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Bitcoin and electricity

How many times have you read something like this, “Bitcoin uses as much electricity as Malaysia or Sweden or Denmark or Chile….”. What a bore. Have you ever wondered, however, why the comparison is to countries? Why don’t they ever tell you what would seem to be a more natural comparison which is how much “Bitcoin” spends on electricity?

The reason is that electricity is incredibly cheap so Bitcoin electricity expenditures priced in dollars don’t look very large. Bitcoin uses something like 100 terawatt hours (TWH) of electricity annually (depending on the price of Bitcoin) but a TWH costs less than $100 million (10 cents per KWH times 1000000000). Thus, Bitcoin spends say $10 billion on electricity annually. (In fact, it’s less than this since bitcoin miners can be located in places where electricity prices are especially cheap.)

$10 billion in spending isn’t a lot. It’s less than the world spends on toothpaste ($30b), much less than the US spends on cigarettes ($80b), and considerably less than the US Federal government spends in one day ($18.65 billion).

If we think of the $10 billion spent by Bitcoin as a security budget (as the spending secures the blockchain) it also compares reasonably to US bank spending on cybersecurity. Bank of America alone spent more than $1 billion on its cybersecurity budget and the total financial security budget is much larger.

So the next time you read that Bitcoin consumes as much electricity as Sweden substitute Bitcoin spends as much on electricity as Americans spend on Halloween costumes.

Source: https://marginalrevolution.com/marginalrevolution/2021/11/bitcoin-and-electricity.html



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9 Comments

  1. What is more is that Bitcoin mining often uses offpeak, seasonal surpluses that would otherwise have no use and would be wasted.

    By monetising surplus/offpeak electricity Bitcoin increases the viability of many renewable electricity generation systems and lowers the cost for other consumers.

    Finally Bitcoin by enabling a monetary paradigm based more on savings and thrift is likely to encourage an economy that is less wasteful and less damaging to the physical and social environment.

    Bitcoin is a driver of a better less wasteful and more productive and efficient monetary system and economy.

  2. Offpeak spot price of electricity here in NZ is often below one cent kw/h when there is surplus water in the hydro lakes that provide most of NZs electricity.

    The 10cents/kw/h quoted above seems rather high when most Bitcoin miners will be buying in bulk at wholesale prices and probably paying closer to 3 cents kw/h.

What do you think?

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