Mathematicians may soon run out of words to describe the number of hashes processed by the bitcoin network every single second.
A trillion has been passed long ago. A quadrillion too. Now we have 52 quintillion. That being a million trillion. Afterwords, we just start counting in Latin, adding lion at the end until Centillion, 10 to the power of 303. After which point, words no longer describe numbers, at least for now.
Unlike bitcoin’s price, the straight up rise of bitcoin’s hashrate has seen no slowdown or pullback. It appears to have only one direction, and that direction is up and up.
Some say these calculations take as much energy as all of Austria, or Belgium. Just around three years ago it was more than only tiny Iceland.
Proof of wasted work, one cryptonian called it. That’s because all these hashes are solving useless math problems that have no end result, ancillary or otherwise, with the purpose being simply to show that work was done, like children completing school equations.
It does however secure the movement of around $8 billion worth of bitcoin per day. At a trillion hashes, billions of dollars moving in bitcoin would have been difficult because it might have taken little to double spend such transactions.
That’s due to a theory by Nakamoto himself that suggests the amount of bitcoins that can move depends on the amount it would take to 51% attack the network both within and outside of the current hashrate.
If say it costs $1 billion to 51% attack the network, then a $2 billion transfer would be very risky indeed. If, on the other hand, it costs $20 billion, then the $2 billion transfer would be very safe.
How much it would cost to currently 51% attack the bitcoin network is unclear, but we can imagine that, for an external attack, it would have to be a very large and very visible operation capable for undertaking only by a rich government.
That’s not going to happen at this stage. The more realistic risk, thus, is an internal 51% attack. That being a collusion say between two pools or two rogue employees within them or a secret undertaking by the Chinese government to covertly take over the current hashrate based in China.
The latter makes no sense because in such scenario the Chinese government would be able to make $13 million a day by being a nice good and honest miner. That translates to a billion dollars every three months, hardly pocket change even for a government.
Collusion between different pools that leads to a 51% attack has not yet been seen, but when the Ghash mining pool gained 51% of the network hashrate in 2014, a rogue employee there did undertake a very small scale double spending attack.
Such attacks do not seize coins, but only reverse history. So if a payment is made from A to B and it is confirmed, the attacker can reverse that payment, sending the bitcoins back to A. He can not send them to himself, or to C, or to anyone else but to A.
That very limited damage capability means such attacks are in many ways pointless, especially when one considers the attacker is loosing on the nearly $100,000 reward per block. As such, they are very rare if they happen at all.
There is a problem here, however, as Nakamoto was probably aware. One billion every three months is arguably a lot of money to pay for this security, with individuals in bitcoin then having to pay transaction fees on top as well.
Initially, of course, such high inflation was needed to distribute the coins, but now you need a lot of upfront capital to mine and due to the ever increasing difficulty, you need to invest in more and more hardware to keep up.
It is that loop which causes some concerns because mining farms are not aiming to get bitcoin, but through bitcoin to get fiat so they buy more hardware, which translates to the entire point of mining being more hardware.
That’s obviously a useless pursuit, so Nakamoto implemented the halving mechanism where the reward drops in half every circa four years. It will be 2020 when it does so this time, falling to just 6.25 bitcoin per 10 minutes from the current 12.5 btc.
That reduction in supply, however, might lead to an increase in price. So as far as fiat value is concerned, miners might see no difference and might even see gains despite the reward being halved.
That means the hashrate might continue going up and up, so consuming more and more energy, in a loop of sorts that appears unsustainable.
Bitcoin has no plan to address that, but the second most popular cryptocurrency, ethereum, plans to move away from Proof of Work (PoW) to Proof of Stake (PoS).
The point of solving those useless math equations in Proof of Work is to show that the miner is not a fake miner, is not a sockpuppet, but a real entity that is “voting” for the legitimacy of the block.
You don’t need to solve equations, however, to prove that some entity is real. In ethereum, they plan to do so by requiring a stake in eth. One can’t fake eth. So in PoS the eth are the ones “voting,” or more correctly said the software program utilizes eth for identity establishment and the node operator oversees the entire operation.
The benefits of that approach are numerous, including the lack of requirement for energy expenditure. Nor is it an untried approach. PoS mechanisms have been utilized in some public blockchains for some time. Ethereum has learned from those approaches and is implementing complex reward and punishment incentives.
For now, however, eth too is Proof of Work, with their hashrate too up and up, with miners there too getting some $8 million a day.