The real cost of mining blockchain
Why private blockchains will overtake their public rivals
Cost and Time. That’s the answer. It’s probably easier to start at the beginning though, rather than the closing statement.
Making a living as a miner
Public blockchains pay independent miners to authenticate transactions. For this article, we’re going to use Ethereum for our calculations.
On the Ethereum network, or EVM (Ethereum Virtual machine), miners get paid in fractions of bitcoin. These fractions are called GWEI. With me so far? Good.
The power it takes a computer to mine a transaction is measured or calculated in GAS.
There is a relation between GAS and GWEI. The person who needs a transaction made, sets the price they are willing to pay for the GAS needed, by setting their own GWEI multiplier. The more GWEI you are willing to pay for GAS, the more money the miner will get, and the more appealing it becomes for the miner to choose mining your transaction over someone else’s. Think of it like eBay. The miners are the seller, it’s their time/processing power you’re bidding for. The bidders are all the people who want to make a transaction. The person who offers the highest amount, wins the bid. Simple.
There is a minimum amount set for the value of any transaction, which is 21,000 GAS. That sounds a lot, but it isn’t. There are one billion GAS to one Ethereum token. So at a one to one ratio of GAS to GWEI, 21,000 GWEI is 0.000021 Etha. That’s 0.95 cents at the current market value. Cool hey! You’d only have to mine 106 transactions and you’d have a whole dollar! This is why sellers can set their own GWEI price. If you decide to pay 10 GWEI for one GAS, it becomes a lot more appealing. The average transaction fee on Ethereum is currently about 50 cents (AUD) and takes about half an hour to process.
The data mined for transactions is small when trading Etha. It doesn’t use much GAS. Documents on the other hand are BIG. Lots of data = lots of GAS. 1 kilobyte (KB) of data will need a whopping 640,000 GAS to process it. Even at a one to one GWEI ration that’s over 30 times the cost of trading in Etha. A five-page word document, a good size for an employment contract or Transfer of Deeds (about 2,200 words or 12,500 characters), would be roughly 265 KB. That’s assuming it’s fairly plain text and doesn’t include equations or calculations, which would increase the GAS needed considerably. You’re now looking at a mining fee in the hundreds of dollars to get your document stored on the blockchain. Blocks are limited to about 1 megabyte (MB) of data. If your document was that big (very possible if you throw in some pictures and calculations), it could cost thousands! With no fixed cost of GAS no one can say exactly how much these transactions would cost, but if sellers are paying 50 cents to process 256 bytes of data, a simple multiplication puts the cost of processing 1 MB at about $2,000.
The cheaper option
So there you have it. If you want to store documents, unless you have cash to burn, don’t even think about doing it on a public blockchain. If you want to store data that constantly needs to be updated but has a low intrinsic value, don’t store it on a public blockchain. If you need records stored quickly, don’t store them on a public blockchain.
If you want to find out more about the progress of private blockchains, here’s a good article on Hyperledger Fabric here. HyperledgerFabric
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