Report Details Bitcoin mining cost by 2040

Report Details Bitcoin mining cost by 2040

Byline: Hannah Parker

As the world’s most-valued cryptocurrency, Bitcoin’s value is set to rise over the next decade. The question is – will Bitcoin become a major energy consumer as a result of this? 

The short answer is yes, Bitcoin has the potential to become a significant energy consumer by the year 2040 – but only if its price reaches several million dollars. This is an estimate based off of new research conducted by Arcane Research. Arcane Research is a crypto-dedicated research firm that provides data-driven analysis and research within the field of Bitcoin and other digital assets. 

The crypto research and analytics firm have released a report estimating the development in Bitcoin’s energy usage toward 2040. Authored by Arcane Research analyst, Jaran Mellerud, the report explains that Bitcoin’s future energy consumption differs greatly depending on future Bitcoin prices in addition to external factors such as transaction fees, electricity prices and a few others.

Theoretically, if the Bitcoin price reaches $2 million in two decades, Bitcoin would potentially consume 894 Terawatt-hours (TWh) per year, surging 10 times from its current level, the report suggests. Despite significant growth, such energy consumption would only account for 0.36% of the estimated global energy consumption in 2040, increasing from Bitcoin’s 0.05% current share, the analyst estimates. Mellerud notes that “currently, based on their energy consumption of 88 TWh and an average energy price of $50 per MWh, Bitcoin miners spend around 50% of their income on energy”. On the flip side, Bitcoin’s future energy consumption would be significantly lower in less bullish market scenarios. The Bitcoin price would need to reach $500,000 by 2040 for Bitcoin to consume 223 TWh per year. If Bitcoin trades at $100,000 in 17 years, Bitcoin mining would consume just 45 TWh per year, according to the report. 

Mellerud also highlights the significant impact of the Bitcoin halving, a quadrennial event implying a 50% reduction in miners’block reward. According to the report, the Bitcoin price must be rising at a tremendous rate as a result of the halving, while halving’s “mitigating effect” can be offset by increasing transaction fees in the future. Mellerud explains that “such an increase will only happen if there is a significant demand for using Bitcoin as a payment system”. According to the Bitcode Method developers, “the Bitcoin price depends on the market demand for Bitcoin as a store of value, while the transaction fees are driven by the usage of Bitcoin as a medium of exchange”. As a store of value, and a medium of exchange make up two of the chief functions of money, the report also suggests that Bitcoin’s energy consumption will only reach a significant level if Bitcoin succeeds as money in the upcoming years.

The Bitcoin mining industry has suffered a major decline in 2022 amid the ongoing crypto bear market, with many major crypto miners opting to tell their Bitcoin holdings instead of HODLing, to continue operating. Mining companies in the United States have also faced pressure from regulators, with its lawmakers requesting energy consumption data from four major Bitcoin mining firms.

Despite the increasingly bearish crypto ecosystem, many Bitcoin miners are still optimistic about Bitcoin’s short and long-term price perspective. Only time will tell how much the value of Bitcoin will increase over the next decade. 

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