Is Bitcoin Really More Expensive to Maintain than US Dollar?
The Answer will Surprise You
If you had one overvalued dollar, then it would be worth half a Bitcoin.
Hello Savvies, welcome to the friday edition of the HardwareSavvy newsletter. Here, I will be covering deeper topics related to tech, crypto and tech economics.
HardwareSavvy is a reader-supported publication. To receive new posts and support my work, consider becoming a paid subscriber.
Before you begin
HardwareSavvy Portal is an independent, ad-free portal supported by the monthly contribution of our readers.
First time reading? Sign up here. Get access to the entire archive of 50 others.
🙏 Not subscribed? Take the next step and become a subscriber here.
📣 Share the HardwareSavvy Portal on Twitter here, Facebook here, or LinkedIn here 👇
Instead of reinventing the wheel, I decided to check how much energy Bitcoin uses compared to another good we use everyday, the dollar.
I have done an incredibly crude calculua question that I hear a lot from people new to Bitcoin is “How much electricity does it cost?”
An average bitcoin transaction would cost about $33 in electricity. To put it in perspective, the production of a US dollar costs only 2 cents. In contrast, the production of a bitcoin costs up to 33 times more than producing the money we generally use. But that amount of energy does not go into producing anything physical; it only pays for computer time according to Bitcoin’s protocol. Ttion which will be reviewed later by someone who has better knowledge (the average response is that Bitcoin costs a lower percentage of electricity than the dollar), but it can serve as a first rough estimate.
The US dollar is used all over the world because of the stability it has maintained for hundreds of years and its adoption as reserve currency by central banks. The US dollar can be considered as a kind of “gold-like” good: both store value and transfer it between parties at costless .
Now that we have an idea of how much the dollar costs to maintain per year, where does the bitcoin come in?
The Bitcoin network is a series of nodes (computers) performing calculations and checking for inconsistencies. They do this by downloading the entire global transaction history (approximately doubling every year), and then doing heavy-duty number crunching known as “mining”. The mining process is also hard to eliminate because it serves an important function: preventing people from creating extra bitcoins out of thin air. The total amount of information contained in that database adds up to approximately 150GB, meaning it would take a sizable investment in hardware and several months to create a fraudulent database.
Here is a rough estimate of what that number might be:
The Bitcoin blockchain has about 180GB of information at the moment, meaning it would take 150GB to duplicate it. This also means that you will need 6 months to download the blockchain and do any number crunching yourself, otherwise it will be done for you. This is assuming you have a 100Mbps connection and need only 15 high-end computer chips. If you assume slightly slower speeds, then miners would only have 30 days max to download the bitcoin blockchain from its current position (180GB). This is an incredibly crude calculation; I hope someone more knowledgeable can correct me in details.
To calculate the energy use, we need to multiply the amount of money entering the system by the number of years it stays in the system. Now that we have this number, let’s take a look at how much energy goes into keeping a dollar:
There are 2 different ways to keep track of money in our system: placing it on deposit at a bank or lending it out. The first option is
Keep reading with a 7-day free trial
Subscribe to HardwareSavvy to keep reading this post and get 7 days of free access to the full post archives.