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What is Bitcoin Mining?
The process of adding transaction records to Bitcoin’s public ledger of past transactions or blockchain is called Bitcoin Mining. This ledger of past transactions is called the blockchain as it is a chain of blocks. The blockchain serves to confirm transactions to the rest of the network as having taken place.
It takes on average 10 minutes to mine 1 bitcoin. However, currently, as that bitcoin is mined, so will another 5.25 BTC. This is because Bitcoin is mined as a new block is successfully added to the blockchain, which currently generates 6.25 BTC and takes on average 10 minutes. It might only be possible t mine close to one single bitcoin by block number 1,050,000–by 2028– When the block reward is expected to be about 1.56 BTC still, it will take on average 10 minutes to mine that block.
DEBUNKING COMMON MISCONCEPTIONS ABOUT BITCOIN ENERGY USAGE
#1. Bitcoin uses dirty, Non- Renewable Energy
If truth be told, bitcoin mining offers a new market to the electricity industry that challenges the longstanding notion of energy generation from grid restrictions. This new opportunity reveals and incentivizes global renewables’ potential to achieve significant carbon-free power production.
Soon, bitcoin mining will be key to an abundant, clean energy future. Solars and wind energy generation capacity are key to this reasoning because the Bitcoin network can act as a unique energy buyer of such renewable, facilitating the global transition to cleaner energy production and storage.
As solar and wind energy are becoming increasingly affordable, bitcoin miners are inclined to use it as they typically settle where electricity is cheaper to be more competitive and ensure their business remains profitable.
Solar and wind energy costs are now even cheaper than fossil fuels. indeed, they are currently 3-4 cents/kWh and 2-5 cents/ kWh, respectively, in contrast with fossil fuels such as coal or natural gas, whose costs are 5-7 cents /kWh.
However, solar and wind energy intermittency is a significant drawback compared to natural gas or nuclear power. With the sun shining only during the day and the wind blowing unpredictably, their energy production can be either abundant or negligible.
Bitcoin mining is a viable technological solution providing increased transmission and energy storage capacity to overcome intermittency. The pathway to carbon-free energy generation has already been molded, with new mining facilities settling down where natural resources are widely available
West Texas, for instance, provides an excess of wind and solar energy that has already prompted bitcoin miners to flock to that region to exploit the enormous opportunity.
Hydropower is another fundamental natural resource exploited by bitcoin miners where it is abundantly available. In Norway, for example, 100% of the country’s electricity is generated from renewable energy for bitcoin miners who can enjoy cost-effective electricity fees and a climate properly fit for equipment cooling.
#2. Bitcoin Waste Energy
According to the Cambridge Center for Alternative Finance (CCAF), Bitcoin currently consumes roughly 87 Tarawatt Hours per year which equals 0.55% of global electricity production, or the annual energy draw of small countries like Malaysia and Sweden.
While this could alarm Bitcoin’s detractors, overall attention should be directed to the carbon emission levels and not consumption. This is a critical distinction because Bitcoin could consume the entire globe’s electricity, but if it comes 100% from renewables, its impact on carbon emissions would be negligible.
Determining Bitcoin electricity consumption is straightforward to estimate, just by looking at its hashrate over the defined period. On the other hand, the main issue is determining carbon emissions from bitcoin mining, and a few factors make this task harder to perform without knowing the exact energy mix utilized.
For various reasons, miners have a typical reticence in providing mining data. Due to Bitcoin nodes’ anonymity, we often do not even have on miners existence in some regions of the world. When we do know, we can just guess their carbon impact based on the energy resources in that region.
Due to such inaccuracy of data estimates for what percentage of bitcoin mining uses renewable energy could vary widely.
The Bitcoin mining council estimated that the global mining industry’s sustainable electricity mix was 59.5% in Q2 2022 and had increased by approximately 6% year-on-year from q2 2021 to 2022.
In 2019, Coinshare published a report suggesting that 73% of Bitcoin’s energy consumption was carbon neutral from hydropower in major mining hubs such as southwest china and Scandinavia.
In 2020, the CCAF estimated that the figure was closer to 39% suggesting that considering energy consumption alone is hardly a reliable method for determining Bitcoins’ carbon emissions.
What would be more beneficial to the debate is whether we consider mining bitcoin a worthwhile activity to utilize energy on or not. Here the gate is open to a broad and sometimes fierce discussion depending on the level of appreciation for the alternative monetary system that Bitcoin represents.
#3. Bitcoin uses more energy than Visa per Transaction
We already mentioned that it’s essential to consider the clear distinction between how energy to mine and use Bitcoin is issued and how Bitcoin actually consumes power.
Many Bitcoin distractors may be heard mentioning that Bitcoin per-transaction energy cost is very high especially compared to other payment system transactions, for example. In reality, they do not have a clue and that’s only another way to attack Bitcoin. The vast majority of Bitcoin’s energy consumption happens during the mining process. Once coins have been issued, the energy required to validate transactions is minimal.
Many calculate Bitcoin’s total energy consumption to date by diving it by the number of transactions. However, that doesn’t offer an accurate perspective since most of that energy was used to mine Bitcoins, not to support transactions.
We can go one step forward and claim that Bitcoin is a final “Cash” settlement layer without needing a trusted party. Popular payment networks, like Paypal or Visa, do not provide instant irreversible settlement between banks.
All traditional retail payment systems are based upon a complex multiple-layered structure that might require as much as six months to finalize a transaction besides being lengthy, how much energy is wasted during that long period? This is why the comparison cannot be regarded as valid.
The opportunity to turn Bitcoin mining from an “environment disaster” narrative to a beneficial aid to cut CO2 emissions is real and already unfolding before our eyes.
New emerging methods and natural resources are continuously being explored such as unlocking ocean energy to benefit as many as one billion people worldwide with 2 to 8 terawatts of continuous clean power.