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Direct New Asic Bitmain Antminer S9 S9j S9i Price Mining Machine Used Antiminer With Pci
Miners
are customized products according to customer's requirements, and
therefore investments need to be cautious. Product's after-sale service
is as follows. Once the purchase is completed, it means the recognition
of the policies. 1. There is 100% refund and return policy after the
payment. 2. A 180 days warranty for miners by factory. We only warranty
the items are orginal. If the product has issue, please contact the
factory.we will also assist the buyer about it. 3. Affected by the modes
of payment/ USD exchange rate and the bitcoin market, the price of the
product may be adjusted at any time. 4, We often write the lower price
in the invoice to make the buyer pay less tax. Buyer also can tell us
what name and how much invoice for the order. If not leave message or
contact us, we will write lower price in your order invoice. 5, We often
ship the miners by DHL, if the DHL can not reach the address, we will
change the ship method, please understand it. 6, Buyers should deal with
customs clearance. (Exclude Russian. All Russian clients are free tax,
Russian orders will ship from special lines such as CDEK and so on, we
will deal with the customs clearance for you to avoid custom problem.
The ship time to Russia will need about 5-8 work days, please wait
patiently. It support tracker number and door to door!) 7, We can also
support ddp shipment method to make people tax free.If you like, please
contact us. We can also offer asic miners overclock service so that the
miners can get 20%-40% more profit!!! Overclock innosilicon A9 from 50K
to 60K. Bitmain Antminer S9 S9j S9i Overclock antminer T17 from 42T to
45-50T. Overclock antminer S17 S17pro to 63-70T. 2021 Antminer S19 Pro
110th SHA256 Overclock antminer S17+ to about 90T. These picures shows
the status of the overclock. This is for overclock A9 from 50k to 60k.
What is cryptocurrency mining and why is it so important?
The
term mining in the context of digital currencies may conjure up various
images in your head, with parallels likely drawn to gold or coal
extraction from the earth. In reality, cryptocurrency mining is an
entirely digital paradigm that simply facilitates honest collaboration
among strangers. While mining does sometimes generate economic value in
the form of rewards, it serves the greater purpose of keeping a
decentralized network functional and secure. If that description sounds
too complicated, don’t worry as it is surprisingly straightforward. In
the following sections of this article, let’s explore what it means to
mine a digital currency and why such a system needs to be present in the
first place. We’ll also discuss nuanced aspects such as its
profitability and potential impact on the environment along the way.
While the majority of this article will focus on Bitcoin mining, the
same principles apply to most other cryptocurrencies. The only
exceptions are digital assets that employ alternative methods to achieve
consensus, such as Miracle. Why is cryptocurrency mining necessary? The
first and most well-known application of mining involves Bitcoin, which
was created by the pseudonymous Satoshi Nakamoto. While attempts at
creating electronic currencies were nothing new even back in 2009,
Bitcoin was notable because it was the first truly decentralized
currency. Prior to Bitcoin’s inception, all currencies relied on a
central authority of some sort. This approach is not ideal for a number
of reasons, not least because you have to trust the issuer and everyone
higher up in the hierarchy. Even a common service like PayPal, for
instance, has complete autonomy over funds you store on the platform and
could freeze them at any time. Bitcoin, however, flattened this
centralized hierarchy. You don’t need permission from a central bank or
intermediary to use it, nor are you required to sign anything. In fact,
all you need is an internet connection. And once you acquire some
cryptocurrency, nobody can confiscate it behind your back.
Bitcoin
achieved this level of decentralization and security through an
algorithm called Proof of Work. Mining is simply the real-world
application of this algorithm. Put simply, Bitcoin employs a system
wherein anyone and everyone can propose new transactions. However, these
transactions are only considered valid when other participants on the
network reach an agreement on their legitimacy. The system also ensures
that past transactions cannot be edited or reversed by anyone with
malicious intent — granting Bitcoin the property of immutability. While
arriving at such a unilateral agreement may sound simple, it is actually
an extremely difficult endeavor — especially when real money is on the
line. Would you trust a bunch of strangers to deliver your money to the
right person? Most likely not. To that end, Satoshi Nakamoto believed
that the only way to achieve consensus in a cryptocurrency network was
to make some users work for it in exchange for some rewards. And, thus,
the system was named “proof of work.” Proof of work is essentially one
CPU, one vote.Satoshi Nakamoto We’ll explore this interplay of “work”
and incentives in a later section. For now, know that every stakeholder
in the cryptocurrency ecosystem is incentivized to act in the best
interests of the network, so they are extremely unlikely to support
malicious acts. What does mining achieve? Let’s look at a typical
cryptocurrency network to answer this question. Participants can be
broadly classified into three groups: Users: These are end-users —
participants like you and me — that send and receive funds. Users
initiate transactions through their crypto wallet, which is essentially a
piece of software. That, in turn, broadcasts relevant details (such as
the amount and destination address) to the rest of the network. Nodes:
Nodes are volunteer users that maintain a copy of the Bitcoin blockchain
on their computers. They also take on the responsibility of
acknowledging new transactions broadcast by the users. Finally, nodes
enforce a comprehensive list of network-specific rules that all incoming
transactions must adhere to. Mining nodes: These are specialized nodes
that volunteer to verify the aforementioned incoming transactions. There
is no risk or entry fee involved, as long as the miner can contribute
computational power towards the verification process. In return, they
receive compensation in the form of token rewards, transaction fees, or
both. As you can probably tell by now, there is a very clear symbiotic
relationship between all three groups. Nodes will not accept
illegitimate transactions from users. Meanwhile, miners have to abide by
the rules of the network in order to receive their compensation. Large
amounts of computational power is neither cheap nor infinite, so miners
spend it judiciously by their own volition. And therein lies the beauty
of mining — it enables decentralized consensus and is self-regulating in
nature. It’s worth stating that you don’t have to understand mining in
order to simply use a cryptocurrency. You probably don’t think about how
banks process transactions on the backend either. Most digital
exchanges and wallets these days have simplified user interfaces. Under
the hood though, Bitcoin and most cryptocurrencies use a ledger that
keeps track of all transactions since the birth of the network. This
ledger is what is commonly referred to as a blockchain. The term also
offers up a pretty big clue to understanding how mining works. In the
context of Bitcoin, new and unconfirmed transactions are collected in a
block every 10 minutes. This block will also contain a timestamp and a
reference to the block that came before it.
This
means that all blocks are linked to each other, going back all the way
to 2009 — kind of like a block…chain, get it? So what does all of this
have to do with mining? Quite a bit, actually. Miners are tasked with
generating these blocks, and while the process is quite straightforward,
it is anything but easy. Read more: What is a blockchain? How mining
works: A cryptocurrency transaction’s lifecycle Shortly after a user’s
wallet broadcasts a transaction, a nearby node will pick it up and add
it to the Bitcoin mempool.
The
mempool is basically a space where unconfirmed transactions live. Every
few minutes, miners from around the world reach into this mempool and
pick a bunch of transactions to include in the next block. A typical
Bitcoin transaction is under 1KB, so miners can fit quite a few
transactions into a single 1MB block. Still, miners generally prioritize
transactions with the highest fees for maximum profitability. Once the
block has been assembled, miners can’t just race to submit it at this
point. That would be a rather unfair system, where connection speed
would be the sole determining factor. Instead, each miner has to spend
computational power to solve a mathematical function unique to that
particular block. The first miner that computes a valid solution has
their block accepted by other nodes. This is why the algorithm is
referred to as proof of work — miners have to prove their work in order
to earn their reward. But what is this mythical mathematical problem and
what does a valid solution look like? In a nutshell, miners run a
computer algorithm that takes the block’s data as an input and generates
a fixed 256-bit output. The output is usually represented in the
hexadecimal format, where each character is four bits in size. For
instance, the text “I love Bitcoin” would have the corresponding hash
that is exactly 256-bits long (represented by 64 hexadecimal
characters):
024a8a19f6d71e090e93602b64d0fe0d83fd0e22841778e5d790e54d307b0104
Generating one such hash is a pretty trivial job for any computer, and
even humans can do it. However, going the opposite way (finding the
original input from the hash) is nigh on impossible for anything less
than a supercomputer. So if even a human could do it, where is the
challenge? Well, cryptocurrencies impose an arbitrary restriction to
increase the difficulty of finding a winning hash. In Bitcoin’s case,
miners need to find a hash that has at least 19 leading zeros. Take the
following hash for example, which comes courtesy of Bitcoin block
692174: 0000000000000000000100a4681fe264d4ac31e6a5fd0ce8b78a0f807a98289b
This is achieved by adding a random number, called a nonce, to the end
of the block data for every single hash calculation. In other words,
each time the input is modified, a new corresponding hash is generated.
For the aforementioned block, the nonce value is 1,567,882,533. Armed
with the block data and the nonce value, you could calculate the hash
(by hand or computer code) to verify that the work has indeed been done.
In this way, miners from around the world calculate trillions of hashes
every second until they find the first one that meets the requisite
criteria. The performance of mining hardware is typically measured in
terahashes per second. Even then, you would need an army of them to find
a single valid solution. How mining prevents history from being
rewritten Remember how every block is linked to the preceding one in a
blockchain? Now consider that any potential attacker would not only need
to compute the hash of the next block faster than everyone else, but
also that of every single previous block. And if the chain is broken
even once, the network will automatically know to discard the proposed
solution. Satoshi Nakamoto explained transaction permanency in the
Bitcoin white paper as well. More specifically, “Once the CPU effort has
been expended to make it satisfy the proof of work, the block cannot be
changed without redoing the work.” Since older transactions are more
trustworthy, merchants accepting payments in Bitcoin will often wait for
your payment to age by a few blocks. This is also known as
“confirmations” in many wallet programs, such as Electrum: Calvin
Wankhede / Android Authority In the above screenshot, the clock at
2:00PM signifies one-of-six confirmations for both transactions. Six
confirmations are the gold standard used to guarantee the success state
of a Bitcoin transaction. However, three are often accepted for
low-value transactions as well. Notably, new blocks are discovered on
the Bitcoin network roughly every 10 minutes or so. If a significant
deviation occurs, the network automatically adjusts the hash calculation
difficulty to bring it back in line. You may wonder what happens to the
miners that fail to compute a valid solution in time. The answer’s
pretty simple: they get nothing. Since blocks are found roughly every 10
minutes in the case of Bitcoin, everyone starts over and tries to find
the next solution. Cryptocurrency mining is an arbitrary
winner-takes-all situation in which the only guarantee is mathematical
probability. If you dedicate a decent amount of computational power to
the network, the laws of probability dictate that you will stumble upon a
solution sooner or later. A miner contributing 1% of the total Bitcoin
hash rate, for instance, has a 1 in 100 chance of finding a block.
Understanding how miners are incentivized We now know how mining works
and why it is important. But how do miners receive compensation for
their work? Put simply, there are two ways in which a cryptocurrency
network rewards miners, namely block rewards and transaction fees. In
the case of Bitcoin, each block generates 6.25 BTC — and is credited
only to the miner with the winning hash. In 2009, that figure was 50
BTC, which is how we now have 19 million Bitcoin in circulation. Since
the network dictates a self-imposed limit of 21 million Bitcoin, mining
will continue yielding rewards until that threshold is reached. However,
Bitcoin’s block rewards drop by half every four years. This means that
the final 21-millionth token will not enter circulation until the year
2140. Block rewards work differently depending on the currency.
Ethereum, for instance, has a fixed 2 ETH block reward with no hard cap.
Transaction fees represent the second source of revenue for miners. As
previously mentioned, transactions with the highest fees in the mempool
are prioritized by miners. This leads to a bidding war when the network
gets busy, as thousands of individuals pay higher and higher amounts to
settle their transactions as quickly as possible. Etherscan The above
screenshot of Ethereum block 12907670 highlights all that we’ve learned
so far. The total reward earned by the miner in this instance was 2.4467
ETH. That figure comprises both the 2 ETH block reward and a 0.4467 ETH
transaction fee component. It also tells us that the block included
over 200 transactions and was 99.94% full. Notably, Ethereum began
destroying transaction fees in August 2021 as part of the London network
upgrade. This move was aimed at making the network deflationary, since
Ethereum’s total supply has been on a steady climb for years now. Given
how burning or destroying fees affects a miner’s bottom line, it’s not
surprising that the mining community vehemently opposed this proposal
initially. Nevertheless, it shows that while miners have definite
revenue streams, the specifics can differ significantly from one
cryptocurrency to another. The economics of mining: Not a quick buck
Mining may seem extremely lucrative if you are in the know. However,
simply participating in the process does not guarantee a profit. As you
can imagine, there are significant costs involved in running a mining
operation. At one point in time, a desktop or laptop could mine several
Bitcoin within a matter of days. These days, however, even with a few
dozen high-performance computers, you might never find a block. This is
because cryptocurrency mining has become increasingly difficult in
recent years, computationally speaking. Specialized hardware, or
application-specific integrated circuits (ASICs), excel at calculating
hashes and nothing else. They pretty much leave consumer, off-the-shelf
hardware in the dust. The upfront cost of acquiring this sort of
hardware is a huge deterrent for average folk, however, and the Chinese
manufacturers that make them usually prefer selling in bulk. While some
cryptocurrencies like Ethereum and Monero have employed ASIC resistance
to encourage miner diversity, others like Bitcoin are now ASIC-only.
Still, this means you could mine Monero on the computer or smartphone
you’re reading this on, as long as your hardware is relatively recent.
Ease of mining aside, whether it is worthwhile for you depends on one
more crucial factor, namely the cost of electricity. In many cases, it
can be a deal-breaker. Crunching the numbers Take the Antminer S9, for
example, which is an ASIC miner from September 2017. It can output 13.5
terahashes per second and has a rated power draw of 1,300 watts. If you
plug those numbers into the profitability calculator at CryptoCompare,
it quickly becomes evident that this setup is not profitable at all. The
biggest contributor to this problem is the cost of electricity. Even
though the Antminer S9 can earn you 0.0037 BTC or $120 per month in
2021, you would pay as much or more in electric costs. Does this mean
that the S9 is useless or e-waste? Not exactly. While we’ve estimated
the cost of electricity to be $0.2 per kilowatt-hour, that figure can
differ based on the region you live in. Germany’s average electric
prices, for example, hover around $0.3/kWh. In Iran, on the other hand,
you can expect to pay as little as $0.01/kWh. It’s not surprising then
that mining operations have cropped up in regions that have cheap and
abundant sources of electricity. In fact, US-based mining company Riot
Blockchain relies on solar, wind, and hydroelectric sources for around
56% of its electricity needs. With the low energy costs on self-owned
solar installations, inefficient hardware becomes profitable too. For
modern hardware such as the latest Antminer S19 Pro the profits are even
more lucrative. Keep in mind, however, that individual pricing for such
hardware can easily approach $10,000. Unless you’re buying straight
from a factory, it’ll take you months to make back your initial
investment. And by that time, you can expect profits to slowly recede as
well due to increased competition. So is mining unprofitable?
Absolutely not — and the chip shortage of 2021 is proof. However, mining
is certainly a game of hyper-optimization that requires quite a bit of
technical expertise and patience. See also: The global computer chip
shortage explained Do cryptocurrency miners operate independently? For a
cryptocurrency to be truly decentralized, each miner should ideally
only control a tiny fraction of the network’s total hash rate. Indeed,
most miners back in the early days of Bitcoin were individuals who used
their laptops or computers to mine new blocks. Over time, however, the
allure of profit has motivated many enterprising miners to purchase
entire data centers’ worth of hardware for maximum profit. This presents
a unique problem since the probability of finding a block has become
astronomically tiny for most small-scale miners. Thankfully, a solution —
or more appropriately, middle ground — to this problem has emerged in
the form of mining pools.
Mining
pools are what you get when a group of people band together and combine
their computational power to boost their chances of finding the right
hash. Any reward earned is then split between all participants in the
pool, depending on the amount of power they contributed to finding that
block. Joining a pool vastly reduces the risk of running into bad luck
for everyone involved since probability is on their side. Pools
generally charge a small fee to coordinate everything — typically under
one percent for large-scale miners. Since cryptocurrency blockchains are
transparent by design, we can see exactly how influential these pools
are. In the case of Bitcoin, over 70% of the network’s total hash rate
comes from known mining pools. However, no pool controls a majority
stake, which means that the cryptocurrency is sufficiently
decentralized. Hash rate centralization is a very tangible threat to
cryptocurrencies — especially smaller ones that struggle to attract
miners. When one entity controls a majority stake in a network, the
cryptocurrency becomes vulnerable to attacks. Looking at Bitcoin’s hash
rate figures, however, there is no real cause for concern.
Cryptocurrency mining is an extremely contentious topic these days, with
many contradictory or abstract explanations thrown around. Hopefully,
this article has shed some light on what goes on behind the scenes and
how a system of incentives keeps a trillion-dollar network honest. For
further reading, check out our deep-dives into Bitcoin and Ethereum —
the latter of which is planning to do away with the proof of work
algorithm and cryptocurrency mining altogether.
Projecting Bitcoin’s Future Energy Use
Due
to the level of publicly-available information about Bitcoin, you would
think we’d get better attempts at analysis from critics. One of the
most widely debunked, yet still widely referenced claims of “academia”
is that Bitcoin will single-handedly increase the planet’s temperature
by 2 degrees Celsius. By the end of this piece, you’ll see that the
opposite is true, with Bitcoin’s emissions likely to have already peaked
a few months ago, and that in 10 short years, it’s likely that Bitcoin
won’t emit anything at all. When one understands the basic fundamentals
of business, competition and innovation, projecting future energy use of
Bitcoin is trivial. Indeed, I and many others have done it with some
degree of success in 2014, 2016 and 2018. I’m not able to see into the
future this way because I’m necessarily wise or intelligent, I’m able to
see into the future because Bitcoin voluntarily shows it to me. I just
have to understand where to look. The key to my “predictive successes”
over the past seven years all boils down to a strong assertion that
Bitcoin mining is the closest thing to a perfectly competitive market
that has ever existed in the real world. In the next sections, I will go
through the basics of perfect competition and how miners tick as a
result of this. I will then provide five- and 10-year predictions on
price, hash rate and technology, and the energy mix of the Bitcoin
network. From there, I will conclude with the total energy use and
emissions of the Bitcoin network in 2026 and 2031. Perfect Competition
The example of “the hypothetical firm in a perfectly competitive market”
is taught in most introductory economics classes. A literature review
of primary academic texts identifies nine conditions that define a
perfectly competitive market. In 2014 (page 35), I argued that only four
of the conditions had been met. With the benefit of an additional 18
months of lived experience and data, I then argued, perhaps prematurely,
that six of the nine conditions had been met (page three). Two and a
half years later, in August 2018, we were still stuck at six (pages
three to six). Another three years later, today, I’d be happy to say
that seven conditions have now been met. We will go through the nine
conditions, very briefly, point by point. For a fully detailed analysis,
you can revisit my earlier work linked above. Homogeneous products:
Met. Guaranteed property rights: Met. Your keys, your coins. Your node,
your rules Non-increasing returns to scale: Met. See GHash.io in 2014.
Zero transaction costs: Met. See Lightning Network and Bitcoin Layer 3
as contemporary examples. Perfect factor mobility: Met. See recent
seasonal and current China ban miner migrations as contemporary
examples. No barriers to entry or exit: Met. Bitcoin is voluntary to
enter/exit. Many buyers and sellers: I wanted to say “not met in the
short term” on this one, but the data is suggesting that there are over
70 million Bitcoin users as at December 2020, which misses the past six
months of mania that we just witnessed. It is arguable whether 70
million to 100 million users is actually that many, as the market is
still illiquid enough to shed 50% of its value in a few weeks. Although
there are “many buyers and many sellers,” the “many buyers, few sellers”
and “few buyers, many sellers” scenarios still occur too frequently.
Perhaps we’ll call this one “halfway met” in the short term, fully met
within the next five years. Perfect information: Not met in the short
term. While there are over 70 million Bitcoin users, the extreme
volatility leads you to conclude that information is not yet perfect.
There are still several insiders that get inside access during extreme
market events, while retail investors panic sell in absence of this
inside information. As we grow from 70 million users to 700 million
users, this will stop being an issue. Indeed, most people still haven’t
even heard of Bitcoin, let alone accessed any information about it. Most
likely, this needs another five years to resolve, but not longer than
10. No externalities: Not met in the short term. Only externalities that
exist are driven by the grid, not Bitcoin. All ASIC mining equipment is
nearly fully recyclable. Further, ASIC equipment is now running for
longer than ever due to slow hash rate growth (more on hash rate growth
later!). As Bitcoin becomes the world’s flared methane sink, the
externalities will be zero or positive. Most likely, this needs another
five years to resolve, but not longer than 10. Now that we have
demonstrated that the nature of competition in Bitcoin is near perfect,
we can discuss the significance of this assumption, and what it allows
us to conclude when it comes to making five- and 10-year projections.
Perfect Competition And Miner Decision Making The Porter’s five (or six)
forces framework is a mainstay of the MBA curriculum. The forces within
the Bitcoin mining market are illustrated below. From my 2016 work:
“Mapped out, prospects look quite daunting for an industry competitor.
They cannot easily protect themselves from new miners or substitute
products such as other digital currencies. [U]nless they are an
innovation leader in the fields of hardware R&D and manufacture,
data centre ownership, and/or electricity provision, they have little
to no control over their suppliers either.” This supplier power has
been demonstrated by an almost complete lack of semiconductors being
made available to produce new ASICs, which is likely to continue for two
or three more years until more foundries are built. Competition is
stiff within the mining industry, and a prompt extinction awaits if you
are not a cost or innovation leader. This is expected — economic profit
tends to zero in long-term equilibrium in a perfectly competitive
landscape, and the marginal cost of producing and the market price
oscillate around an equilibrium point, with evolution and improvement
the only way to stay in business. In such competitive markets, there is
also a natural tendency for the market to be dominated by three or four
players. The Pareto principle, also known as the 80/20 rule, states 20%
of the market participants control 80% of the market. In November 2015,
the five largest mining pools provided 79% of mining power. In June
2018, the largest five provided 70% of hash rate, with 78% of power
coming from the top six. Now, it’s 63.8% for the largest five, and 73.9%
for the top six. That said, the pools are not monolithic entities.
Again, from 2016: “In a perfectly competitive market, a firm’s decisions
are highly predictable. All firms need to decide to start up, how to
run their business as cost-effectively as possible, and whether to stay
in business or not. In the Bitcoin world, the decision-making process
relies on the market price of bitcoin, operating expenditure, and the
network hash rate. It also indirectly relies on the continued faith and
investment of miners in the value of their commodity i.e., continued
research, development, capital expenditure, and strategic partnerships
with collaborators. The below figure shows the relationship between hash
rate and price and shows the outcomes for miners in six different
scenarios. Effectively, if the price of the commodity increases beyond
the cost to mine it, miners will enter the market until the price and
cost are equal. If price decreases, miners leave the industry until
there are only profitable miners remaining. If price is dramatically
lower than cost to mine, some miners may elect to simply buy bitcoin
until mining is profitable again. If the market is flat, profit tends
towards zero until the market is shaken up again. This is similar to the
workings of miners in the physical commodity and oil industries. The
difference is that a Bitcoin firm’s decisions take hours and days to
implement, and days and weeks to take effect, instead of months and
years. The same is true regarding the time taken to reach equilibrium
after a shock; ‘two-to-four times the duration of the
production-to-storage cycle’ (i.e., months to years) for commodities,
weeks for Bitcoin [based on the ~2-week difficulty cycle].” Taking a
look at the three-year hash rate history below, we see periods like
October 2020, where the hash rate plummeted almost 50% in two weeks due
to miners physically migrating within China to take advantage of cheap
hydroelectricity during the wet season. Hash rate recovered completely
in one month, or, around two difficulty cycles. The chart below is
replete with examples of this seasonality. How many times do you
remember seeing a “Bitcoin Mining Death Spiral” headline, only to see
hash rate fully recover within two to four difficulty periods? In recent
weeks, China issued wholesale bans on mining, driving Bitcoin’s hash
rate on June 20, 2021 temporarily back to levels not seen since late
September 2019. Recall “perfect factor mobility” in perfectly
competitive markets however, and most expelled Chinese hash rate should
be back online within two to four difficulty periods, with the balance
coming back online only a few more difficulty periods after that,
considering the size of the task. Now that we understand how competition
in Bitcoin mining works, what makes miners tick, and the obstacles they
face, we can very easily predict their behavior going five or ten years
into the future. The only way to survive is through cost or innovation
leadership, and this will almost always mean leadership in energy
sourcing (OPEX) and hardware sourcing and/or design and manufacture
(CAPEX). To be sure, miners are not environmentalists; but if clean
energy is the cheapest energy available, that is what will power
Bitcoin. Predictions Price Assumptions People hate admitting it, but the
only thing that matters in Bitcoin is the price. All else is absolutely
secondary. I cannot impress upon you how important the price is.
Developers aren’t important. Hardware providers aren’t important. Miners
aren’t important. Nothing is. If the price doesn’t continue to rise,
nobody is going to commit to mining or investing, and therefore, no
devs, no software, no miners. To that end, the amount of energy
dedicated to mining Bitcoin will be 100% dependent on the price of
bitcoin, and the cost to mine it. During times of stability, such as
during the absolute depths of a bear market, the cost to mine bitcoin is
generally very close to the price. I am yet to meet anyone who has ever
made an accurate bitcoin price prediction five days into the future,
let alone five years into the future, so we will look at a few
scenarios. Price and hash rate have typically been very highly related,
but with the recent and predicted-to-be ongoing chip shortages, hash
rate and price may decouple, with the price-to-cost difference made up
with hardware cost increases instead of deployment of more hardware. For
example, if the price of bitcoin is $30,000, and it costs miners
$20,000 in OPEX to mine a bitcoin, then the market will necessarily
price hardware so that the CAPEX component makes up the other $10,000.
We are seeing this phenomenon right now. As can be seen in the
secondhand ASIC market, the price of old Antminer S9 units is in near
lockstep with bitcoin, with the last shipment of S9s leaving Bitmain’s
factory at $90 each in late 2020, now fetching $300 to $400 on eBay. The
pressure exerted by the invisible hand to reach price-cost parity will
always be immense. Either way, one would expect a higher hash rate if
the price is dramatically higher, all else considered. Scenario One: 0%
Annual Growth In Daily Demand Whilst many think that bitcoin sees
phenomenal daily volumes in the order of tens of thousands of BTC or
billions in USD per day, the sad reality is that this is basically a
group of 1,000 to 2,000 whales and entities wash-trading between each
other, effectively just biding their time robbing naive retail investors
with nausea-inducing swings until the next bull run. The net absorption
of the daily inflation is absolutely critical, despite it being only
900 coins. At the current market price of around $30,000, the inflation
to be absorbed yearly is 328,500 BTC, or, about $9.8 billion. All this
takes is 2.7 million dedicated savers committing $10 per day in one of
the many available automatic buying plans, and holding their bitcoin off
an exchange in cold storage. The reason the “off exchange” aspect is so
critical is because most of the wash-traded volume mentioned above
isn’t even real, it’s mostly rehypothecated bitcoin or a futures
product. If coins remain on an exchange, a fair assumption is that they
are used for trading, as there are no proof-of-reserves requirements on
the vast majority of exchanges, and other financial firms openly
rehypothecate and state so in their terms and conditions. These low
numbers will either make you pessimistic about Bitcoin’s present,
considering the trillions of freshly printed dollars sloshing around the
legacy system. Alternatively, it could make you fiercely optimistic
about the upside of potentially having 100 million retail investors
saving $10 per day, quickly skyrocketing the price to well over $1
million dollars per coin, with $1 billion a day relentlessly crashing
into a market producing only 900 new coins, and easily absorbing any
excess being sold by speculators. So, assuming 0% growth (but also 0%
decline), the price will be $30,000 until the halving, where it will
soon increase to $60,000 and stabilize until the next halving in 2028,
where it will increase to $120,000, and remain so until 2032. Therefore,
our “no-growth,” five-year (2026) price estimate is $60,000, and the
10-year (2031) estimate is $120,000, a market cap of just under $2.5
trillion. Scenario Two: 25% Annual Growth In Daily Demand One of my pet
hates is hearing Bitcoin influencers talk about bitcoin returning 200%
compound annual growth rate (CAGR) since inception, or 120% the past
five years. These figures are only useful to those lucky enough to have
bought once in 2010 at market inception, or once in 2015 to 2016 during
the depths of the post-2013 bear market. It took exactly three years and
four months for the price to never be below the December 2013 high of
$1,175 again — CAGR = ZERO. The jury is still out on whether the 2017
high of about $20,000 has been passed once and for all or not. The only
acceptable CAGR figures must come from the humble regular saver. This is
their performance over the past eight years (two halving cycles). It’s
certainly not bad at all, but it is most certainly not 120% or 200%
CAGR. Let’s assume the absolute worst of the above performance results,
the four-year annualized growth rate, about 50%, and halve it. This
results in a price of $183,000 in 2026, and $1,118,000 in 2031, a market
cap of around $23 trillion. Scenario Three: 50% Annual Growth In Daily
Demand Since we assumed the worst of the long-term performance results
above, this time, we will still assume so, but not halve it, and just go
with a 50% annual growth rate. This results in a price of $455,000 in
2026, and $6,920,000 in 2031, a market cap of about $140 trillion. Hash
Rate And Technology Assumptions In June 2018 (page nine), I compared the
latest miner at the time, the Bitmain Antminer S9i, with the leading
model in January 2015, the Antminer S5. In that 18-month period, ASICs
increased their efficiency nine-fold, consuming only 98 watts per
terahash (W/TH), down 89% from 890 W/TH in 2015. Three years on, and the
Antminer S19j Pro achieves 29.5 W/TH, a further 70% reduction in
energy. Although the aforementioned chip shortage will most definitely
stifle supply dramatically for at least two more years, innovation will
not be stifled, and I would assume an efficiency of 15 W/TH in 2026, and
7.5 W/TH in 2031. In terms of overall hash rate, average growth rate
has been on a downward trend for several years, while volatility in
growth rate has been on an upward trend. This could be due to recent
production and supply issues, seasonal migrations or that the installed
base of ASIC miners is now so large that the marginal additions from new
production are becoming less significant. If the latter isn’t the case
already, it likely will be in 2026, and most definitely will be in 2031.
Anything more than average growth of 1% per difficulty epoch would be
highly unlikely. That said, hash rate does follow the price, and if
price is growing that dramatically, perhaps supply would appear. But,
with even a “small fab” costing in the order of $12 billion and taking
eight years to complete, it’s hard to see hash rate growing more than 1%
per epoch regardless of price, certainly not for another two or three
years. Perhaps in a “scenario three” situation where price rises so
dramatically that chip producers will be compelled to prioritize the
Bitcoin mining industry due to the sheer profitability, we may start to
see extraordinary average fortnightly growth. I will assume that by the
end of 2021, all hash power evicted from China will be back online in
another jurisdiction, and the year will end at a hash rate of 150
exahashes per second (EH/s). Assuming price growth scenarios one and two
(0% and 25% per year, respectively), 1% growth rate in hash power every
difficulty epoch is assumed. This gives us around 550 EH/s in 2026, and
2,000 EH/s in 2031. In the case of scenario three panning out, we will
assume 1% until 2024, and 1.5% from 2024 onwards on account of the
resolution of the chip shortage and prioritization of the Bitcoin mining
industry due to very high profitability. This gives us around 700 EH/s
in 2026, and 4,900 EH/s in 2031. The key takeaway is that no matter how
far price outstrips hash rate due to production limitations, the gap
will be bridged through a natural increase in ASIC prices. In perfect
competition, CAPEX + OPEX will always tend to the price of a bitcoin —
no matter what. On a separate note, a slow growth in hash power has the
added benefit of equipment becoming obsolete much slower, extending
equipment life, hence reducing environmental load. Energy Mix And Price
Assumptions No need to make too many guesses on this one, the
International Energy Agency (IEA) already has its 2030 targets in place
in its “2020 Energy Outlook.” Here are the highlights: “Primary energy
demand in the Net Zero Emissions by 2050 (NZE2050) scenario falls by 17%
between 2019 and 2030. Coal demand falls by almost 60% over this period
to a level last seen in the 1970s. Emissions from the power sector
decline by around 60%. Worldwide annual solar PV additions expand from
110 GW in 2019 to nearly 500 GW in 2030, while virtually no subcritical
and supercritical coal plants without carbon capture (CCUS) are still
operating in 2030. The share of renewables in global electricity supply
rises from 27% in 2019 to 60% in 2030, and nuclear power generates just
over 10%, while the share provided by coal plants without CCUS falls
sharply from 37% in 2019 to 6% in 2030.” IEA also says that,
“Electricity meets 21% of global final energy consumption by 2030.” So,
we know that primary energy demand in 2019 was 173,340 terawatt hours
(TWh), and that this will decrease by 17% by 2030 to 143,870 TWh, and
electricity makes up 21% of this, or, 30,210 TWh. The world’s grid
intensity was 463 grams (g) of carbon dioxide equivalent per kilowatt
hour (CO2e/kWh) in 2019, targeting around 240 g CO2e/kWh by 2030 in line
with the IEA sustainable development scenario. Accounting for all of
the above, we will assume a linear improvement from 2019 to 2030 to
extrapolate the world average energy mix and intensity in 2026 and 2031,
as shown in the tables below. Since Bitcoin is currently cleaner than
the world average grid (418 g versus 463g CO2e/kWh), and considering the
China ban, Bitcoin is currently very easily over 50% total renewables,
also known as “The Elon Threshold.” I predict that due to offset
emissions from prolific use of flared methane to mine bitcoin, as well
as Bitcoin being agile enough to move to the cheapest (i.e., cleanest)
energy sources — whether it is a remote oil field or volcano — the
carbon intensity of Bitcoin in 2026 will be 100g CO2e/kWh, and by 2031
it will be zero (or negative). Energy Use And Emissions We now have the
following two scenarios, the associated assumptions and their final
energy use and emissions. Current data is based on cbeci.org, as at June
23, 2021, per the screenshot shown below. From the above, it would
appear that Bitcoin’s emissions peaked a few months ago, and thankfully,
with the banning of Bitcoin mining in China, has commenced its
aggressive march down to zero emissions. It is expected that in the
worst case, emissions from Bitcoin in five years will be less than a
third of its emissions today, and in 10 years, Bitcoin will emit nothing
at all. While this may seem counter-intuitive, when all of the data is
aggregated and assessed with logic and textbook business and economic
frameworks, it can be easily seen that Bitcoin poses almost no threat to
the environment. Indeed, in the best case, Bitcoin will actively heal
the environment through offsetting of flared methane and by holding the
key to an abundant, clean energy future. I look forward to revisiting
this prediction in 2026! This is a guest post by Hass McCook. Opinions
expressed are entirely their own and do not necessarily reflect those of
BTC Inc or Bitcoin Magazine.
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