Bitcoin Mining has been considered as a troublemaker for the environment by many as it consumes the humongous amount of energy. Much has been spoken and written about it because in absolute terms it consumes a hell lot of energy. But if Vladimir Jelisavcic’s analysis on Long Hash is to be believed Bitcoin mining uses far less energy compared to Gold Mining.
Bitcoin mining energy usage: A top-down and bottom-up approach
Vladimir Jelisavcic, to estimate the energy usage for Bitcoin uses two rough methods for estimating power consumption: the “top-down” approach and the “bottom-up” approach as Bitcoin is a decentralized network with millions of mining units and there is no structure for reporting power consumption for mining till now.
In the “Top-Down” approach, the block rewards are used as a premise to estimate the consumption of power. The report says
“Every time a new block is created, 12.5 Bitcoins are given to miners. Assuming 10-minute time intervals between blocks, that comes to about $562,500 every hour (12.5 x $7,500 x 6) earned by miners. If miners were using 30% of that $562,500 per hour to buy electricity, how much would they buy? The answer provides an estimate of power consumption. Electricity prices vary greatly, but we can assume about $100 per MWh for the cost of power to the ultimate end-user. That comes to about 1,688 MWh to support the Bitcoin blockchain.”
In the “Bottom-Up” approach, the hash rate is used as a premise to estimate the consumption of power while it is also considered that every miner is using the latest Antminer S9 which rates 14.5 terahashes per second. The report says,
“The total Bitcoin network hash rate is about 50 exahashes per second (exa is short for one billion trillion, or 1018). That means that the equivalent of 3.45 million Antminer S9 units is required to support the Bitcoin blockchain. The S9 is rated to consume 1,650 watts. This implies that 3.45 million S9s will consume 5,693 MWh. Let’s start with 5,693 and assume that older mining hardware is about 25% less efficient than the latest S9s, implying that about 7,000 MWh are required to currently support the blockchain.”
If we average 1,688 MWh using the top-down approach, and 7,000 MWh using the bottom-up approach, we estimate Bitcoin has a total energy cost of about 4,344 MWh.
For analyzing gold mining energy usage, the author uses Barrick Gold Corporation (the world’s largest gold mining company) into the global gold mining industry. Taking figures from the annual report of Barrick, the author does his calculations reaches to an implied figure of $6.0 billion of energy cost, and $87.3 billion of total annual costs. He then summarizes the two by saying
“To summarize, gold mining’s $6.0 billion of direct energy usage is about 92 million barrels annually ($6.0 billion/$65 bbl). The world consumes about 34 billion barrels annually. That means gold mining direct energy costs (diesel fuel) are about 0.27% of worldwide oil consumption. Bitcoin, in comparison, uses about 0.07% of worldwide electricity capacity”
Changing faces of Crypto mining: Renewable energy may change the game
This Topic has got a few comments already from leading names. Joseph Young shared the same analysis saying “Yes, it costs $4 billion to mine Bitcoin every year. But it costs $80 billion to mine gold. “but the total cost of mining gold is equal to Bitcoin mining + clearing houses as Bitcoin is maximizing supply as well as is clearing transactions.
Yes, it costs $4 billion to mine Bitcoin every year. But it costs $80 billion to mine gold.
Because mining Bitcoin isn’t just maximizing its supply but approving transactions and payments, a more accurate comparison would be: Bitcoin mining Vs gold mining + clearing houses. pic.twitter.com/SJW42T0iFe
— Joseph Young (@iamjosephyoung) September 14, 2018
John Lilic, member of the Ethereum development studio ConsesnSys, chimed in on the difference in the energy consumption between the two aforementioned assets. “The real question is whether the gross energy inefficiency costs in crypto is worth the benefits like custody over assets. My contention is Yes! It is worth it but only if our industry prioritizes & continues to work towards energy efficiency gains like Proof of Stake,” he stated.
While the analysis considers the use of traditional non-renewable sources of energy, one shouldn’t forget that there are efforts being made for renewable sources of energy to mine bitcoin which will make mining bitcoins eco-friendlier.
Is Mining Bitcoin less destructive to the environment than mining gold? Do let us know your views on the same.
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Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.