Power cost of bitcoin

Assuming a fixed rate of 5 cents per kilowatt-hour. Cost percentage. %. Estimated ratio of electricity costs to total miner income.
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Critics see this as a big problem. Many countries have unstable power grids and some cannot handle the increased needs.

Bitcoin’s Energy Consumption Is A Highly Charged Debate – Who’s Right?

In January, the Iranian government blamed Bitcoin mining for power outages in the country. On top of that, there is the giant CO2 footprint of all that electricity production. Though Bitcoin's environmental damage is so far only a tiny fraction of what cars and industry produce, these ecological concerns have pushed many miners away from coal power to places with cheaper hydroelectric power. And despite most concerns, the cryptocurrency still has a big fan base, most famous among them Tesla's Elon Musk.

Bitcoin is not the only cryptocurrency on the block though. Some use a similar mining technique to Bitcoin. Others use alternatives in which the block creation process depends on wealth rather than computational power. Last month, the electric carmaker registered an office in Bengaluru, which is a hub for global technology companies. Nigeria — the world's second-largest Bitcoin market after the United States — has banned the trading of cryptocurrencies. It's triggered anger among Nigerians who see cryptos as a safe haven in a battered economy.

After smashing multiple records in recent weeks, Bitcoin is on track to become the gold of the future, investment experts say. But the precious metal, which could hit record prices this year, won't dull so easily. German Chancellor Angela Merkel's chief of staff, Helge Braun, warned that the country still finds itself "in the most dangerous phase of the pandemic. DW correspondent Nicholas Connolly was temporarily detained while reporting on anti-government protests in the Belarusian capital. At least people were arrested during smaller rallies across the country. A concert by the band Love of Lesbians was held with an audience of 5, to test whether such an event can be held with strict hygiene measures.

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Do Bitcoin Mining Energy Costs Influence Its Price?

Nigeria's cryptocurrency crackdown causes confusion Nigeria — the world's second-largest Bitcoin market after the United States — has banned the trading of cryptocurrencies. Will Bitcoin become 'millennial gold'? Date Coronavirus: Merkel aide warns of vaccine-resistant mutations.

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Coronavirus: Barcelona holds music concert with 5, to test hygiene measures. The energy cost of mining. The overheads for the maintenance of the mining farm, such as infrastructure costs and cooling facilities. The cost of purchasing and renewing the mining hardware. For the purpose of this study, we focus only on the first element, the energy cost of running the Bitcoin mining hardware which is likely to be the key driver and is the only cost that can be estimated with some precision.

The maintenance costs for running a Bitcoin mining farm varies widely depending on the location, design and scale of the facility and since such information are usually not disclosed to the public, it is infeasible to estimate it accurately. The sales price of mining hardware is publicly available but incorporating it into cost calculations is arduous because of the rapid rate of evolution in the industry and the information opacity regarding the market share of each hardware and the rate at which obsolete mining hardware are replaced.

Newer mining hardware may achieve faster hash rates and higher energy efficiency but the renewing costs makes it unlikely that all Bitcoin miners immediately replace all their existing mining hardware with the latest versions as they are released. Certainly a combination of both old and new mining hardware should coexist in the Bitcoin network as long as each machine continue to generate a profit. However, the market share of each hardware and its evolution over time is an unknown. With respect to the purpose of the present estimate of the lower bound of the mining cost, we must stress that the maintenance and the hardware costs must be anyway proportional to the energy consumption costs.

By ignoring them we are under-estimating the total mining cost by some factor but, beside this factor, the estimation of the overall behavior of the mining cost should not be significantly affected.

Energy consumption of a Bitcoin (BTC, BTH) and VISA transaction 2021

Most prior works have priced energy usage according to global average electricity prices see for instance Vranken, ; Derks et al. In this paper, we introduce a different approach, by converting the energy consumed during Bitcoin mining into barrels of oil equivalent and priced according to the Brent Crude spot price. Our rationale is that the Brent Crude oil price is a publicly available daily value standardized around the world whereas electricity prices varies widely across different countries and suppliers. Note that there is a premium that electricity producers and distributors charge on the electricity price with respect to the oil cost and there can be also taxes.

These extra charges depends on countries and situations but they will add a certain percentage to our estimate of the mining cost based on oil prices. As another point of comparison, regional electricity prices were also used as a proxy for the energy cost. The average global electricity price used for mining was calculated based on the geographic distribution of hash rate on the Bitcoin network and the local industrial electricity price.

An overwhelming proportion of Bitcoins are mined in China so the data there is further stratified based on provinces. They are shown in Table 3. The three nations also publish government statistics regarding industrial electricity prices on a regular basis China: NEA, USA: EIA, Russia: Petroelectrosbyt which allowed for the annual weighted average electricity price for Bitcoin mining, E t , to be calculated as.

How Wasteful Is bitcoin?

Table 3. Geographic distribution of the share of hash rate on the Bitcoin network, — A disproportionately large percentage of mining activity within China was based in provinces with lower than average electricity prices so where provincial data were not available, a 0. Regional share of hash rate and electricity prices were not available for USA or Russia so similar adjustments weren't possible. Another limitation of electricity prices is that a growing proportion of Bitcoin mining uses low-cost stranded renewables Andoni et al.

Due to these other factors and the lack of historic data on electricity prices in several other countries around the world, the majority of this paper will focus on energy pricing using the Brent Crude oil index. A comparison of ratio between the cost of mining and Bitcoin transaction volume is presented in Figure 6 to show the standardized oil prices as a measure of energy cost yield similar results to using regional electricity prices.

For the purpose of estimating a lower bound to the energy costs of Bitcoin mining, we considered at any point in time that the entire network is adopting the most energy efficient machine available at that time. In situations where a mining hardware has different power setting options in which the user may choose to increase or decrease the hashing speed of the machine along with energy consumption, the most efficient power setting is used for calculation.

The lower bound of the energy costs of Bitcoin mining is estimated from total number of hashes times the energy cost of hashing by the most energy efficient Bitcoin mining hardware available on the market at any give time, divided by the conversion factor between energy and barrel of oil and multiplied by the cost of the oil. Specifically, the lower bound for daily mining cost, C t , is:. H t is the daily number of hashing operations in Th on day t ;. Table 2 reports a list of the Bitcoin mining hardware which consumed the least energy per hash operations at the time of their release to the market.

In a previous work a power-law model was proposed by Kristoufek However, the exponential model is more consistent with what is commonly expected for the rate of technology growth, according to the Moore's Law Moore, Figure 1. Figure 2 displays the total number of hashing operations per day. We note that the number of daily hashes have increased from 10 15 to 10 25 in the period between September to May when this paper was written.

Daily hashes have been growing at exponential rates linear trends in semi-log scale , which is in agreement with previous observations O'Dwyer and Malone, However, we can see from the figure that there are four, very distinct, periods with different grow rates. Specifically: i mid to mid ; ii mid to early ; iii early to early ; iv early to early The estimated best-fit doubling times in these periods are respectively: 1 33 days; ii days; iii 38 days; iv days.

Figure 2. Daily hashes computed by the Bitcoin network. The lines are best-fits with exponential growth laws in the corresponding sub-periods. Doubling times are respectively i 33 days, during mid to mid ; ii days, during mid to early ; iii 38 days during early to early ; iv days, during early to early Figure 3 shows the variations of the energy price per gigajoule in the period — computed from the Brent Crude spot prices.

One can notice that the cost of one gigajoule of energy has two distinct levels—around 20 USD from to mid and around 10 USD from late to early Oil prices has since collapsed under the coronavirus pandemic, dropping to below 3 USD per gigajoule of energy. However, while large, the rate of change in energy price is several orders of magnitude smaller than the rate of change in the number of hashes. Figure 3. The lower bound of the total energy costs of Bitcoin mining is estimated as the minimum energy cost of each hash multiplied by the total number of hashes computed over a given period of time a day in our case.

Note that this is the lower bound estimate and the actual cost is presumably much larger. The growth in mining costs is affected by both the changes in energy cost see Figure 3 and by the increase in the hashing rate in the Bitcoin network see Figure 2. We note that the variations in energy cost oscillates in a much narrow band with respect to the changes in the daily number of hashes and therefore, the minimum Bitcoin mining costs Figure 4 mostly mirrors the growth in the total number of hashes. Figure 4. During the last 10 years the Bitcoin network activity has also increased with increasingly larger amount of money transferred daily through the network.

Figure 5 reports the total transferred value per day in the Bitcoin network specified in USD. One can see that the total daily volume of transactions has grown from about one thousand USD in to nearly one billion USD in for an increase by six orders of magnitude. Figure 6 reports the ratio between the daily mining cost C t and daily transaction volume V t.

The largest variations occurred in the first few years then, after , the ratio value has stabilized into a plateau with then a jump to a higher plateau at the end of presumably due to the large decrease in Bitcoin price from over 19, USD in December to just a little over 3, USD in December Despite the change in this relation between mining costs and transaction volume in —18 and the change in Bitcoin prices in the same period, we note that in general this ratio is not correlated with the price of Bitcoin.

There is actually a small negative correlation between the two for the daily variations. Using regional electricity prices to calculate the mining costs shows a similar pattern over time, though on a slightly higher level after with the mean ratio being 0.

Bitcoin Energy Consumption: An Inside Look

Note that this band of oscillation is within one order of magnitude whereas the underlying quantities C t and V t vary of six orders of magnitude during the same period. If we limit our analysis to the last period after the end of , we obtain a mean ratio of 0. Figure 6. The band is the region between the first and tenth decile and the center line is the mean value, which is 0.

The proof of work allows a network of anonymous and untrustful parties to operate together without central authority control.

It is a powerful instrument to keep a distributed system secure from malicious attacks. However, it has a high cost. We estimate that presently at least a billion USD per year is burned by the Bitcoin network for the proof of work. This amount corresponds to a one million times increase with respect to the costs in Using data from to , this paper quantifies the lower bound for the energy costs of Bitcoin mining and examines the relationship between this bound to the total value of transactions over time.