Bitcoin mining demystification – episode 1 –

Today I came across a pretty bad article on who is more “putaclic” than informed: Mining bitcoins, useful or futile energy? (a paid item that does not deserve to spend a single penny for it). This article is bad because the author, Mathilde Farine, does not understand what mining really is. This is quite common, because the subject is not obvious and journalists do not always have the technical knowledge to assess the relevance of their sources. Here I am going to show all the wrong information in the article by trying to popularize the subject in a series of articles that will offer a concrete and simple way how to reduce your carbon footprint and make Bitcoin a fantastic tool for the energy transition.

Bitcoin’s proof of work consumes energy

“Bitcoin, which requires an increasingly substantial IT infrastructure, is it not an energy sink? ” – Mathilde Farine, The weather.

This first sentence (in addition to being of dubious neutrality, but that’s okay, we’re used to it) sums up most of the bad representations and fantasies about mining. Of course, Bitcoin needs energy and hardware to function, there is no dispute on this point. It concerns the representation of this consumption.

Contrary to what the article claims, the infrastructure that underlies the Bitcoin network is extremely simple: a network of computer nodes that can be your personal computer, the server that hosts another service, or a microcomputer like a computer. raspberry pi + computers dedicated to computing, the “miners”. A node or miner is fairly easy to use and requires only reasonable maintenance and a limited internet connection. It can easily be hosted at home or in very remote locations, unlike the servers of most Internet services which require the entire data center infrastructure to function properly. In comparison, “mining farms” are just simple warehouses or even old recycled containers.

I would add that this infrastructure is very flexible: at any time, a node or a computer can join, leave, move and join the network, without this posing the slightest problem of stability for the network as a whole. .

By design, Bitcoin does not require any delicate hardware or requiring advanced maintenance, because its goal is above all to be flexible, decentralized and accessible. This is why since its creation, Bitcoin developers have taken great care to maintain the necessary simplicity of the software to remain the acephalous network it should be. In reality, it is this simplicity that does everything the genius of Satoshi Nakamoto’s invention and its uniqueness.

Initially, Bitcoin worked just between a few PCs that served as nodes and miners at the same time. Theoretically, this could still be the case today. The size of the infrastructure is not a technical necessity, but only a consequence of the adoption of Bitcoin. It’s good because Bitcoin is being used that its infrastructure has scaled organically. I will expand on this essential point in a future article that will explain the mechanical link between adoption and increasing the computing power of the network.

“The debate has heated up greatly in recent months and the answer often depends on where you are on the scale of cryptocurrency fans and critics. ” – Mathilde Farine, The weather.

In fact, it’s fun to want to debate this point: Bitcoin is as it is and it consumes energy to be secure while being open, public, borderless, neutral and censorship resistant. We can have all the debates we want, we can rebel, we can want to ban it, that does not change anything. Bitcoin will continue to exist regardless, it is indestructible because it is built to withstand all attack vectors.

The debate that journalists usually offer looks like “Does Bitcoin have the right to consume what it consumes? “ This debate is futile, because whatever the answer, it will not prevent the Chinese / Emiratis / Americans / Russians / Salvadorians / Iranians / Icelanders / Congolese / Canadians and even your next door neighbor from plugging in one or more miners to its electrical outlet to earn the associated reward. The dogs bark, but the caravan passes.

To truly act for the climate, the debate should rather be: “How can we reduce Bitcoin’s ecological footprint? “. But to have an informed public debate on this subject, the media like The weather do not propagate false representations of how Bitcoin and mining work:

“At first glance, things seem crystal clear: to exist, money must be mined. However, the more time passes, the more this operation – a resolution of computer calculations – becomes more complex, requires more sophisticated equipment and explosive energy consumption. ” – Mathilde Farine, The weather.

Everything is wrong in this excerpt from the article!

  1. Mining is not used to make “money” exist. Mining is used to secure the Bitcoin network, it is a computer calculation that prevents malicious agents from tampering with transactions in the past. It serves to crystallize the blockchain in an indisputable mathematical way. The bitcoins that miners receive as a reward is not an end but a remuneration, an incentive.
  2. No, the difficulty of the calculation does not depend on “the passage of time”, but on the calculation power observed on the network during the last blocks. The difficulty is adapted every 2016 blocks (approximately every two weeks) up and down depending on the situation. The difficulty is statistically established so as to have a block every ten minutes on average. If the computing power increases, this average decreases therefore the system increases the difficulty. If the power decreases, the temporal spacing between the blocks increases therefore the system decreases the difficulty. Even though the general trend is upwards, it can be seen that the difficulty drops many times, like last summer with a drop of nearly 50% in 2 months.
  3. The complexity of the calculation does not necessarily mean that energy consumption is exploding. The performance of the machines increases with time, without being more sophisticated, moreover. The increase in difficulty primarily reflects a technological development in computers rather than an increase in energy consumption (Article on the evolution of miners by coindesk).

These errors come mainly from the journalist’s sources, especially Digiconomist which is not at all a reliable blog on the subject. His lack of seriousness has been pointed out to many times and the insane comparisons taken by the journalist are a further demonstration of this:

“The comparisons are endless. Digiconomist offers others, for example on the carbon footprint of a single bitcoin transaction, which corresponds to more than 2 million transactions with a Visa card or 168,000 hours watching YouTube. We can also assess the computer waste related to this transaction (equivalent to the weight of 1.85 iPhones). “ – Mathilde Farine, The weather.

No, no one is able to measure the carbon footprint of the Bitcoin network: neither a pro nor an anti-Bitcoin. These comparisons are therefore based on nothing. I will come back to this in a future article. Moreover, the necessary computing power does not depend at all on the number of transactions which differs a lot from one block to another (check yourself in a block explorer), whereas between two adjustments, the calculation difficulty does not change.

Thus the calculations of the miners do not serve “just” to validate transactions on the blockchain contrary to what the journalist implies, but secure the entire past state of the blockchain and serve to establish the indisputable and decentralized consensus that makes it possible economic exchanges open, public, borderless, neutral and resistant to censorship thanks to Bitcoin.

Moreover, Bitcoin is not used “just” to make transactions on its blockchain. Bitcoin is a consensus secured by a computing power unique in history: it is possible to build and run applications that are based on this indestructible foundation. The use of these applications does not induce a greater need for computing power.

The best example today is the lightning network which is today the most used protocol for spending / paying in bitcoin: it’s instantaneous, almost free and the volume of transactions per second is potentially unlimited. For my part, I do many more transactions via Lightning than transactions registered on the Bitcoin blockchain. These transactions are not taken into account at all by the journalist and her sources. To form an opinion, it is important to be exhaustive.

The comparison “in computer waste” is just as absurd for two reasons:

  1. In the same way that it is impossible to have a reliable statistic on the carbon footprint of Bitcoin consumption, it is impossible to know how many machines are in operation and how many are being scrapped.
  2. A miner is a fairly simple calculator and much easier to recycle than a phone. Weights and sizes are also not comparable. The components are also different eg no rare earth in miners. We are really in a comparison between a watermelon and one litchi.

You would have understood it. I do not dispute that Bitcoin consumes energy, nor that Bitcoin uses machines to function. What I am disputing is the way of presenting it through spurious comparisons based on a misunderstanding of the subject.

The Manichean debate “Bitcoin, good or bad” is useless, because it does not improve the situation. It is sterile, because Bitcoin doesn’t really care what people think, whether we like it or not, whether it is banned in certain countries or not, it will always continue to produce a block every ten minutes. It was created to be indestructible and to spiral out of control. You can’t uninvent Bitcoin, so you’ll have to learn to live with it.

I really regret that Kazakhs, Iranians, Venezuelans and others use electricity produced with fossil fuels to mine Bitcoin. Like many citizens, I am very concerned about global warming and the importance of a rapid energy transition. But unlike the living room (or hemicycle) Calimeros, I don’t see Bitcoin as an “enemy” (or even a friend), but as a phenomenon that must be transformed into an opportunity.

For my part, I say that there are simple measures that will significantly reduce the ecological impact of Bitcoin. These measures bring in money, reduce greenhouse gas emissions and even have an extremely positive effect on the energy transition.

I will develop all of this in future articles:

  • The simple business model with local and global impacts
  • The impossible statistics of mining: understand through its history and trends
  • Policy measures to drastically reduce the ecological impact of Bitcoin

Article originally published on the blog ” Ludomire’s ramblings«

Lionel Jeannerat

About the Author

Entrepreneur and publisher (PVH editions), Lionel Jeannerat is also a director of Coin Circle, French-speaking association on Bitcoin, decentralized currencies and blockchains.

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Bitcoin mining demystification – episode 1 –

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