pAlex de Vries: The Global Energy Use Of Bitcoin LBW: I think what you had predicted was by the end of this year 2018 the whole of Bitcoin that it would be using something like a half a percent of the worlds Energy electric energy is something like .5 of the entire energy thats being used up in the world is being used for Bitcoin mining and transactions.
Is that right? ALEX DE VRIES: Yeah, pretty much and theres a few ways to look at the number one of the things you can do to get an estimate of energy consumption is something like I just did right because you can have a look at Whats the total computational power in the network. And you can go into the market and check Okay, what are the machines available for mining at this time. We know What their advertised performances. We know their advertised energy use.
So if you just take like the most efficient one and we divide let say total computational Power by the computational power of one of those machines. We first of all get the number of how many machines are in the network. thats why I just said like okay four million machines and we can multiply to that with the energy use and then you can gather a Energy use estimate which is not accurate, but its a start right if you apply this method you sort of get like a minimum number. One thing people often forget is that one single mining machine uses around 1500 watts of electricity all that gets converted to heat if youre putting 20 thousands of those machines into a single facility Its going to be hotter than a sauna.
So you need to get rid of all that heat to cool you chips. So theres a lot of cooling involved the cooling requires energy as well. So if you do the approach I just said and then youre going to fall short. So I personally took things in a little bit different way, by the way, I should mention that if you do the approach I just mention youll find that the whole network consumes surrounds 46 terawatt hours of electricity per year, which is really like the bottom line at this time.
Comparable its not as far from thats a country like Singapore and Portugal because they do around 50 terrawatt hours of electricity per year. And thats the very minimum I personally took things from the economic perspective. So I was kind of interested in looking forward by the time I was doing my studies the price of Bitcoin was still significantly higher than the say several months before despite the crash. I wanted to tell you to what point is the number going to be growing? one thing we can do is we we know How much income all these miners are earning so we can just take the amount of block that have been mined multiplied with Well the reward has been paid in the Box.
So 12 and a half coins per Block.
Theres also some things you should have account for. But lets not include those for now. And then times the price because ultimately the electricity is still paid in dollars if you wanted to know profitability the USD value matters a lot or local currency value You can you find if you do that well if you do it today the miners are earning roughly two and a half billion annualized thats the total income available to miners at this time. I think that back then it was a little bit higher. and one thing we learned from economics Like generally economics is that It should Roughly cost a bitcoin to create a Bitcoin. So all that money should be effectively used for. creating Bitcoins If not, thats its profitable to add more machines or you should be removing machines from depending on what side youre on. so I went to look for that equilibrium point I kind of Did some research into the equilibrium point whats going to be the energy expense at that point of what its going to be around.
60 of the total expenses at the time and there was also Capital expenses constantly making the decision to invest in new machines and stuff like that. the only thing thats is left once you have that equilibrium is to figure out Okay, how long is it going to have to take to actually produce the amount of machines required to reach that equilibrium Which at the time I have some numbers on how many machines bitmain the biggest producer of these mining machines could be producing My research published I could estimate Okay, this is going to be the equilibrium roughly the size of Austria. and its going to take up until The end of the year for production can actually produce that many machines. What is the second half of the year and my my my energy index the one thats featured on my by blog digiconomist.net is featuring this methodology using this methodology on a daily basis. to reflect a daily estimate Which is currently a lot less. So if you look at it from an economic perspective I would estimate that the whole network users about 52 terawatt hours of electricity per year, which is not a lot more than the minimum number I just mentioned. right that said 46 economically speaking its 52. So thats a whole long story for a little bit more. The difference was bigger recently, but Lets say the recent price crash has really squeezed the miners and if that happens you will. kind of see those two different methods they will they will converge to pretty much the same results.
So thats whats going on at this time, which is very recent right? So if we talk Not even 2 weeks ago estimates were a little bit higher with the economic estimate of lets say 73 terrawatt hours of electricity per year and a minimum at around 60 So things have been falling really fast rapidly over the past few weeksp