Is btc price sustainable with growing downward selling pressure of energy use?

[colinistheman]

I am a firm believer that some day a single bitcoin will be worth over $10,000. But I can't wrap my wits around the math when it comes to the cost of electricity required to sustain that size of a market cap.

If there are 25 bitcoins created every 10 minutes, this means there are 150 bitcoins created every hour, and 3600 bitcoins created per day.

At today's prices of roughly $230 USD per bitcoin, 3600 bitcoins per day are valued at about $828,000 USD.

That means it costs roughly that much electricity per day to mine bitcoins and just to secure the network. (The total cost of mining will typically grow until it is close to the value of the coins being mined.)

That is $302,220,000 dollars per year at current prices. And this is only for a $230 bitcoin!

To sustain a $1000 USD bitcoin it will cost $1,314,000,000 USD ($1.3 billion per year in mining & electricity costs)

To sustain a $10,000 USD bitcoin it would cost $13,140,000,000 USD ($13.1 billion per year in mining & electricity costs)

That is a lot of money just to maintain the bitcoin value where it is.

When bitcoin value goes higher, that electricity cost will increase as the network difficulty increases. It seems that the bitcoin market value is being eaten in electricity, and electricity companies are the true ones to profit in the end.

So there is this constant downward selling pressure on the bitcoin price as bitcoins are constantly being liquidated into fiat just to pay for mining costs and electricity. It's like an "existence cost", just to allow existing bitcoins continue to exist. I'm not even talking about making new coins.

Can someone please show me that this isn't such a horrible looking math equation, and how this can realistically work in the long-run, especially with a much higher value bitcoin and correspondingly higher network maintenance costs flowing out of the network in the form of liquidated bitcoin into fiat?

Will the bitcoin network even be sustainable at a $10,000 bitcoin, with such high total electricity costs?

Is this just during the inflationary period of bitcoin? Once the block reward goes down to 12.5 and then down to 6.25, will things look brighter electricity-cost-wise? When the block halving occurs, the value of the bitcoins will roughly double over time, so I feel it will, in effect, be the same math as above.

NOTE: I'm not starting this thread to invite suggestions as to alternate methods of proof of work (or proof of stake). I want to look at how our existing Bitcoin model works.

[johnyj]

Exactly, mining cost will eventually get close to its market price due to arbitraging

Imagine that one bitcoin only cost $20 to mine but the market price is $200, what will happen? Everyone who want to get bitcoin will mine, no one will buy. And many arbitragers will mine and sell for a quick and immediate fiat profit, that will drive the market price down, and raise the mining cost, until they get close

Similarly, when one bitcoin cost $200 to mine but the market price is $20, all the people want to get bitcoin will stop mining and go to exchanges to purchase, all the miner will refuse to sell, thus raise the market price and lower the difficulty and mining cost, until they get close

[ticoti]

If price goes down,miners will turn off machines,and that's all, and the reduction of the rewards of the block will be harder than that.
We'll see what happens next year

[DannyHamilton]

You are missing two important pieces of information in your calculations.

First, electricity isn't the only costs miners have.  The total cost of mining will typically grow until it is close to the value of the coins being mined.

Second (and probably more importantly), there won't always be 25 new BTC mined every 10 minutes.  When bitcoin started out it was 50 new BTC every 10 minutes.  A bit over a year from now it will be 12.5 new BTC every 10 minutes.  That number will continue to be cut in half every 4 years.

[mercistheman]

Not sure you can use today's cost in future calculations... miners will become more efficient... many areas have lower electric cost (these will be the hubs).... colder climates benefit with lower heating bills... when I was mining we only turned the furnace on if it got below 30 degrees....
Solar etc.

[colinistheman]

Exactly, mining cost will eventually get close to its market price due to arbitraging

Imagine that one bitcoin only cost $20 to mine but the market price is $200, what will happen? Everyone who want to get bitcoin will mine, no one will buy. And many arbitragers will mine and sell for a quick and immediate fiat profit, that will drive the market price down, and raise the mining cost, until they get close

Similarly, when one bitcoin cost $200 to mine but the market price is $20, all the people want to get bitcoin will stop mining and go to exchanges to purchase, all the miner will refuse to sell, thus raise the market price and lower the difficulty and mining cost, until they get close

Yes, precisely.

And my concern is the wastefulness of all the money spent on electricity used to maintain the network.

It's not even the electricity that I care about. It's the money gone to pay for it. That money just disappears and goes back into the fiat economy in this endless stream to pay for electricty.



[Maybe some day electricity sources will accept bitcoin for payment and we can close the loop? ]

[crazyivan]

Nope, it s not. Once we come to the halving, the price needs to go up or the diff needs to go down.

Also, I think a lot of people are going to switch over to staking.

[Kprawn]

This might sound dumb, but it's a legitimate statement... The eventual goal of Bitcoin {reward system} will go towards a Fee only reward, when all Bitcoins are mined.

If we reach this stage, where it's no longer sustainable, could they not make a change to the protocol, to increase the fee structure to accommodate for that earlier? {This could be like a subsidized miners fee}

I am sorry if this sounds silly.. but I was just thinking of a extreme solution, if this could happen. 

[Ruckspin]

Miners might have to look at alternative energy. Maybe the big mining farms in the future will be run off huge solar pannels or wind turbines etc and generate their own electricity for free.

[Kaneki]

Miners might have to look at alternative energy. Maybe the big mining farms in the future will be run off huge solar pannels or wind turbines etc and generate their own electricity for free.

I agree with this, should probably use an alternative electricity or create their own power source for mining purposes.

[Eastwind]

Miners might have to look at alternative energy. Maybe the big mining farms in the future will be run off huge solar pannels or wind turbines etc and generate their own electricity for free.

I agree with this, should probably use an alternative electricity or create their own power source for mining purposes.

But the total cost (machine+human+electricity) is the same even if all of us use cheap electricity. We will buy more machine to mine and total electricity cost will remain the same. If we have more efficient machines, we will also buy more, the result is the same. The total cost  of mining is more or less same as the block reward including fees.

[NUFCrichard]

Miners might have to look at alternative energy. Maybe the big mining farms in the future will be run off huge solar pannels or wind turbines etc and generate their own electricity for free.

I agree with this, should probably use an alternative electricity or create their own power source for mining purposes.

But the total cost (machine+human+electricity) is the same even if all of us use cheap electricity. We will buy more machine to mine and total electricity cost will remain the same. If we have more efficient machines, we will also buy more, the result is the same. The total cost  of mining is more or less same as the block reward including fees.

New generation miners will become more efficient reducing the amount of electricity needed.
Bitcoin mining farms will also be more often powered by hydro-electric/solar/wind power, also reducing the negative CO2 emissions related to bitcoin mining.

If the price rises as you say, then difficulty will rise accordingly, but the mining profit margins will remain razor thin, meaning people will have to become more efficient somehow.

[WhatTheGox]

Nope, it s not. Once we come to the halving, the price needs to go up or the diff needs to go down.

Also, I think a lot of people are going to switch over to staking.

people are probably twice as likely to hodl during a block halving, we already seen with the last one things went a little crazy on price.  Its not like bitcoin was even a big deal back then either.

[unamis76]

Miners might have to look at alternative energy. Maybe the big mining farms in the future will be run off huge solar pannels or wind turbines etc and generate their own electricity for free.

This... And I also think mining will always be sustainable without really depending on the price. We will eventually find a way to more efficient chips and after that we'll find ways to make the heat from the chips heat our homes, our ovens, furnaces, barbecues... And we'll eventually find a way to make chips that don't make heat haha

[Billy Hlapinnio]

Miners might have to look at alternative energy. Maybe the big mining farms in the future will be run off huge solar pannels or wind turbines etc and generate their own electricity for free.

I agree with this, should probably use an alternative electricity or create their own power source for mining purposes.

Alternative sources are not very effective for constant mining. Solar energy is produced only during the day.

[Eastwind]

Miners might have to look at alternative energy. Maybe the big mining farms in the future will be run off huge solar pannels or wind turbines etc and generate their own electricity for free.

I agree with this, should probably use an alternative electricity or create their own power source for mining purposes.

But the total cost (machine+human+electricity) is the same even if all of us use cheap electricity. We will buy more machine to mine and total electricity cost will remain the same. If we have more efficient machines, we will also buy more, the result is the same. The total cost  of mining is more or less same as the block reward including fees.

New generation miners will become more efficient reducing the amount of electricity needed.
Bitcoin mining farms will also be more often powered by hydro-electric/solar/wind power, also reducing the negative CO2 emissions related to bitcoin mining.

If the price rises as you say, then difficulty will rise accordingly, but the mining profit margins will remain razor thin, meaning people will have to become more efficient somehow.

If everybody uses hydro-electricity, which means cheap unit price, then more miners will be used, then more electricity will be consumed. The total cost will be the same as the more expensive unit cost electricity.

[countryfree]

Forget everything about solar or renewable energy, that costs way more than dirty electricity from coal or another fossil source, but nobody said processors couldn't get more efficient. They have.

[bronan]

Mining is for the smaller miners like me dead, there is no viable or sustainable value to continue.
Its plain and uther useless to constant buy hardware and endless huge bills for energy just to get a few coins which not even cover the costs of the electricity bill.

The so called $10.000 dollar will not happen in the near future because the massive companies mining have to sell the coins to cover the bills of energy as well.

Bitcoin is as heavily centralised as fiat is, some huge investors get the most.

The development of new and more efficient miners has slowed down enormous already, and i do not expect huge breakthroughs to become available for the small miners as well. Those will also be in the hands of the large investors and companies.

And yes the costs of solar energy are in my country insane for 4500 Kwh a year i had to pay 12000 euro, try to give me a calculation where mining would make profit on this. ( 0.26 euro per kwh )

[Ingatqhvq]

I am a firm believer that some day a single bitcoin will be worth over $10,000. But I can't wrap my wits around the math when it comes to the cost of electricity required to sustain that size of a market cap.

If there are 25 bitcoins created every 10 minutes, this means there are 150 bitcoins created every hour, and 3600 bitcoins created per day.

At today's prices of roughly $230 USD per bitcoin, 3600 bitcoins per day are valued at about $828,000 USD.

That means it costs roughly that much electricity per day to mine bitcoins and just to secure the network. (The total cost of mining will typically grow until it is close to the value of the coins being mined.)

That is $302,220,000 dollars per year at current prices. And this is only for a $230 bitcoin!

To sustain a $1000 USD bitcoin it will cost $1,314,000,000 USD ($1.3 billion per year in electricity costs)

To sustain a $10,000 USD bitcoin it would cost $13,140,000,000 USD ($13.1 billion per year in electricity costs)

That is a lot of money just to maintain the bitcoin value where it is. (When the block halving occurs, then this may drop in half.)

For bitcoin value to go higher, that electricity cost will increase. It seems that the bitcoin market value is being eaten in electricity, and electricity companies are the true ones to profit in the end.

I'm not starting this thread to invite suggestions as to alternate methods of proof of work (or proof of stake). I want to look at how our existing Bitcoin model works.

Can someone please show me that this isn't such a horrible looking math equation, and how this can realistically work in the long-run with a much higher value bitcoin?

Will a $10,000 bitcoin even be sustainable with such high electricity costs?

Is this just during the inflationary period of bitcoin? Once the block reward goes down to 12.5 and then down to 6.25, will things look brighter electricity-cost-wise?

Such question never be answered yet.
Maybe it hint that $10,000 can't be sustainable in the near feature, until the reward of every block reduce to a very little number, like 12.5 or 6.25?

[DannyHamilton]

That money just disappears and goes back into the fiat economy in this endless stream to pay for electricty.

Actually, it doesn't disappear.  It just changes hands from the miner to someone else that wants it.

The miner has bitcoins.  The electric company wants fiat.  Someone else (lets call him Bob) has fiat and wants bitcoins. The miner must exchange his bitcoins for Bob's fiat.  That way the miner can pay the electric company, but the bitcoins haven't disappeared, they've just gone to Bob that wants them.  The loop is closed.