We should not link network security with computing power, but with the energy cost of mining. After all, energy costs determine the level of computing power.
Original title: “Viewpoint丨The security of the Bitcoin network is not determined by computing power? 》
Written by: Aat de Kwaasteniet
Translation: Olivia
It is often said that the security of the Bitcoin network is the best of all cryptocurrencies. This security is based on the fact that Bitcoin requires huge hashrate, which means that it is impossible for a malicious attacker to attack it with >50% attack methods.
However, there is still a lot to know about Bitcoin’s PoW system. Since Bitcoin halves every 4 years, the current security level may only be maintained if the price continues to rise in the future. In addition, people are reluctant to consume too much energy. In this report, we will delve into computing power, miners, rewards and mining equipment.
Network computing power
The security of the Bitcoin network consists of the mining capacity or computing power of the Bitcoin network. The size of the computing power and the security of the Bitcoin network actually depend on the profits of the miners.
In fact, the profit and loss of a miner is actually determined by many factors:
- The value of Bitcoin and the relatively high liquidity of Bitcoin have a positive impact on miners’ profits.
- Total computing power, that is, how many miners should distribute the total profit.
- The number of bitcoins that can be mined per unit time. It is now 6.25 BTC every 10 minutes.
- The computing power of mining equipment. The higher the computing power, the greater the chance of finding a block, and thus the higher the rate of return.
- The cost to be paid by miners. Costs include energy costs, custody costs, operating costs and depreciation.
- The efficiency of mining equipment. The more modern the mining equipment, the higher the hash/energy cost ratio, and the stronger the profitability of the mining equipment.
We can assume that once miners start to invest in mining equipment, this means that the cost must be recovered before the equipment is replaced again, so the relevant data in points 4, 5, and 6 are fixed. In fact, the data in the other three factors are also fixed except for the halving every 4 years. This means that the profit of miners is highly dependent on Bitcoin price and computing power.
We can observe the connection between price and computing power. If the price of Bitcoin increases, computing power will increase accordingly. Because more and more miners are seeing the feasibility of mining Bitcoin. On the contrary, if the price of Bitcoin decreases, the computing power will decrease. Because miners will not dig at a loss. At each price level, there will be a stable point between computing power (number of miners) and price. But in fact, it always maintains a dynamic balance. This is because new miners will be able to mine with more profits as the mining equipment gets better and better.
In addition, the development of computing power in a rising market will always lag behind prices. After all, it takes time to buy and install mining equipment. But shutting down the mining equipment can be completed in a very short time, so we see that the (substantial) drop in prices will also directly lead to a drop in total computing power.
figure 1
We can find that after the price peak in December 2017, more and more miners started mining. As one of the largest suppliers, Bitmain cannot cope with the influx of a large number of orders, resulting in a delivery time of up to 6 months. Under the circumstances at the time, this delivery cycle became normal, and this is why it took 6-8 months to reach the top of the computing power. The price of Bitcoin has been falling all the way. In December 2018, the exchange rate dropped from US$8,000 to US$4,000, which directly affected computing power. From April to May 2019, we saw that the price appeared an upward trend line again, and then there was an upward line of computing power immediately afterwards. It reached the price top again in July 2019, and the computing power did not reach its highest point until the end of September.
After November 2019, we have seen prices gradually stabilize, but computing power will continue to grow in the future. This is due to the increasing efficiency of mining equipment that is about to enter the market, as we will see below.
benefit
In order to examine the efficiency of mining equipment, we put all equipment on the market in the past and present in a table for comparison. These are Asic SHA256 miners. Efficiency is expressed in terms of how much power (W) is required to achieve 1 Terahash/s computing power.
We can see that the 2014 mining machine needs more than 750W of power to support 1 Terahash/s network activity. The latest equipment only needs about 30W of power to reach 1 Terahash/s. Except for the mining machines before 2017, the efficiency data of these mining equipment is shown in the form of a point cloud in the figure below to make the view more observable, while avoiding some extreme values.
figure 2
In addition, an exponential trend line has been added so that we can make some predictions about the future. According to the figure, in January 2021, if the development of mining technology continues to maintain the same speed, the average efficiency of the mining machine will be less than 30W/Th/s.
Through the above data, we can understand the installed power of mining equipment and the energy consumption related to it. It should be noted that not all miners are using the latest equipment, because of course the equipment will be used for a period of time after purchase to control depreciation costs. This calculation is based on the assumption that the depreciation period of mining equipment is 2 years, so the average service life of the equipment in the entire mine is 1 year. This means that a reliable estimate has been made on the total installed capacity of the mine each day. These values are also shown in the price background chart.
image 3
We can see from Figure 3 that in recent months, the growth rate of mining machines has not been as fast as the computing power in Figure 1, and is probably stable at around 6 to 7 GW. We found that the computing power is increasing and the power of the mining machine tends to stabilize, this is because the efficiency of the mining equipment has increased.
Energy consumption and cost
From Figure 3 above, it is also easy to get the energy consumption of Bitcoin. Based on the power of 7GW mining machine, the annual energy consumption of Bitcoin is 61TWh. These amounts are similar to the results of other studies based on other inferences, such as Digiconomist’s calculations.
Compared with a 3MW modern large wind turbine providing 6000MWh per year. This means that around 10,000 wind turbines are needed to keep Bitcoin running. From a social and environmental point of view, this is basically a huge number. Some people say this is not too bad, because it only accounts for <1% of the world’s total energy consumption.
If we look at the cost of mining, we can find that energy cost is the most important factor, followed by depreciation costs, operating and custody costs.
Of course, the cost cannot exceed the profit, because the miners are mining for the purpose. The profit of one day of mining is 144 block rewards, which is 6,25BTC=900 Bitcoins. According to the current price of about 12,000 US dollars, its value is about 11 million US dollars. One day of mining uses 24h×7GW=168GWh of energy. Therefore, if we assume that energy costs account for 80% of the total mining costs and required mining profits, we can calculate that mining can only be profitable when the energy costs are roughly below US$0.05/kWh.
in conclusion
From the above introduction, we see that energy consumption is similar to Bitcoin’s price development rather than computing power. In fact, we should not link network security with computing power, but with the energy cost of mining. After all, energy costs determine the level of computing power.
In other words, because the energy cost of mining is directly proportional to the mining revenue, and the mining revenue is composed of the product of the block reward and the price.
Source link: mp.weixin.qq.com
