Node Blockchain Study Identifies a Variety of Bitcoin Mining Benefits
Study Identifies the Positives of Bitcoin Mining
On August 30, Node Blockchain published a study stating, “It’s become popular today to dismiss Bitcoin’s Proof-of-Work as wasteful and bad for the environment.” Those who search the term “bitcoin” on any MSM website will find an article that links Bitcoin Core’s energy consumption to countries such as Ireland and Iceland. However, many of the articles overstate Bitcoin’s energy bill by at least a third.
Medium released a discourse on Bitcoin’s Proof-of-Work model and it acknowledges the above point. The report states, “The cryptoapocalypse is coming. Bitcoin’s’ Proof-of-Work (PoW) is so bad that it’s going to destroy the world in 2020.” Interestingly enough, a major issue with the model is that it equates bitcoin transactions with mining costs. However, there may not be a relation between the two. The cost of mining remains the same, regardless of whether a bitcoin block is full or empty.
Back to Node Blockchain’s study. The study asserts that there are several reasons as to why bitcoin mining has “positive externalities.” For example, one reason is that has hardware advances reach the point of diminishing returns, miners can remain profitable by looking for cheaper energy sources. The study states,
“Since the physical location of mining centers is not important to the Bitcoin network, miners flock to areas generating surplus electricity for the lowest marginal costs. In the long-run, this has the potential to produce more efficient worldwide energy markets with Bitcoin miners performing an arbitrage of electricity between global centers.”
Bitcoin arbitrage is often considered as traders looking for price differences between exchanges. The concept makes sense, as it is how miners find more profitable regions that can meet their energy needs and cost expectations. Over the long term, renewable energy sources may be the only avenue to meet this demand. Therefore, with this type of state, bitcoin may reduce its reliance upon “brown” energy.
Miners are not only switching to greener energy sources, they are looking for ways to reuse “wasted” energy as well. For instance, an example is natural gas which is released from oil wells by a process known as “flaring.” A mining company has developed hardware that captures the flared energy and converts it into electricity. Others are converting automobile tires into energy and using the energy for mining too.
The Node Blockchain study ultimately concludes that “[i]t’s important as well to review the electricity usage against the closet comparable, global data centers, which today consume over 2% of worldwide electricity (a measure that is 133x larger than Bitcoin’s usage). Why is it claimed that Bitcoin’s electricity usage is wasteful yet these other uses are largely considered ‘fair’?”
It is clear that PoW is energy intensive, but different from data centers, gold mining, and other industries, mining is efficient and is becoming more environmentally friendly. Miners who are interested in being a part of the mining future must reduce their energy bill or they will be priced out of the business. Further, they need not switch to renewable energy based on ethics – financial reasons are enough.