A colleague of mine Shivkumar Kalyanaraman recently wrote an excellent article on bitcoin mining and its energy consumption. I wanted to add my own comments to the article, so please read this in relation to Shiv's article.
An important metric to consider is energy cost per transaction commit on the bitcoin blockchain. I feel this is important for three reasons.
First, block miners get the transaction fees fabricare bitcoin value transactions included in the block mined, in addition to the mining reward. So, the energy consumed to mine a block is paid for by the transaction fees and fabricare bitcoin value reward, and hence amortized across the transactions in the block.
Second, for the end user of the bitcoin blockchain, seeing their transaction committed on the blockchain is when they realize value.
How much the end-consumer would be willing to pay for the transaction, would fabricare bitcoin value on the value they derive from it, at least indirectly and partially justifying the high energy consumption. A third reason for why the energy cost per transaction is an important metric in my opinion, is due to the ongoing heated protocol debate on the block size.
I dont want to get into the details of that debate in this article, fabricare bitcoin value primarily the debate was pertaining to the poor transaction throughput of bitcoin and ways to improve it. If the block size were increased or if the size of a transaction was decreased to include more transactions in a block, that would also serve to amortize the energy costs amongst more transactions and more clients deriving value from the network.
Hence, the energy cost per transaction could be a useful metric to also compare protocol alternatives. All these considerations lead to a very interesting dynamic playing out on the bitcoin blockchain. On one hand, miners spend a tremendous amount of money on energy costs, specialized hardware and data centers to power the bitcoin network. As Shiv pointed out in his article, energy costs are likely to only rise in the future.
On the other hand is the value derived by customers for their transactions. Unless customers are willing to pay greater transaction fees to compensate for the costs of running the network, miners aren't going to find it profitable to continue mining blocks. If we consider bitcoin as a medium for currency transfer and for a moment set aside the fact that it fabricare bitcoin value being used as an instrument for speculative near-term investmentthen arguably bitcoin would be meaningful only for transactions of relatively high value.
This is evidenced by the fact that the number of unconfirmed transactions at one point rose toToday banks tend to charge a percentage fabricare bitcoin value the transaction value as their commission due to counter-party risk that they bear, so compared to traditional payment mechanisms, the flat-fee structure of bitcoin is attractive for higher value transactions. Unfortunately, value isn't always directly measured in currency terms. Transactions fabricare bitcoin value illegal and impermissible in traditional payment systems and the fabricare bitcoin value risk of being caught by law enforcement, have found a haven and 'value' in bitcoin due to its pseudo-anonymization.
Estimating energy cost per transaction commit, however, is non-trivial. It depends on a number of factors such as the unit cost of energy at the geo-location of a miner which tends to fluctuate and vary fabricare bitcoin value different parts of the world, and the number of transactions in a block which in turn depends on the size of individual transactions.
Further, there is also mining energy wasted due to forks and orphaned blocks in the bitcoin blockchain, where some mined fabricare bitcoin value end up in a fork and never actually get included in fabricare bitcoin value largest chain and hence get discarded. This wasted energy in forks is quite hard to estimate. For these reasons, current estimates I could find on the Internet vary as widely as 70 KWh per transaction to KWh per transaction.
They all employ different methods and assumptions to arrive on a ballpark estimate. Bitcoin today is faced with many different technological and operational challenges a topic for an article at a later date. Its huge energy consumption is one of the biggest criticisms and questions have been raised as to whether its value could be attained through alternative technological fabricare bitcoin value, which is a research question that has gripped the industry and academic world today with tremendous amount of innovation taking place.
Many permissioned blockchain platforms such as Hyperledger Fabric fabricare bitcoin value looking at radically fabricare bitcoin value designs for providing the same benefits as promised by the bitcoin blockchain, for a wider range of enterprise applications with stronger security and privacy guarantees, significantly higher transactional throughput at a much lower energy cost per transaction commit on the blockchain. It is indeed extremely interesting times ahead with research innovation, technological advancement and business value all driving to determine the transaction processing ecosystems of the future.
Some of the estimates cited in this article are picked off from the Internet and I haven't made an attempt to verify fabricare bitcoin value veracity of those numbers. Summary Bitcoin today is faced with many different technological and operational challenges a topic for an article at a later date.
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