from the discussion of real carbon taxes to force polluters to pay for the damage they're causing.
I'm sure I'm one of the largest supporters of cryptocurrency in this thread so far, and I'm perfectly comfortable stating the obvious that mining with fossil fuels is an abomination. It's going to keep happening though until regulators get serious about reigning in the fossil fuel industry.
Would you support a carbon import tariff for PoW cryptocurrencies mined outside of countries that implement a carbon tax? Because otherwise I can just imagine mining moving to countries without one, as is already happening with regards to other climate-based restrictions.
> if energy were priced correctly ... would BTC become higher in value? ... If energy were to become more expensive, the growth in supply would slow.
It doesn't work like that. The consensus algorithm targets 1 block mined every 10 minutes. If the amount of energy expended goes up (i.e. blocks are mined more frequently) then the difficulty increases to counteract it. If the rate of block production decreases, then the difficulty decreases to counteract it.
(I've used "difficulty" here in the English-language way. Confusingly, "difficulty" is kind of backwards in Bitcoin - the "difficulty" is a number that a mined block hash must be below - it gets more "difficult" to mine a block if the "difficulty" number is lower. Maybe it should be called "easiness" instead of "difficulty").
And this is exactly the problem with Bitcoin. Adding more computational power to the network changes absolutely nothing in terms of the amount of mining completed per unit time. Instead it just shuffles around the chances of being the one to succeed at a block.
This is something that I'm not sure many people actually understand. Because in the physical world, increasing your energy input into mining will result in more output of the resource you're mining. Adding another excavator to your mine doesn't reduce the effectiveness of every other excavator in the world.
We know since many decades that a carbon price might be a good idea. But it's not that simple, because either you do it worldwide or you introduce lots of exceptions or you do something like carbon import tariffs (which the EU wants to do, but I think no such mechanism exists anywhere in the world right now).
Bottom line is: Most of the world has no carbon price, and the places that do have one (e.g. the EU ETS) there are so many loopholes that it is not very effective. It's not that it isn't worth trying to do better, but a carbon price is definitely not a short term solution.
So I'm inclined to think whoever proposes a carbon price as "the one true solution" really doesn't want a solution at all.
The age of the proposal for carbon tax mirrors the age of sophisticated "reasons" why it should not happen or why it's supposedly not a good idea "if you think about it".
Nonsense. It's lobbyism. In more drastic terms, corruption. Plain and simple.
We can have this "discussion" once significant industrial nations have implemented a carbon tax. Until then, it's all just excuses. Similar to all the bunch of nonsense people come up with why they can't start working out today or save money today or go to bed right now instead of after watching the next episode of whatnot-series.
I don't think it helps that carbon isn't the be-all, end-all in the polluting effects of general consumption (including crypto mining). Even if all these miners were 100% green energy, the green tech would still be a net pollution on the world. I wish we stopped thinking of things so simply.
It already worked in Australia until conservatives and vested interests ran an aggressive media campaign, facilitated by Newscorp.
Emissions dropped. Consumers didnt notice a hike in prices, or where they did, switched.
An increase in energy price wouldn't (in equilibrium) affect the Bitcoin price - it would affect the Bitcoin block difficulty, requiring less energy to mine the blocks (the mechanism being that miners unprofitable at the new energy price are driven out).
Turkey - a minor economy - was able to crush the price of BTC by 15% with their recent ban. A large economy doing the same could have a major effect on price. Energy and hardware use is directly aligned with price.
If there are any Governments out there who desire to fight climate change - and it seems like there are a reasonable amount - then illegalising proof-of-work coins seems like a reasonable step at least from an energy use perspective.
The growth in supply would not slow - in Bitcoin every two weeks you have a rebalancing of difficulty, so if miners have less hashing power the difficulty of producing each block gets lowered to keep the supply stable.
Sure, but energy usage still goes down. Revenue from block rewards is limited. Costs can’t exceed revenue or unprofitable miners will drop out. More money spent on one expense (the carbon tax) would mean less can be spent on the electricity itself.
Or more likely they’re outcompeted by anyone who doesn’t have to pay the tax, such as miners using green energy or in a jurisdiction without the tax.
Wrt. your second question: Supply of Bitcoin is pretty much constant, regardless of energy expended, regardless of mining technology. The causation runs like this: demand -> price -> mining. Less demand, lower price, less mining. More demand, higher price, more mining. This is different than any other resource we are used to, because the supply of nothing else is as constant as with bitcoin. If the cost to mine Gold increases, the supply goes down and the price will rise.
Wrt your first question: The best argument against making energy more expensive is the same argument as it was 100 years ago:
If you use energy now, you build a more prosperous civilization for the future. Your grandchildren may have to deal with a warmer climate, but they will be much better able to do so than if they were more poor.
This argument stands and falls with your evaluation of the benefits of using more energy, the costs of a warmer climate and how you weigh these against each other.
> Seriously, what are the current best arguments against levying such a disincentive?
The best argument against it is: it's very hard to enforce it on everybody internationally, and if one country adopts it unilaterally, then production just moves to another country (making everyone worse off - same amount of pollution, but the production is presumably less economically efficient).
The second best argument against it is "the tax shouldn't be $x/ton, it should be $0.5x, which is a more accurate reflection of the external costs".
A distant third, but very effective in practice, is "the carbon tax is good, but it shouldn't apply to Special Interest Area X, because of these social/political/historical reasons..."
These aren't completely unsolvable problems, and people do try. But if your question was genuine, I hope you now see that there are some reasonable arguments not to just do this tomorrow.
> The best argument against it is: it's very hard to enforce it on everybody internationally, and if one country adopts it unilaterally, then production just moves to another country
So tax imports (including the carbon cost of shipping)
It would likely require agreement between the US and EU to shift enough of the global consumer market to actually care, but with Poland and Texas that doesn't seem likely.
Absolutely agree, thanks for this reply. I was cognizant of the foreign policy implications (how would this possibly get implemented globally) but I hadn’t heard or considered your points 2 and 3.
Given how much lobbying I suspect there is, 3 probably isn’t all that distant of a concern. Especially in older industries, say railroads or trucking, I understand there could be a lot of contention.
And as others mention, I think there needs to be a separation of taxation by segments of polluting activities. Would burning fuel in a combustion engine count as taxable energy production? Only power plants? What about agriculture, construction, material production?
Like, in reality miners will use whatever power is cheapest, and solar is currently the cheapest. They are also extremely* agile and can shift location/power source in a handful of days which leads me to believe that they are currently driving adoption of solar, BUT: with miners being framed as The Big Threat, we might be able to finally use that perception as a crowbar to remove incentives for energy sources that pollute and even impose heavy taxes on those sources and end up completely digging out the oil/coal industries.
Win Win Win as far as I’m concerned.
*Apparently unless you can buy an entire power plant
Well that's fine, no legitimate businesses hold them. Seriously. Your suppliers are paid in dollars, your tax burden is in dollars based on the conversion price on receipt. To hold them on receipt is wildly irresponsible speculation, as a business.
What we need a get rid of all the print and spend politicians. The reason for the raise of bitcoin is a direct response to the trillions and trillions of dollars just printed out of thin air.
It is insane how much grocery cost nowadays. I was at the supermarket last week and was looking at lobster, I thought it was listed for $6.99/lb for those 1 to 1.25 lb size, but when I got closed, it was $16.99/lb. It is crazy. Blue Crab at $5/each.
Well less energy does have downsides, see: all the things we use energy for. We probably don’t want to tax that except to prevent terrible harm. So I can imagine an argument being along the lines “alternative energy production isn’t ready to meet demand yet, oh and also burning carbon is useful for figuring out alternative energy (see: Tesla and the coal in China that’s burned to make their batteries) so how about instead we greatly fund alternative energy”.
Are not renewables (that is, wind and solar) the cheapest energy sources today? If I understand correctly, that would mean that bitcoin mining has to use them (in order to stay competitive), and bitcoin is effectively subsidizing renewables (because it pays money for renewable power generation, especially at times with low other demand - which makes expensive storage of electricity less of an issue).
The only thing necessary would be to cancel ASAP any public subsidies for fossil-powered generation of electricity (which is a measure that is overdue anyways).
AFAIK No, BTC algorithm ensures fixed mining difficulty (so amount of mining&minners doesn't matter (only for overtaking network)). Actually if too much BTC will be mined by limited amount of miners whole coin my lose value, e.g. if we require that barier to entry is having own power plant BTC might get destroyed by too greedy miners.
IMO BTC existence is possibly good as it raises demand for cheap energy (and currently green energy is cheapest it seems), it's also good as forcing function for fiat.
> BTC existence is possibly good as it raises demand for cheap energy
As opposed to the rest of the economy, which only demands expensive energy?
It would be pretty funny though, if the world's various governments decide BTC is an existential threat to their legitimacy and institute a carbon tax to destroy it.
> IMO BTC existence is possibly good as it raises demand for cheap energy (and currently green energy is cheapest it seems), it's also good as forcing function for fiat.
No. It increases demand for energy period. Increasing demand makes energy more expensive, not less.
The carbon tax should be earmarked to be spent capturing carbon, and cover about 2x the emissions of the power generated.
A handy rule of thumb, for gasoline: A gallon of gas produces 20lbs of CO2. A ton is 2000lbs. If a carbon capture technology costs X dollars per ton, it costs X cents per gallon.
Most carbon capture technologies will be in the $15 to $85 per ton range when they scale.
Therefore, a $1/gallon gasoline tax (and equivalent for coal, etc), would be enough to solve climate change.
> we can and already do regulate energy production.
True. If BTCUSD goes to $1m AND you have strict global regulation banning carbon energy, it will be a powerful incentive to harness green energy, which will be good for mankind in the long run.
I think we need a carbon quota. Something grounded in the hard reality, not a tax you can bypass or finance indefinitely with a money printing machine (edit: or bitcoin :).
The price of bitcoin will only rise if it's more pricey to mine. Miners will never (or almost never) sell their new bitcoins against a lower price than they invested.
> I think we need a carbon tax, that is specifically a financial disincentive towards any means of energy production that directly pollutes the atmosphere.
Then by all means lets ban video games which are an extreme waste of electricity polluting the atmosphere for no good reason.
US co2 generation on the grid is about 0.5kg per kwH, so would add 10c/kWh.
That means that your PS5, using 200 Watts, costs an extra 2c per hour to play -- on top of the existing 15c/hr for normal electric costs.
A single bitcoin transaction of 780kWh would cost $78 and a transatlantic flight about $300, or $1.20 to a gallon of gas.
Make the tax $2k/ton, it raises your PS5 cost from 15c/hr to 25c/hr and a bitcoin transaction to $780 and take transatlantic flights back to the cost of the 70s
That sounds fine to me. The energy used by a PS5 is insignificant.
> You see how this reasonning can go?
Yes I do, it sounds really exciting.
The money raised would be spent on carbon reduction (which gives a financial incentive to Brazil to not chop down rainforest, or pays for other forms of carbon capture), and disincentivises carbon usage. Brilliant.
>I think we need a carbon tax, that is specifically a financial disincentive towards any means of energy production that directly pollutes the atmosphere.
Ok then lets end 2 biggest industries that pollute the planet the most.
Construction and food production.
We can live in environmentally friendly uniform grey boxes and eat protein bars.
Carbon tax is unusual in that it has a major benefit simply by suppressing consumption.
If an alien civilization invaded earth and imposed a carbon tax, and took all of the proceeds back to their own planet, then we would still be better off.
Governments don't have to profit from it. In fact to get the desired effect (less carbon) the tax should be revenue neutral. It should be used to fund UBI or give everyone a tax credit.
Hard to do this when you can have other countries with much looser regulations allow Bitcoin miners run rampant.
What probably should happen is to make converting from any cryptocurrency to major world currencies a crime. I have no delusions that this will halt activity in this sector entirely, but it will make it reasonably difficult to make any substantial money this way without raising some serious eyebrows.
It is also hard to manage humanity if the temperature increases by 5 degrees celsius.
Yes, this is hard policy to get right. So what? We have the entire world to figure this out and we are on a timer. Any first attempt will have flaws and loopholes and need to be improved over time. But this is just an excuse for people to avoid acting.
We need to do something. A carbon tax is the least extreme solution that has any chance of functioning.
A carbon tax won't halt activity but it could cause the price to drop. If Bitcoin drops to $300, it is no longer profitable to mine. I agree that making it illegal would help. Main street would be loathe to depend on wire transfers to Hong Kong to transfer in/out. However, given Coinbase just went public, there will (unfortunately) be way too much political pressure to kill the segment.
easy? How do you enforce it worldwide? If you impose it volutarily then how you don't lose competitive adventage?
It's only possible now because clean energy ia cheaper (but still cannot compete in emergency situations), so we should invest in fission and fusion research
EDIT: I'm in favor of carbon tax BTW, we can afford it now and will incentivise investment in green tech more
Why tax carbon emissions rather than directly taxing the manufacture of bitcoin? Carbon taxes increase costs for everything. Should we increase the cost of say, hospitals because some people _really_ want to mine bitcoin?
Yes, because everyone should pay the "real" price stuff costs unless deliberately subsidized. If hospital bills go up because of it (doubt it), then subsidize hospitals. The incentives will be much better in that world. Hospitals can for example optimize for using less energy, which would be a win for the world.
Just look at Europe and the effect of the carbon tax there. I don't have links (sorry), but there are lots of studies "proving" that that makes for a more efficient and optimized market aligned with the desired outcome.
Because Bitcoin is not the sole cause of climate change, carbon is.
You can try to play a game of whack a mole by taxing and regulating individual activities hoping to reduce carbon as a second order effect, or you can just target the root problem.
There's will always be another wasteful use of carbon intensive energy so long as carbon intensive energy remains cheap.
Who is to say what is a valid use of energy? How much energy goes into watching television? The pollution tax should be levied such that it provides the government enough to "undo" the pollution.
Who cares? Everyone is fixated on Bitcoin... there are tons of energy inefficient processes out there. The solution has nothing to do with Bitcoin... environmental impact needs to be priced into energy itself, whatever the application. This is a failure of the markets (and therefore ourselves). Bitcoin is a scapegoat.
Here's the problem with this sentiment. Bitcoin isn't replacing anything. Not pre-existing fiat currency, not banks, nothing. Bitcoin only adds to the problem at an alarming rate.
Bitcoin is certainly not a scapegoat. It's a massive problem and, largely, a symptom of human greed that must be put in check.
So, are you saying that new technologies must be considered wasteful if they don't wholly replace existing technologies and instead create new usages of their own?
For example would you say that smartphones are wasteful because they allow us to communicate more frequently than we could before, thus they don't strictly replace an existing consumption of energy?
That seems like a silly interpretation to me. Of course our energy demands rise as we develop and use new technologies. It's because we are doing more things with them!
Also, as I mentioned in another part of the thread, I don't think it's obvious that cryptocurrencies won't replace any existing usages of energy.
I think that’s highly unlikely. Surely the people mining Bitcoin would be doing something else if Bitcoin didn’t exist. Or to think of it the other way, if there was some better way of making money with electricity then the Bitcoin miners would be doing that instead.
> Bitcoin isn't replacing anything. Not pre-existing fiat currency, not banks
How in the world do you say this? It's made significant progress in replacing both of these things. Just because it hasn't 100% eliminated all extant currencies and banks doesn't mean it's not making meaningful progress in that direction.
You should have said that Bitcoin is a bad solution to a problem. The mining algorithm is wasteful because it uses cpu/gpu cycles as much as it can to calculate useless math instead of doing something a lot less energy-intensive like proof of stake. I’m not gonna pretend to be up to date on crypto mining but useless math is useless.
Many things are symptoms of human greed, isn't that what capitalist societies are built on, after all? If carbon was taxed, you'd see a huge investment in green energy and nuclear from both BTC and everyone else then it wouldn't matter. Why should one industry pay for externalities and another not?
The failure is governments subsidize so much energy production they effectively take the market out of the equation. Remove government incentives for cheap power at all costs and then you'll see the action of the market.
I have sources who have purchased hydro plants in South America and refineries with installed power production and use the excess capacity for mining. My feeling it’s more common than a single crazy dude.
And we had imagined we'd all die in a flood of something vaguely cool, like nanotech grey goo. But no, it's going to be something as stupid as a conflagration of SHA-256 hashes.
The Greenidge team told potential investors last month that the plant had mined 1,186 bitcoins at an average net cost of about $2,869 for the 12 months ending in February. At this week’s Bitcoin price, that would translate into a profit margin of about $60,000 per mined coin.
Surely this cannot last. This kind of outsize profit ought to be bringing online enough new mining capacity to increase the block difficulty until that margin erodes away - is it the worldwide chip shortage preventing that from happening?
That's at 19 megawatts burning natural gas. So that means they spend about 140MWh of energy for one BTC. I calculate that comes to around $20/MWh, which seems to be on the low side of energy production. Coal is $40 to $143 per MWh.
The other aspect here is let's say you're a speculator and you think the price of BTC can go up another 50x or roughly $1M/BTC. Then even spending any amount less than the BTC spot price now is a bargain.
Yes, the chip shortage must be preventing the manufacture of enough ASICs.
The same can be said for Ethereum. The shortage of GPUs is preventing the difficulty to raise fast enough. The profit margin has been like 5-10x the electricity cost for the last few months. If you bought a RTX 3080/3090 it would have paid itself and the electricity by now.
Even in 2017 when AFAIK there wasn't a general chip shortage there was still a shortage of crypto ASICs because the lead time is months and Bitmain can't know how much demand there will be for mining. I doubt mining will ever reach an equilibrium.
Speculation in the value of cryptocurrency has forced the market into a regime of operation where neither the constraints of power & compute nor supply of semiconductors apply right now. The hierarchy of value constraints goes something like:
Speculation > silicon constrained mining > power & capital constrained mining
I believe the silicon constraints would instantly relax as soon as speculation falls into line based on how much hardware everyone has been stacking up on lately.
At the end of they day, the cost of energy & your ability to keep the machines operational will be the final constraint. This is the one that the long investors should anticipate. I.e. "How do I mitigate power cost in a power-cost-constrained market".
Right now at current market prices, owning an entire power plant to run your operation is folly. In a few more years when a delta of 2c/KWh is make-or-break on profitability, it makes perfect sense.
It felt like the lede is buried at the end of the article, and signals a deeper institutional issue. It looks like the Department of Environmental Conservation was petitioned to take a look at the permit for the plant claimed to be damaging lake’s environment. Meanwhile, DEC didn’t consider environmental damage when reviewing plant’s permit, wants to ignore (seemingly on a technicality) the evidence for one particular kind of damage, and furthermore last year it has discontinued the funding for tests for that kind of damage. Encouraging more coal plant construction seems strange in this age, even if we forget about this particular use case.
Readit News
No entity in the world can control the price of crypto. But, we can and already do regulate energy production.
I think we need a carbon tax, that is specifically a financial disincentive towards any means of energy production that directly pollutes the atmosphere.
Seriously, what are the current best arguments against levying such a disincentive?
Moreover, if energy were priced correctly (its toll on the climate priced in) would BTC become higher in value? That is, we have a supply, increasing at a rate fixed between the arbitrage of energy and mining efficiency. If energy were to become more expensive, the growth in supply would slow. Assuming demand remains constant or continues to grow as well, the only way for price to go is up.
People mine because it is expensive, it isn't the other way around, so the real questions we should be asking in good faith are things like "Why it is profitable in the first place?" and I think it is probably related to other questions like why have the greater financial markets become so wonky, why has the behavior of investors changed so radically (GME et al), why have politicians been unable to be effective policymakers for decades, and why many institutions, both social and political in nature, appear to have become less trustworthy in the eye of the greater public? These are some of the questions among others which I think probably provide a better understanding of what is happening than the overly simplistic 'ponzi scam' explanation that has been repeated ad nauseam since its inception.
Bitcoin is just one of many things (pretty much everything) that have been able to use energy profitably, while subsidizing the costs by externalizing them via climate change, that part isn't new. People get too caught up on bitcoin because it is new and nobody understands it (not just from a technical perspective), so it is really easy to dismiss. Singling it out in that manner seems silly.
It's basically becoming a unregulated comodity that big money institutions get to gamble with because there is just nowhere to put the money on the market right now. If bitcoin and crypto (ETH, etc.) was just a money dumping speculation comodities I wouldn't even bother thinking about it - but it's causing realworld problems (eg. hardware disruptions) and it's going to get worse and worse.
So I'm in favor of preventing institutional investors in crypto in some form, but unfortunately it's not going to happen - too many individual interests behind it at this point and nobody gives a fuck about the overall stability.
FOMO, mining lotteries, and the guise of financial innovation are typical cover stories here. But all stocks and other publicly traded investments are basically making a bet that others will buy in after you do, raising the price higher. Most stock owners hope this very thing, though some stocks actually pay dividends on profits. The same is true with BTC with the added benefit of that novel mining lottery thing going for it.
> These are some of the questions among others which I think probably provide a better understanding of what is happening than the overly simplistic 'ponzi scam' explanation that has been repeated ad nauseam since its inception.
So what if the rich have too much money? That would explain a lot. It would explain why GME stock was shorted %140 of float.
It would also explain why politicians are so ineffective at regulation. If you were rich, would you want effective politicians? No. You would put your money behind the least effective politicians.
It would also explain why most institutions have become less trustworthy in the eye of the public, as big money has corrupted the system.
And finally it would explain the gold rush on BTC. Because they need new investment vehicles.
1. It's a practical way to store value without the government destroying it by monetary emission.
2. People are free to speculate.
The solution to the first point is that governments should stop pulling the rug from under people's feet. Monetary emission should be predictable in the short, medium, and long term, or be tied to some real world indicator, like the cost of consumer goods. Just stop with this inflationary nonsense.
Problem 2 will be partially solved by time. Relative price changes in Bitcoin are reduced each cycle, so by the year 2030 the incentive to speculate in the short term will be much smaller. We will see it more as a long term investment. Another solution is to deregulate other markets so that we can freely speculate in them and stop putting as much attention to Bitcoin, but I don't think politicians are very eager to do that, and it could also have some negative consequences.
As long as we are having this kind of "discussion" I can see why fantasies about leaving earth and colonizing space are popular.
Since the global saving glut (1), the best question to ask of crazy asset valuations is not "does it reflect the fundamental value?", but "does the money have anywhere else to go?"
(1) - https://en.wikipedia.org/wiki/Global_saving_glut
Bitcoin, in part, is a marker for loss of trust in governments. Trust in their motives and/or ability to responsibly steward currencies.
Where do I invest that cash? Equities are obviously overvalued as an asset class, and treasuries return basically zero, so people are buying up real estate and crypto instead, and using some cash on the side to gamble in the options market. But this really only exacerbates the wealth inequality problem.
It sounds like you're saying that bitcoin is like a hedge against trust in government. A sort of financial measurement of conspiracy theorism. This is a fascinating perspective, but I'm not sure who is financially exposed to that form of risk. It seems like a great vehicle for speculation ("do I think people will trust institutions more or less in the near future?") but not much else. I'm sure there's someone who stands to lose money if public faith in government erodes. but its difficult to imagine that investor
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"People get too caught up on bitcoin because it is new and nobody understands it"
We understand it quite well thank you (and it's not new!) - far far more often than not, it's the BTC proponents who don't really grasp what it is, and it's not the 'technical aspects' that are the most salient factors.
Bitcoin creates no value.
It's 'profitable' to an individual, but not the system as a whole - and because it has negative externalizations in the form of CO2 emissions etc. - it's actually a net negative.
Making magic digital baseball cards and trading them does not help us make roads, bridges, iPhones, software, drugs, vaccines, clothing, homes - it just makes all of that a little bit harder actually.
Much like residents of Easter Island using all their resources competing to make Giant Heads. Those heads may have mad some people very powerful, they did not help them grow food, make boats.
If all BTC mining stopped right now, not a single thing would change, other than the price of electricity would be a little cheaper in some places.
BTC isn't going to 'end the world' but the energy consumption is a really negative artifact of this purely speculative activity.
There's not so much wrong with people wanting to exchange digital baseball cards if they want to do that - fine - but with the externalizes it's a problem.
Carbon offset tokens, or some token that will increase in value when cryptos global electricity usage goes up, and offsets with renewable projects. If it were funded by governments in billions of dollars it would make an impact, and everyone could participate in funding the token.
The problem must be addressed in altering the fossil/non-fossil energy mix. You are not going to control the financial incentive to mine, or kindly ask ppl to use less electricity please. Carbon taxes have been proposed but you would have to get that done globally, they are certainly working on that from a political perspective but you never know there are always resistance to a new tax.
Literal whataboutism.
We 100% need massive carbon taxes right now. It's really telling how the energy industry is trying to push blame to consumers, especially cryptocurrency miners, in order to distract from the discussion of real carbon taxes to force polluters to pay for the damage they're causing.
I'm sure I'm one of the largest supporters of cryptocurrency in this thread so far, and I'm perfectly comfortable stating the obvious that mining with fossil fuels is an abomination. It's going to keep happening though until regulators get serious about reigning in the fossil fuel industry.
It doesn't work like that. The consensus algorithm targets 1 block mined every 10 minutes. If the amount of energy expended goes up (i.e. blocks are mined more frequently) then the difficulty increases to counteract it. If the rate of block production decreases, then the difficulty decreases to counteract it.
This page has more information: https://en.bitcoin.it/wiki/Difficulty
(I've used "difficulty" here in the English-language way. Confusingly, "difficulty" is kind of backwards in Bitcoin - the "difficulty" is a number that a mined block hash must be below - it gets more "difficult" to mine a block if the "difficulty" number is lower. Maybe it should be called "easiness" instead of "difficulty").
This is something that I'm not sure many people actually understand. Because in the physical world, increasing your energy input into mining will result in more output of the resource you're mining. Adding another excavator to your mine doesn't reduce the effectiveness of every other excavator in the world.
Bottom line is: Most of the world has no carbon price, and the places that do have one (e.g. the EU ETS) there are so many loopholes that it is not very effective. It's not that it isn't worth trying to do better, but a carbon price is definitely not a short term solution.
So I'm inclined to think whoever proposes a carbon price as "the one true solution" really doesn't want a solution at all.
Nonsense. It's lobbyism. In more drastic terms, corruption. Plain and simple.
We can have this "discussion" once significant industrial nations have implemented a carbon tax. Until then, it's all just excuses. Similar to all the bunch of nonsense people come up with why they can't start working out today or save money today or go to bed right now instead of after watching the next episode of whatnot-series.
If it were banned in the US/EU the price would crash.
Most major BTC backers have a lot of money and they can't be involved in something that is illicit.
For regular citizens, it's just not worth the risk.
That leaves quite a lot of people to play with it, but not enough to maintain the price.
Without constant headlines, Tesla's involvement, Coinbase IPO headlines etc. the price would suffer quite a lot.
It would maintain some price but not so much that people would be buying energy sources.
If there are any Governments out there who desire to fight climate change - and it seems like there are a reasonable amount - then illegalising proof-of-work coins seems like a reasonable step at least from an energy use perspective.
Or more likely they’re outcompeted by anyone who doesn’t have to pay the tax, such as miners using green energy or in a jurisdiction without the tax.
Wrt your first question: The best argument against making energy more expensive is the same argument as it was 100 years ago:
If you use energy now, you build a more prosperous civilization for the future. Your grandchildren may have to deal with a warmer climate, but they will be much better able to do so than if they were more poor.
This argument stands and falls with your evaluation of the benefits of using more energy, the costs of a warmer climate and how you weigh these against each other.
The best argument against it is: it's very hard to enforce it on everybody internationally, and if one country adopts it unilaterally, then production just moves to another country (making everyone worse off - same amount of pollution, but the production is presumably less economically efficient).
The second best argument against it is "the tax shouldn't be $x/ton, it should be $0.5x, which is a more accurate reflection of the external costs".
A distant third, but very effective in practice, is "the carbon tax is good, but it shouldn't apply to Special Interest Area X, because of these social/political/historical reasons..."
These aren't completely unsolvable problems, and people do try. But if your question was genuine, I hope you now see that there are some reasonable arguments not to just do this tomorrow.
So tax imports (including the carbon cost of shipping)
It would likely require agreement between the US and EU to shift enough of the global consumer market to actually care, but with Poland and Texas that doesn't seem likely.
Given how much lobbying I suspect there is, 3 probably isn’t all that distant of a concern. Especially in older industries, say railroads or trucking, I understand there could be a lot of contention.
And as others mention, I think there needs to be a separation of taxation by segments of polluting activities. Would burning fuel in a combustion engine count as taxable energy production? Only power plants? What about agriculture, construction, material production?
Like, in reality miners will use whatever power is cheapest, and solar is currently the cheapest. They are also extremely* agile and can shift location/power source in a handful of days which leads me to believe that they are currently driving adoption of solar, BUT: with miners being framed as The Big Threat, we might be able to finally use that perception as a crowbar to remove incentives for energy sources that pollute and even impose heavy taxes on those sources and end up completely digging out the oil/coal industries.
Win Win Win as far as I’m concerned.
*Apparently unless you can buy an entire power plant
A wealth tax on proof-of-work currencies would discourage legitimate businesses (that don’t cheat on taxes) from holding them.
I think the biggest hurdle is that it is a tragedy of the commons: the entire market needs it, not just a single country...
What we need a get rid of all the print and spend politicians. The reason for the raise of bitcoin is a direct response to the trillions and trillions of dollars just printed out of thin air.
It is insane how much grocery cost nowadays. I was at the supermarket last week and was looking at lobster, I thought it was listed for $6.99/lb for those 1 to 1.25 lb size, but when I got closed, it was $16.99/lb. It is crazy. Blue Crab at $5/each.
The only thing necessary would be to cancel ASAP any public subsidies for fossil-powered generation of electricity (which is a measure that is overdue anyways).
IMO BTC existence is possibly good as it raises demand for cheap energy (and currently green energy is cheapest it seems), it's also good as forcing function for fiat.
As opposed to the rest of the economy, which only demands expensive energy?
It would be pretty funny though, if the world's various governments decide BTC is an existential threat to their legitimacy and institute a carbon tax to destroy it.
No. It increases demand for energy period. Increasing demand makes energy more expensive, not less.
A handy rule of thumb, for gasoline: A gallon of gas produces 20lbs of CO2. A ton is 2000lbs. If a carbon capture technology costs X dollars per ton, it costs X cents per gallon.
Most carbon capture technologies will be in the $15 to $85 per ton range when they scale.
Therefore, a $1/gallon gasoline tax (and equivalent for coal, etc), would be enough to solve climate change.
True. If BTCUSD goes to $1m AND you have strict global regulation banning carbon energy, it will be a powerful incentive to harness green energy, which will be good for mankind in the long run.
I think we need a carbon quota. Something grounded in the hard reality, not a tax you can bypass or finance indefinitely with a money printing machine (edit: or bitcoin :).
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Paolo Ardoino would like a word with you.
Then by all means lets ban video games which are an extreme waste of electricity polluting the atmosphere for no good reason.
You see how this reasonning can go?
US co2 generation on the grid is about 0.5kg per kwH, so would add 10c/kWh.
That means that your PS5, using 200 Watts, costs an extra 2c per hour to play -- on top of the existing 15c/hr for normal electric costs.
A single bitcoin transaction of 780kWh would cost $78 and a transatlantic flight about $300, or $1.20 to a gallon of gas.
Make the tax $2k/ton, it raises your PS5 cost from 15c/hr to 25c/hr and a bitcoin transaction to $780 and take transatlantic flights back to the cost of the 70s
That sounds fine to me. The energy used by a PS5 is insignificant.
> You see how this reasonning can go?
Yes I do, it sounds really exciting.
The money raised would be spent on carbon reduction (which gives a financial incentive to Brazil to not chop down rainforest, or pays for other forms of carbon capture), and disincentivises carbon usage. Brilliant.
>I think we need a carbon tax, that is specifically a financial disincentive towards any means of energy production that directly pollutes the atmosphere.
Ok then lets end 2 biggest industries that pollute the planet the most. Construction and food production.
We can live in environmentally friendly uniform grey boxes and eat protein bars.
I get the concerns for the carbon issue of Bitcoin but I don't see why the solution should be governments profiting more from it.
If an alien civilization invaded earth and imposed a carbon tax, and took all of the proceeds back to their own planet, then we would still be better off.
Who cares if you’re using energy to mine Bitcoin? Or if you’re using it to play video games? Or to run the AC all day?
If it you’re internalizing the cost of any emissions, then you’ll use those resources efficiently.
What probably should happen is to make converting from any cryptocurrency to major world currencies a crime. I have no delusions that this will halt activity in this sector entirely, but it will make it reasonably difficult to make any substantial money this way without raising some serious eyebrows.
You tariff their imports and apply economic sanctions.
> What probably should happen is to make converting from any cryptocurrency to major world currencies a crime.
Why cryptocurrencies? There are plenty of things that pollute far more.
And yet we've done this for other pollutants. CFC's aren't destroying the ozone layer anymore.
Yes, this is hard policy to get right. So what? We have the entire world to figure this out and we are on a timer. Any first attempt will have flaws and loopholes and need to be improved over time. But this is just an excuse for people to avoid acting.
We need to do something. A carbon tax is the least extreme solution that has any chance of functioning.
Both are effective at fixing the emissions problem. Both are also extremely oppressive and unjust.
Lol.. and that will stop all crypto-world currency trading? Just like how making drugs illegal stopped all drug trade?
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It's only possible now because clean energy ia cheaper (but still cannot compete in emergency situations), so we should invest in fission and fusion research
EDIT: I'm in favor of carbon tax BTW, we can afford it now and will incentivise investment in green tech more
Just look at Europe and the effect of the carbon tax there. I don't have links (sorry), but there are lots of studies "proving" that that makes for a more efficient and optimized market aligned with the desired outcome.
Because carbon emissions do the same amount damage whether it's the result of bitcoin mining or running a hospital.
Carbon taxes increase costs for everything.
Everything that produces carbon, which is exactly the point.
Should we increase the cost of say, hospitals
To the extent that they are significant polluters, yes. Trying to micromanage "good" and "bad" emissions just encourages exploiting loopholes. (e.g. https://www.washingtonpost.com/blogs/ezra-klein/post/cafe-lo...)
You can try to play a game of whack a mole by taxing and regulating individual activities hoping to reduce carbon as a second order effect, or you can just target the root problem.
There's will always be another wasteful use of carbon intensive energy so long as carbon intensive energy remains cheap.
The point of the tax is to make the carbon price correct so as to incentivize correct usage across all domains.
I'm pretty sure we can all afford yet one more tax.
Bitcoin is certainly not a scapegoat. It's a massive problem and, largely, a symptom of human greed that must be put in check.
For example would you say that smartphones are wasteful because they allow us to communicate more frequently than we could before, thus they don't strictly replace an existing consumption of energy?
That seems like a silly interpretation to me. Of course our energy demands rise as we develop and use new technologies. It's because we are doing more things with them!
Also, as I mentioned in another part of the thread, I don't think it's obvious that cryptocurrencies won't replace any existing usages of energy.
The international space station isn't replacing anything, i still think its valuable.
How in the world do you say this? It's made significant progress in replacing both of these things. Just because it hasn't 100% eliminated all extant currencies and banks doesn't mean it's not making meaningful progress in that direction.
The failure is governments subsidize so much energy production they effectively take the market out of the equation. Remove government incentives for cheap power at all costs and then you'll see the action of the market.
Current HN headline: "Bitcoin miners are buying power plants"
Actual headline: "A New Threat to New York’s Clean Energy Goals: Bitcoin Mining"
It's trying to imply that buying power plants is some hot new trend, but the article is about a single crazy dude in New York buying a single plant.
Which?
Surely this cannot last. This kind of outsize profit ought to be bringing online enough new mining capacity to increase the block difficulty until that margin erodes away - is it the worldwide chip shortage preventing that from happening?
Edited to add: That's roughly 60 tons of CO2 emissions per BTC mined. https://www.eia.gov/tools/faqs/faq.php?id=74&t=11
The other aspect here is let's say you're a speculator and you think the price of BTC can go up another 50x or roughly $1M/BTC. Then even spending any amount less than the BTC spot price now is a bargain.
The same can be said for Ethereum. The shortage of GPUs is preventing the difficulty to raise fast enough. The profit margin has been like 5-10x the electricity cost for the last few months. If you bought a RTX 3080/3090 it would have paid itself and the electricity by now.
Speculation > silicon constrained mining > power & capital constrained mining
I believe the silicon constraints would instantly relax as soon as speculation falls into line based on how much hardware everyone has been stacking up on lately.
At the end of they day, the cost of energy & your ability to keep the machines operational will be the final constraint. This is the one that the long investors should anticipate. I.e. "How do I mitigate power cost in a power-cost-constrained market".
Right now at current market prices, owning an entire power plant to run your operation is folly. In a few more years when a delta of 2c/KWh is make-or-break on profitability, it makes perfect sense.
yes, feel free to start a new fabrication line to arbitrage away the margin lol.
Who knew! Of course this won’t be a problem until it is.