The cost of energy consumed is directly borne by the people mining the bitcoins. The costs of the power gluts should be being directly borne by the customers (I'm pretty sure it is in Germany, I don't know about California).
The energy market is distorted by government interference, sure, but the costs are clear and (unless the regulators are doing something really stupid) being borne by parties with skin in the game.
The problem of course is that China is still getting most of its power from fossil fuels (the rosy numbers they often promote usually end with "by 2050"). Given that the environmental effects of bitcoin's fossil fuel usage may not be borne by the people buying/mining bitcoin, it doesn't make sense to expect the market to price it in.
Edit: I mention China because that's where a lot of bitcoin is mined due to cheap electricity.
That would have been great. The opposite is the case: industrial users get paid and regular consumers pay those payouts with their monthly bill. Those payouts are a cost to the utilities
Let us assume a perfectly rational market... should preface all of these statements. That way it triggers us appropriately like "Assume an infinite plane" does.
But let's not take this for granted and let's try and approach this practically, for this specific subject.
If I said "I think the market is wrong and having a decentralised consensus system that provides strong cryptographic guarantees is not worth X amount of electricity, while maintaing multipple centralised banking systems is worth Y amount of electricity"
then there are some hard follow-up questions to deal with:
Is it not worth any amount of electricity then?
Why is it worth only that amount (or none)?
Who is to say what amount of electricity it is worth? So far we know that markets are the authotity of how much anything is worth. Why should we trust some other authority? And if we accept that some authority can decide how much electricity one application deserves, then why should it do it selectively? Why not say how much every application should be using?
And if we somehow found answers to the above, then we have to ask:
How would that be enforced?
Would we want to live in a society with this level of control where enforcing such things is possible?
Without extending to address these tough problematics, any opinion about the market being wrong carries no weight -the simple answer would just be
"if the market can be wrong, so can anything or anyone else we know of"
'Market is the best process we have for determining relative value, just like science is the best process we have for determining truth.'
I cant upvote this enough. People have been saying the price is what the market is willing to pay. This never stuck is as an answer, but both word relative AND value perfectly describe pricing. Thank You
Do you think the precious metal markets are wrong?
Markets aren't right or wrong. People decide what's right and wrong, and apply the relevant constraints via regulation.
One off events that happen because of an alignment of several external factors are not good markers to plan the future from. Further, you can't assume the Bitcoin is the only sink for excess energy and that other markets/systems aren't in a better position to take advantage of it.
e.g. if a block costs ~70k USD of electricity and you accept a tx for more than 210k USD after 6 conf then if the sender is a purely self interested actor in a perfect market their rational decision would be to spend a bit more than 210k USD in electricity to mine 7 blocks.
Obviously this is a completely idealized market where you can purchase mining power to fork at will.
But the end result is that the more electricity burned the larger tx you can trust with a lower amount of confirmations. In ~7 years we'll see block rewards drop to ~3 BTC. By that point if we don't have tx fees that compensate then we'll see a large drop in hash rate. If the size of the blocks doesn't increase, the size of a tx decrease or something else we will either see the security drop quite a bit or the cost of a on the chain tx increase dramatically.
The math doesn't work that way.
If you take all the bitcoin mining operations in the whole world, China and every other country, put them together and somehow duplicated all that under your own control, so that you own as much as everyone else put together, you own 50% of the global hashrate... that only gives you a 50% chance that you will mine the next block, let alone 7 in a row.
The chances of mining 7 blocks in a row, even if you own as much as everyone else in the world put together, is less than 1%.
And it would cost billions of dollars worth of ASICs to get that 1% chance.
The idea that it would cost billions of dollars worth of ASICs to get this chance relies on the fact that Bitcoin is in an absurd boom right now, such that only new ASICs are competitive and there isn't a pile of old used ASICs available. If Bitcoin ever stagnates, this will rapidly stop being true.
You're also assuming that the ability to rewrite an hour of Bitcoin history isn't worth a couple billion dollars to anyone. That's an interesting assumption. (If I were, say, Israel, one of my enemies started using Bitcoin to buy weapons, and I thought that the ability to rewrite Bitcoin history an hour at a time could bankrupt them, I would be thrilled at the opportunity to spend a billion dollars to do so.)
I'm frankly rather surprised that Bitcoin, and proof-of-work blockchains in general, are considered secure enough for serious high-value work.
Then you end up with an orphaned chain which will have effect at all.
In practice you'd need to show the world the blocks before they got to old or they'd be dropped due to an old timestamp.
Buying up the ASICs would be the real cost, It seems like the chain is largely safe because of that. If the price drops enough that lots of mines liquidate it'd be good to keep an eye on where they go. If 50% of the hash power is dark large txs should rely on a whole lot of confirmations if at all.
So what? That doesn't make its energy use any less unethical. Especially since the only "value" that Bitcoin provides is as a tool for speculation.
The reason none of this matters is because the market says it doesn't matter. The market is finding enough value from Bitcoin to keep running the network. Going forward, I think energy consumption won't matter because we are now producing more power than we can consume. For example, Germany had to pay citizens to consume power because there was a glut. Another example recently was in California where the state had to pay Arizona to take their excess capacity.
The same is happening in China. China is heavily investing in alternate forms of energy and when you boil it down, it is still cheap to mine a 14,000+ USD bitcoin. In other words, the market says it's ok.