Mining consumes large amounts of energy—so do data centers

Another day, another FUD [fear, uncertainty and doubt] about Bitcoin. This time, the target is Bitcoin mining and its effect on the environment.

The Global Cryptocurrency Benchmarking Study, published by the Cambridge Judge Business School in April, showed that medium-to-large mining facilities the world consume an estimated 288 megawatts (MW) to power their operations.

The study was quoted by a report that hammered some alternatives to digital currency mining, which it claimed “is not only affecting our environment, it is also harming cryptocurrencies themselves by promoting centralization and industrialization.” In actuality, the article is about ethereum taking a swipe at Bitcoin—all under the pretext of ending “the centralization of Bitcoin mining and the environmental devastation that is being left in its wake.”

The Bitcoin network actually runs at around 343MW, according to another report. Yes, that’s quite a lot of energy, but still less compared to data centers. Or even Citibank, for that matter.

In 2014, data centers in the United States consumed an estimated 70 billion kilowatt per hour (kWh), or about 1.8% of the total electricity consumption in the country, according to the Energy Technologies Area of the U.S. government-backed Berkeley Lab. By 2020, data centers’ energy consumption is forecast to reach 200 billion kWh per year, with 50% of the power directed at cooling systems that keep the processors from overheating.

Then, there’s Citibank, which has consolidated 20 data centers with 40,000 systems—not the supporting systems, mind you—using 66MW of power. The banking giant employs 219,000 staff using an average with off times of 850W of power on systems. Add to that are the company’s 120 smaller computer rooms, which consume an estimated 138MW. The total: 390MW, and that’s not including all the branch systems, etc.

Proof of Work vs Proof of Stake

The article also mentioned that Proof of Work, where the probability of mining a block depends on the work done by the miner, “is not the only way to do run a digital currency.” There’s also Proof of Stake, which it claimed “offers some less-than-obvious advantages” in terms of security, and also consumes less energy.

However, distributed consensus from Proof of Stake is impossible, according to Blockstream mathematician Andrew Poelstra.

“We showed that by depending only on resources within the system, proof of stake cannot be used to form a distributed consensus, since it depends on the very history it is trying to form to enforce loss of value,” Poelstra wrote.

Currently—and for the foreseeable future—there is no meaningful alternative to proof of work. To quote developer Paul Sztorc, “Proof-of-Work exists because money is being created. It is, then, impossible to ‘create a new form of money’ without invoking Proof-of-Work.”

Using Proof of Work for other purposes only shows an inept understanding of economics. SolidX CTO Bob McElrath explained it best: “If Bitcoin mining had a second ‘useful’ purpose, this would simply reduce the security of the mined chain, from an economic perspective, since miners could in principle sell the ‘useful’ output as well as the Bitcoin. Thus the value of Bitcoin relative to the amount of resources consumed goes down. Nefarious people could use selling this ‘useful’ output as a hedge against failure of their attack.”

It’s not the first time that somebody has called out Bitcoin for the energy it “wasted” mining. This time, however, it’s blatantly obvious that this is ethereum spreading FUD to cover up all the shortcomings and needlessness of ethereum.

As McElrath once wrote, “the energy used by Bitcoin is not so much wasted as it is a hedge against the energy expenditure capabilities of the criminal element (as are Bitcoin’s transaction fees). Numerous alternative crypto-currencies have been proposed that try to eschew mining, but they all have the property that there exists a computation one can perform (often called ‘grinding’) to nefariously transfer yourself more coins.”

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