The Cost & Sustainability of Bitcoin — Part VIII — Calculating the Costs
Economic Costs
The following tables show the outputs from the economic model, which is based on the assumptions set out in the Part 6 of this series. Orange cells are variables / inputs, grey cells are calculation cells.
CAPEX
OPEX
Total Cost of a Bitcoin
Adding the CAPEX figure of $4,337.57 to the OPEX figure of $2,077.92 results in a total cost of $6,455.49.
Environmental Costs
Environmental Impact Factors
It is unfair to only benchmark Bitcoin’s environmental impact by CO2 emissions alone, so we will assess a few other environmental impacts to compare with the impact of Gold mining.
Eutrophication
Eutrophication, measured in tonnes of Phosphorous equivalents, is the introduction of nutrients into groundwater and other fresh water sources, having a drastic impact on water quality, the local ecology in general, and adverse economic impacts[1]. Bitcoin generally has very low externalities, as it relies almost strictly on the electrical grid both to mine and produce hardware. Therefore, to determine the Eutrophication produced by the energy sources that power Bitcoin, based on a weighted world average.
Global Eutrophication stands at 126.6 million tonnes per year[2], from a total 150,000 TWh/yr. of global energy produced[3], therefore, 1TWh produces about 850 tonnes of PO43- equivalents. As Bitcoin uses around 105TWh/yr., 89,250 tonnes are produced.
Acidification
As can be seen from above, countries that have high percentages of Natural Gas in their energy mix contribute greatly to acidification, while Biomass contributes insignificant amounts. Coal & Oil also have large contributions. Since the global energy mix (see Part 6 of this series) consists of 81.4% fossil fuels (of which 21.6% is Natural Gas), 9.7% Biowaste, and 8.9% Nuclear & Other Renewables, using the average of around 4 g SO2 eq/kWh is appropriate due to the contribution of Biowaste, as well as the above sample countries with high acidification having a disproportionately high use of natural gas compared to the world average. At 78TWh/yr. of energy usage, the Bitcoin Network produces 312,000 tonnes of SO2 equivalents
Ecotoxicity, Carcinogenics, Non-Carcinogenics, and Respiratory Inorganics
Global per-capita data on Ecotoxicity, Carcinogenics, Non-Carcinogenics, and Respiratory Inorganics measures[9] are as shown in Table 5. Population statistics[10],[11],[12],[13] are also included. All data is as at 2011.
When per capita stats are multiplied by population figures, and the totals then divided by world energy generation (~150,000 TWh/yr.), then multiplying per 78TWh for energy used on the Bitcoin network, the following is found:
A comparison of these 6 indicators versus that of gold mining and recycling will be discussed in Part 9 of this series.
Sensitivity Analysis
For the below sensitivity analysis, it is assumed that all aforementioned assumptions in the model are held constant, with one variable being changed at a time to see the impact on overall cost. Four scenarios are demonstrated for each of the 6 variables below, alongside the difference between the modelled cost of $6,455.49.
Over time, the above sensitivities will allow us to make sense of the model’s results when compared to actual market price and tweak the model in line with new evidence.
References
[1] Smith, V., 2003, “Eutrophication of Freshwater and Coastal Marine Ecosystems: A Global Problem”, Environmental Science & Pollution Research, Volume 10, Issue 2, pp 126–139, https://pdfs.semanticscholar.org/057e/8da9c04b59091046e1482828760472713e30.pdf
[2] World Resources Institute, 2009, “Sources of Eutrophication (Table 2)”, http://archive.is/9vbx6
[3] International Energy Agency, 2012, “Key World Energy Statistics”, http://archive.is/Wxlr5
[4] Günkaya, Zerrin & Özdemir, Alp & Özkan, Aysun & Banar, Müfide. (2016). “Environmental Performance of Electricity Generation Based on Resources: A Life Cycle Assessment Case Study in Turkey”. Sustainability. 8. 1097. 10.3390/su8111097. http://www.mdpi.com/2071-1050/8/11/1097/pdf
[5] International Energy Agency, “Member Countries”, http://archive.is/ArM1y
[6] TanzaniaInvest.com, “Tanzania Energy Profile”, https://www.tanzaniainvest.com/energy (accessed 6 July 2018)
[7] Energypedia, “Nigeria Energy Situation”, http://archive.is/z2lCF
[8] Energypedia, “Mexico Energy Situation”, http://archive.fo/PGgM4
[9] Laurent, A., Espinosa, N., 2015, “Environmental impacts of electricity generation at global, regional and national scales in 1980–2011: What can we learn for future energy planning?” http://www.rsc.org/suppdata/ee/c4/c4ee03832k/c4ee03832k1.pdf
[10] Population Reference Bureau, 2011, “2011 World Population Data Sheet” https://assets.prb.org/pdf11/2011population-data-sheet_eng.pdf
[11] Worldometers, 2018, “World population by Year”, http://archive.fo/ACK7O
[12] OECD, 2013, “OECD Eurasia Competitiveness Programme”, http://www.oecd.org/global-relations/Eurasia%20brochureweb.pdf
[13] Eurostat, 2011, “2011 Census”, http://archive.fo/wTjW1
