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Bitcoin just recently hit a new all-time high at $66.9k. The largest and oldest digital asset, surpassed its initial ATH of $64 days ago. It has a market cap of over $1.2 trillion and has passed some of the globe’s largest companies in the process.
More to bitcoin’s performance, experts predict that the coin can hit $100k by the end of 2021. As such, there has been a lot of buying and trading pressure surrounding this coin.
However, even though bitcoin is vastly growing in value, several factors still slow down the growth of this coin. Among them include regulation issues and lacking trust. But, one factor which has been slowing down bitcoin adoption is the cost of electricity. When talking about the costs of electricity, the main area of focus has always been mining.
Electricity Consumption of Bitcoin Mining
It’s no doubt that bitcoin is one of the largest global electricity consumers. Some statistics show that Bitcoin takes about 0.5% of the worldwide energy consumed annually. The energy consumption by bitcoin has in the past been likened to the power consumed by small countries. Therefore, it’s no doubt that Bitcoin is consuming very high amounts of energy daily. But how?
The process of mining bitcoin is very complex. The miners have to participate in solving very complex arithmetic equations. The more you decrypt the hashes, the higher your chances of mining and getting the reward. Initially, basic laptops and CPUs were capable of mining these coins efficiently.
However, soon miners realized that more power would bring in better results. They began using GPU mining and later ASICs. Combining the three mining methods consumes humongous amounts of electricity every year.
Some stats show that bitcoin uses around 91 terawatt-hours every year. Statistics show that it takes around 122 thousand terra-hash to produce a single bitcoin in 24 hours. The report also indicates that the 122 thousand terra-hash is produced by 1109 S19 pro. As such, if using 1 ASIC, you need 86509kWh (85.5 MWh, or 0.0865GWh) to generate one bitcoin.
S19 Pros are perhaps the most energy-efficient of the mining ASIC. Others like Bitmain, MicroBT, Canaan, Innosilicon, and Ebang consume slightly higher.
High Electricity Costs
Today, the average electricity costs are quite high, depending on the country of origin. The global average cost per kilowatt-hour of electricity stands at about $0.136 for households and $0.124 for businesses.
Now, those amounts could seem very low until you consider the monthly average consumption per household. Some reports indicate that the monthly consumption of electricity for an average house is about 208 kilowatt-hours. Using some little mathematics, you can see that every month an average household spends nearly $28.288. While that may seem like a small figure, it’s already too high for most people in developing countries who live hand to mouth.
Now, consider this: the average household wants to mine bitcoin. The most efficient system requires 86509 kWh to complete mining a single bitcoin. Multiplied by the average business cost, the household will have to pay $11 thousand on electricity to mine a bitcoin. Although the amount is fair compared to Bitcoin’s price, it’s still too high for others. As such, it’s a hindrance to bitcoin adoption.
Can Cheap Electricity Drive Bitcoin Adoption?
After looking into the costs of electricity and average mining costs of bitcoin, it’s vital to see how cheap power would impact bitcoin adoption. Indeed, there are many ways cheap electricity would speed up the adoption and use of bitcoin in the world. Here are the major ways;
Cheaper Mining, More Miners
Of course, one of the biggest beneficiaries of cheaper electricity is bitcoin miners. Generally, many people today have some interest in mining bitcoin, but their main hindrance is electricity.
Remember, the numbers above were merely considering one rig which has a low chance of mining. However, to increase the chances of mining, you need to have several rigs, all operating concurrently.
As you increase the number of rigs, the electricity consumption also increases, and so do the costs. Hence, smaller investors would prefer purchasing bitcoin on exchanges and benefiting from its volatility rather than mine.
But, if the electricity costs go down, the costs of mining will be lower. As such, more people will get into mining, even in underdeveloped and developing countries.
Cheaper Mining, More Value Gain
Another benefit that would come with cheaper power costs is more value gain/profit. The process of mining bitcoin is expensive; as such, the amount of gain is very low. However, if the electricity costs are reduced, there will be more rewards in mining. As the rewards increase, so will the number of people intending to benefit from mining.
Cheap Electricity Means More Time Online
Cheap electricity, accompanied by affordable internet, can easily result in people using more time online. As more people go online, it will be easier to know about bitcoin and even choose to invest.
Indeed, Cheap Electricity is Undervalued
This guide has been exploring the use of electricity in Bitcoin. The focus has been on the electricity consumption and costs surrounding electricity.
It’s clear that, as the average electricity prices may appear low, people in developing countries find it quite expensive. Hence, most people might prefer using their funds on other investment options rather than mining bitcoin. Once bitcoin mining slows down, so does the adoption of this entire coin.
Cheaper electricity will lead to more affordable mining, which translates to more value to users. Hence More people will join bitcoin mining since they can get more rewards at lower investments.
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