The Cost of Bitcoin Mining Has Never Really Increased

Abstract

The Bitcoin network is burning a large amount of energy for mining. In this paper, we estimate the lower bound for the global mining energy cost for a period of 10 years from 2010 to 2020, taking into account changes in energy costs, improvements in hashing technologies and hashing activity. We estimate energy cost for Bitcoin mining using two methods: Brent Crude oil prices as a global standard and regional industrial electricity prices weighted by the share of hashing activity. Despite a 10-billion-fold increase in hashing activity and a 10-million-fold increase in total energy consumption, we find the cost relative to the volume of transactions has not increased nor decreased since 2010. This is consistent with the perspective that, in order to keep the Blockchain system secure from double spending attacks, the proof or work must cost a sizable fraction of the value that can be transferred through the network. We estimate that in the Bitcoin network this fraction is of the order of 1%.