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@mbarkhau
Created September 5, 2021 19:50
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MAD Bitcoin Energy Savings

MAD Bitcoin Energy Savings

Imagine you're a bitcoin miner. You have a huge power bill, you have your capital that is depreciating like a glass of milk in the sunshine, but as long as the price per bitcoin is high and the local government isn't driving you out of the country, things are pretty good. I mean, figuratively speaking, you're printing money.

But think about this for a minute. It's not as if the bitcoin network would work any worse if you and 99% of the mining capacity would turn off, as long as the capacity is there to be turned on again if somebody gets some stupid ideas. You all save some money on your electricity bill, the network continues to run fine and is as secure as before.

If only there were some way you could reach an equilibrium, a kind of mutually assured destruction. You know, like the standoff between the Yanks and the Ruskis. As long as the other doesn't launch their missiles, you don't launch yours. Now, of course there's an issue with accountability. I mean, why should you sit on your capital expenditure with 10x the capacity of the next guy, who simply says he has the same hash-rate as you? Why should you not spend money on your cheap energy, when the other guy simply says his $/KWh is soandso. Furthermore, since anybody can start a mining rig at any time, you're not going to be able to have a contract with every last miner, so you're guaranteed to forgo some mining rewards, just hopefully much less than your savings on electricity. But before we talks about accountability, let's just run some back of the napkin numbers and see if these contracts even remotely make sense.

As of early September 2021, according to https://btc.com/stats/pool the network is running at 131EH/s. The top ten pools taken together provide 87% of this. So they provide 114EH/s and the remaining miners provide 17EH/s. If these ten miners would cut their hash-rate in half down to 57EH/s, their energy expenditure would be cut in half, but the block rewards they receive would only be reduced to 57 / (57 + 17) = 77% of the rewards, instead of the 87% they would get otherwise.

It seems to me, there is money and energy to be saved here, but it won't be easy to get everybody on board, and it won't be easy to keep everybody honest. But where there's a buck to be made, there's may be a way.

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