[mrb]

I provided this statement to some journalists who contacted me to get another viewpoint on Alex de Vries's paper:

His findings are not completely accurate, but also not completely wrong either. My own formal well-documented estimate is that Bitcoin used 0.09% of the world's electricity as of January 11th, 2018 (http://blog.zorinaq.com/bitcoin-electricity-consumption/). After 4 months of growth I estimate we are around 0.15-0.20% today. Therefore reaching 0.50% by the end of 2018 is plausible; not likely but plausible. That said, overall I think Alex de Vries's figures are rather inflated because he makes two errors. Firstly, his model assumes that manufacturers sell at cost and make zero profits, which allows miners to spend more on electricity. In reality we've seen Bitmain, the largest manufacturer, make billions of dollars over the last few years. No one expects them to make zero profits by the end of 2018. Secondly, de Vries makes the mistake of assuming that all cryptocurrency mining chips produced by TSMC on behalf of Bitmain end up in Bitcoin mining machines. In reality many chips are fabricated for cryptocurrencies other than Bitcoin. This altcoin sector is rapidly growing. It wouldn't be unreasonable to assume that Bitcoin mining machines will represent less than half of Bitmain's sales by the end of 2018.

[hudon]

> After 4 months of growth I estimate we are around 0.15-0.20% today. Therefore reaching 0.50% by the end of 2018 is plausible; not likely but plausible

What model are your forecasts based on? From what I could tell, the featured paper’s model allows us to forecast future consumption but your research only presents a current-day lower bound (Jan 2018 in this case). I may be wrong though

[nneonneo]

The deVries estimate of ~2.55GW/26PH/s (mid Mar 2018) tracks closely with mrb’s lower bound estimate of 1.62GW/16.2PH/s (mid Jan 2018). In just two months the power consumption and hash rate has risen 60%. Two months later, mid-May 2018, the hash rate is around 31 PH/s, an increase of 20%.

This is on par with historical increases documented by mrb (325 TH/s in late Feb 2017 to 640 TH/s in late Jul 2017, an increase of 100% in 5 months). If we see an average growth of 100% each 4 months, then we will easily surpass 100 PH/s by year-end, which is around 10GW, or around 0.4% of the world energy production.

[hudon]

Thanks for the response and analysis. I think I have qualms with how mrb exaggerates the difference in their conclusions. He says Alex' numbers are "rather inflated" and has told me before that Alex makes "fundamentally flawed assumptions" and has "holes and flaws" in his logic, when really when you look at the difference in their forecast it's 0.5% versus 0.4%... both numbers support the general idea that assuming the technology brings no efficiency to society, Bitcoin is an environmental catastrophe.

[mrb]

Alex's BECI model claims Bitcoin currently consumes 7.6 GW. Whereas this paper is more reasonable and states the future consumption might grow to 7.6 GW by the end of 2018. These are 2 very different statemetns. What I call "fundamentally flawed" is the BECI claim, not this paper.

[hudon]

Oh I see. Thank you for clarifying.

[mrb]

My model actually provides both an upper bound and a lower bound current-day figure (explained in http://blog.zorinaq.com/bitcoin-electricity-consumption/) 0.50% is not predicted by my model, but it's just a target that seems plausible if the current growth stays the same.

[nneonneo]

For the first point, the article explicitly examines at Bitmain’s profit margins on their devices, where they find e.g. a profit margin of 56% on the Antminer S9. Although Bitmain might be headed for increased profits in the short run, from an economic standpoint it is reasonably to assume that market participants will converge towards zero economic profit - this is a standard economic assumption.

For the second point, he’s fairly careful to specify that these are estimates from a third party (Morgan Stanley) and does not explicitly specify that he expects all of them to be Bitcoin mining rigs. The estimate of power consumption he produces here, 8.92 GW, is used merely as a check on his main figure of 7.67 GW obtained through the economic analysis; he does not directly rely on the Bitmain production figure. Plus, he also notes that this 8.92 figure doesn’t take into account the ~30% of the market not owned by Bitmain.

[mrb]

«this is a standard economic assumption.»

Yes, but given this convergence hasn't happened in years, it is unreasonable for de Vries to suggest it might happen in 7 months.

For the second point, he definitely assumes 100% of the production ends up in Bitcoin mining machine. His source says "cryptocurrency" chips, but de Vries assumes "Bitcoin" chips.

[GlobalFrog]

I'm curious about this actually: what is the power consumption of the whole ensemble Bitcoin+altcoins? From what you're saying + the original thread, it looks like almost sure that electricity used by those combined would be at least 0,5% and could even be a higher number, no? Even if Bitcoin is the biggest one, the others are quite a lot which makes them not completely discardable I guess.