Cryptocurrencies are usually subject to high issuance costs, comparable to dozens of communities who use privately issued money. However, it is vital to bear the technicalities in mind when considering the numerous cryptocurrencies. The complexity of each blockchain is usually equivalent though none of the alt-coins have an energy consumption close to that of Bitcoin. Some might argue that energy consumption devoted to the computation of Bitcoin is way too costly. Such proponents dismiss the point that the cost of energy is the first indicator of value, nor do they consider the point that when society advances, there has always been an increase in energy consumption.
In the case of Bitcoin, a simple heuristic determined the BTC price in its experimental phase. An appropriate price for each BTC is at least higher than the cost of electricity to compute the hash problem and mint additional BTC. So that nodes can later sell or exchange block-rewards with a profit.
Linking the price of energy to goods and services seems obscure. However, everything consumes energy to some extent, beginning with the transportation of commodities such as water. Cooking requires energy while boiling water. So does the production of any product, which is on display in supermarkets. Under free-market conditions, the cost of goods primarily reflects the energy used in producing that good. If free-markets encourage the lowest price of goods, then the energy consumption becomes more efficient while producing goods. Money measures the work required to produce goods and services and represents these in prices. Hence, in a way, money could perhaps be viewed as ‘stored energy.’
The ledger of Bitcoin can only be immutable if it is costly to maintain its integrity. The fact that the underlying PoW consensus is ‘costly’, in terms of energy consumption is a feature and not a problem of the blockchain. In the past, securing something anticipated constructing physical walls around whatever was considered valuable. Cryptocurrency such as Bitcoin is accessible via the virtual sphere. Hence, there are no physical walls to protect user’s BTC.
Each Node expends energy to maintain the blockchain’s integrity, and through the peer-to-peer networks’ collective hashing power, each user’s BTC is secured. The PoW fundamentally alters how its participants form a consensus. PoW is the most simplistic way for the physical world to validate something in the digital world from political votes between participants to apolitical votes. By the conversion of energy, via the computation of hash problems that validates burnt energy instead of merely ‘wasting it’. All of which underlines another dismissed point. The more energy that is expended by nodes increases the chance of a trustless system to maintain resilience. Thus, the cumulative of all energy expended is the equivalent cost to collapse the system of Bitcoin in place.
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List of Abbreviations:
BTC - denotes units of ‘coins’ or ‘tokens’ in Bitcoin
PoW - Proof of Work
check twitter for works cited at https://twitter.com/bitcoin_banana/status/1249282785518465024
Well written about the Bitcoin energy reality bitcoin_banana! Yes all our social systems have their related energy costs, often overlooked. In an increasingly information-fueled economy those so-called "wasted" energies are just the cost to upgrade generic data bits to an organized form capable of holding value and transferring it worldwide.