The Cost of Bitcoin Mining Has Never Really Increased

16 Pages Posted: 15 May 2020 Last revised: 19 May 2020

See all articles by Yo-Der Song

Yo-Der Song

University College London

Tomaso Aste

University College London

Date Written: May 18, 2020

Abstract

The Bitcoin network is burning a large amount of energy for mining. In this paper we estimate the lower bound for the global energy cost for a period of ten years from 2010, taking into account changing oil costs, improvements in hashing technologies and hashing activity. Despite a ten-billion-fold increase in hashing activity and a ten-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 a 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%.

Keywords: Bitcoin, mining cost, proof of work, cryptocurrency, blockchain

Suggested Citation

Song, Yo-Der and Aste, Tomaso, The Cost of Bitcoin Mining Has Never Really Increased (May 18, 2020). Available at SSRN: https://ssrn.com/abstract=3574512 or http://dx.doi.org/10.2139/ssrn.3574512

Yo-Der Song

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Tomaso Aste (Contact Author)

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

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