The Intergovernmental Panel on Climate Change set a 2030 goal of 50% worldwide carbon reduction as a first step to limit global warming to 1.5°C, above which even more devastating impacts of climate change are expected. The Paris Climate Agreement, agreed to by 196 countries in 2015, set out a less ambitious plan to limit greenhouse gas emissions to limit global warming to 2.0°C, but progress towards this weak goal was not made. In 2021, global greenhouse gas emissions were at an all-time high.
Recent profitability trends show greater risks in a relatively short time period. Figure 2 shows this. The reward per tera-hash in US dollars is shown in this plot. Rewards see highs of the order of 0.45 USD/TH/day and lows of the order of 0.1 USD/yr in 2022, a difference of more than four times. However, even a low reward rate of 0.1 USD/TH/day for the world's best mining technology—currently the Antminer S19 XP-Hydro (255 Th/)—results in a modest return over a year on a mining investment.
In line with the desire to reduce global greenhouse gas emissions, the United Nations has set the goal of achieving sustainability with equality. With more than 2 billion people without access to the economic engine that reliable energy brings, there are many opportunities to integrate equity issues into potential solutions for developing countries.
Bitcoin Basics
Bitcoin is a decentralized form of cryptocurrency, relying on a peer-to-peer network called the blockchain to record transactions. It is not tied to any regulatory authority. Blockchain is associated with a so-called hash function, which provides a unique record and authenticates each financial transaction. When each transaction is verified as unique, it is sent to join other transition “blocks.” At this stage, it becomes impossible to modify. Blockchain represents a collection of these blocks.
Blockchain uses many volunteer computer servers to validate Bitcoin network transactions based on cryptography. This transaction is said to be irreversible. They cannot be canceled or changed.
All Bitcoin transactions are documented and made public, although the people involved in processing the transactions are anonymous. It is nearly impossible to hack the system, unlike the data breaches increasingly seen with traditional financial transaction companies. When Bitcoins are bought, sold, or otherwise transacted, no personal information (passwords, credit card numbers, addresses, etc.) is transmitted.
In the Bitcoin network, each computer/server that performs the hash is called a node, of which there are now more than 100,000 worldwide, ensuring resilience. If one of the nodes fails, one of the others can perform the required function. Data security is ensured by the fact that someone interested in hacking the system for information does not know which node or nodes will be called for a particular hash. Other cryptocurrencies are not tied to hardware processing (and thus energy use) and are generally considered less secure than Bitcoin. It is for this reason that Bitcoin continues to be the dominant cryptocurrency in the world.
Bitcoin has been suggested to be an equalizing economic force for the world. Upon its founding, it was hailed as “offering a vision of money free from the control of central banks and intermediaries.” The place of the dollar and RMDs as currencies of exchange around the world favors the monetary policies of, respectively, the US and China. This lack of currency holdings is particularly important for developing countries, where many borrowers borrow heavily using US currency even with non-US lenders. That so much debt around the world is in US dollar terms makes US Fed policy more forceful internationally than it would otherwise be. The Bitcoin currency, on the other hand, would not, at least theoretically, grant special privileges to countries at the top of the financial hierarchy.
Others suggest that Bitcoin and other cryptocurrencies could be a more immediate asset for poor people. The total amount of money that crosses national borders is significantly 'taxed' by banks for money transfer services. This tax is called remittance. According to a World Bank report, around USD 630 billion worth of remittances are paid annually worldwide. Additionally, taxes on remittance prices have been documented to exceed 16% [25]. Even when loans are accessible and lenders meet all credit requirements, small business loans often have interest rates greater than 20 percent. Therefore the UN Sustainable Development Goals have set a 2030 target for remittances below 3 percent.
Bitcoin mining profitability
What does 138 terawatt-hours per year mean for mining $BTC worldwide in terms of the economic value that can be gained from Bitcoin mining? This annual energy demand is associated with worldwide power requirements of 15.7 GW. This immense power translates into a worldwide Bitcoin hash rate of 200 EH/s. Given the price of BTC (December 1, 2022), this translates to approximately 9 billion USD/year in total revenue, assuming no energy costs. At 0.05 USD/kWh, the total revenue earned is 6.07 billion USD/year. At 0.10 USD/kWh, the total annual revenue generated is just over USD 3 billion.
The revenue earned per hash, however, has decreased. That mining profitability per hash has decreased significantly since 2015 is clear. At the same time, mining energy efficiency has improved rapidly over the same time. The latest and greatest miner, the Antminer S19 XP-Hydro has a documented energy efficiency of 27,000 MH/Joule. Thus, while mining profitability per hash has decreased, energy usage per hash has decreased even more. Thus, the cost to mine, assuming little change in energy costs over this time, has also decreased. Mining profitability, to date, is probably as strong as ever.
Recent profitability trends show greater risks in a relatively short time period. The reward per tera-hash in US dollars is shown in this plot. Rewards see highs of the order of 0.45 USD/TH/day and lows of the order of 0.1 USD/yr in 2022, a difference of more than four times. However, even a low reward rate of 0.1 USD/TH/day for the world's best mining technology—currently the Antminer S19 XP-Hydro (255 Th/)—results in a modest return over a year on a mining investment.
The future market for mining is likely safe. Erasing the big drop in 2021 when the Chinese government banned Bitcoin mining in China overnight, one can see a consistent increase in the world's total hash rate over time. Plus, the development of the Lightning Network was critical to allowing Bitcoin to emerge as a vehicle for financial transactions. Essentially, this network enables millions of two-party financial exchanges at any time. Additionally, it allows transactions between parties that are not on the blockchain network. Lastly, like Bitcoin itself, the network relies on miners' blockchain to process transactions. Thus, it offers transparency, permanent documentation and anonymity. However, these benefits do come with some risks from hacking.
This network has enabled greater adoption of Bitcoin payment transaction channels. Twitter, Starbucks, Twitch, Whole Foods, Microsoft, Wikipedia, AT&T, Overstock, PayPal, Home Depot, Burger King, KFC, Subway, Pizza Hut, Virgin Galactic, and AMC are among the early adopters of Bitcoin as a payment agent. This trend almost guarantees greater adoption and thus increased need for mining.
