Bitcoin Energy Estimates (DRAFT)

Estimating the energy use of the bitcoin network using two different approaches.

by Steven Black
Project home: https://github.com/StevenBlack/bitcoin-energy-estimates
Updated: October 23 2023

Introduction

Bitcoin mining uses a proof-of-work consensus mechanism. This is controversial for some people because that supposedly requires a lot of electrical energy. We see claims the bitcoin network “uses as much electricity as a small country”, or “requires as much electricity as Belgium, or Chile.”

This Mathematica notebook assessed those notions using the following approaches:

Presuming bitcoin mining is marginally profitable, how much electical energy can be funded that balances actual mining rewards over time?
Given the reported hashrate, how much energy would be required to achieve that?

This paper uses Canadian dollars, partly because that’s my fiat currency, and because Canada publishes particularly good statistics about electricity generation and costs.

Background: bitcoin price, block rewards, and fees

Here we outline the major factors that play in the economics of bitcoin mining.

The bitcoin price right now

What is the current price of bitcoin in Canadian dollars?

Bitcoin block rewards

Bitcoin miners are compensated with block rewards from blocks they successfully mine, plus all the transaction fees in that block. In the current epoch (2020 - 2024) the block reward is 6 1/4 BTC.

Bitcoin transaction fees per block

ASSUMPTION: the average transaction fees paid to miners, per block, is 0.125 BTC, which is about 2% of the total mining reward for each block.

Therefore, the total bitcoin paid to miners for an average block, denominated in bitcoin.

The actual block rate

Historically the bitcoin block production rate is faster then the block time target (6 per hour, or 144 blocks per day). Let's reckon an average block rate over a sample interval of blocks in the immediate past.

Let's look at the past 100,000 blocks. How many days did it take to produce the last 100,000 blocks?

Let's calculate the average block time for those 100,000 blocks.

We can now calculate the actual block rate per hour, and per day

Total miner compensation, per hour

Bitcoin price in Canadian dollars as a time series

Let's gather data on bitcoin price over the past sampleIntervalTime.

Let's graph that bitcoin price over time.

Average bitcoin price over our sample time

1. Assuming mining is ecomomically marginal, how much electricity could be funded by mining rewards?

Global revenue per hour

The value, in Canadian Dollars, of all bitcoin mined globally, per hour.

Electricity cost, per kWh

See: https://www.hydroquebec.com/business/customer-space/rates/comparison-electricity-prices.html

Let’s presume that nobody in their right mind would want to mine bitcoin in New York or Boston. Here's the distribution of electricity input costs from the other 5 locations.

Business cost assumption

Let’s presume 85% of mining revenue is available to pay electricity cost. The rest covers wages, maintenance, depreciation, and taxes.

Economically sustainable mining power consumption

Cognitively we can say, bitcoin's power consumption is in the order of 10 GWH.

Economically sustainable mining energy consumption

Cognitively we can say, bitcoin's annual energy consumption is between 75 and 105 TWH.

Comparisons with large power generation facilities or regions

Let’s compare the bitcoin network with the power and energy that generated, or used, by various things.

Here's the raw data for various generation facilities and regions.

Facility or region	BTC relative consumption

Grand Coolee dam (USA)
Chile (2021)
Belgium (2021)
Three Gorges dam (China)
Province of Québec (2019)
Canada (2021)
USA (2021)
China (2021)
World (2021)

2. Given the reported hashrate, how much energy would be required to achieve that?

Coming soon.

Conclusion

The claims that the bitcoin network “uses as much electricity as a small country”, or “requires as much electricity as Belgium, or Chile” seem reasonable from the perspectibe of bitcoin mining economics.

Appendix

Robert-Bourassa generating station — a.k.a. “LG-2”

Here we compare the power consumption of the bitcoin network with the power generation capacity of the Robert Bourassa generating station in the James Bay region of northern Québec.
See https://en.wikipedia.org/wiki/Robert-Bourassa_generating_station

What is bitcoin’s global energy use in terms of LG-2?

Province of Québec

In 2019 the Province of Québec produced 212.9 TWh of electricity.

What is bitcoin’s global energy use as a proportion of Québec’s electricity production in 2019?