Road to $1m Bitcoin – Ecopocalypse Now? Terawatt in the streets!

Gather together friends and put on your tinfoil hats. Its time to talk about the latest monster to threaten the future of bitcoin.

Thanks to BTC’s enormous electricity requirments, we’re all going to be grunting around campfires amongst the shattered ruins of civilization. Massive data centres like gleaming fortresses will hum along churning out cryptocurrency while we fight over an unopened box of Kraft Dinner. (KRAFT:T)

This latest doom comes courtesy of the echo chamber of the internet. For example in this CNN piece, as they gleefully discuss the latest volatility a mention of the electricity monster is chucked in for extra schadenfreude.,

WHAT THE HELL IS A JIGGAWATT?

So what is everyone talking about? Here it is in a nutshell. Bitcoin currently uses 32 Terawatts of power a year (including mining and transactions. It’s unclear if the number includes trading and discussions etc.).

32 Terawatts (TWh) is a lot of juice. Here’s some comparisons:

The United States used 59 TWh in 2016, (not counting Puerto Rico’s 1.9 Tw (Hey, it’s not me! The official records separate out PR and the rest of the USA. Send your letters to the CIA.)

Canada used 5 TWh.

You could power the Middle East with the amount of electricity used each year for BTC:

Country Name (Source Wikipedia) Annual Power Usage (TWh)
pastedGraphic.png Israel 5.9 2014 EST.
pastedGraphic_1.png Oman 2.5 2014 EST.
pastedGraphic_2.png Bahrain 2.5 2014 EST.
pastedGraphic_3.png Syria 1.7 2014 EST.
pastedGraphic_4.png Jordan 1.6 2014 EST.
pastedGraphic_5.png Lebanon 1.6 2014 EST.
pastedGraphic_6.png Korea, North 1.5 2014 EST.
pastedGraphic_7.png Sudan 0.9 2014 EST.
pastedGraphic_8.png Libya 0.9 2014 EST.
pastedGraphic_9.png West Bank 0.5 2014 EST.
pastedGraphic_10.png Yemen 0.5 2014 EST.
pastedGraphic_11.png Brunei 0.5 2014 EST.
pastedGraphic_12.png Western Sahara 0.8 2014 EST.
pastedGraphic_9.png Gaza Strip 0.2 2009
Total annual Usage: 21.6

Heck, you’d have enough left over to run the Netherlands (10.8 TWh).

Like I said, a lot of Juice.

Who started it?

In the article that kicked off this latest scare, Eric Holthus clutches his pearls and lays out his case around the idea that the electricity needs of an expanding Bitcoin market will force us to reopen our coal plants, drill for more oil and club baby seals.

There are no numbers in his piece. He makes this point, scares us, and moves on. I can’t fault him for that, heck I do it on occasion, especially in tinfoil hat posts like this one.

This premise has some testable ideas in it. Let’s take a look at some numbers, and see if we need to build bunkers or bitcoin.

Cough – Choke Hack!

First off how much does it cost to produce the electricity? A lot of the cost is based on geography. Electricity is a bitch to transport and store, so if you have a lot of power generation near a lot of consumption, your costs go way down. It’s why big northern Hydro projects lose so much power between generation and sale/use.

For our test case – let’s take Switzerland. There are a lot of BTC mining operations there, and it’s easier to find numbers, compared to say, China.

According to Wikipedia (good enough for our needs) the country used 63 TWh in 2013. I am guessing there’s a huge spike in use in the last few years, but for this experiment, not important.

Switzerland generates power from Hydro (59%), Nukes (39%) and Thermal etc. (5%) Don’t see a lot of choking coal and stuff there. Maybe I’m missing it.

Crunch Crunch Crunch (numbers)

I know, let’s be generous, We’ll say to meet the new BTC market, Switzerland will need to cover 50 %  of BTC market. How much will an additional 16 TWh cost? To the markets!

Swissgrid says 6 per cent of the cost is the grid – or 52 CHF ($71.26 CAD). Great, they also say 34% is the cost of imports. That means Switzerland pays 292 CHF for 4500 KWh or 15.41 per KWh ($19.44 CAD)

At $15.41 per KWh, that’s $15,410,000,000 to import enough power to cover the estimated needs if we give ‘em 50 % of the pie.

Mean and Green.

Guess what’s cheaper then $15.41KWh?  Renewables. They are cheaper, faster and easier to build than traditional plants, especially in economic areas where legacy systems don’t have to be coddled (Cough China, Cough).

Switzerland has already committed to expanding on it’s renewables, so has China. In fact, Solar, wind and Hydro all beat every other power generation in terms of new capacity and falling costs.

As I told a co-worker recently who made a case for coal, “Hey man, I can buy Kerosene at Canadian Tire, but we don’t light our houses with it anymore.” Coal and fossil fuels aren’t going anywhere, but they are on the way out.

This is why I reject the premise BTC is going to eat the planet. In fact I think the demand for BTC and other Blockchains will push two things, massive grid and renewable energy products, and a quantum jump in computing processing power around the world.

It will be like the Internet. We had no idea what it could do until we had it. This next generation of computing and power generation will be transformational. The only thing holding us back is energy storage.

Which brings me to tomorrow.

Part II – It’s All About the Juice

Tomorrow I want to pick up where we left off and talk about how energy metals and battery tech aren’t going to suddenly solve anything. We’re looking at a long hard incremental slog, and the demand for the raw materials to fuel the revolution will be mind-blowing.

See you then.

FULL DISCLOSURE: I don’t own any stock in anything above, and I still think BTC will be intrinsically valuable on its own and that we’re missing the forest for the trees.

[I don’t think that’s how disclosures are supposed to work -Editor]

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

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