The energy usage of cryptocurrencies is currently a hot topic on everyone's minds.
The claims on both extremes are a bit silly, with blockchain extremists claiming people should ignore energy usage completely, while anti-blockchain extremists want to leverage this to ban all of cryptocurrency without exploring options like Gulden that offer an alternative solution.
I’m not going to take a side on that in this particular article other than to say that the truth as always lies somewhere in the middle, we should all care to some extent about these things and form our own opinion.
With these sort of topics on everyone's minds, a lot of people recently are asking me about Guldens energy usage and energy efficiency .
In this article I attempt to do as fair as possible a comparison of the energy consumption of gulden to that of bitcoin.
There are a lot of factors to consider, including current vs future block rewards and network parameters, but given the same market cap as Bitcoin (were Gulden to replace Bitcoin)…
The Gulden network is capable of realistically achieving, with some fine tuning, over 260x the efficiency of bitcoin at minimum, potentially more, while still maintaining equivalent or probably higher security. And with the potential to place an upper bound on energy usage instead of eternal growth.
A network that can run at lower costs not just in terms of capital but also environmental.
At absolute worst, if left completely otherwise unchanged, it would still achieve four times the efficiency of bitcoin for the same market cap but with massively excessive security in comparison.
Basic information on the two coins
Bitcoin is of course based on PoW, at time of writing it has a price of around $50'779 per coin, a total eventual supply of 18'708'768 coins, market cap of $950'202'346'596 and a network hash-rate of 175'000'000 Th/s. Miners are rewarded with 6.25 BTC for every block or $317'368 per block. Blocks are found on average every 10 minutes.
Bitcoin is predominantly mined by ASIC’s; an antminer S9i has a hash-rate of 14Th/s and an energy consumption of 1320 watts. The performance between latest and modern hardware varies massively, an older generation miner antminer S7 has in comparison 4.73Th/s for a power consumption of 1293W or roughly only 33% of the performance for the same wattage.
Gulden utilises our own consensus model PoW² which has a PoW component just like bitcoin but also a second unique witnessing component, which shares a lot of similarities with PoS. PoW² differs from a lot of other “alternative” consensus models in that like PoW its security can be proven to hold if the same simple assertions hold and isn’t vulnerable to additional attacks via other means. More technical info on this here and here.
At time of writing Gulden has a price of $0.032, a total eventual supply of 750'000'000 coins, market cap of $17'000'000 and a network hash-rate of 5'000 Mh/s. Miners are rewarded with 50 NLG for every block or $1.6 per block, however this is set to soon reduce to 20 NLG per block or $0,64 per block. Blocks are found on average every 2.5 minutes.
Gulden is mined only by CPU, one of the few coins with CPU mining that has managed to stand the test in time thanks to synergies made possible only by our witnessing system. A reasonable “high end” CPU can mine at about 10Mh/s with a consumption of around 300 watts. Though the hash-rate of various CPU's differ the performance per watt characteristics are roughly equivalent with some minor fluctuations.
Thanks to a more efficient transaction format Gulden can fit up to twice the quantity of transactions in the same block size.
A simple/naive comparison
The current energy usage of Gulden can be computed at around 150 kW.
Bitcoin could be said to be 16’500’000 kW, if it were entirely latest generation hardware, as it isn’t we add an extra 30% (in reality its probably more), leaving us with a figure of 21'450'000 kW (though some estimates are that this is much higher).
Therefore Gulden is 143'000 times more energy efficient than Bitcoin, or 286'000 times if we consider energy usage per block transaction capacity, quick stop the presses and tell everyone!
Well no, if we were the average scam coin that is exactly what we would do, but at Gulden we are better than that, so lets dive into why this is wrong.
Simple, Gulden is currently valued at a lot less than Bitcoin; energy usage scales with price, so if Gulden were to replace Bitcoin tomorrow these numbers would suddenly look a lot different as the higher price would drive higher energy usage.
A slightly less naive comparison
So how do we compare then? Well we can look at what would happen if Guldens price were to increase, we could consider what would happen if 1 NLG were equal to 1 BTC, but this is unlikely as Gulden has a lot more supply than Bitcoin.
So the right comparison is if their market caps were identical.
So lets look at the impact of this…
At a market cap of $950'202'346'596, 1 Gulden would be worth $1267, ~39618 times greater than before.
With 20 Gulden being found per block ($25340) we could anticipate the network hash rate to climb to 79'237'000 and energy consumption to 2'971'387 kW. Or roughly 14% that of bitcoin.
Though some may argue that instead we should simply look at dollars per hour and assume pure raw energy usage; which on bitcoin would be $1'904'208/hour while with Gulden $608160/hour. Or roughly 32% that of bitcoin.
The first comparison prices in other market externalities, hardware cost, setup and so on, while the second assumes only energy. While I think the first is slightly more accurate the truth probably lies somewhere in between, so we could say that Gulden is about 25% more efficient that Bitcoin or would use about 1/4 of the energy at the same price. Or 50% and 1/8th if we consider transaction capacity.
Still an improvement, but not as exciting as before, however this is still not the full picture as it doesn’t account for the difference in consensus models. Is this much energy consumption actually necessary? Is it really secure? Any coin can claim to be infinitely more energy efficient if they don’t have to back their security model up.
A better attempt at a comparison
In order to do a better comparison we need to consider the security model of Gulden. More on this here.
Bitcoins security model is relatively simple, the more energy (and hardware) protecting the network the more secure it is, price and energy usage must continue to rise over time or eventually the network can become vulnerable to 50% attacks if the cost/profit ratio of using cheap idle mining hardware and electricity expenditure to do harm becomes more profitable than using it to mine coins. Although a miner can feasibly do both at the same time which complicates this equation some more.
Regardless, though there is some scope to reduce energy usage (if mining rewards were lowered without price raising) one could likely at best halve or quarter this before major issue arose. And anyway this is not possible because the Bitcoin developers and community are extremely unlikely to ever allow changes to rewards outside of the original halvings. Halvings are usually accompanied by a gain in price offsetting any potential for energy saving.
Guldens security model is more complex, the price of an attack is determined by both the PoW mining and the witnessing participation, and is multiplicative of both. i.e. Attacking Gulden is more expensive/difficult than attacking a PoW coin with the same energy usage and also more expensive/difficult than attacking a pure PoS coin.
At our current meagre energy usage of 150 kW we are already quite secure with an attack costing more than that of many higher market cap PoW coins that have much higher energy usage.
We, unlike bitcoin, are also not as locked in to being set in stone and have and will continue to make changes when those changes have the consensus of the community and improve things.
The community has signalled repeatedly its intentions that should the price ever rise substantially that the rewards should lower, and right now we are in the process of implementing a halving to aid with this, though its my intention to suggest for debate a more dynamic method of reducing mining rewards as price rises.
And though if our price were to go up we would definitely want our security to rise a little bit more than what they are now, the security level that $25340 per block would bring is vastly in excess of anything that is ever reasonably required, and so its possible to speculate that if the Gulden price were to rise to $1267 that the block reward could be lowered to as little as 1 NLG while still providing ample security at what would amount to only around 118'800 kW constant energy usage.
This would represent a network that not only has lower energy consumption at 0.5% the energy usage; or 180x more efficient but with lower running costs and higher security. Once factoring in transaction capacity this is even lower at around 0.25% the energy usage or 260x more efficient. With a large security margin to spare.
Above I give some security numbers, but without the working out some might think I’ve plucked them from thin air, so in this section I show my working out.
Gulden currently has a total witness weight of around 1279689223, we will assume half of this to err on the side of caution 639'844'611 1% of this is a weight of 6'398'446 which represents about 500'000 NLG locked up for a year.
The below ignores hardware capital expenditure on hardware which I leave as an exercise for the reader we assume hardware is “free” here as the differences between hardware for the two while an interesting topic, does not change things much and adds too much complexity to an already complex discussion.
For more reading on how the numbers below are derived see this article for more details.
Note that the below overlooks that an attacking miner still gets the block reward (a factor that favours Gulden with the lower reward as its less profitable than bitcoin) and the difference in block time between the coins, a factor that means that whats a 10 conf attack on gulden would be a 3 conf attack on bitcoin but otherwise changes very little.
$25340 reward per block scenario:
On Gulden to attack 10 confirms would require 10 such accounts which at $25340 reward a block is a total capital outlay of $6'335'000'000 locked up for an entire year!; and would still require 100x (or likely more) of the network hash-rate, or an energy expenditure of around 297'138'700 kW/h (13.8x that of the requirements for an attack on bitcoin) representing a further or $0.06 per kWh a cost of almost $17'828'322 per hour vs $645'953 per hour on bitcoin. This still ignores capital expenditure on hardware which I leave as an exercise for the reader we assume hardware is “free” here.
$1267 reward per block scenario:
At $1267 reward a block the capital outlay would remain still at $6'335'000'000 as the price is the same!; and would still require 100x (or likely more) of the network hash rate, or an energy expenditure of around 11'885'500 W/h (half that of the requirements for an attack on bitcoin) representing a further or $0.06 per kWh a cost of almost $713'130 per hour vs $645'953 per hour on bitcoin.
The energy consumption for an attack is still a bit more than bitcoin at this point, after considering the extra witnessing capital outlay as well as other security aspects discussed in more detail here its fair to say that at this reward level Gulden substantially exceeds Bitcoin in terms of security.