Content adapted from this Zerohedge.com article : Source
What would you guess? Five…twenty five…fifty?
James Stafford, editor of Oilprice.com not only does the math, but explains the energy-driven geographic arbitrage currently driving bitcoin mining.
The bitcoin boom is well and truly underway, and investors are constantly looking for new ways to gain an advantage in this space The best way to do this, it seems, is by cutting the energy costs of mining this precious commodity. The bitcoin mining industry consumes 22.5 TWh of energy annually, which amounts to 13,239,916 barrels of oil equivalent.
With 12.5 bitcoins being mined every 10 minutes, that means the average energy cost of one bitcoin would equate to 20 barrels of oil equivalent.
While it's all about where you sit on the cost curve, Stafford provides us with some context on gross energy consumption.
To put this in perspective, the total energy consumption of the world's Bitcoin mining activities is more than 40 times greater than that required to power the entire Visa network.
And it's very profitable...
Mining bitcoin has the potential to be a wildly lucrative business, with a single Bitcoin now valued at more than 100 barrels of oil.
That kind of price makes it one of the most valuable commodities on the planet and, just like oil, this commodity is increasingly valuable to mine if the energy costs can be kept down. Bitcoin transactions are secured by computer miners, who are competing for rewards in the form of coins from the network.
The more computation power they use, the better their chances. The drill rig is a computer, and hydraulic fracturing is done with the tip of your fingers.
...if you've got bucket loads of cheap electricity.
It's a phenomenally energy-intensive process. Cheap electricity is exactly what made China the Bitcoin mining king. The yearly cost of the energy necessary to mine Bitcoin determines its economics. But to get in on that you risk reputation because you're either siphoning off surplus energy from somewhere else, or you're partnering with the government. No matter how you look at it, it's a very gray area. No one wants dirty coal fueling such a sophisticated endeavor, for example.
As we discussed recently, subsidized electricity and hyperinflation has led to rapid growth in Bitcoin mining in Venezuela, albeit from a low base.
When it comes to scale, however, the new Bitcoin mining hub - with a different type of energy advantage - is Iceland. James Stafford calls it the "New Ground (Below) Zero", he continues.
That's why HIVE Blockchain Technologies Ltd. - a gold-miner-turned-bitcoin-miner - has set up in Iceland. As one of the first public companies that lets you participate in the build-up and infrastructure of crypto mining, HIVE is taking advantage of Bitcoin's favorite element: Ice. It's freezing in Iceland, so the relative energy cost of mining there is lower. Mining hardware requires enormous power and creates tons of heat, and natural temperature is key: Iceland saves on cooling costs, making it one of the most potentially profitable places to mine Bitcoin.
He cites other examples of crypto companies moving to Iceland.
Giant ether mining start-up, BitFury Group, is there. BitFury, out of the Netherlands, generated over $90 million in revenue this year, and predicts it will be generating $585 million in revenue by 2021. While its flagship data center is in the Republic of Georgia, it's also now tapping into the cool temperatures of Iceland. Emmanuel Abiodun, founder of Cloud Hashing, a company which owns a computing facility in Iceland, chose Iceland because of its cheap and plentiful geothermal and hydroelectric energy, and the "free Arctic air" that is piped in to cool the machines. Iceland is also ground zero for Hong-Kong-based Genesis Mining Ltd, which is building the largest ether mining facility in the world in Iceland. And HIVE has recently acquired a new data center from Genesis for $9 million and a 30 percent equity stake in HIVE, according to Bloomberg, which says HIVE shares have _"Bitcoin investors buzzing". _Right next door to this landmark bitcoin facility in Reykajanes, Iceland, HIVE has just acquired a second data center from Genesis.
Stafford states that "The cold countries are now the home of what is being dubbed 'geothermal gold'." Talking of which.
HIVE's backers include mining mavericks Frank Giustra and Frank Holmes. Giustra built up Goldcorp (NYSE:GG) in 2000 and today it trades at a market cap of nearly $11 billion, and is one of the largest gold-mining companies in the world. He was also behind Silver Wheaton, which is now Wheaton Precious Metals Corp. (NYSE:WPM), the biggest silver and gold streaming company in the world. Giustra's 20-oscar-winning entertainment behemoth, Lion's Gate, also took in $2.4 billion in revenue in 2015. And these are just a few of his multi-billion-dollar hits. Holmes is the CEO of San Antonio-based US Global Investors, which has $2.6 billion in assets under management and is one of the definitive top precious metals funds. Both have backed HIVE, and Holmes is now its chairman. Both still love gold because gold will always be gold, but they're not old-fashioned. Bitcoin is huge, and they won't be left out of the wave.
A two-pronged strategy of gold and crypto, we're not going to argue with that.
Renewable energy will cut the cost and is just another area where the US is missing the boat. China certainly took the bull by the horn and made the commitment. Leaving the environmental aspects aside, it simply is more economical to go this route.
One of the companies, perhaps it is HIVE, I read is allowing regular people to invest in much like a gold miner. They simply mine for Bitcoin and share the proceeds with all who own the stock.
Welcome to the 21st century.
IT seems like the BRICS countries are doing way better with new technologies than 'the west'.
China, India and Russia already stated interest in crypto currencies. While most politicians in Europe haven't even considered it.
Unfortunately coal is still the cheapest way to produce energy. Oil and natgas is spent in manufacturing and delivery of renewables. The negative to the article is oil is not really used to make energy. Natgas and coal are much more common methods. Where i live I enjoy .06 kwh prices and all the energy is from coal.
That is true. Oil is used mostly as a back up.
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Awesome! here's a way to make money but very few people know about it http://bit.ly/2ylZWDe And Electoneum is going to be big.
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[steemit](https://steemit.com)Unlike short links this allows the reader to see where they are going by simply hovering over the link before they click on it.I am sure new solutions will arise to solve the electricity problem concerning bitcoin mining.
Damn, 20 barrels of oil for one bitcoin. That is not exactly the sort of resource management that is going to improve things on this planet. This is a bummer.
well green energy is becoming cheaper, efficient and better.
Not very enviro-friendly.
I guess members of the Sierra Club and the Earth First, flying around on private jets, don't concern themselves with such things as long as donations in Bitcoin keep coming in.
it will once non renewable fuel become expensive and people switch to cheep renewable energy.
Bitcoin is better than oil any way :)
This is the fucking softest most bs article I have ever read. https://steemit.com/eos/@truckminer1980/eos-just-keep-swimming-just-keep-swimming
Having cheap electricity isn't what made China the leader in mining. Being the country where all the ASICs are made did.
Zerohedge is basically a bullshit site. Like Alex Jones lite
seems like a lot of energy just for bitcoins
Thanks for sharing, I'm also a reader of zerohedge. However, would it be more appropriate if you were to write commentaries citing parts of their articles instead of copy-paste the entire article? I am not sure this is fair for who actually wrote the article
Thanks for explaining your concern.
Commentaries is not the service I provide and since the source of the article is written I think that I most likely bring more people to know about ZeroHedge than people who stop going to Zerohedge because of my posts here.
great analogy
Interesting. Thanks.
Very nice post , thank you! Bitcoin is better and i believe that one day it should reach $50K+ price.
nice post
I liked this analogy. It's curious. 😎
I wonder what happens to the Bitcoin network once all the coins have been mined? With no miners, who will be left to power the network? Perhaps that's where the Federal Reserve will step in?
you pay tips. when all coins are payed out you will send a small transaction fee that will go to a miner.
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Smart economy, most people earn the least energy. China has used it, Iceland has a natural cooling which brings significant savings in energy. Bitcoin is very cost-effective for swimming in the coming period, I believe it's a real investment for all of us. Genesis itself offers excellent conditions for cooperation in mining. Excellent text and comparison with oil. @zer0hedge
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