CNBC reports Cryptocurrency Mining Puts Electrical Grid of Small Washington State County ‘to the Test’.
“Our infrastructure is actually being put to the test. We’re full,” Ron Cridlebaugh, the Port of Douglas County economic development manager, told CNBC’s Michelle Caruso-Cabrera on Thursday.
Cryptocurrencies such as bitcoin and ripple have skyrocketed in value recently. Last year, those digital currencies surged 1,500 percent and 35,000 percent, respectively.
People have been trying to get in on the action by purchasing these digital assets or by “mining,” or creating, them. But the mining process requires a lot of electrical power as computers process gargantuan amounts of data.
Cridlebaugh said the county is building out 100 megawatts (100,000 kilowatts) of infrastructure just in data centers to keep up with demand. “It’s going to take some time to catch up because growth has been so quick.”
How Much Electricity?
Fortune says Bitcoin Miners on Track to Use More Electricity Than All of Argentina.
Business Insider says the electricity used to mine bitcoin this year is bigger than the annual usage of 159 countries.
Fortune says Bitcoin Consumes 30 Times More Electricity than Tesla Cars.
Really?
A CNBC report says No, bitcoin isn’t likely to consume all the world’s electricity in 2020.
- Estimates of bitcoin’s soaring energy use are likely overstating the electric power required to mine the cryptocurrency, top experts warn.
- One model from Digiconomist is being widely cited by journalists, analysts and investors, but researchers say its estimate is not based on hard data.
- Digiconomist’s estimate of bitcoin’s energy consumption is the basis for a lofty projection that reminds some experts of debunked forecasts that led businesses to over-invest in internet infrastructure.
Mysterious Bitcoin ‘Mining’
Bitcoin mining is now being done at dedicated data centers that have sprouted up from Iceland to Inner Mongolia, where electricity prices are cheap. Much of the mining takes place in China, which generates most of its electric power from coal, prompting warnings that bitcoin threatens to wreck the environment and supersize the world’s carbon footprint.
Several energy experts caution that there is currently no reliable, verifiable way to measure just how much electric power is consumed in the process of minting the cryptocurrency. They say the first step is gathering hard data from the data centers, and no one has done that work yet.
“Many of those calculations that you see today I think are based on very weak assumptions,” said Christian Catalini, an assistant professor at the MIT Sloan School of Management who studies blockchain technology and cryptocurrencies.
“I don’t think anybody can make a credible claim about the current” electric power use for bitcoin mining “without actually having data from the miners.”
“So perhaps the grey swan of next year is not Bitcoin’s bubble bursting, as so many commentators tend to suggest, but instead it’s [sic] continued rise and a surging demand for coal,” Nomura analyst Jordan Rochester wrote.
Nomura noted that power used to mine bitcoin is estimated at 33.2 terawatt hours. That figure came from the bitcoin energy consumption index, which is updated daily on the cryptocurrency website Digiconomist.
Digiconomist’s index has emerged as something of an authority recently. The index was developed by Alex de Vries, a 28-year-old consultant for PwC with a background in data and risk analysis who now specializes in blockchain, the technology that underpins bitcoin. He founded Digiconomist as a hobby in 2014 and acknowledges he has no previous experience in energy economics.
De Vries stands by his figures. Given what we know about bitcoin mining, he says it is fairly easy to determine the lower bounds of its energy usage. If all bitcoin mining were done on the fastest machines in optimal conditions, he says, it would still consume 13 to 14 terawatt hours. But since not all mining is done under these conditions, he said, his estimate is “plausible.”
“I’m obviously confident in this number. I wouldn’t be publishing it if I wasn’t confident,” he told CNBC.
Bitcoin Consumption Index
Regardless of which side has the numbers correct for now,, “mining” for beanie babies, which is essentially what’s happening, is taking more and more energy as the mathematical problem that miners must solve gets increasingly difficult.
This is another of the many numerous flaws in cryptocurrencies.
Another flaw is that if and when quantum computers can factor huge prime numbers multiplied together, the whole thing blows up posing other security problems as well.
Finally, if and when it takes more electricity to mine bitcoins than the things are worth, the system will likely break down.
Meanwhile, mine away while pondering this: What is Bitcoin Other than a $15,000 Beanie Baby?
Mike “Mish” Shedlock
@KidHorn amen
>@dollarwhale When you mine gold, you get gold. When you mine bitcoin, all you get is a block of data which serves no useful function other than you can sell it to another fool.
Humans are so entertaining!
Tulip cultivation seems to be using up all the fertile land. We will all soon starve as arid food producing dirt is instead utilized to grow inedible flowers.
Mining Gold soaks up most resources available in some counties as well.
If mining a currency wasn’t hard, the currency wouldn’t be scarce hence valuable. Just as is the case with gold miners and oil drillers, producers will expend resources roughly equaling the cost of the output they produce. Noting particularly shocking, nor “bad” about that.
More troublesome for Bitcoin, as well as most currently popular Hypecoins, is that their hashing functions aren’t “hard” enough. As in, they are simple enough to be amendable to centralized, specialized hardware. Rather than, as was the case with early Bitcoin mining code, being ran on general purpose hardware. With general-purpose hardware, spare cycles on the computers of “everyone” would mine on the side. Rather than sitting idle most of the time. Hence preventing unhealthy concentrations of miners acting in ways undesirable by Bitcoin users at large. The only way to ensure that, is to ensure mining exercises virtually the entirety of a full, general purpose processor. Rather than just a small subset of it’s functionality.
Also, the idea that a base currency, in its raw form, should support all the world’s transactions instantaneously, is just silly. Physical gold utilized in trade between the US and China, takes hours to days to weeks to settle. So those wishing to trade, use other means. That eventually settle in Gold. In the process trading off 100% freedom from risk, for speed and convenience. Pretending Bitcoin can somehow be different, just because it’s, like, eh, on a computer!, just shows a lack of understanding of what the main functionality of a currency really is.
so will we all have to pay higher electricity rates so these guys can run their ponzi scheme?
Articles like this one make one step back and reflect on this craze from a new perspective. As a civilization, is this a reasonable thing for us to do? We run computers to do calculations of little value, burning large amounts of energy to produce data on a chip that we can use as “money”. Are we better off for having done so? In what way? It’s a strange and curious phenomenon. Is it the future of money? I think not. There has to be a more efficient way. Then, factor in the safety. Consider those that have lost money when exchanges were hacked, or who were duped into using insecure “wallets”. As it stands, I don’t see a safety advantage, either.
Congrats to everybody in the US who made money with Bitcoin. It would be prudent to take some profits now. If N. Korea creates an EMP blast over America, your Bitcoin will be unavailable for who knows how long. You’ll need cash and prepper items. Bitcoin will be the last thing you’ll be thinking about.
I just realized that investing in bitcoin mining *does* meet the requirements of a pyramid scheme. As mining capacity increases, positive ROI to miners requires a stable or increasing bitcoin price, which requires an ever increasing flow of new money into bitcoin by speculators. Investors who build mining late in the game will get neither return on capital nor return of capital. Those who build mining capacity first get paid best. With an ongoing race to build more mining capacity, the future financial collapse of mining operations is mathematically guaranteed. When that happens, a collapse in the price of bitcoin will follow because it will be difficult to get transactions processed. Look out!
@dollarwhale When you mine gold, you get gold. When you mine bitcoin, all you get is a block of data which serves no useful function other than you can sell it to another fool.
On one side we input a lot of valuable resources: coal, natgas, big dams, generate heat, on the other side out pops more heat and a string of bits. Our grandchildren will despise us.
Wednesday I got a call from a friend. Apparently the warehouse space next door to the one where he works is being converted from a recreational pot grow operation to a bitcoin mining operation. He was approached by the guy who’s building the miners, surprisingly not the same crew who ran the grow house, to invest in the startup. I explained that the major expense of running a miner is the power consumption and dumping heat. Since it is located in Silverthorne Colorado heat isn’t much of an issue for most of the year (if he has a properly thought out cooling system, which I doubt). But electricity cost is unbelievably high in comparison to places like China and northern Europe. He wasn’t going to invest anyway, but the more I hear about this stuff happening the more I realize this is going to end badly. Of course the people who will win ultimately are the creditors, suppliers and authors who will profit from the dreams and greed of the miners.
In the report Mish quotes at the top, “Douglas County Washington” is another name for “Columbia River.” The Columbia River is a long string of huge hydroelectric dams. Electricity in Washington has traditionally been cheap and available because of these dams. The server-farm guys (Google, Microsoft, etc.) know this. So they’ve built humongous humming buildings near these dams. Google Earth 45 37 53.64 N 121 12 02.67 W for an example.
@Top-GUN: I believe a bitcoin (or fraction of a bitcoin) is a string of numbers, not unlike the serial number printed on physical paper currency. Unlike paper currency, a bitcoin string includes information that proves ownership (the string incorporates a code generated using a cryptographic hash function and a private key – i.e. an encrypted password). If physical paper dollars each had a chip that prevented them from being spent until the owner provided a secret code authorizing that money’s transfer to someone else, that would be analogous to the private key encoded within each bitcoin string.
When one “mines” bitcoin, one is providing the computational power that processes bitcoin transactions over the internet. “Mined” bitcoin are newly minted coins (strings of numbers) that are issued by an algorithm to miners as a reward for “compiling recent [bitcoin] transactions into blocks and trying to solve a computationally difficult puzzle.” (Investopedia)
A computationally difficult puzzle is used to regulate how quickly miners can submit transactions to the blockchain (a public ledger containing all transactions for all bitcoin since inception). Since blockchain security relies on multiple miners reaching a consensus, prohibiting individual miners from flooding the blockchain with falsified information is an important part of the system’s security. As computing power dedicated to processing bitcoin transactions increases, the difficulty of the puzzle which must be solved to submit a block also increases to compensate. The computational puzzle is wasteful in the sense that it does no useful work other than provide a brute-force method of controlling how quickly a miner can submit blocks to the blockchain.
Investopedia “What is Bitcoin Mining?” here:
link to investopedia.com
Blog post with a helpful editorial “The Cryptography of Bitcoin” here:
link to blog.ezyang.com
Full disclosure: I do not own any crypto nor do I mine any crypto.
If I could harness the energy you guys waste disparaging bitcoin on this website alone, I could run my own node. And that would still be easier, and likely more lucrative for me than panning for gold down by the river. You guys need to put on your thinking caps, because it looks to me like you think mining for gold is cost free.? Is mining bitcoin really any different than separating the element from the ore? Is mining bitcoin more environmentally destructive than mining for gold? Not likely. You all should do a little more digging for information, understanding and comprehension of bitcoin and less digging for gold.
To mine a bitcoin, or crack encryption, you need to find very large prime numbers, something which has been theorized but never mathematically proven to be what we call an “NP complete” problem. In simpler terms, extremely difficult and computationally intensive.
Exactly Mish. When bitcoin price falls below cost of mining the miners will abandon it and move onto some other crypto or create a new and better bitcoin from scratch.
How do you mine a bitcoin, exactly what are you doing when you mine a bitcoin,,
Stupid, pointless waste. Just when you think people can’t act any dumber…