All data used in this paper is as at Block 534,240, mined on 29 July 2018. Network Difficulty was roughly 5.95 trillion. Hash Rate was roughly 42.6 EH/s. Price on the Bitfinex exchange was roughly USD$8200. It should be noted that price on 9/8/18 was roughly USD$6400 — a number that aligns very closely with this model.
The changes in mining ecosystem metrics since January 2015 are shown below:
This paper serves to update the assumptions used in a prior version of this research from February 2015[i], and provides a systematic methodology of modelling the environmental and economic costs of Bitcoin. Furthermore, the paper will provide a thorough discussion on the economics of Bitcoin mining to support the underlying model assumptions. Comparative data with the Gold Mining industry will also be revisited.
Based on the assumptions set forth in this paper, the model has estimated the average cost to mine one bitcoin to be roughly $6,450. It should be noted that this research is an inductive, bottom-up estimate, with the intent to provide a ball-park estimate. A sensitivity analysis has also been undertaken to demonstrate range of costs under different scenarios, which shows a realistic range of average mining cost of between $5400 (driven by aggressive electricity price assumptions), and $7500 (driven by hash rate increase assumptions). Due to the nature of competition in the Bitcoin mining market, costs that are significantly higher than the market price of Bitcoin can generally be ignored in the short term. Running the model again on 11/8/2018, using the exact same assumptions and methodology yielded an average mining cost of $6200 — which happened to be the market price at the time. Cost to mine has decreased due to the launch of the Bitmain Antminer S9j last week. A second confirmation of our rough estimate’s assumptions.
Major Assumption Updates
- The previous version of this research omitted the cost and impact of air-conditioning to the network, so the tonnage of CO2 was underestimated by over a third. It also did not capture the impact of manufacturing, packaging and air-freight transportation of ASIC mining rigs, or the impact involved in the resource extraction or recycling process. The new methodology set forth in this paper captures these items, and the result is a Bitcoin network that exhales 63 million tonnes of CO2 per year — about 0.12% of global greenhouse gas emissions[ii],[iii],[iv] (37 Gt CO2 + 16.5 Gt CO2e). Of the 160,000 TWh of energy generated globally each year[v], the Bitcoin Network chews through about 105 TWh/year (0.0661%). It should be noted that all figures include the impact of the manufacture of ASICs, which represent over 50% of all emissions generated.
- In early 2015, the fee market was almost non-existent. In 2015, the average daily miner’s fee revenue was 22.4 BTC. For the six years between 2009 and 2015, the average was only about 15 BTC. In the past 6 months, daily revenue has been very consistent, hovering at just under 50 BTC/day. To that end, this extra revenue has been accounted for in this update.
Thank you to Lena Klaaßen for her review of my methodology and calculations.
[i] McCook, H. 2015, “An Order-of-Magnitude Estimate of the Relative Sustainability of the Bitcoin Network” https://www.academia.edu/7666373/An_Order-of-Magnitude_Estimate_of_the_Relative_Sustainability_of_the_Bitcoin_Network_-_3rd_Edition
[ii] The World Bank, “Total greenhouse gas emissions (kt of CO2 equivalent)”, https://data.worldbank.org/indicator/EN.ATM.GHGT.KT.CE?view=chart, (accessed 21 July 2017).
[iii] Janssens-Maenhout, G. et al, 2017, “JRC Science for Policy Report” http://edgar.jrc.ec.europa.eu/booklet2017/CO2_and_GHG_emissions_of_all_world_countries_booklet_online.pdf (accessed 21 June 2018)