Bitcoin’s Energy Dilemma: Booming Hash Rates Amid Looming Energy Crises
The Bitcoin network achieves a hash rate high of 400 th/s, even as global energy challenges loom large
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The Bitcoin network, in a landmark development, has reported a hash rate of 400 terahashes per second — a figure never before seen in its history — according to Glassnode analyst James Straten.
The #Bitcoin hash rate just hit 400 th/s for the first time ever. It is mind-blowing, considering the energy issues in Texas and the cost of electricity surging worldwide.
This is the miner bull run leading up to the halving next year. Similar explosive hash rate growth that… pic.twitter.com/pRI2w7GHKP
— James V. Straten (@jimmyvs24) August 27, 2023
Historically, Bitcoin’s growth pattern reveals intriguing parallels. A similar upswing in the hash rate was evident in the run-up to the 2020 halving event, but such spikes often hint at what industry insiders term a miner bull run. This means that miners anticipate an impending halving event that typically halves block rewards, ratchet up their computational power to maximize their earnings.
Yet, it’s impossible to talk about this achievement without acknowledging the vast energy consumption that accompanies it. While Bitcoin’s computational resilience is noteworthy, the juxtaposition with the global energy scene is jarring.
For a closer look at the challenge, consider the recent actions in Laos. The country’s state-run electricity entity, Électricité du Laos (EDL), recently announced a suspension of electricity supplies to cryptocurrency mining operations.
This decision was influenced by a combination of factors: an intense drought in the first half of 2023, increased electricity demand due to high temperatures and the limitations faced by its hydropower plants which cater to 95% of the nation’s electricity needs. Moreover, with Laos looking to expand its electricity exports to Thailand by 2024, the balance of resources becomes even more critical.
One thing is clear: The Bitcoin Halving in 2024, predicted for April, could bring more problems to miners because of the hash rate.
Even now, Bitcoin miners are grappling with increased operational challenges due to decreasing rewards. A Bloomberg report cites Jaran Mellerud of Hashrate Index, who anticipates that inefficient mining operations with elevated costs could affect nearly half of all miners.
This could lead to a possible consolidation or even a departure in the mining sector, with many potentially facing an incremental cost of $.08 k/h:
“Nearly half of the miners will suffer given they have less efficient mining operations with higher costs.”
Wolfie Zhao, head of research of Blockbridge, told Bloomberg that public mining companies pay $10,000-$15,000 for every BTC mined. Estimates suggest, however, that after the halving, mining 1 BTC will cost between $20,000-$30,000.