In the United States alone, there is a total of 206 TWh of electricity lost per year due to inefficiencies in the distribution and transmission of electricity. With that amount, we could power the Bitcoin network 1.4 times, every year.
But that's not all. Worldwide, there are 688 TWh of energy in the form of natural gas that is burned and disposed of in refineries, again, every single year.
With that amount of energy, the Bitcoin network, which is the largest and most secure computer network on the planet, could be powered 4.5 times.
The point that I'm trying to make here is that there is an awful lot of energy that is simply being wasted, and energy is the most fundamental form of functioning that humans and the planet have. Even money is, at its core, a way of exchanging and storing energy.
What if I told you that that energy that is being lost can be used to fund the needs of entire countries?
Understanding Bitcoin Mining basics
Bitcoin mining is the process by which this network manages to create new bitcoins, process transactions and increase its security every day. This task is performed by thousands of people around the world, who use machines specially designed for this purpose.
As a reward for their work, miners receive bitcoins (this is an oversimplified explanation for the sake of this article).
As you can imagine, this task requires an intensive use of electricity, which has a variable cost for the miners, depending on their location. The general rule is that miners look for places where the energy is cheaper, so their profits are higher.
Today, Bitcoin mining is practiced by independent individuals, who profit from this economic activity, but also companies.
How can countries take advantage of their lost energy
Digital mining, in this case Bitcoin, could help raise funds for various country requirements. Social plans, building schools, hospitals, and virtually any need.
Here's how:
In renewable energy production plants there is something called “curtailment” or deliberate losses of energy, mainly due to lack of demand for it.
As an example, we will use solar panels. These produce electricity during the day, which generally results in a surplus, since most of the electricity is needed at night.
Only a certain amount of this excess energy can be stored, and the rest that has no use (due to a lack of demand) ends up not being produced, although it does not entail any extra cost for the production plant to do so. This is how, in this case, the energy ends up being lost.
Now let's look at mining:
For this example, we will use one of the most popular Bitcoin mining machines: Antminer S19.
The yearly energy required to keep this machine running is 28.47 MWh (considering 24/7 operation), which implies that with the energy lost due to transmission system inefficiencies in the US, 7,236 Antminers S19 could be put into operation.
Bringing the numbers down to earth
One Antminer S19 produces 95 TH/s, with zero electricity cost, as is this case. This translates to a daily profit of US$ 13.77 per machine with a Bitcoin price of US$ 40,000 and also considering the increase of the Bitcoin network hashrate over time.
If a country decided to buy 7,236 Antminers S19, it would cost around US$ 58 million (US$ 8,000 each). This investment would be recovered in approximately 1.6 years, supposing a US$ 40,000 stable price throughout the period.
These machines, having paid for themselves, would generate for the country an annual passive return of US$ 36.4 million, and this is scalable with the purchase of more Bitcoin miners.
In the next few years, Bitcoin will most likely become the new global monetary standard, or a very relevant player in the economic game. Perhaps governments around the world are not very convinced that this will happen, but what if they are wrong, and why not allocate a small percentage of the money to that “small” chance that they are wrong, and Bitcoin ends up succeeding?
It's a very low risk bet for the level of return that being one of the first countries to start mining Bitcoin could mean.
October 2024 update and considerations
Although the Antminer S19's price has dropped significantly (US$ 600 each by the time of writing this update), it is now considered an inefficient miner.
Market value fluctuations for all mining equipment is not taken into consideration for this article.
Today, mining operations with the S19 are as goes:
Energy Consumption: With 206 TWh, you can still power 7,236 Antminer S19.
Revenue per Machine: Each Antminer S19 generates US $4.4 per day (after halving and network difficulty adjustments).
Daily Revenue: US $4.4 /day × 7,236 machines = US $31,838.4
Yearly Revenue: US $31,838.4 /day × 365 days = US $11,621,016
Bitcoin Network Status
Energy Consumption: According to the Cambridge Bitcoin Electricity Consumption Index (CBECI), the Bitcoin network consumes approximately 156.35 TWh of electricity per year
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Network Revenue: The total revenue of the Bitcoin network is estimated to be around $13.9 billion per year.
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Key Considerations
Similar Energy Usage: The operation seen in this article consumes 206 TWh, which is slightly more than the total network consumption of 156.35 TWh. Yet, the network generates significantly more revenue because:
The Bitcoin network as a whole consists of many different machines, many of which are more efficient than the Antminer S19, meaning they produce more Bitcoin per watt of electricity consumed.
Hashrate Distribution: Machines in this example contribute a very small fraction of the global hashrate. Larger operations with more powerful machines capture a bigger portion of the block rewards.
Final Thoughts
The calculations highlight the disparity in revenue due to network efficiency, scale, and the portion of the hashrate the machines represent. Antminers S19 in this example are producing millions, but the overall network, with greater efficiency and scale, produces billions.