While most computer systems have become more efficient in recent years, developments have gone in the wrong direction for bitcoin. In 2012, the average computer power corresponding to the 16th digit in the TH/S module was used to control the blockchain. This year, one spends the same job 139 Millions of the same unit of measurement for computing power.
At the same time, the volume of bitcoin trading decreased from 2.5 million bitcoins per day to 2 million bitcoins.
To understand this increase, one must take a deep look at how Bitcoin works. For regular bank transfers, banks and international payment systems ensure that payments are made correctly. In the cryptocurrency world, payments go directly between people. There are volunteers with a computer who check that everything is going well.
To take over this control function, you receive payments in the form of Bitcoin. This is the control process that we refer to as bitcoin redemption. To provide incentives for players to work efficiently, you pay per block, and only one player gets paid at a time.
There is a new block of transactions every ten minutes. For a computer, it only takes a microsecond to verify all transactions, and I could run these accounts from my home computer. In this way, the Bitcoin system can be very efficient.
But there is one problem. Payment comes with bitcoin, and you decide right from the start how much bitcoin you should get to verify payments. In 2012, the price of Bitcoin soared to just over ten dollars. Paying 25 bitcoins every ten minutes, the value was $36,000 per day. This means that those who control the transactions can incur the same amount on electricity and PC costs.
Today, the bitcoin price is $43,000 and you get 6.25 bitcoins per block. And by the same account, you’re running into nearly $40 million a day. In addition to the new bitcoin, you also get a small amount from those who trade.
Thus, the average daily payment has increased from $70,000 in 2012 to $43 million so far this year. This is a 600-fold increase.
Then, all other things being equal, players will be able to spend 600 times what they spend on electricity and computers.
The Bitcoin system is very open in many ways, and the capacity of the data used at any time is openly available: now about 140 million TH / s. Usually used computers handle 28 TH/S each, thus five million computers are used.
These computers do not share the function among themselves, they perform exactly the same function.
The advantage of this is that one can be confident that all transactions will be thoroughly checked. With one or a few computers, there was a risk that someone would bypass transactions and make an impact on payments.
The downside of many computers is that each consumes a few kilowatts of power. Thus, it ends up using the same amount of electricity as ten million apartments.
A fun little detail is that it’s not the control that takes that long. To ensure the authenticity of the blockchain, each block gets its own “hash ID” which comes after all transactions are encrypted.
My home computer was able to perform 100,000 calculations per second. But it is known that there should be ten minutes between each block. To make sure this computation actually takes ten minutes, this computation has been turned into a game: you have to add a random integer at the end of the transactions.
This must be done until the first digits start with zero. Currently, one has to guess a number that means the first 19 numbers start with a zero. Since you are using both numbers and letters, there are a number of combinations. There is so much that my computer will go from running 100,000 per second to spending 43 million years.
This is the game that computers spend most of their time in.
If the price of Bitcoin goes up, it will be possible to increase the energy consumption accordingly. However, there will not be a steady increase, as the payment is halved every four years.
It is possible to change this, and there are two simple solutions.
- One is to introduce a new currency that is used only as a payment for redemption, and is tied to the price of electricity. Then you will easily be able to reduce the thrust, so that the energy consumption is reduced.
- The second possibility is that one does not require that millions of computers actually do the same job. Then you can alternatively give the job to those who manage to show the most loyalty to the system, for example by owning the most bitcoins.
Both solutions are used in part by other cryptocurrencies.
The official reason these changes were not made is that the Bitcoin process has become less secure. Maybe this is a partial argument, but in this case maybe the system isn’t robust enough?
It’s tempting to think that with as much as $43 million a day and good sales of custom machinery, there are many who have an incentive to keep the current solution.
In Norway, data centers engaged in bitcoin mining receive lower electricity fees. The University of Cambridge estimates that about 0.7 percent of global bitcoin mining takes place in Norway. These figures indicate that players receive NOK 100 million annually in reduced electricity tax. As the lower electricity bill allows for more computers to be in the bitcoin network, this will lead to higher energy consumption.
Sounds nice with renewable energy in Norway. But as long as the power consumption is transferred only to Norway, the marginal power will come from Europe, even if the computers are located in Norway.
So the solution for Norway is not, as Sturle Sunde suggested in DN on September 15, to build hydroelectric power stations to power the machines, or to continue the current scheme to give bitcoin winners cheap power.
The solution is the opposite. With an additional tax on electricity for bitcoin mining, the winners will get less money for electricity. Thus, the consumption of electricity and carbon dioxide2Emissions go down.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We want you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For more conditions see here.
“Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff.”