Cost & Sustainability of Bitcoin (Dec 2018) — Executive Summary
All data used in this piece is as at Block 556,416 mined on 31 December 2018 (EoY), the 276th Difficulty Change. Network Difficulty was roughly 5.6 trillion. Hash Rate was roughly 40.22 EH/s. Price on the Bitfinex exchange was roughly USD$3,900. The changes in mining ecosystem metrics since the August 2018 edition of this report are shown below:
This story is an updated and abridged version of my report, “The Cost & Sustainability of Bitcoin (August 2018 Edition)[i]”. The reader is asked to refer to the original paper for detailed references and deeper discussion. Future updates will come in this form, and include updates on methods and assumptions as new data emerges.
Changes to Inputs & Assumptions
- Since my previous report demonstrated that “$/GH is king” due to low electricity prices amongst most large miners, the Antminer T15 will be taken as the proxy benchmark ASIC for this report. It should be noted that the co-released Antminer S15 is 12% more energy efficient than the T15, but 21% more expensive on a $/GH basis.
- Further to the above, the “GH/kg” Manufacturing metric comes in to play, as energy required for manufacturing & shipping ASICs is quite weight-centric. By the end of 2018, weight of material required to produce 1TH dropped 5%, from 300 grams (excl. PSU) to 285 (S9i was net 4.2kg, the T15 net 6.6kg). Using the S15 as a proxy, the ratio drops by 20%. It should be noted that this is the first model of this new generation of ASICs, and the kg/GH metric will improve as chips start getting optimised and overclocked.
- It should be noted that the dramatic drop in price has caused negative hash rate growth over the past 6 months, however, as the price stabilises, so will hash rate growth due to constant improvements in $/GH and W/GH metrics. That said, I will be dropping my difficulty increase assumption from 7.2% to 5.3%, which is more in line with the growth witnessed since the “Age of ASICs” began in 2014/15 (See Table 2 in this linked article)
- It was assumed that the Bitcoin Mining Industry was powered by the “World Average” Energy Grid. Analysis by The University of Cambridge[ii] showed that 28% of the power used to mine Bitcoin is renewable, of which the majority is Hydroelectric. This reduces the average CO2e per kWh from 0.6 tonne/MWh to 0.53 t/MWh
- All other assumptions remain constant
Based on the changed assumptions outlined above, the model has estimated the average cost to mine one bitcoin to be roughly $3,750. It should be noted that this research is an inductive, bottom-up estimate, with the intent to provide a ball-park estimate. A sensitivity analysis has also been undertaken to demonstrate range of costs under different scenarios, which shows a realistic range of average mining cost of between $3,000 (driven by aggressive electricity price assumptions), and $4,000 (driven by hash rate increase assumptions). Due to the nature of competition in the Bitcoin mining market, costs that are significantly higher than the market price of Bitcoin can generally be ignored in the short term.
Further, the model has estimated that the Bitcoin Mining Industry exhales 34 million tonnes of CO2 per year — about 0.06% of global greenhouse gas emissions[iii],[iv],[v] (37 Gt CO2 + 16.5 Gt CO2e). Of the 160,000 TWh of energy generated globally each year[vi], the Bitcoin Network chews through about 63 TWh/year (0.04%). It should be noted that all figures include the impact of the ASIC supply-chain, which represents over 50% of all emissions generated.
[ii] Rauchs, M, et al, 2018, “2nd Global Cryptoasset Benchmarking Study”, Cambridge Centre Alternative Finance, https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/alternative-finance/downloads/2018-12-ccaf-2nd-global-cryptoasset-benchmarking.pdf
[iii] The World Bank, “Total greenhouse gas emissions (kt of CO2 equivalent)”, https://data.worldbank.org/indicator/EN.ATM.GHGT.KT.CE?view=chart, (accessed 21 July 2017).
[iv] Janssens-Maenhout, G. et al, 2017, “JRC Science for Policy Report” http://edgar.jrc.ec.europa.eu/booklet2017/CO2_and_GHG_emissions_of_all_world_countries_booklet_online.pdf (accessed 21 June 2018)