What miners need #2. Electricity:
The mining race in 2024 and beyond continues to be about access to cheap electricity.
Most of the stories covering bitcoin mining in the news focus on total energy consumption. “Bitcoin mining consumes more energy than the Netherlands,” someone might scream at you. In relative terms, the total energy consumption of the Bitcoin network is comparable to (actually, lower than) the energy consumption of domestic tumble driers (see image below).
While it’s true that Bitcoin mining does consume energy and electricity, the economics of Bitcoin mining reveal a more complicated story: that miners are in a race to find the cheapest electricity in order to maximize revenue and remain competitive.
And the cheapest electricity often comes from:
1. Energy sources that might otherwise go to waste
2. Renewables like solar, hydro and wind
3. Highly efficient energy sources like nuclear
Bitcoin miners are also nimble and can go to the energy source, rather than needing the energy to come to them as long as they have stable internet connections. This is why miners set up at remote hydro dams in China, on sites where natural gas is vented or flared in Argentina, or on top of volcanos in El Salvador.
At flaring or venting natural gas sites, energy producers who would otherwise waste this energy have economic incentive to either set up Bitcoin mining rigs or sell the excess energy to outside miners who can likely negotiate favorable contracts.
As Alex Gladstein recently said on Peter McCormack’s podcast, “not bitcoin mining wastes energy.”
So the innovation in the mining space comes from the combination of quality, efficient hardware that requires little maintenance with access to reliable and cheap electricity.
Below image somewhat dated illustrates the race for cheaper electricity between Aug 21 and Aug 22.
