A small piece of good news for the global climate

The market price of Bitcoin and other cryptocurrencies is plummeting, having dropped by 10 per cent just today, and 50 per cent over the past month. The bubble that reached maximum expansion a year ago is gradually deflating.

The good news is that a lower Bitcoin price makes the energy-wasting process of Bitcoin mining unprofitable for many, so lots of miners are turning off their servers.  Most estimates of the marginal cost of mining are around $4500 per coin, but the market price has just fallen to $3500.

That situation won’t last long. Every couple of weeks (more precisely, every 2016 blocks) Bitcoin adjusts the difficulty of the pointless algorithm used to mine coins, so as to ensure a steady flow of around one every 10 minutes. As mining effort has declined, the difficulty is reduced, which means less electricity wasted per Bitcoin.[1]

The rapidity with which Bitcoin prices are falling give some hope that the entire disastrous episode will soon be over. If the current rate of decline (50 per cent per month) is maintained, Bitcoins will be worth less than dollar coins in a year’s time, and their impact on electricity demand will be negligible. That’s equivalent to taking a small country like New Zealand off-grid.

In this context, it doesn’t matter whether Bitcoin miners are using renewable energy or coal. The opportunity cost of the electricity they use is the coal-fired electricity that would otherwise be displaced by renewables.

 

fn1. As shown here, mining difficulty leveled out in September and started declining in November. Since electricity consumption depends on both mining difficulty and the speed of the machines being used, which is increasing over time, the energy wasted on Bitcoin probably started declining modestly as soon as mining difficulty leveled out.

8 thoughts on “A small piece of good news for the global climate

  1. It’s too early to be doing a victory lap. Bitcoin is still four times the price that it was two years ago. The recent price falls might be because everyone accepts it has no fundamental value or Bitcoin might just be caught in the volatility affecting all financial markets. Even accepting the premise that Bitcoin’s true long run value is zero, there’s still plenty of scope for the price to go up when there’s a change in speculator sentiment. The fact that Bitcoin becomes cheaper to mine the lower is its price seems on its face to be a stabilising factor,

  2. As James mentioned in another post’s comments, 2018 emissions are only an estimate at this point so maybe this will help revise them down a little.

  3. It’s not too early for a victory lap over Bitcoin failure. It wasted energy and now it has failed or is failing for the most part. That is a little piece of good news in the scheme of things.

  4. “According to a recent study, more than 44% of bitcoin holders call themselves libertarian. Meanwhile, around 10% of Americans now identify as libertarian, and the 2016 US presidential election had the largest Libertarian Party turnout in history, with 3.3% of the vote.” *****qz.com/1284178/almost-half-of-cryptocurrency-and-bitcoin-bros-identify-as-libertarian/

    Bitcoin does have value in one sense as it allows right libertarians (propertarians) to act out their ideology. That and the criminals, gullible fools and speculators might be enough to keep Bitcoin alive for a few more years.

  5. @James Wimberley
    Damn, I thought that was mine! I used to think of it as the currency one uses to make wagers with idiots.

  6. I just think people got a bit ahead of themselves and a steady price rise from early 2015 through 2016, coupled with an increase in media hype and FOMO meant that a bubble was inevitable. Not the first time it has happened either. There is lots of interesting tech in Bitcoin and Etherium so I wouldn’t rule it out just yet. Time will tell.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s