Topic: Is Bitcoin mining sustainable? (Read 1234 times)

Why do you use $600 as a cost reference? I have read somewhere that $200 is currently the break even point for most miners to still be

sustainable and to make some profit... below that, people would shut down their miners. In any way, the electricity cost of Bitcoin are not

even comparable to the amount of electricity that are needed to power the fiat system { Electricity used for bank buildings & ATM's etc. }

If that is also the issue... You making too many assumptions, and there are too many variables that cannot be predicted. { difficulty

adjustment, Bitcoin price, technological improvements ... }

Bitcoin value is not dictated by how many are mined per block, but based on how many people want to buy per block (demand) and competition (cost).
Value of Bitcoin is in geometric increment, more or less, exactly because its userbase is in geometric increment.
This means that if Bitcoin value will be 1000$ in the next months, we will be more than twice its value of the last year.
But this is still nothing.
Once banks will begin to serve it as a profitable investment, there will be a huge request.
Once banks will begin to collapse, there will be a huge request.
And once Bitcoin will begin to enter mainstream, there will be a huge request.
Bitcoin is just at the end of the take off strip and is not yet flying.
What I want to say in the end, is that Bitcoin value will probably reach 50000-100000$ by 2020.

If you please read my post before posting, that would be nice.
Otherwise we get in a loop where I try to explain, you don't read, and just repeat what everybody knows about market's law, which is not what sustainability is about.

That's a hope, but you can't base your future on hopes.
Also, 4 years ago was the dawn of mining, we are now very far off that point.
We are probably already near to hit the hardware wall, I mean that progress in efficiency won't be as much as it was in the bast 4 years. At all.

First of all, I didn't estimate 600$ of electricity. 600$ is the cost of one Bitcoin, which I took to calculate how much revenue miners are doing, and thus how much electricity they are paying, based on the fact that competition pushes the price down to the threshold that miners have to keep afloat by paying electricity, hardware and rent.
And because of this I tied Bitcoin value to the cost to mine it, which I am sure isn't coming as a surprise at all.

My actual calculation was of 5000$ of electricity per block, aka every 10 minutes.
Which brings to 5000$ * 6 =30000$ per hour.
Which brings to 30000$ * 24 = 72000$ per day.
Which is far less than your calculation (500000$) only because I consider 20$ for household bill per month, and is really not far off from your calc if you used my 20$ bill per month, bringing to 5000$ * 20 = 100000$.
Or to say it better, you paint an even worse situation than I paint.


But you shouldn't consider what a person is using as hardware. We are talking in general here, so the only factor we put in here is total consumption per time.
The only thing that I can acknowledge you, is that I have no sharp knowledge of how much electricity is needed to mine a block. But that's variable also on which hardware is run.
And that's why I base my calcs on miners income: because they are this is probably the most reliable source.
Miners are making Bitcoin prices based on what they can cut off after paying all the expenses.
And they make it based on market of course, and they lower prices because of competition, but they can't put prices below costs.

I get that 20$ for house, because that's what I spend where I live in Italy, and I'm not even paying much. North of Italy is more expensive.
But USA is not the world. The world is using far less electricity than the average american, in case you didn't know.
Also 11 cents per kWh is cheap when compared to Europe. Italy is known for its high electricity cost and I've just checked: it's well over 20 cents per kWh.
However, we can raise that to 30$ or even 50$, as I said: the problem here is not of 1 or 2 or 3 or even 5 measures, it is of order of magnitudes.

So to conclude, you paint an even worse picture than I paint, by just a 30% or so... but still, I am not far off from your measure and Bitcoin mining is sustainable now, but it won't in the future when the price will reach what we all expect it to reach.

the biggest thing the OP is missing

4 years ago. someone spends $1600 on equipment. that has a power draw of ~1.4kwh = same costs, same electric...
but..... it only hashed at ~300 M/hash(4gpu used on 2mainboards with 2 700wPSU)
this was the olden days of GPU mining

today. someone spends $1600 on equipment. that has a power draw of ~1.4kwh = same costs, same electric...
but..... hashes at ~13 T/hash (1 s9 bitmain)
this was the current days of ASIC mining

in 4 years someone spends $1600 on equipment. that has a power draw of ~1.4kwh = same costs, same electric...
but..... probably hashes at XX P/hash (some crazy assed asic)

There are probably a few variables that you haven't included in your analysis.

The first one that comes to mind is the "halving" every four years.

You calculated:
"600*12.5=7500"

But in four years that 12.5 is going to be replaced with 6.25
Four years after that it will be replaced with 3.125
This will continue to reduce the mining revenue unless the bitcoin exchange rate doubles every four years.

I don't know that bitcoin will ever get to $100,000 per BTC, but if it takes 32 years for the exchange rate to reach that target, then the math would be:
100000*0.04882812 = 4882.81"

That's less miner revenue than today.

Another thing to consider is the law of supply and demand. There are costs associated with building additional power generation plants to support bitcoin mining, these costs would be reflected in higher electricity costs which would increase the cost of mining.  So the same amount of mining revenue in the future might not buy as much electricity as it does today.

I haven't looked too closely at the maths behind it recently, but I suspect that you've attributed too large a percentage of the revenue to electricity and not enough to equipment and other mining related expenses.

If we do altcoinhosting's maths again, we see that he's made a mistake:

Current network hashrate = 1,819,984,088,000,000,000 hash/s
Antminer S9 = 14,000,000,000,000 hash/s for 1471 Watt at the wall
1,819,984,088,000,000,000 / 14,000,000,000,000 = 130,000 antminer S9 units
130,000 * 1471 = 191,230,000 Watts
24 hours in a day
191,230,000 * 24 = 4,589,520,000 Watt*hours = 4,589,520 kWh per day
The average US electricity use is 911 kWh per month
4,589,520 / 911 = 5,037 households for 1 month

So, if I haven't made any errors in my maths, 1 day of Bitcoin mining currently uses as much electricity as about 5,000 average U.S. households do in 1 month.
(much less than the 170 million household calculated by altcoinhosting)

Your estimate of 36,000 households seems a bit high.  Clearly not everyone is running an antminer S9, but anyone mining with equipment half as efficient would have to have costs that are half as much in order to remain profitable.  As such, it seems unlikely that the daily electricity use is more than 10,000 households would use in a month.

I'm not sure where you got your $20 per month being the average cost of electricity for a household.  Here in the U.S. the average cost is somewhere around $0.11 per kWh. If we multiply that by the average usage of 911 kWh, it's about $100 per month.

So if mining electricity costs as much in a day as 5,037 average U.S. households spend on electricity in 1 month, then daily mining electricity costs should be about:

100 * 5037 = $503,700 per day
With 144 blocks per day, that's about $3500 per block spent on electricity (not the $600 that you estimated).

I also think the system will adjust itself eventually...
That being said, https://coinmarketcap.com/ tells us that about 80 million USD worth of BTC is bought/sold per 24 hours... I don't know how much an average bank transacts in the same timeframe. Offcourse, this market cap has little to do with the ammount of BTC used to create outputs on a daily basis... But it's a start.
I do know an average bank has a big server room, a big network, ATM's, physical local bank offices filled with pc's, lights,...
Physical money is made out of paper, which has to be made from raw material, printed, transported,...

Instead of wondering how much power sustaining the BTC network consumes, it might be more interesting to compare FIAT to BTC regarding power consumption.

For example, how much power is used to circulate 80.000.000 * 365 USD (including printing, transporting, bank offices, ATM's,...). compared to sustaining the BTC network for a year...

I have no idear where to start such a calculation tough...

The mining hardware becomes better and better.
The mining is shifting more and more to the places with cheap electricity (and I know that this is extremely bad).
If BTC will ever reach such prices, the difficulty will rise so much the average Joe with an old miner will finally give up (which will be great for the power consumption and very bad for the not-so-decentralized-anymore network).
The power will become cleaner over time. If its price will rise, some businesses will stop mining too.
All in all, I expect the system to adjust itself and not get to the alarming numbers you expect.

No no I got what you said, I only don't think Las Vegas is using in electricity in one hour anything near to what could feed 6 millions of houses for one month.
But that's exactly what is going to happen if Bitcoin will hit 100000$ value with the actual software.
And that's the whole point: Bitcoin is sustainable now, but it won't be sustainable ANYWHERE if it reaches, let's say, 50000$ of value per BTC.

Somebody said (Antonopoulos I think) that we are already very near to the hardware wall.
The problem is not only Bitcoin's cost, but also the fact that this brings to centralization into countries with cheapest electricity.
I don't think this was forecasted by Satoshi Nakamoto when he released the software.
All this China centralization in mining is due to this effect.
We are just lucky that countries in Africa where electricity is even cheaper didn't start mining yet, because in those countries internet is even worse than in China...

You missed the main point of my post. There are places / businesses much more power hungry than Bitcoin and with much less use than Bitcoin.
The power is not for free. If somebody is willing to pay for it, he will pay. Some will earn from it, some not.
Some will prefer to mine Bitcoin and pay for electricity, some will prefer to donate the money to the poor. If you want to donate to the poor instead of mining, it's your call.

Most of industries are not sustainable, and I'd start with the production of electricity.

You forget one important thing:

You assume linearity of power consumption and bitcoin price. This is not the case. The hashpower will become more efficient, so the power use will go down.

I agree with you that there is a problem with the amount of power that is used to mine bitcoin though. It just feels like a giant waste to only burn this much power for a chance at finding a bitcoin block.

Ahah and what would you do if I gave you 123.45 BTC?
Yeah Bitcoin is slowly entering mainstream and this is what happens...

I guess I'll have to dig better on the PoS paradigm then, because the last time I read about it, it seemed to me too much rewarding for people that own the currency, or to put it better, it become a bit similar to a Ponzi: the more you own, the more interests you have. And there's also inflation problems if I recall correctly.
However, once the electricity consumption will be solved, also the centralization problem will be solved.

The problem is: we are fine... NOW.
What when Bitcoin will value 100000$? (and that's what we are all waiting to happen and expect to happen...)

We will spend the same that is spent to feed 6 millions of houses for ONE MONTH to uphold the Bitcoin network for ONE DAY?
You see this can't be going anywhere.

People have already noticed it for years. There has been some arguments to replace proof-of-work mining with proof-of-stake mining, and power consumption has always been listed as one of the key advantages of PoS.

These discussions come up periodically, but lately they always gets buried by shit topics such as "What would you do if I gave you 765.43 bitcoins?"

no problem... I was editing my post along the way
If i find an error in my calculation (or if somebody else does), i'll try to make a fresh post this evening, without editing my initial post, to keep everything clear

OK I'm sorry I answered you real time.

I don't know the numbers, but I also have the feeling that Bitcoin mining is quite power hungry on the big picture, mainly because of a ton of "hobby miners" who don't care of the power costs.
But when you figure out something close enough to the real numbers, please compare it with the power consumption of Vegas. I think that we are still much lower than that, so yeah.. we're fine.

Well... That's what i've written at the end of the calculation... I must be off somewhere... These numbers are way to high... I probably did a miscalculation or something, because this can't be right...
I'll re-read my calculations this evening (when i have some more time, currently at work)..