Post
Topic
Board Bitcoin Discussion
Re: Correlation between mining costs and Bitcoin value and ecological nightmare
by
wareen
on 29/06/2011, 00:04:30 UTC
So, before this thread goes to sleep, I'd like to leave a working conclusion that if the bitcoin price increases 200 fold over the next year or so, bitcoin mining will be using in the order of 1GW of energy, or about 1 large power station.
Stated like this it is really misleading - you need way too many assumptions for this conclusion to be of any worth by itself.
Apart from all the other influential factors mentioned in the thread you also ignored the fact, that mining is no rational investment in a market which seems to be consistently growing all the time (your premise).

Example: consider a starting price of 1 BTC = 1 USD and you invest 10.000 USD in a mining rig which gives you 50 BTC per week. With difficulty following price (your conclusion) you'd roughly end up with 650 BTC by the end of the year, worth 130.000 USD. Including electricity costs you'd have a mere 11 fold return on your investment compared to a 200 fold increase if you had bought BTC directly to begin with.

You see that you have to also make very specific assumptions on the expectations of the future price level for predicting the amount of new hashing power entering the market. If for example, miners suspect a pump and dump by big speculators (which would not look too differently to the price explosion you base your argument on), new miners might not enter the market despite its seemingly short-term profitability.

To conclude from my perspective:
Yes, if price shoots up 200 fold within a year, Bitcoin's total energy consumption will be much higher by the end of that year but your conclusion of a 1:1 relationship is ignoring so many factors that it most certainly does not even hit the right order of magnitude.

Also, regarding the usefulness of extreme extrapolation: