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So I've been trying to figure out how much running the Bitcoin system really costs using the following numbers:

  • Total Bitcoin Hash Rate: 300.000.000 GH/s
  • Hashrate of an ANTMINER S4 (currently one of the most efficient ASICs): 2.000 GH/s Power
  • power consumption of an ANTMINER S4: 1.400W

  • Energy price: $0.15/kWh

  • 300.000.000 / 2.000 = 150.000 Antminers

  • 150.000 * 1400W = 210.000.000W
  • 210.000.000W * 24 hours = 5.040.000.000 Wh = 5.040.000 kWh
  • 5.040.000 * $0.15 = 756.000$

Taking into account other less efficient rigs around $1.000.000 seems (theoretically) realistic to me, but I just can't wrap my head around Bitcoin costing $364.000.000 per year. What am I doing wrong?

Sebastian Kovats
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1 Answers1

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Of course. At the current block reward of 25 BTC per block, on average 3600 BTC are mined per day which are worth over $1 million.

If it were significantly much cheaper than $1M (in terms of energy costs) to mine that $1M worth of coins, more people would do so, thus the difficulty would go up, thus the energy costs would go up.

By definition, the energy costs to mine x amount of bitcoins will never be significantly less than the actual worth of those bitcoins.

By the way, "wasting" (well, not really) only $365M per year is an incredible efficient improvement over the current banking system worldwide. The huge costs, waste of resources, and TONS of other collateral damage that come with the fiat currency infrastructure is astronomical, and saying that it's much, MUCH more than the costs of Bitcoin is even still an understatement.

Madzi Konjo
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    The asker never used the word waste. – Nick ODell Nov 02 '14 at 22:24
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    You could improve your comparison with fiat by showing how much they (e.g. US dollar or Euro) spend every year. – Arturo Torres Sánchez Nov 02 '14 at 22:27
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    That's the thing, if it's 1 million a day that's $14 per transaction (around 70.000 yesterday) which I think is comparably high (if not higher) than the cost of processing transactions in traditional banking systems. Hence i suppose that Bitcoin can only maintain its currently very appealing low transaction cost so long as miners can make a profit without charging transaction fees, which might eventually be just as high (if not higher, since miners compete which means resources are wasted) as those currently charged by banks. – Sebastian Kovats Nov 03 '14 at 13:33
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    Sebastian, you are absolutely right! The cost of supporting transactions in bitcoin is much more higher, than in centralized systems. Bitcoin is alive now only because it is ponzi. – amaclin Nov 03 '14 at 17:11
  • Sebastian Kovats, your logic is reversed. If it's no longer profitable for miners, some will quit, and mining will become cheaper, rather than tx fees going up. The mining profit (block reward) vs costs (energy consumption) will always remain in a dynamic equilibrium. And @amaclin You better put your trust in fiat currencies then :) – RocketNuts Nov 04 '14 at 11:54
  • That's true but if mining becomes cheaper because some miners quit, it follows that the value of bitcoins will not be justified anymore if it doesn't decline. I realise that neither fiat currencies are backed and limited since the gold standard was left, but they have powerful GOVERNMENTS behind them. What's behind Bitcoin if not miners' effort ? – Sebastian Kovats Nov 04 '14 at 17:36
  • Fiat has powerful governments, Bitcoin has powerful cryptography, transparency, lack of limitations or need for trust. I consider mathematical laws stronger than goverments laws. – Madzi Konjo Nov 05 '14 at 07:13
  • About that trust thing, Bitcoin doesn't require less trust. If you buy something with a cfedit card you have a chance of getting back your money if you're ripped off (chargeback). Since Bitcoin transactions are irreversible, you need to trust the person you're sending to even more. Thus trust isn't made obsolete, it's just moved to another instance. – Sebastian Kovats Nov 05 '14 at 20:18
  • @sebastian multi signature transactions since this in a fundamentally better way than credit cards. Exactly because bitcoin is such a stable foundation, better solutions are being built on top of it. As for the electricity cost: that's to maintain the network, not for a specific amount of transactions. 10x more transactions and the electricity cost will still be the same. Also the electricity costs are not your problem. Other people pay for it and apparently they believe in bitcoin, you can just freely transact thanks to that. – Jannes Nov 05 '14 at 23:51
  • @MadziKonjo then you consider quantum mechanics part if mathematics and problematic? Like it if not (I'm not getting into this btw....) the govt serves some roles – Wizard Of Ozzie Nov 09 '14 at 01:08
  • @Wizard Of Ozzie uhm, I don't understand your sentence? But if you're hinting about quantum computing being a problem for Bitcoin: no, it's not. On the contrary, in fact, it's a problem for most banking and other financial protocols, which are far less flexible and adaptive than Bitcoin, so it'd be an excellent opportunity for Bitcoin as a safe haven. – Madzi Konjo Nov 10 '14 at 06:11
  • @Sebastian Kovats besides trust between buyer and seller, other payment systems also fully depend on a 3rd party middle man to facilitate the payment. Paypal, credit card companies, banks, you name it. These have proven to be untrustworthy: paypal and visa randomly blocking payments for political motives (e.g. to wikileaks), paypal randomly freezing accounts (see sites like paypalsucks.com for tons of horror stories), banks appearing in the news for one scandal after the other, etc. Bitcoin completely removes this dependency on a 3rd trusted party. – Madzi Konjo Nov 12 '14 at 05:59
  • That's true, bitcoin does have advantages over other payment systems but it is not better in every single way. Most normal people don't care too much about anonymity and independence, they would rather have someone (the middleman) to blame if anything goes wrong. – Sebastian Kovats Nov 12 '14 at 11:13
  • Banking systems process far more transactions, and critically, provide credit- something Bitcoin does not do. Credit makes any financial system dangerous. – noɥʇʎԀʎzɐɹƆ Nov 04 '17 at 15:26