# Banking on Blockchain: Costs Savings Thanks to the Blockchain Technology
## 4 The Bitcoin System
### Ecologically Unfriendly and Friendly Protocols: PoW vs. PoS  
As already mentioned, in the Bitcoin network, miners have to run their mining hardware continually, proving that they are spending a substantial amount of money in order to secure the network. In exchange, they gain newly minted bitcoins. Contrary to Bitcoin, in a PoS system, such as Nxt, every one who owns stakes can be chosen to protect the network. The bigger the stake they own, the more often they are chosen to protect the network. With this mechanism, only one or possibly a few computers at a given time run on full power, processing transactions and using energy for validating the transactions, and not for the sake of proving they exist, and spend a lot of money to secure the network. Ref. [29] presented an interesting comparison between energy and cost efficiency of the Nxt and Bitcoin network. He computed the electricity and the hardware expenses of the Bitcoin network in May 2014. Instead, for the Nxt network, he computed these expenses considering a hypothetical Nxt size equal to that of the Bitcoin network in May 2014. He analysed the energy and cost efficiency of the Nxt network under the hypothesis that 2500 Cubietrucks will power the network when it gets to Bitcoin's size. A Cubietruck is a forging machine that offers a 1.2 to 1.6 GHz dual core processor. Its value of power consumption, when idle, is equal to 3 W, whereas, at full power, is equal to 18 W. Correctly, he assumed that these forgers use up to 18 W while forging, and consequently that a number of network users equal to 2497 uses only 3 W while idling. As a result, in [29], the total power at a specific time in order to secure the network is equal to 7545 W, and hence equal to 181 kWh per day about 66 MWh per year. Assuming an average rate of 12 cents per kilowatt hour, [PERSON] computed a cost of electricity to power the network per day equal to $7937 per year. He also computed the cost of hardware per year, and assuming a cost equal to $100 and a 5-year lifetime for Cubietrucks, he found a cost of hardware per year equal to $50,000.  
Regarding the Bitcoin system, he computed the total power consumption on 24 May 2014, starting from the value of the hash rate at that date, equal to approximately 99,300,000 GH/s, and hypothesizing that all miners used on that date the best machines available on the market. Specifically, he picked the Cointerra TerraMiner II, which runs at 1000 GH/s and costs $3500. Assuming hence that 99,300 Bitcoin miners powered the network, he found a power consumption per year equal to about 520,000 MWh, a cost of electricity to power the network per year equal to $62,400,000, and a cost of hardware per year equal to $69,510,000 considering, as in the previous computations, an average rate of 12 cents per kilowatt hour and a 5-year lifetime for mining hardware. Although the author considered the most energy and cost efficient machines in the market, he highlighted a difference of four orders of magnitude between the Bitcoin and Nxt system, highlighting hence a much higher efficiency of the system using PoS than that using PoW. Results similar to those by [PERSON] for the Bitcoin system emerge also from other works, such as that by [25], who simulate an artificial Bitcoin market, and that by [37], who wrote:  
_\"In April 2013 it was estimated that Bitcoin miners already used about 982 Megawatt hours every day. At that time the hash rate was about 60 Tera Hash/s.\"_ See article by [38]). Adopting the same approach used by [25], based on the fitting curve of the hash rate per US$[H/(s*$)], \(R(t)\) and on that of the power consumption [W/H/s] \(P(t)\) (defined in the next section), in this work, we compute the electricity and hardware expenditures supported by the Bitcoin miningnetwork over time, from 30 September 2010 to 31 December 2016. We estimated these expenditures dividing the real total hash rate in the network by \(R(t)\). The real total hash rate data was recovered from the blockchain Web site.