Cryptocoins: who pays the huge energy?

[iNow]

2 hours ago, martillo said:

What I don't understand is the mess you are doing with such a simple thing.

It’s a direct response to you suggesting demand for Bitcoin would go down due to the mining of it consuming so much energy. 
 

Here it is again in case you forgot:

5 hours ago, martillo said:

Isn't this volatility due to its current energy consumption?

Demand is strongly afeected by energy consumption nowadays.

 

[martillo]

1 hour ago, iNow said:

It’s a direct response to you suggesting demand for Bitcoin would go down due to the mining of it consuming so much energy. 

I arrived to that conclusion with the discussion in this thread. It's a conclusion of my own, I agree. It is a natural conclusion for me. I don't have a scientific back up for it. What do you mean? Are you asking me to make a rigorous demonstration within Economics Theory of it? I'm not an Economist. I cannot do that. 

You commented:

7 hours ago, iNow said:

Volatility comes mostly from demand… as in supply and demand. It’s unrelated to energy consumption or mining in any direct sense. 

Seems you are referring in economical terms something I don't know too much. What I don't understand is why you refuse to include energy consumption as an important factor in the variation of demand in general and particularly in the demand of bitcoin. Am I making some error in the Economics Theory with this? 

I wonder where is the fatal error I made for you to make a mess with this... (???)

Elon Musk founded his decision for Tesla not deal with Bitcoin on its energy consumption. May be he lied as you mentioned, I don't know. What I know is that If Elon Musk made such justification it must be valid in economical terms. So would be my conclusion.

May be you are right in that is not a direct relation between demand of bitcoin and its mining energy consumption. It could be an indirect one, but what is the problem???

Edited May 18, 2021 by martillo

[iNow]

22 minutes ago, martillo said:

What I don't understand is why you refuse to include energy consumption as an important factor in the variation of demand in general and particularly in the demand of bitcoin. Am I making some error in the Economics Theory with this? 

Energy consumption often (but not always) influences demand on consumer products where energy costs if owing that product play a major role. You mentioned several good examples of these yourself… automobiles, appliances, air conditioning units, etc.

These are goods that require continuous inputs of energy after they’ve been purchased and hence there will be payment outlays one must make across the entire life of the product… I must pay my electricity bill to keep my refrigerator and AC running… I must buy gasoline to keep my car running… buy natural gas or propane to run the furnace during winter in our home.

These are all goods where considering energy consumption as part of the Total Cost of Ownership makes very good sense, and those considerations can and often do affect demand… more efficient products tend to outcompete less efficient options other things being equal (Not always, though... see also people buying horribly inefficient sports cars and big trucks, etc… energy consumption is only one among thousands of variables).

Bitcoin is a different category entirely, though. It’s not a consumer good. It’s an investment… a gamble… a currency that can be sold and traded to buy other things. 

Once you’ve bought it, however, you own it. It’s yours, and there’s no need to pay for gas to keep it running, or to buy electricity to keep it online. There are no additional considerations other than, “I paid $X to obtain it and right now it’s worth $Y” and energy consumption is irrelevant.

The people who mined it had to purchase electricity to do slayer… and the platform/bank who holds your bitcoins has to pay for servers and network infrastructure to support your account and manage the transactions, but those are fees THEY are responsible for and they aren’t generally something you need to worry about yourself even though you’re the owner of the Bitcoin. 

For that reason, it’s simply incorrect and inaccurate to say energy consumption is in any way relevant to Bitcoin demand or even price.

Sure, Elon Musk made a passing tweet about it and I’m sure there are many environmentalists in the world who who would never buy Bitcoin for these reasons of energy consumption, but these folks are a tiny marginal fractional few in the broader and much larger cryptocurrency market. They aren’t relevant enough to care about in discussions of overall price. 

Hope that helps. 

[MigL]

Its more than simple supply/demand, iNow.

E Musk, one man, announces that Tesla might divest itself of its cryptocurrency holdings, and all cryptocurrencies take a nose dive in value.

And that is just a future possibility; imagine the carnage iif/when it finally happens.

I would like my currency to be backed/controlled by my society ( country ).
Not one man who is prone to lunatic/self-aggrandising behaviour.
( and who sucks on SNL )

Edited May 18, 2021 by MigL

[martillo]

32 minutes ago, iNow said:

The people who mined it had to purchase electricity to do slayer… and the platform/bank who holds your bitcoins has to pay for servers and network infrastructure to support your account and manage the transactions, but those are fees THEY are responsible for and they aren’t generally something you need to worry about yourself even though you’re the owner of the Bitcoin. 

For that reason, it’s simply incorrect and inaccurate to say energy consumption is in any way relevant to Bitcoin demand or even price.

I finally understood your disagreement but there's something you must take into account, I think:

Those ones, the miners, the banks, platforms, will not make it for free. They have to pay a large amount for their electrical energy consumption. Now, as it is a fact that the total energy consumption by Bitcoin is huge as large as a country, that cost is distributed among them and I guess it would be nothing but neglihible, am I wrong? And they would need real money to pay for it. So, they someway will pass the cost to the users of the coin, those making business with it, or not? If not they will simply lose the money of the cost of the energy something I don't think they want in any way. Then, that cost is passed to the buyers of the coin and what does this mean? Means the rising of price of the coin and as the coin get more expensive I guess a drop in the demand. Final users of the coin would have to pay more for it. I think in the coin just as a tool for making business and the tool getting more expensive for the users and so a drop in its demand would be expected. Where I could be wrong in this reasoning now?

Edited May 18, 2021 by martillo

[MigL]

Maybe we should sic G Thunberg on cryptocurrencies ...

Then again, maybe she owns some, as her net worth is already over $1 million.
( not bad for a teenager )

[martillo]

22 hours ago, iNow said:

Please clarify what you think was the original aim of virtual money. I’m not at all following your point. 

Seems you edited that post and I didn't see this before.

As far as I know the original aim was to have a worldwidw money competing with international credit cards. I mean you would not need an international credit card, would just need to buy some international money to make some international business. Of course it would be valid between who would acept the money only.

For now, due to its price and volatility, as StringJunky said: "It's a game for gamblers and crooks to wash their money."

Edited May 18, 2021 by martillo

[iNow]

1 hour ago, MigL said:

Its more than simple supply/demand, iNow.

E Musk, one man, announces that Tesla might divest itself of its cryptocurrency holdings, and all cryptocurrencies take a nose dive in value

Did he not cause demand to decrease as a result of his comments?

1 hour ago, martillo said:

they someway will pass the cost to the users of the coin, those making business with it, or not?

Transaction fees and interest fees on holdings are hardly specific to crypto currencies. Even standard savings and checking accounts often have them.

1 hour ago, martillo said:

the rising of price of the coin and as the coin get more expensive I guess a drop in the demand

Perhaps you haven’t noticed, but the exact opposite of this is what we’ve seen happening with BTC values these last several years. 

It’s down about $15,000 in the last few weeks (almost reached $64K just one month ago), but the trend the last 5 years suggests your “theory” doesn’t accurately describe reality and should be abandoned. 
 

[martillo]

16 minutes ago, iNow said:

Perhaps you haven’t noticed, but the exact opposite of this is what we’ve seen happening with BTC values these last several years. 

I should have talked about a drop contribution in the demand. The demand is affected by many factors I know.

Edited May 18, 2021 by martillo

[iNow]

7 minutes ago, martillo said:

I should have talked about a drop contribution in the demand

I’m unfamiliar with this term. Will you please elaborate? 

[martillo]

5 minutes ago, iNow said:

I’m unfamiliar with this term. Will you please elaborate? 

I mean that the energy costs just contribute negativelly in the demand, it is just one of the factors affecting the demand.

Edited May 18, 2021 by martillo

[iNow]

7 minutes ago, martillo said:

I mean that the energy costs just contribute negativelly in the demand

I don’t believe that’s true for any but a tiny few environmentalist / green investors, but you’re certainly welcome to your opinion. 

Edited May 18, 2021 by iNow

[martillo]

1 hour ago, iNow said:

I don’t believe that’s true for any but a tiny few environmentalist / green investors, but you’re certainly welcome to your opinion. 

My concern in this thread is about costs not ecology issues.

By the way, I don't consider myself as an environmentalist although I take some care on the environment. I don't like to live in the garbage.

Edited May 18, 2021 by martillo

[iNow]

1 hour ago, martillo said:

My concern in this thread is about costs not ecology issues.

Which costs? You seem very confused about BTC costs and their payment. 

[martillo]

I'm not confused anymore. It was you that have already clarified my confusion:

On 5/17/2021 at 12:36 AM, iNow said:

The same people who invest in stocks. Or go to Vegas / Macau … or who have enough money to burn to venture into these new financial spaces. See also: NFTs

Thanks for the answer. 

The last postings in this thread were just about the mess you made because I said that the electric energy cost of Bitcoin (already clarified early in the thread as due to mining) would affect negativelly in the demand of the cryptocoin. We have already talk too much about.

Actually the discussion is centered in if the energy cost paid by miners, banks, platforms, etc is or is not passed to the final users of the coin affecting negativelly its demand.

You said that is not valid. Seems we will not agree. I'm don't know much on Economy so I cannot discuss in your terms I think. I don't know if I could continue the discussion. Please try to make things simple.

 

 

Edited May 18, 2021 by martillo

[iNow]

4 hours ago, martillo said:

the discussion is centered in if the energy cost paid by miners, banks, platforms, etc is or is not passed to the final users of the coin affecting negativelly its demand.

You said that is not valid. Seems we will not agree.

You seem to believe that demand for Bitcoins from the general population goes down as a result of the energy costs miners must pay to retrieve new ones.

You seem to believe that demand for Bitcoins will go down among the general population due to the costs banks and technology platforms who manage Bitcoin owner accounts/profiles pass on to their members (transaction fees, account service fees, etc.). 

You assert that those costs from mining and those costs for account management are being passed on to Bitcoin owners, and that this somehow affects demand for Bitcoins. I explained why I find your thinking flawed and you said that we cannot agree.

You say that you disagree when I say these same issues you describe apply to ALL banking and ALL currencies and ALL investments. You seem to disagree when I say it's silly to apply these thoughts only to cryptocurrency, or only to Bitcoin specifically.

Please explain why you disagree. It's okay for us not to agree. I'm simply trying to understand your position. Right now, your position makes very little sense to me. I'm asking for your help to see things more clearly from your perspective.

What informs your conclusion that demand for Bitcoin is affected by how much energy is consumed when mining it? Elon Musk making one tweet that causes a sudden drop in price is just an anecdote, not data or evidence in support of your claim that energy consumption needs affects Bitcoin demand. 

Edited May 18, 2021 by iNow

[martillo]

3 hours ago, iNow said:

You seem to believe that demand for Bitcoins from the general population goes down as a result of the energy costs miners must pay to retrieve new ones.

You seem to believe that demand for Bitcoins will go down among the general population due to the costs banks and technology platforms who manage Bitcoin owner accounts/profiles pass on to their members (transaction fees, account service fees, etc.). 

Yes, as StringJunky said Bitcoin is popular for "gamblers and crooks to wash their money" only. Is not the case of general population acquiring it to buy things on the web. I consider this a small demand for a worldwide virtual coin compared with the general population. Bitcoin could be a great business but with those people only. I think this is because Bitcoin is too expensive for the general population. Considering the graphic you provided and not taken into account the last peak can be seen Bitcoin averaging about 10k dollars (1 Bitcoin - 10K dollars). Too expensive for the general population I think.

3 hours ago, iNow said:

You assert that those costs from mining and those costs for account management are being passed on to Bitcoin owners, and that this somehow affects demand for Bitcoins.

I associate the high price of Bitcoin mainly (not being the unique factor involved) to the high cost of its energy consumption. A price that only "gamblers and crooks" can pay (a small demand at the end).

Other factor would be just the psycologica one. General people perceive that bad scenario someway and don't like to deal with it.

That's my reasoning about.

 

Edited May 18, 2021 by martillo

[iNow]

41 minutes ago, martillo said:

Bitcoin is popular for "gamblers and crooks to wash their money" only. Is not the case of general population acquiring it to buy things on the web. I consider this a small demand

In the US alone, at least 46 Million people (approximately 17% of the entire population) own at least some bitcoin. 

 

43 minutes ago, martillo said:

Bitcoin is too expensive for the general population. Considering the graphic you provided and not taken into account the last peak can be seen Bitcoin averaging about 10k dollars (1 Bitcoin - 10K dollars). Too expensive for the general population I think.

You seem to be unaware that fractional ownership is possible. You don't buy a "coin." You can buy as little as One One Hundredth Million of a Bitcoin... That means you can own 0.00000001 BTC and still “own Bitcoin.”

Cost of a full bitcoin as of the time of this post $46,375. That means you could right now buy a piece of bitcoin for $0.0005 (only 5 one hundredths of a single penny).

How exactly is that too expensive for general population? Admittedly, there is usually a $5 minimum required for a transaction, but that's moot given my actual point.

 

49 minutes ago, martillo said:

I associate the high price of Bitcoin mainly (not being the unique factor involved) to the high cost of its energy consumption.

I know that's what you think, and there's no evidence that this is correct. Quite the opposite, really. 

 

50 minutes ago, martillo said:

A price that only "gamblers and crooks" can pay

So you're saying only gamblers and crooks own Bitcoin? That's quite a generalization. 

[martillo]

16 minutes ago, iNow said:

I know that's what you think, and there's no evidence that this is correct. Quite the opposite, really. 

I will think more about this but which do you think is the cause of the high price of Bitcoin then?

 

[StringJunky]

39 minutes ago, martillo said:

I will think more about this but which do you think is the cause of the high price of Bitcoin then?

 

Same way as stocks: Buy low, sell high. That's where the volatility is, with the big players buying then dumping.

[martillo]

34 minutes ago, StringJunky said:

Same way as stocks: Buy low, sell high. That's where the volatility is, with the big players buying then dumping.

So, as iNow said, the opposite of what I was thinking: just the demand setting the price and the energy consumption as consequence...

If this is the case I have a final question: Would the energy consumption (due to mining) continue so high if the cryptocoin maintains its existence, even still rise or it could drop with time?

Edited May 18, 2021 by martillo

[iNow]

28 minutes ago, martillo said:

So, as iNow said, the opposite of what I was thinking: just the demand setting the price and the energy consumption as consequence...

Exactly

29 minutes ago, martillo said:

Would the energy consumption (due to mining) continue so high if the cryptocoin maintains its existence, even still rise or it could drop with time?

It will probably be stable or go up until all coins are mined / more attractive crypto currencies replace it. 

[wtf]

2 hours ago, martillo said:

Would the energy consumption (due to mining) continue so high if the cryptocoin maintains its existence, even still rise or it could drop with time?

Yes. The energy cost is the cost of validating blocks. That never changes. Even after the limit of creating bitcoins is reached, blocks must still be validated whenever there is a transaction.

A good question is, why would the miners keep mining when they can no longer create new bitcoins? According to Investopedia, they would still collect transaction fees. 

Quote

 

It may seem that the group of individuals most directly affected by the limit of the bitcoin supply will be the Bitcoin miners themselves. Some detractors of the protocol claim that miners will be forced away from the block rewards they receive for their work once the bitcoin supply has reached 21 million in circulation.

But even when the last bitcoin has been produced, miners will likely continue to actively and competitively participate and validate new transactions. The reason is that every Bitcoin transaction has a transaction fee attached to it.

These fees, while today representing a few hundred dollars per block, could potentially rise to many thousands of dollars per block, especially as the number of transactions on the blockchain grows and as the price of a bitcoin rises. Ultimately, it will function like a closed economy, where transaction fees are assessed much like taxes.

 

 

https://www.investopedia.com/tech/what-happens-bitcoin-after-21-million-mined/

[martillo]

3 hours ago, wtf said:

Yes. The energy cost is the cost of validating blocks. That never changes. Even after the limit of creating bitcoins is reached, blocks must still be validated whenever there is a transaction.

A good question is, why would the miners keep mining when they can no longer create new bitcoins? According to Investopedia, they would still collect transaction fees. 

 

https://www.investopedia.com/tech/what-happens-bitcoin-after-21-million-mined/

All that human effort and consumtion of energy to mantain, let me say, an "informal" economy of "informal" business...

It could be interpreted as a sink of the "formal" circulating money to "informal" activities and someones could be inclined to forbid that. Bitcoin is forbidden in certain countries.

But who knows what would be "formal" and what "informal" in the future? It is known that considered "informal" activities in the past became "formal" time after. And some "informal" activities were always tolerated in all human societies ever.

Seems to me now that Bitcoin came to stay but as an "informal" coin.

For "formal" business we already have the proper dollar stablished as the main international money the same as English is stablished as the main international language.

In this sense Bitcoin does not compete with dollar anyway, just complement it...

 

Edited May 19, 2021 by martillo

[iNow]

6 hours ago, StringJunky said:

Same way as stocks: Buy low, sell high. That's where the volatility is, with the big players buying then dumping.

And another just for fun: