by Joseph Young
Over the past 12 months, the rate of solar energy conversion has grown at such a rapid rate that some countries like Chile have begun to distribute it for free. An increasing number of miners and bitcoin enthusiasts have expressed their concerns with regard to the potential drop in marginal costs of bitcoin mining due to the increasing abundance of renewable energy.
Security expert and author of Mastering Bitcoin, Andreas Antonopoulos, recently released a Q&A section from his Silicon Valley Bitcoin Meetup at the Plug and Play Tech Center, held on September 13. The talk entailed his response to a marginal cost decline with respect to mining bitcoin, originating from solar energy-based mining.
The theory on non-electricity bitcoin mining presented at the event described a situation in which solar energy literally becomes costless and eliminates various electricity fees miners have to cover in order to sustain their operations.
For instance, the solar capacity of Chile’s central power grid (SIC) has expanded to 770 megawatts in just over three years, producing an excess amount of solar energy-based electricity. According to the SIC, solar energy has been distributed around some parts of the country for free since early 2016, where spot prices were zero for 192 days in 2015.
Despite the rising trend surrounding solar energy and other forms of renewable sources, Antonopoulos states that the marginal costs of bitcoin mining will not be significantly affected primarily due to other major costs involved in the mining process and other opportunity costs that arise.
Antonopoulos states that there are essentially three major factors that must be considered in pursuing the argument:
- Costs of solar panels
- Costs of mining equipment
- Opportunity cost
The first two factors are straightforward in the sense that electricity is only one out of several capital costs miners have to face. New mining equipment is being introduced in almost a quarterly basis due to miners’ demand for more formidable and power-efficient ASIC miners.
As a case in point, THMiners recently released a 60 TeraHash per second bitcoin miner that costs $3,000, which came after Antminer’s launch of its R4 product line in August. The costs for miners and other machines needed to mine bitcoin surpasses electricity fees by a large margin.
However, as Antonopoulos explains, the most important factor to consider is opportunity cost. The assumption that solar energy could reduce marginal costs of bitcoin mining ignores the fundamentals of global electricity consumption.
Before an argument that solar energy could eliminate a substantial portion of bitcoin mining costs basically by reducing electricity fees can be presented, opportunity costs have to be analyzed. That means, is utilizing solar energy for high electricity consuming operation like bitcoin mining the most beneficial to the masses?
Antonopoulos states, “the problem is at that point, we’ve solved the energy problem of the world. And at that point, if proof of work is one thing that doesn’t work, you’ve gone to a star trek universe where money doesn’t exist.”
He further noted,
“if you solve the fundamental issue of energy scarcity in this planet, as in completely solve it for marginal costs to go down to zero, you’ve solved much bigger problems. Then, we need someone as brilliant as Satoshi Nakamoto to come up with a new proof of work algorithm.”