More often than none, Cryptocurrency mining has been frowned upon for the sheer amount of energy it employs. Though according to the data by Long Hash, every year, around $87.3 billion is spent on mining gold and contrastingly less, around $4.3 billion is used to mine Bitcoin.
Gold mining requires 20 times more energy and cost in comparison to Bitcoin mining. So all the narratives about Bitcoin’s huge negative impact on the environment that surfaced after the tokens price surge in early 2017, should be equally if not more applied to Gold as well.
A bigger discrepancy than the electric consumption lies in the market cap of the two commodities. Where gold is estimated to be around $8 trillion, the cryptocurrency market stands at around $200 billion. The analyst can argue that gold justifies its mining cost, with its price point and market cap.
Cost of Gold mining
However, to meet growing demand for the bitcoin and keep enough tokens in circulation, mining is no less than a necessity. Notably, bitcoin and every other proof-of-work cryptocurrency in the market, mining is involved in the settlement of transactions. Implying that the cost of mining of Bitcoin should be compared to the combined cost required to mine gold and the transfer of gold.
The transfer of the traditional store of value is overseen by London bullion market (LBMA), the largest wholesale over-the-counter market for the trading of gold and silver, and its clearing partners ICBC Standard Bank, HSBC, Scotiabank, JPMorgan, and UBS; along with many other clearing houses and gold brokerages. So, if the cost incurred by clearing houses and agencies to transfer gold physically to overseas markets and the cost of energy are combined, the huge discrepancy would sort of reverse itself.
Another argument in support of the digital coins is the rapid adoption rate of renewable energy sources. Notably, Australia will soon host the First Solar Powered Bitcoin Mining Farm. Additionally, in some regions like Chile and Southwest China, the supply of clean or renewable energy is so abundant that it is offered freely to households and corporations.
Agreed, that non-renewable sources of energy are cheaper and thus most mining centers currently rely on it mine crypto. But, bitcoin is not one-of-a-kind high energy consumer, gold, silver, fiat, and any other form of money that is currently available sails in the same ship.
A member at Ethereum blockchain development studio ConsenSys, John Lilic, states that currently, the unit cost of each transaction in crypto is higher than banks and legacy systems. Though as the industry is looking forward to energy optimization systems, the energy consumption should soon become a non-issue. Lilic elaborates:
“The real question is whether the gross energy inefficiency costs in crypto is worth the benefits like custody over assets. My contention is Yes! It is worth it but only if our industry prioritizes & continues to work towards energy efficiency gains like Proof of Stake.”