Bitcoin’s unique energy consumption incentives, its ability to buy stranded energy, and more make it the long-term of our energy consumption as a planet.
Here’s a full, easy-to-read article based on my recent Twitter feed, the first component on Bitcoin and the long-term nuclear of our energy network. In the first component, I analyze the stories about the energy markets in general and those of Bitcoin. Energy consumption, canopy some industry facts and ideas, and offer some of my non-public reviews along the way for a fun read.
But before I begin, I want to provide my own little story, as it is applicable to today’s topic. I am a graduate chemical engineer (BS and MS) and have worked as a senior engineer in the complex nuclear generation sector in recent years, so this topic is like at home.
I need to make a nod to some of the references I use and quote below. None is bigger or bigger than Lyn Alden – I take charts and data from her recent newsletter to cover some of this thread, everyone stop by and read it here.
Other resources I will mention are the following (in no order):
With that figured out, let’s start with the basics. What’s the innovation in Bitcoin?Here’s a list I like, from Farrington’s recent article: =
To achieve this, Bitcoin will have to have a connection to the global physical: energy. Energy expenditure is the link between the genuine global and the virtual global. Henry Ford proposed this in 1921, to have an energy-backed currency for the global. .
Ford proposed the following design criteria for a universal currency that would liberate the global in 1921:
There was nothing that met those design criteria before, until the advent of bitcoin, which is a technical breakthrough. This will prove to be the greatest invention/discovery in human history once humans catch up. It is the discovery of the chimney through the first humans who drove civilization.
Michael Saylor covered this with Robert Breedlove on the latter’s show, went through the human discoveries that went towards the advancement of civilization as a total and put Bitcoin in that range.
Now that we deal with this, let’s go through energy first and put Bitcoin’s energy intake in terms of the world’s total energy intake. to us humans?
Take a look at U. S. energy intake. USA In 2020, for example: of the 92. 9 quads of power available, only 30. 6 quads are used for energy services. Therefore, almost two-thirds is rejected energy for multiple reasons. you can extract much more.
In addition, many other energy resources are being put online and under development, which further expands the overall energy source resources, so simply put, a decent amount of energy is used, a lot is wasted, and more to connect.
Now, how much is Bitcoin’s energy expenditure used for a proof-of-work consensus?According to the University of Cambridge, Bitcoin’s annualized (peak) energy consumption rate is lately around 103 TWh and was reaching 190 TWh earlier in the year, due to the exodus of bitcoin mining from China this year.
How much is 103 TWh compared to 173,000 TWh? That’s 0. 06%. That’s the way it is, even if you take the 190 TWh from the beginning of the year, it’s still only around 0. 1%. Therefore, Bitcoin uses only one-tenth of 1% of the world’s total energy. Let us perceive this fact.
Bitcoin’s energy intake is just a rounding error compared to the overall energy intake. Scientists who provide figures on energy intake for the world can seamlessly move 1 to 2% in any direction, and here we are talking about a tenth of that. very little.
Will Bitcoin’s energy intake increase over time?Oui. Si Bitcoin manages to adapt to the world’s “energy currency,” its energy expenditure will have to accumulate to protect the proof-of-work consensus and the network. Humans accumulating, their energy consumption will also increase.
But Bitcoin’s power will still be a rounding error compared to global energy consumption figures. We’ll come back to the calculations later, though your power consumption may not exceed your long-term application (either giant or small over time). he covered this strangely in his article cited above.
Now, what are the mainstream media telling you?See below for a revealing excerpt. He sees those kinds of messages all the time. We have just identified above that they are true, on the contrary, Bitcoin uses very little power for its application relative to today’s world, as we will identify later.
The source
Before we dive into some power calculations, let’s highlight the usefulness of bitcoin in today’s world.
Do you think something with those properties, the hardest form of money backed by power, can have any long-term use for humans in the world we live in today?If the answer is yes (which I expect), 0. 1% of the world’s energy intake is nothing and is perfectly justifiable.
Next, let’s move on to some of Bitcoin’s power math. First, let’s identify how Bitcoin even consumes energy. For example, how does this style of proof-of-work consensus work?Like, WTF is all that?
Simply put, the evidence of Bitcoin paintings is designed to produce a “block” every 10 minutes. A new block is produced by solving a mathematical puzzle, brutally forcing it with the help of computational paintings and therefore you guessed it, electrical energy. or energy.
Energy expenditure is the key to the production of blocks and proofs of work, somehow Bitcoin is subsidized through energy, spent to secure the network through the miners who are responsible for generating those blocks, although not the network, as has happened. It has been demonstrated in blockize wars.
The puzzle is designed in such a way that a block is produced approximately every 10 minutes. If it takes less time to produce a block, the puzzle becomes more difficult to solve, while if it takes longer to produce a block, the puzzle becomes easier. It is the innovation of “complicated adjustment” that is the key to Bitcoin. Never in history have we had an asset whose source is surely independent of demand, pre-programmed, exactly designed and coded, immutable through a central authority.
Now, thanks to the incentive style built into the network, millions of machines are deployed to “mine” Bitcoin blocks providing computing power to the network, or “power. “This is measured by what is known as a “hash rate. “which is lately 166 exahashes consistent with momentum (EH/s).
What do miners get in return for offering this energy?They get block rewards, which consist of two things: the block grant and the transaction payment (tx). Bitcoin’s block subsidy follows a four-year halving cycle (something you’ve possibly heard from chart analysts).
The block subsidy of 50 bitcoins is consistent with the block when it started in 2009, and fell to 25 bitcoins 4 years later, then to 12. 5 bitcoins 4 years later, and was recently reduced to 6. 25 bitcoins last year, in May 2020. New bitcoins can see the smoothness of the day, so think about the impact of the source.
Suddenly, the network tells miners looking to mine bitcoins: “Hey, starting today, just get a part of what you were given before, and in 4 years it will be part of that and so on. “This is a massive source of surprise in the market itself.
We’ve noticed in the afterlife that bitcoin’s emerging costs are connected to those “halving cycles” because of the inherent surprise that accompanies them. As some say, “the number is increasing” is embedded in the consensus style itself.
Now enough mining rewards. We were talking about energy consumption, weren’t we?If we assume that the capitalization of bitcoin in the place of the open market in the place of the open market corresponds to the price locked on the network, which means that bitcoin is valuable to us humans, then we can calculate the energy expenditure. , or in other words, “security expenses” (energy) as a percentage of Bitcoin’s market place capitalization to see if the network becomes effective over time or not. Decrease the percentage, the more effective the network becomes, simply.
Let’s take the general reward, i. e. the global subsidy and tax rates, as an indicator of network security spending. This is not entirely true, as security expenses are just the electric power charge or energy expense, which is a percentage of that reward so it’s a measure of the upper limit.
As we see, annual spending on security has increased over time in USD, however, as a percentage of bitcoin’s market capitalization, it has been declining since 2011. In the first part of 2021, they were less than 2% of the market. Alden noted in his article. This is precisely what analysts understand.
Bitcoin becomes incredibly effective over time. It literally uses fractions of the network price to protect it (currently at 2%). There is another halving in 2024 that reduces the global subsidy to 3. 25 bitcoin, and the one in 2028 will take it to 1,625 bitcoins.
As you can see, security spending over the next decade will continue to be cut through this halving of the subsidy. Of course, a greater part of the expenses will be covered through the payment of taxes in the future. Alden expects spending to be between 0. 25% and 1%, depending on tax payment levels.
Here are some projections of security spending as a percentage of bitcoin’s market place limit over the next few years. Let’s say bitcoin will succeed at $1 million (or a market place limit of around $20 trillion) until 2025, and after 2024, halving security spending now. falls to 0. 5%, or an expense of $100 billion. The current expenditure is $16. 5 billion.
This would mean that the total energy intake of Bitcoin in 2025 would be around 0. 6%, which is only six times the current intake, and keep in mind that the security expenses are exactly the same as the energy expenses, which make up a percentage of them and, secondly, the total energy intake in the world will also increase.
For an undeniable mathematical equation, we are still below 1% of the total global force intake to protect the network, even at a point where $20 trillion of global financial strength will be safe on the network itself. so useful, don’t you think?
Here is a comparison of Bitcoin’s existing energy intake with other industries and its CO2e emissions. As we have already analyzed the numbers, Bitcoin’s energy intake is a rounding error right now. Nothing to load here.
Now, after Bitcoin’s energy consumption figures, let’s take a look at the energy mix of existing use. As the Bitcoin Mining Council’s second quarter report reports, Bitcoin’s energy mix is the maximum sustainable and particularly more sustainable than most countries.
The mainstream media gives the impression that bitcoin miners are competing with other industries for electric power, as if they are pressuring someone else to avoid energy. It’s not true. Bitcoin miners pass by in search of the cheapest source of electrical power. Because that’s most of their daily operating costs to operate the miners. They simply cannot compete with other miners globally with moderate to high electric power costs charged to general users. Therefore, they are not your competitors.
Bitcoin miners seek to locate inefficiencies between source and demand in electric power markets and seek underutilized or wasted energy resources to gain competitive merit over other miners by making sure the energy load is low. It’s a global search everywhere.
Humans have never organized around an energy source, at least this has not been the main driving force behind human settlements. You see that power is transported and carried away, rather than built around power.
Bitcoin miners are this way. They will go anywhere where it is cheaper to extract energy. Here are some excerpts about them:
It seems like an incredibly attractive organization of other people to examine a little more. Like, who are those monsters? Okay, let’s dig a little deeper and get some evidence of this group of Americans and why I call them “stranded power hunters. “
China has long been the largest mining country until 2021 after China’s mining ban and the mass exodus of miners from its provinces in recent months. Chuan Province is unique. It has a ton of oversized hydroelectric capacity that is wasted.
During the rainy season, it produces more energy than it can use, so those Chinese bitcoin miners flocked to Sichuan to capture this stranded or wasted energy to mine bitcoins instead, simply because, yes, there are incentives to locate the cheapest energy imaginable to mine.
What would happen to this power if they hadn’t used it to mine bitcoins?That would simply have been lost. Bitcoin miners have turned this locked power into a source of income, and most of those miners are now moving westward respecting China’s mining ban.
Do you see this big drop of more than 50% in the hash rate after the mining ban in China?Well, guess what: it’s almost back to where it was before. Talk about the resilience of this network. No single point of failure, no country controls or governs it.
Below is an example: “torch fuel extraction”. Many oil fields have caught the herbal fuel related to them. Typically, those drilling sites are remote and have no connected pipes through which you can ship and sell this fuel, even if they are moderate amounts to sell.
With the costs of herbal fuel so low, there is no point in investing in pipelines or similar infrastructure to ship them. So what are the options? Ventilate it outdoors or burn it. The first option is methane, the second is CO2. In what quantities?1. 48 billion cubic feet, or 150 TWh according to the U. S. EIA. USA And that’s only in the United States in 2019, not even around the world.
Remember how much power the Bitcoin network uses today?100 TWh. Then you can force the entire net and more simply by capturing that stranded fuel that burns. Would that also be for the environment? Absolutely.
Now, here’s a wonderful one, which is my favorite: the concept of “Bitcoin as a battery of energy. “The first time I heard about him was in this article. Nick Grossman has written about how Iceland sends its large amounts of geothermal energy. Iceland uses its renewable geothermal energy, which is blocked in a different way because it is complicated to build pipelines under the Atlantic, melt aluminum and then ship aluminum around the world. Aluminum serves as a battery.
What is a power battery? Something that can send energy by area and time. Guess what? That’s precisely what Bitcoin. Es much bigger than anything else in the world. It is the maximum liquid form of battery power, anything that can run 24/7 in the form of a battery without permission, frictionless, borderless, inconsccionable, rugged, power-saving and maximum power density. Wouldn’t it be sensible for Iceland to mine bitcoins instead of its geothermal energy for aluminum?
Power grids balance two things: source and demand. Very few force resources can operate with interruption 24 hours a day, 7 days a week. The nuclear force is the best. Solar, wind and hydraulic strength are variable depending on weather conditions. Because of this variability, networks are overbuilt on the source side.
The consumer’s call also varies, especially from season to season and between day and night. You get a peak call in intermediate periods. Therefore, you will have to answer this variable call. It is therefore a balance that the networks will have to maintain.
A big challenge with intermittent force resources like the sun and wind force is the garage. They are simply not reliable as a base load without the force garage. And the force garage is not a simple challenge to solve. Guess what: we would possibly only have one engineering option. available in Bitcoin.
The graph below shows the return on energy investment (EROI) of energy sources. If you can see how it’s going right now, solar/wind isn’t even successful at the energy threshold with garage prices included.
The nuclear force has an EROI of 75 times with no cost of force garage. It’s just the source of strength we have on the planet and yet we continue to shut down our nuclear power plants. Once again, mainstream media narratives and some of the wounds of the afterlife have replaced public opinion, but the facts are there.
Another renewable energy bureaucracy can use Bitcoin as an energy garage option to decrease its garage charge and economically more viable as investment projects. Bitcoin miners can help make complex power generation projects economically viable options.
Bitcoin miners can serve as the first consumers and buyers of the last hotel for those complex power generation responses and help them gain long-term secure investment capital for them to succeed. As we have noted from the beginning, Bitcoin and power are strongly linked.
In my opinion, Bitcoin will lead us to a Type I Kardashev civilization, which can use and buy all the power you have on your planet. Today, we are a Type 0 Kardashev civilization, and this procedure can take years to develop. I might not be there to see him in person.
Let’s take a few things from this article before concluding:
There are many things I haven’t covered in this article, which I plan to write about as a more detailed follow-up to this one. I looked for it to be an introductory article.
My next purpose would be a deep dive into energy markets, power grid design, synergy between next-generation molten salt nuclear reactors and bitcoin mining, and much more about Bitcoin’s power math and long-term projections. , let me know on Twitter, I appreciate your comments. Thank you for taking some time to read this.
This is a guest article through Puru Goyal. The reviews expressed are entirely our own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.