Bitcoin Mining is 20x Less Energy Intensive Compared To Mining Gold

According to LongHash.com, this means that combined energy consumption and other costs related to mining gold amount to 20 times more than what Bitcoin mining requires.

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Gold mining costs over $87.3 billion every year compared to about $4.3 billion spent on mining Bitcoin.

According to LongHash.com, this means that combined energy consumption and other costs related to mining gold amount to 20 times more than what Bitcoin mining requires.

The assertion deviates from the longstanding narrative that Bitcoin mining consumes huge amounts of energy and its massive electricity needs pose risks to the environment.

It is true that the energy consumed by bitcoin is colossal by all standards, and is rightly causing concern among many. However, do the same concerns arise with regard to gold?

Both these of these assets are stores of value, so why not compare the costs involved in mining physical gold and bitcoin, digital gold?

The $7 trillion vs. $200 billion market valuation argument

The total cryptocurrency market capitalization is about $200 billion at the moment, with bitcoin accounting for about 55 percent of that market.

In contrast, that of gold is about $7.8 trillion. Understandably, therefore, the clear discrepancy between these markets valuations may be seen to be justifying the latter’s energy needs.

However, that would assume BTC mining has the sole purpose of increasing the circulating supply of the coins. It basically is a disregard of a few other facts about what constitutes bitcoin mining.

As with every other cryptocurrency that uses proof-of-work, Bitcoin mining is an integral part of its network. It is a method through which the network verifies and confirms transactions and helps secure it.

This means that mining cryptocurrencies should not be seen to be costly when compared to gold mining. If so, the best thing to do may be to compare average costs involved in mining the leading crypto to that of mining and transferring the precious metal.

The argument that a $7 trillion market cap justifies any huge costs in mining gold should not, therefore, stand.

Annual cost estimates

The annual estimate of total energy costs used to mine BTC amounts to about 4,344 MWh. Miners pay an average of say, $100 per watt- though electricity costs vary and there is a gradual move towards renewable sources.

In some regions around the world, renewable energy is abundantly available. In such places (a good example would be Chile and Southwest China), households and corporations access energy at the lowest possible costs or sometimes free.

Using the above estimates, it costs about $4.3 billion annually to mine bitcoins. What about gold mining?

Taken as a whole, the entire process of mining and transferring gold becomes far more resource-intensive and costs more than Bitcoin mining.

The gold mining industry primarily utilizes diesel oil for its energy needs, which combines to huge energy needs for the entire industry.

Barrick, the world’s leading gold miner, uses up around $288 million annually in costs towards oil or about $54/oz of gold. In 2017, the corporation used $4.2 billion in producing gold.

There are numerous clearinghouses, brokerages, and platforms that all contribute to the movement of gold around the globe. The London Bullion Market (LBMA) and a host of its partner institutions provide the largest over-the-counter (OTC) market for trading gold.

These markets add to the total costs that should count in the comparison between bitcoin cost of mining and that of world’s leading store of value.

Estimates for the diesel costs used in direct gold mining and the entire gold transfer and storage industry uses about $87.3 billion annually.

It is therefore clear that there is a massive difference between the total costs in energy consumed by bitcoin and that used to mine and move gold around.

It even becomes more of a non-issue to continue saying that bitcoin consumes a lot of energy when the same can be said of any other currency or form of money, including fiat.

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