Bitcoin mining: electricity costs eat up 100 percent of sales

Bitcoin mining is currently a zero-sum game. At least if you go with digiconomist.net’s estimates.

Bitcoin mining is no longer for “small fish”. While digital gold could still be “digged” with a normal household laptop in its early days, it now takes entire factory halls of mining equipment to have a realistic chance of winning the block reward. The CPU and GPU have been replaced by ASICs (application-specific integrated circuits). These are highly specialized chips, which in this case specialize in the Crypto Bank mining algorithm . In a sense, they are technical idiots with a single task: to guess the correct hash for the next block as quickly as possible.

Bitcoin mining: a zero-sum game?

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Basically, the more guesswork a miner can make per second, the better his chances are. The more miners throw their hats or hash power into the ring, the more difficult it becomes to find a block. The so-called mining (also: network) difficulty is adjusted every two weeks by the Bitcoin protocol. The decisive factor here is the total computing power used for mining (hash rate). With an increase in this computing power, which is specified in hashes per second, the mining difficulty also increases .

But it is not only the difficulty that increases with the hash rate: Bitcoin is notorious for its extraordinarily high energy requirements. With its Bitcoin Energy Consumption Index, the blog Digiconomist tries to translate Bitcoin’s hunger for energy into numbers.

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According to this, the Bitcoin network currently consumes more energy per year than the whole of the Czech Republic

Based on the current Bitcoin exchange rate , the total hash rate in the network, and an average electricity price of $ 0.05 per kilowatt hour, things are not looking good at the moment: neither for the environment nor for the miners. Because if you follow the digiconomist’s data, then Bitcoin mining is currently a zero-sum business: Bitcoin miners currently have to spend 100 percent of their annualized income on electricity costs.

Digiconomist does not accept the argument that it ultimately depends on the type of energy source – renewable or fossil :

While renewable energies are a volatile source of energy, Bitcoin miners have a constant energy requirement. A Bitcoin ASIC miner is not switched off after being switched on until it either collapses or is no longer able to mine Bitcoin profitably. For this reason, Bitcoin miners increase both the base load demand on the grid and the demand for alternative (fossil fuel based) energy sources to meet this demand when renewable energy production is low,