Bitcoin Mining and Electricity Consumption

44 Pages Posted: 8 Feb 2022 Last revised: 31 Aug 2022

See all articles by Min Dai

Min Dai

The Hong Kong Polytechnic University

Steven Kou

Boston University

Shuaijie Qian

National University of Singapore (NUS)

Ling Qin

National University of Singapore (NUS) - Department of Mathematics

Date Written: August 31, 2022

Abstract

We propose a dynamic industry equilibrium model for Bitcoin electricity consumption in a general framework, including Bitcoin miners’ optimal entry and exit with technology innovation. Using average operating costs to approximate the true operating costs, we overcome the difficulty of strong path dependency incurred by the interaction among entry, exit, and technology innovation. The model can capture the upside and downside co-movements of miners’ computing power, electricity consumption, and mining revenue. Our model predicts that the Bitcoin electricity consumption will not grow indefinitely and the ratio of Bitcoin electricity consumption to the miners’ revenue fluctuates within a certain range.

Keywords: Industry Equilibrium, Bitcoin Mining, Electricity Consumption.

Suggested Citation

Dai, Min and Kou, Steven and Qian, Shuaijie and Qin, Ling, Bitcoin Mining and Electricity Consumption (August 31, 2022). Available at SSRN: https://ssrn.com/abstract=3994797 or http://dx.doi.org/10.2139/ssrn.3994797

Min Dai

The Hong Kong Polytechnic University ( email )

Steven Kou (Contact Author)

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
6173583318 (Phone)

Shuaijie Qian

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

Ling Qin

National University of Singapore (NUS) - Department of Mathematics ( email )

Department of Mathematics
Singapore, 117543
Singapore

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