{"id":7791,"date":"2022-08-01T01:00:00","date_gmt":"2022-08-01T01:00:00","guid":{"rendered":"http:\/\/ci02a76b1210002662"},"modified":"2025-01-28T15:02:01","modified_gmt":"2025-01-28T15:02:01","slug":"bitcoin-mining-is-not-wasteful","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/business\/bitcoin-mining-is-not-wasteful","title":{"rendered":"Bitcoin Mining Isn\u2019t Wasteful \u2014 It Creates Abundance"},"content":{"rendered":"
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The mainstream media mistakenly portray bitcoin mining as wasteful. Nothing could be further from the truth. Bitcoin mining<\/a> provides an economic bid for otherwise unusable, excess energy. Bitcoin will propel humanity to abundance.<\/p>\n

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To discuss bitcoin mining, one must first understand how it works: Proof-of-Work and the difficulty adjustment.<\/p>\n

How Bitcoin Mining Works<\/h2>\n

Bitcoin is a new type of money that uses a Proof-of-Work<\/a> consensus mechanism to secure the network (SHA-256<\/a>). The \u201cwork\u201d is the computation that must be performed to solve the puzzle. Miners use computers specifically designed for bitcoin mining<\/a> (ASICs<\/a>) to compete against each other in a race to guess an extremely large number. Every 10 minutes on average, according to a Poisson distribution<\/a>, the miner who first guesses a successful number gets to add a new block to the Bitcoin blockchain, earning the block reward. The block reward is made up of the deflationary block subsidy<\/a>, which halves every four years or so, and transaction fees paid by users to incentivize their transactions to be added to the next block.<\/p>\n

Proof of work is based on asymmetry. It\u2019s exorbitantly expensive and difficult to generate the proof while remaining extremely cheap and easy to verify that proof. Miners must expend a great deal of energy to have any chance at solving the puzzle before an even faster competitor does. As of June 10, 2022, this cost comes to about $22,000 per BTC for miners in North America<\/a>. At the same time, it\u2019s practically free to verify that a block is valid, enabling all other network participants (full nodes<\/a>) to quickly accept or reject a block proposed by a miner.<\/p>\n

By itself, proof of work would not be sufficient to secure the Bitcoin network. Miners would quickly adapt by specializing in solving this one kind of puzzle, improving the efficiency of their miners (CPUs \u2192 GPUs \u2192 ASICs), increasing the number of miners and thus growing the overall hash rate by leaps and bounds. This competitive rush would result in ever briefer intervals between successive blocks, with bitcoin being issued at a rate far greater than was called for by the original supply schedule.<\/p>\n

Satoshi Nakamoto solved this problem by implementing the difficulty adjustment<\/a>, a remarkable example of algorithmic homeostasis. Over the long run, the difficulty adjustment ensures that new blocks are found, on average, every 10 minutes<\/a>, readjusting itself each time that 2,016 additional blocks (two weeks) have passed. This clever Easter egg is a nod toward reversing the effect of Executive Order 6102<\/a>.<\/p>\n

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When blocks are being mined too quickly (less than 10 minutes between blocks on average), as can often be the case due to increasing hash rate coming online, the puzzle becomes harder at the two-week checkpoint so as to slow the rate of mining. On the other hand, when blocks are being mined too slowly (more than 10 minutes between blocks on average), the puzzle becomes easier so as to accelerate mining back to the targeted equilibrium rate of 2,016 blocks per fortnight. At this pace, the designated halvings every 210,000 blocks take place at approximately four-year intervals.<\/p>\n

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Over the long run, this homeostatic feedback loop determining mining difficulty generally balances out any deviations from the planned rate of 2,016 new blocks per fortnight. However, when rapid increases in the total hash rate are more common than declines in the mining difficulty, this cumulative slight imbalance caused by Bitcoin\u2019s exponential increase in mining power has led to block reward halvings that occur a few months sooner than expected. In practice, when the hash rate rapidly increases, the upward difficulty adjustment every two weeks isn\u2019t nearly enough to fully counteract this trend of blocks arriving sooner than planned. This is ultimately why the first several Bitcoin halvings (November 28, 2012; July 9, 2016; and May 12, 2020) have been about three years and three seasons apart. <\/p>\n

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This elegant, self-correcting system ensures that the bitcoin supply schedule<\/a> set by Satoshi Nakamoto at the beginning is followed, ultimately enforcing the 21 million cap with roughly quadrennial halvings of the block reward.<\/p>\n

Bitcoin\u2019s Energy Usage<\/h2>\n

Bitcoin provides a uniquely valuable product to humanity. It is the best money<\/a> in existence.<\/strong> Bitcoin offers a deflationary store of value, light-speed medium of exchange and precise unit of account for the global economy. Bitcoin, when used with best security practices, protects an individual’s purchasing power and property rights from seizure, debasement, inflation, counterfeiting or other political abuses.<\/p>\n

Historically, gold provided similar benefits to humanity. For generations, people have debated the merits and costs of the gold standard<\/a>.<\/p>\n

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Bitcoin miners are able to convert watts of electrical power anywhere on the planet into money (BTC). This is mind-blowing<\/a> and will radically change energy markets.<\/p>\n