How much energy is needed to mine bitcoins?
This question often makes environmentalists who have always opposed cryptocurrency mining cringe. Regulators are already opposing the existence of cryptocurrencies, and leading US thinkers are considering a strict ban on cryptocurrencies.
It may seem unfair, but these exaggerated sentiments seem justified when you look at the statistics: CoinGecko reports that it would take a single miner 266,000 kilowatt-hours to mine one bitcoin. Now that doubling has happened, that number will increase.
Amid environmental concerns, skeptics often overlook the fact that, according to CryptoSlate, more than 50% of Bitcoin mining operations rely on renewable energy. Moreover, according to the same source, more than 23% of these are powered by hydroelectricity, and more than 7% of these renewable minerals rely on solar energy.
This percentage cannot be low for a long time. A concerted effort has been made to make solar energy more sustainable, and several conglomerates are already setting up solar mines.
What is the impact of solar energy on the cryptocurrency market? Let's take a look at the ins and outs of solar cryptocurrency mining and see how this energy future can increase the rate of cryptocurrency adoption.
Advantages of using solar energy
Solar cryptocurrency mining is now more viable than ever, and there are many reasons why.
First of all, solar energy is clean and abundant. If used correctly, it can provide energy for all mining operations without causing greenhouse gas emissions.
However, using this energy is expensive. According to Feinbold, assuming standard 400-watt solar panels, 35 solar panels would be needed to power the mining rig. But that's easy to limit as solar panels have become more affordable thanks to the Clean Energy Incentives Act.
In fact, the cost of using solar power has been going down for a long time.
"Home prices have fallen by more than 50% in the last decade," said Sean Rammery, senior director of research at the Solar Energy Association.
Another big advantage of using solar power for mining is the independence from the power grid. This reduces the risk of power outages, causing less mining disruption.
This has led to Bitcoin mining becoming a new field in the solar industry. New players who want to properly interact with the cryptocurrency market find that investing in solar panels is a good way to do so.
For example, in late 2022, Meco announced the launch of the world's first solar-electric cryptocurrency mining equipment. Other companies such as TeraWulf, Argo Blockchain, Gridless and others are also looking to provide sustainable cryptocurrency mining solutions, many of which use solar energy.
Major investment firms are also backing solar bitcoin mining companies. For example, Aspen Creek, a bitcoin mining company that uses solar energy in its mining operations, raised $8 million in 2022.
Now, the benefits of solar mining will not be limited to creating a clean mining ecosystem; It could also encourage more investment in solar energy systems. In a Bitcoin Clean Energy Initiative note, Arc Invest writes: "Bitcoin mining can drive investment in solar energy systems, allowing renewables to generate a greater share of electricity on the grid without changing the cost of electricity."
They also noted that it could allow energy providers to "practice arbitrage between electricity prices and bitcoin prices."
This announcement demonstrates the coexistence of two concepts - Bitcoin mining and solar energy - paving the way for both sectors to flourish. These points are just the tip of the iceberg of reasons to be optimistic about solar bitcoin mining. However, achieving a complete transition to solar energy is not easy.
Problems with using solar energy to mine bitcoins
It's easy to ignore the real disadvantages of using solar energy in mining if we only want to see the benefits. Here we will discuss some of the main challenges that people will face when implementing solar mining.
Initial cost
It all starts with the initial costs of running a mining operation. Although you have already noticed that solar panels are becoming more and more affordable, we have to ask ourselves if they are cheap enough.
The reality is that we still have a ways to go when it comes to mass availability.
To highlight the challenges surrounding the cost of solar power, I reached out to Solar Exclusive CEO Rich Viola.
"Completely switching to solar power for bitcoin mining will be difficult," he said. "Currently, people have to install multiple solar panels to run a single mining operation. As mining becomes more energy efficient, we may see growth, but it would be foolish to think that a full transition to solar-powered Bitcoin mining will happen anytime soon."
According to Architectural Digest, the national average cost of solar panels is $20,650. Considering the huge number of solar panels that power the mining rig, a person would have lost over $700,000 long before mining started.
The eternal nature of the sun
Solar energy is abundant, but also intermittent. For a solar cell to produce enough electricity, the sun must be bright and high. This means the panels won't generate as much energy on cloudy days.
Although you can install a high-voltage battery with a solar panel to store energy, don't expect that power to last long during the rainy season; The solar panels may not have enough power to continuously power the mining equipment.
Lack of space to install solar panels
Another big challenge is having space to install the panels. According to Freedom Solar Power, Bitcoin miners will need 6 to 12 square meters of solar panels to power a huge mining rig. If the draft is calculated correctly, more space will be needed.
If someone purchases a site to install solar panels, there will be additional upfront costs. If this space is rented, the mining companies will have to pay huge expenses every month.
The latter choice can seriously affect the profits earned from Bitcoin mining, which is very important given its volatility.
Bitcoin Volatility: Is It Worth It?
Considering the initial costs and space requirements for solar mining, we need to consider another important factor: is bitcoin mining worth it. Bitcoin is an inherently volatile asset. While doubling is approaching and more market leaders like Cathy Wood are inclined to believe it could reach $1.5 million, the likelihood is far from certain.
Moreover, there are doubts about the profitability of Bitcoin mining after the halving. According to the US financial services company Cantor Fitzgerald, 11 publicly traded mining companies may be unprofitable after the next halving.
In addition to the halving, there are other factors to consider that determine the price of Bitcoin. Many countries still do not have any regulations that properly regulate cryptocurrencies, and those that do do not want the uncertainty that this asset carries.
In addition, the sense of community that changes at will must be considered. For example, the adoption of a spot bitcoin ETF was seen as a golden event that would attract institutional investors and boost the price of BTC. Instead, as soon as the approval happened, the value of the world's leading cryptocurrency rose from $46,000 to $42,000.
While these issues make people think twice about the prospect of solar-powered Bitcoin mining, there's no denying its environmental appeal. Additionally, there are cryptocurrencies other than Bitcoin that aim to make solar energy more affordable.
Cryptocurrencies that aim to democratize solar energy
As it became clear that investors were turning to solar and other renewable energy for their mining needs, several cryptocurrency projects emerged to make renewable energy more profitable.
SolarCoin is an innovative project that rewards users for generating solar energy. For every megawatt of energy generated, this project rewards miners with SolarCoin. This incentive-based model acts as an incentive to increase solar deployment.
On the other hand, larger projects like Powerledger aim to democratize renewable energy by allowing households, organizations, and even grids to trade energy.
Such initiatives could create a symbiotic relationship between cryptocurrency and renewable energy. An increase in one may mean an increase in the other.
There is cautious optimism about solar energy production.
As cryptocurrency miners switch to renewable energy sources, solar power is gradually gaining their interest. Abundant and clean solar energy can make cryptocurrency mining more independent and affordable.
However, it is equally important not to ignore the challenges associated with solar energy production. Startup costs are still high, the cryptocurrency market is still volatile, and there are only a few places where the sun shines bright enough to adequately power solar panels.
Fortunately, several cryptocurrency projects have entered the arena to democratize renewable energy. They are working together to create a cryptocurrency boom in the market. But how powerful was this explosion? Time will tell.
