In the past month, the value of one bitcoin has risen to be the equivalent of over $9,000, and bitcoin mining has been an essential part of this rise. Shale Mag covers a wide range of energy sector news, from how an energy company could be affected by a lack of cyber security, to the best steakhouse in Texas to relax at after work. However, yet to be covered is bitcoin mining. Despite taking place across the world, from China to Washington state, it’s not really clear to energy professionals whether it’s actually going to have any impact the traditional mining sector or the energy sector more generally. Here’s a quick overview of what you need to know.
It has nothing to do with actual mining
Bitcoin is a cryptocurrency: a type of currency which uses complex computations to create a tradeable currency. Unlike paper currency, bitcoin is only available digitally, so you can’t actually have a physical bitcoin, but rather all transactions are recorded in a sort of digital ledger. Bitcoin mining is how bitcoin is created. The process of bitcoin mining works by new transactions being written down in a kind of digital ledger when they are created. Because of this, it’s a bit misleading to actually call it mining, as it doesn’t actually involve excavating natural resources from the earth.
A shocking increase in demand for electricity worldwide
What’s interesting about bitcoin to the energy industry is the impact it might have on electricity demand. To mine bitcoin, you need a great deal of computer processing power. On top of this, the amount of power required to create a bitcoin is going up to combat the fast rising cost of mining bitcoin, increasing roughly twelve-fold since the start of last year. This has led to large ‘bitcoin farms’, full of high-powered computers popping up wherever electricity is cheapest. Strong competition has emerged between companies to gain the best and biggest sites to take advantage of the cheapest electricity. Previously, this was in China, where environmental regulations were lax and coal was plentiful. Then, it was Venezuela, where electricity became much cheaper than fuel due to an economy in crisis. Most recently, it doubled energy consumption in Iceland.
Should I be getting ex-static?
Although bitcoin mining has nothing to do with actual mining, we’ve found that it could actually have a big impact on the demand for electricity. Bitcoin drives up energy demands and therefore prices of electricity where electricity is cheap. This could provide great opportunities for a smart energy firm to take advantage of this. A word of caution though: it might be useful to balance thinking about the impact of bitcoin coin with other key technology trends. This includes the Internet of Things, which can also increase profits for an astute energy industry professionals. This is because bitcoin is risky, and bitcoin farms can leave when energy prices rise just as quickly as they enter it.