Bitcoin Mining Economic Costs Comparison to Gold and Banks’ Fiat Currency

Bitcoin Mining Economic Costs Comparison to Gold and Banks’ Fiat Currency

The Costs Of Bitcoin – Upon A Deeper Glance

While cryptocurrencies have enjoyed a meteoric rise to fame both from their highly active, deeply believing users, to the general public and major banking and governments institutions.

Each of the latter generally believes, cryptocurrency still has some ways to go before it can reach the same reputation as its more established counterparts such as Gold, Silver and Palladium.

But what they say does merit a significant degree of attention. And a question that does merit additional thoughts is this one: what are the costs associated with Bitcoin? From mining to general use? Whatever that may be.

While supporters of varying levels of expertise tend to like comparing it to its more established rivals, it's not exactly fair to do that, in the interest of the potential that cryptocurrency has for the future.

This becomes abundantly clear when it comes to the underlying costs that each racks up within a year:

  • Gold mining – $105 Billion
  • Gold Recycling – $40 Billion
  • Paper currency / Minting – $28 Billion
  • Banking System – $1.87 Trillion ($63.8 Billion on electricity costs)
  • Bitcoin Mining – $0.78 Billion

Socio-Economic Costs

Gold –

  • Worker Deaths – 50,000 recorded over 100 years
  • Corruption/Money Laundering/Black Markets – $600 millino
  • Institutional Fraud / Theft – $21 Billion across two separate events
  • Transactional Fraud – N/A
  • Inflation – Deflationary (Long Term)

Fiat Currency –

  • Worker Deaths – 0
  • Corruption – $1.60 Trillion
  • Money Laundering – $2.65 Trillion
  • Black Markets – $1.8 Trillion
  • Institutional Fraud / Theft – $3,800 Billion/Year
  • Transactional Fraud – $190 Billion
  • Inflation – 3.9% Annually

Bitcoin –

  • Worker Deaths – 0
  • Corruption / Money Laundering / Black Markets- Negligible
  • Institutional Fraud / Theft – <0.5 billion ever recorded
  • Transactional Fraud – $0
  • Inflation – Deflationary (Long Term)

Final Thoughts on How These Costs Add Up

One thing that is important to mention too, specifically when it comes to the mining process of Bitcoin, while it does consume a large amount of energy due to the difficulty of escalations over the years, Bitcoin and crypto mining operations have entered a time when the world is moving steadily away from ‘dirty' energy and onto greener, renewable sources.

Effectively, what this means is that the underlying expenditure on electricity will not only decrease for Bitcoin as a whole, but the underlying environmental consequences of intensive mining will also depreciate.

Bitcoin and cryptocurrency mining as a whole, are also more susceptible to drastic, renewable energy changes and advancements to technology which save energy. A factor that Fiat and Gold production are not as able to do.

When considering the environmental impact of each of these currencies/commodities, cryptocurrencies only constitutute 0.13% of the environment impact, and an economic impact of only 0.04% that of Gold and Fiat. When one considers Koomey’s Law, we can expect energy/GH to continue to half every 18 months until 2048.

What this means, is that the best efficiency levels out of the industry, which is 0.733 W/GH will reach 0.0000000873804 W/GH. Which, in the event that Bitcoin scales to over one million times its market cap and relative size, its environmental impact would still be dwarfed by the likes of Fiat and Gold.

What these various elements of expenditure do show is that while raising a massive media presence, cryptocurrencies, when compared to Gold and Fiat, do not even make a dent of the same caliber as its counterparts in terms of corruption, expenditure or fraud. It must be considered, however, that both Gold and Fiat are older institutions.

When it comes to the application of Moore's law in this same discussion, it's also expected to cause a depreciation to the $/GH level which will continue on every 18 months until at least 2020. When we consider the advent of decentralized emission-free renewable energy, we can expect tCO2/GH, and possibly even $/kWh, to tend towards zero.

Bitcoin companies also enjoy a far higher margin of adaptability to the market than established producers of Gold or Fiat do. This makes them more likely to adapt to positive or negative trends on the market. Over time, this means that Bitcoin and cryptocurrency producers are able to become more dynamic over time while the legacy institutions simply cannot keep up with the pace.

Unlike the legacy producers too, there's been no serious adverse effect to any proliferation of Bitcoin, and as the rate of use and adoption grows, the amount of those committing acts such as black market trading or laundering will shrink relative to the total population.

Unlike Fiat and Gold, the cryptocurrency world, Bitcoin in particular, will take some time to develop into a truly powerful segment of the economy, pulling in the same rate of revenue, maybe far more so, than its older counterparts – Rome wasn't built in a day.

Over time, it has become increasingly apparent that issues pertaining to corruption are a human flaw, not an issue with monetary systems. But what the prior statistics show as well is that transactional fraud is endemic wherever a human is handling the money, because algorithms and computers work on a logic stand where 2 +2 is always = 4.

Areas that haven't been addressed include the ideology which has preceded the development of cryptocurrencies such as Bitcoin. And while it is made readily apparent to those that have only just become aware of cryptocurrencies, this piece has stepped away from that to demonstrate what the statistics show, that the grounds for Bitcoin becoming a more powerful, corruption-proof economic institution, are well founded.

The international community is beset by a varying level of issues and inequalities such as a prevailing black market, trafficking, and illegal levels of laundering.

What Bitcoin and other cryptocurrencies are showing to us is that another way is here, and it's the one that an already struggling world needs and deserves.