5 ms·

How much does it cost the sum of all BTC mining?

by ofou 5y ago

graeme 5y ago
Easy to calculate. Assuming an efficient mining market, yearly costs are 900 * 365 * price of bitcoin. 900 is the number of new coins mined per day. At current market price, $60,000, bitcoin costs $19.7 billion USD. Or, 13x Tesla’s famous investment. You’d need a Tesla sized investment every month for a year just to balance sell pressure from miners. This is without any existing investor cashing out. And this scales linearly with market price. People often talk of BTC to $1 million. 900 * 365 * $1,000,000 = $328, 500,000 Almost $1 billion per day. The 900 will change to 450 in about 3 years after the next halving, but until then that’s the cost formula. Madness if you ask me. Bitcoin is a heavily negative sum game. You can only take out what others put in, and miners have to take out their share as well, a negative dividend.
- nazgulnarsil 5y ago
  around 500 million in USD demand flows into gold daily, what's your point?
- fastball 5y ago
  There are only 2,144,500 BTC left to mine. That's 6.5 years at a 900 per day rate.
  - graeme 5y ago
    Yeah the halvings slow it. Every four years the rate halves. We’re 2.5-3 years away from next one. Then 450, 225, 112.25 etc
- nightski 5y ago
  Gold trades something like $183 BN per day. U.S. Equities something like $240 BN per day. These are very rough figures. But Bitcoin is worldwide and I don't see how you are hung up on $1B / day. Bitcoin volume in the past 24 hours was actually $36 BN.
  - matteotom 5y ago
    It's not about volume, but that to support a certain price bitcoin needs $x/day net inflow. To support $1M bitcoin, the market would need ~$1B/day of new money buying into bitcoin (at least for the next few years until the next reward halving).
    - nightski 5y ago
      It's precisely about volume, because that shows us that ~$1B/day of new money buying into bitcoin is already happening (actually $36/BN a day since for every seller - which includes miners btw - there is a buyer). Since the price has been going up, that means demand has been even exceeding supply lately.
      - graeme 5y ago
        You’re mixing up trading volume and inflows. Volume is just people trading back and forth. As a limit example, you and I could wash trade a single bitcoin back and forth a trillion times, for a volume of $60,000 trillion dollars. But that would pay no electric bills! It’s just money moving around. Miners pay bills from net dollars moving into the system from outside. There are no stats which track such inflows in crypto: it’s a hard thing to calculate. You’re also massively overestimating dollar volume. Bitcoin volume is 36 billion Tethers, which aren’t dollars. Dollar volume is max $2 billion per day. Today coinbase was $800 million. It’s tiny. https://coinmarketcap.com/exchanges/coinbase-exchange/ https://coinmarketcap.com/exchanges/coinbase-exchange/
        nightski 5y ago
        It's volume on the exchanges. People trading back and forth on the exchanges shows up on the order book and influences the price. As you point out, USD is not the only currency BTC trades to. But let's say they do $2B USD per day. That still seems to be plenty, given that supply is meeting demand.
- ur-whale 5y ago
  You're assuming miners are sellers. They could very well be HODLErs buying at a huge discount.
  - graeme 5y ago
    > You're assuming miners are sellers. Actually, I’m not. If a Bitcoin is worth $60,000, then in an efficient market miners will spend just under $60,000 to get it. Will some choose to keep the Bitcoin? Certainly. But, they still have to pay the bills. To do so they have a few options: * Raise money from private investors or on the public markets. RIOT and MARA have done this. They pay their bills by selling shares. * Loans. There are many ways for miners to put the Bitcoin up as collateral and get a loan, keeping the bitcoin It turns out it doesn’t matter if the miners sell or not: both methods above involve getting an influx of money, either from equity or from lenders. All that matters for the analysis above is whether the market is efficient. If the market isn’t efficient, and Bitcoin costs $20,000-$30,000 to mine, then my analysis falls apart. And you and I should start bitcoin mining companies to boot. > They could very well be HODLErs buying at a huge discount. See comment about efficient market above. There’s no discount. You could work a job, earn $60,000 and buy 1 bitcoin. Or, you could take the $60,000, buy $60,000 worth of ASIC and coal and burn through it to mine 1 Bitcoin on average. It works out the same, if market efficient
    - deleted 5y ago
      [deleted]
    - NickNaraghi 5y ago
      It's actually way below efficient: a Bitcoin only costs $7-11k to mine at scale. [0] https://minerdaily.com/2021/how-much-does-it-cost-to-mine-a-bitcoin-update-may-2021/ https://minerdaily.com/2021/how-much-does-it-cost-to-mine-a-...
      - graeme 5y ago
        That’s very interesting. But those figures are from May, and once you include ASIC price the average is $19,000 at 5.5 cents per kwh. Is that the average electricity price paid today, after the China ban? If either electric rates or hardware costs have risen, then the cost rises. The article also ignores other costs: staff, accounting, real estate, all the other costs involved in running a company. It’s just looking at an ASIC magically teleported to a generator, and magically protected from the elements. Useful calculation but not 100% of costs. Would be very interested if someone did that calc. Probably can find it for RIOT or MARA by digging through their books. May do it for fun later.
ofou 5y ago
For context: The Cost of Bitcoin Mining Has Never Really Increased https://www.frontiersin.org/articles/10.3389/fbloc.2020.565497/full https://www.frontiersin.org/articles/10.3389/fbloc.2020.5654...

How much does it cost the sum of all BTC mining?

by ofou 5y ago

How much does it cost the sum of all BTC mining?

Easy to calculate. Assuming an efficient mining market, yearly costs are 900 * 365 * price of bitcoin. 900 is the number of new coins mined per day. At current market price, $60,000, bitcoin costs $19.7 billion USD. Or, 13x Tesla’s famous investment. You’d need a Tesla sized investment every month for a year just to balance sell pressure from miners. This is without any existing investor cashing out. And this scales linearly with market price. People often talk of BTC to $1 million. 900 * 365 * $1,000,000 = $328, 500,000 Almost $1 billion per day. The 900 will change to 450 in about 3 years after the next halving, but until then that’s the cost formula. Madness if you ask me. Bitcoin is a heavily negative sum game. You can only take out what others put in, and miners have to take out their share as well, a negative dividend.

nazgulnarsil 5y ago
around 500 million in USD demand flows into gold daily, what's your point?
fastball 5y ago
There are only 2,144,500 BTC left to mine. That's 6.5 years at a 900 per day rate.
- graeme 5y ago
  Yeah the halvings slow it. Every four years the rate halves. We’re 2.5-3 years away from next one. Then 450, 225, 112.25 etc
nightski 5y ago
Gold trades something like $183 BN per day. U.S. Equities something like $240 BN per day. These are very rough figures. But Bitcoin is worldwide and I don't see how you are hung up on $1B / day. Bitcoin volume in the past 24 hours was actually $36 BN.
- matteotom 5y ago
  It's not about volume, but that to support a certain price bitcoin needs $x/day net inflow. To support $1M bitcoin, the market would need ~$1B/day of new money buying into bitcoin (at least for the next few years until the next reward halving).
  - nightski 5y ago
    It's precisely about volume, because that shows us that ~$1B/day of new money buying into bitcoin is already happening (actually $36/BN a day since for every seller - which includes miners btw - there is a buyer). Since the price has been going up, that means demand has been even exceeding supply lately.
    - graeme 5y ago
      You’re mixing up trading volume and inflows. Volume is just people trading back and forth. As a limit example, you and I could wash trade a single bitcoin back and forth a trillion times, for a volume of $60,000 trillion dollars. But that would pay no electric bills! It’s just money moving around. Miners pay bills from net dollars moving into the system from outside. There are no stats which track such inflows in crypto: it’s a hard thing to calculate. You’re also massively overestimating dollar volume. Bitcoin volume is 36 billion Tethers, which aren’t dollars. Dollar volume is max $2 billion per day. Today coinbase was $800 million. It’s tiny. https://coinmarketcap.com/exchanges/coinbase-exchange/ https://coinmarketcap.com/exchanges/coinbase-exchange/
      - nightski 5y ago
        It's volume on the exchanges. People trading back and forth on the exchanges shows up on the order book and influences the price. As you point out, USD is not the only currency BTC trades to. But let's say they do $2B USD per day. That still seems to be plenty, given that supply is meeting demand.
ur-whale 5y ago
You're assuming miners are sellers. They could very well be HODLErs buying at a huge discount.
- graeme 5y ago
  > You're assuming miners are sellers. Actually, I’m not. If a Bitcoin is worth $60,000, then in an efficient market miners will spend just under $60,000 to get it. Will some choose to keep the Bitcoin? Certainly. But, they still have to pay the bills. To do so they have a few options: * Raise money from private investors or on the public markets. RIOT and MARA have done this. They pay their bills by selling shares. * Loans. There are many ways for miners to put the Bitcoin up as collateral and get a loan, keeping the bitcoin It turns out it doesn’t matter if the miners sell or not: both methods above involve getting an influx of money, either from equity or from lenders. All that matters for the analysis above is whether the market is efficient. If the market isn’t efficient, and Bitcoin costs $20,000-$30,000 to mine, then my analysis falls apart. And you and I should start bitcoin mining companies to boot. > They could very well be HODLErs buying at a huge discount. See comment about efficient market above. There’s no discount. You could work a job, earn $60,000 and buy 1 bitcoin. Or, you could take the $60,000, buy $60,000 worth of ASIC and coal and burn through it to mine 1 Bitcoin on average. It works out the same, if market efficient
  - deleted 5y ago
    [deleted]
  - NickNaraghi 5y ago
    It's actually way below efficient: a Bitcoin only costs $7-11k to mine at scale. [0] https://minerdaily.com/2021/how-much-does-it-cost-to-mine-a-bitcoin-update-may-2021/ https://minerdaily.com/2021/how-much-does-it-cost-to-mine-a-...
    - graeme 5y ago
      That’s very interesting. But those figures are from May, and once you include ASIC price the average is $19,000 at 5.5 cents per kwh. Is that the average electricity price paid today, after the China ban? If either electric rates or hardware costs have risen, then the cost rises. The article also ignores other costs: staff, accounting, real estate, all the other costs involved in running a company. It’s just looking at an ASIC magically teleported to a generator, and magically protected from the elements. Useful calculation but not 100% of costs. Would be very interested if someone did that calc. Probably can find it for RIOT or MARA by digging through their books. May do it for fun later.

ofou 5y ago

For context: The Cost of Bitcoin Mining Has Never Really Increased https://www.frontiersin.org/articles/10.3389/fbloc.2020.565497/full https://www.frontiersin.org/articles/10.3389/fbloc.2020.5654...