Is it worth mining bitcoin in Australia?
The fluctuating market for bitcoin and cost of producing coins mean players in the market need to think about whether mining is worth the cost.
With the price of bitcoin moving through peaks and troughs almost every week and energy costs on the rise, the question of whether it's worth mining bitcoin needs to be addressed. It's possible that trading coins that are already in the market is a better strategy that expending the energy to mine your own coins.
Reporting on data collated by Elite Fixtures that was sourced from Blockchain.info and reported by CNBC, bitcoin mining is most expensive in South Korea with Venezuela being the least expensive country in their survey.
When the Elite Fixtures study was released last month, it cost more money to make a bitcoin in 12 of the 115 countries they surveyed than it did to buy one. Unfortunately, it's not easy to determine what variables they used to calculate the costs as the amount of energy they say is needed to mine one bitcoin is not obvious.
According to the Elite Fixtures report, it costs US$9,913 to produce a single bitcoin in Australia. When bitcoin's price was around the $20,000 mark that was a good earner. But at the more recent mark of under $10,000, it's a much tougher call.
Does the Elite Fixtures data stack up?
Based on data we've been able to gather, it takes between 21,000KWh and 49,000KWh to produce a single bitcoin. There's a wide margin as the efficiency of the computers being used can vary markedly. For example, a server farm in Iceland can pull the computing costs down as the climate means there's no need to pay for air conditioning – you can simply pump cold, external air in to keep servers chilled.
And the computing effort required to produce a single coin is increasing as the calculations required to create a new coin become more complex as more coins are mined.
Power prices in Australia vary from state to state. Based on recent research published at The Conversation, I'm going to use an electricity price of $0.40 per KWh. As the Elite Fixtures report is in US dollars, I'm going to use an exchange rate of $0.79 giving us a local energy price of US$0.32.
At the low end of how much energy it takes to mine a single bitcoin, that means the cost is 21,000KWh at $0.32 per KWh, or US$6,720 to mine one bitcoin.
If we take the higher energy requirement of 49,000KWh, the cost jumps to US$15,680 to mine a single bitcoin.
Is that worth it? You decide.
Of course, if you could mine using renewable energy then those costs could plummet closer to zero. But given the cost of a typical 5KW array with an inverter is around $5,000m you'd need a fairly hefty investment in solar, as well as plenty of space for those panels.
- SEC crackdown on Binance, Kraken – What it means for Aussie investors
- Sam Bankman-Fried found guilty – what it means for Australian FTX victims
- Bitcoin’s price soars over 10% on ETF rumours – here’s why
- New regulations for Aussie crypto exchanges: What it means for investors
- Sam Bankman-Fried’s FTX trial starts tomorrow – what it means for FTX customers