New Zealand miners need to spend an estimated NZ$173,192.96 on energy to produce one Bitcoin.
Photo: Jonathan Raa / NurPhoto via AFP
The high cost of energy to produce a single Bitcoin seems to make little financial sense as the cryptocurrency’s price slips to about US$86,000 (NZ$147,000).
Latest data from Cambridge Bitcoin Electricity Consumption Index indicates the energy needed to produce one Bitcoin costs more than US$100,000 for 15 of the world’s top 20 producers, with Australia among the biggest spenders at nearly US$259,000.
New Zealand miners need to spend an estimated NZ$173,192.96 on energy to produce one Bitcoin, according to data provided by New Zealand industry organisation Cryptocurrency NZ.
Cryptocurrency NZ co-founder Nicolas Turnbull said there were more than 1000 Bitcoin miners active in New Zealand, though most were hobbyists rather than commercial producers.
“They purely want to mine it for exposure to it,” Turnbull said.
“It’s still a great asset to mine. It’s an exposure to a different asset class.”
Some miners contributed their computer power to global pools, in order to get a slice of what is known as the “Bitcoin block reward” which worked out to 3.125 bitcoin, valued at between US$280k to $300k, he said.
However, the energy cost per bitcoin was still outpacing the current market price, with three of the top five global producers, USA (171btc), China (95btc) and Russia (21btc), each spending more than US$100k in energy to produce one bitcoin, though Kazakhstan (60btc) was able to produce one bitcoin at the relatively low price of US$67k, with Canada at US$97k.
Still, Bitcoin sucked up a global estimate of 191 terawatt-hours (TWh) of energy a year, though the Cambridge Centre for Alternative Finance noted Bitcoin miners were often able to tap into so-called ‘stranded’ energy assets that could not easily be put to productive use by other industries.
“In those cases, Bitcoin miners are not competing with other industries or residential users for the same resources, but instead soaking up surplus energy that would otherwise have been lost or wasted,” it said.
“Instances of this ‘non-rival’ approach has been observed, among others, with renewables curtailment in as well as gas flaring in North America.”
The UK topped the list with the most expensive energy needed to produce one Bitcoin a day, at US$266k or nearly three times the current market Bitcoin price.
However, Turnbull said price was not the only factor motivating hobbiests.
“There may be factors where it becomes unprofitable, but you can always offset it,” Turnbull said, adding some New Zealand hobbiests were generating their own renewable energy and using the output from high-powered mining computers to heat their homes.
“These machines give off quite a lot of heat, so you can actually use them for heating.”
There were other developments motivating Bitcoin enthusiasts, Turnbull said.
“The rules are changing, especially this year.”
He said an expected change in tax policy to exempt capital gains on any Bitcoin spending under $1000 is expected to extend the reach of Bitcoin.
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