Claims without proper backing
Nobody denies the fact that bitcoin mining is guzzling a lot of energy but many “experts” often exaggerate when pointing that out. Nothing should be taken at face value – expert opinions included.
Jonathan Koomey, a Standford progessor who correctly explained how unsettling claims over the early internet’s energy usage were absolutely unfounded, states researchers like de Vries are getting it wrong. Koomey told NBC News:
For two decades, people have been eager to overestimate electricity use by computing. My concern is that we simply don’t have adequate data to come to the strong conclusions that he’s coming to.
The referred conclusions Stanford lecturer mentions estimate that the Bitcoin network consumes “at least 2.55 gigawatts of electricity currently, and potentially 7.67 gigawatts in the future.” Furthermore, De Vries claims:
Economic models tell us that Bitcoin’s electricity consumption will gravitate toward the latter number. A look at Bitcoin miner production estimates suggests that this number could already be reached in 2018.
However, according to scientists such as Koomey, assumptions made by this researcher and others’ who conducted similar studies are problematic — especially the way they calculate the value of energy and the price paid for said energy. Koomey illustrates:
The worry is that those are two numbers that are picked out of the air. There may be some basis for them, but it’s a very unreliable way to do these kinds of calculations, and nobody who does this for a living would do it like that. It’s odd that someone would.
Bitcoin mining is a centralized operation run mostly in China by couple of big companies. As such, it’s not exactly easy to calculate how much miners pay for energy, even more so since many operations are set up specifically to reduce energy costs — such as mining in cold spaces likes caves, energy-rich areas, or low-cost countries.
De Vries study also fails to consider how miners often use special hardware equipment manufactured specifically to maximize mining efficiency. Christian Catalini, an assistant professor at MIT’s Sloan School of Management who analyzes cryptocurrencies and blockchain technology, told NBC News:
The only people with good data on this are the miners, so you do need that data to understand the electricity consumption. The main challenge is that this gear is scattered across the globe and faces different prices.
Koomey further added:
The equipment they’re using is customized to their use. This is not the standard servers that are being sold. These are machines that are assembled using other components. That makes it more difficult. It’s a custom design and those kind of servers are not tracked as well.
We should try to get the numbers right […]
So, what numbers should we believe? According to Jan Čapek, CEO and co-founder of Braiins Systems and operator of huge Bitcoin mining pool Slush Pool, his firm needs a lot less energy than these studies and regular mining naysayers claim.
Čapek underlines that the total cost of minting one bitcoin, at current mining difficulty is less than $1937 using HW @ 5c/kWh, which shows that significantly less energy is consumed than most critics would like you to believe.
It’s worth highlighting that even the head of this research, de Vries himself, admits there are flaws in his research’s design. He stated:
We’ve seen a lot of back-of-the-envelope calculations, but we need more scientific discussion on where this network is headed. Right now, the information available is pretty poor quality overall, so I’m hoping that people will use this paper as a foundation for more research.