Monday, June 17, 2019

Research: Cost of Mining Bitcoin is Three Times that of Gold

A paper titled “Quantification of energy and carbon costs for mining cryptocurrencies,” published on November 5th, 2018 has indicated that the energy cost of mining Bitcoin higher than the energy required to mine the most expensive metal in the world; gold. This research was carried out by scholars at the Cincinnati, Oak Ridge Institute in Ohio and they categorically stated that Bitcoin consumes over three times the amount of energy required to mine the dollar equivalent of both Bitcoin and Gold itself.

As indicated in the paper, the energy required to mine $1 equivalent of both bitcoin and gold between Q1 of 2016 and Q2-Q3 2018 was 17 megajoules and 5 megajoules respectively which is about the ratio 3:1. Other major cryptocurrencies aren’t left out of the leading energy consumption, as Ethereum, Litecoin, and Monero also consume more energy to mine than bitcoin.

Aluminum and REOs: The Metal “Energy Gulpers”

Aluminum and the Rare Earth Oxides (REO) are the only two metals that consume more energy to mine than the major cryptocurrencies stated above. $1 worth of Aluminum is mined at a staggering rate of 122 megajoules which is almost ten times the amount of energy required to mine bitcoin while $1 worth of Rare Earth Oxides required only 9 megajoules to mine. Although these might seem like little figures, they are in fact, a lot of energy.

Due to this amount of energy being consumed in mining these cryptocurrencies and, there definitely is a lot of carbon waste produced which varies with location. Mining in locations like China produces four times more carbon than mining in Canada.

Calculated Viewpoint

Although other papers have attributed the mining of cryptocurrencies with a possible catastrophic effect on the environment, Max J. Krause and Thabet Tolaymat begged to differ as stated in the paper. Monero’s hard fork implementation was cited as an example, and it indicates a significant drop in network energy consumption and demand. Ethereum’s movement to proof-of-stake could also signify a reduction in energy consumption and demand. In summary, their paper tends to stipulate that adoption and implementation of newer techniques of mining could sufficiently reduce energy consumption during mining.

Future of Mining Cryptocurrencies

Prior to the publication of the paper written by Oak Ridge Institute, a study reported two months earlier that the mining of gold requires more energy than bitcoin. At this time though, the study obviously did not take into account the value of the bitcoin and gold mined at the time instead the total of energy consumed in mining both gold and bitcoin that year was used to make the comparison which produced the results they had earlier published in the paper released.

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