Bitcoin Prices Are Affected by Several Factors Besides High Costs of Mining

As reported by CryptoNewsZ, “Bitcoin, one of the most popular cryptocurrencies, has always been in the news whether for the right reasons or the wrong ones. This is because Bitcoin has experienced unprecedented growth over the last decade and has drawn attention over various issues like security, anonymity, stability, and volatility of the price. One of the major issues related to Bitcoin’s price has been the cost of energy required in its mining, which is required in a very high amount.

“If one looks at the statistics provided by the Digiconomist, a country that uses Bitcoin would have an average global rank of 64 in overall energy consumption. The relation between energy costs of mining and Bitcoin price has always been talked about as miners have been trying to reduce energy costs for quite some time now. The consumption of energy depends on various factors like availability of economic and sufficient power, to energy-efficient hardware to the complexity of problems being solved by machines to earn Bitcoin rewards. For instance, computation-intensive is a relatively complicated problem and energy usage for its resolution will be higher than an easier one. The difference in the value and cost of production of Bitcoin i.e., seigniorage, has to be made viable; the cost of mining has to be reduced.

“In order to keep track of the energy consumption of Bitcoin, the Bitcoin Energy Consumption Index was created, which has also raised concerns about the proof-of-work algorithm. According to digiconomist.net, ‘Ever since its inception, Bitcoin’s trust-minimizing consensus has been enabled by its proof-of-work algorithm, the machines performing the work are consuming huge amounts of energy while doing so.’ The energy consumed by Bitcoin annually is estimated at around 30 TWh or terawatt hour which is equivalent to a sustained power of 114 megawatts for a one year period. In other words, almost 10 U.S. households can be run for one day, on the energy required for one Bitcoin transaction…”