Mining Bitcoins: Weighing Electricity Costs Vs. The Reward

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Mining Bitcoins: Weighing Electricity Costs Vs. The Reward
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Bitcoins are certainly a spectacle within the financial community. As a virtual currency, they’re little more than a string of code stored on a computer or flash drive. But there is a limit to how many bitcoins can exist because it takes a certain pattern combined with a hash algorithm in order to form a bitcoin.

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Mining Bitcoins: Weighing Electricity Costs Vs. The Reward

It requires some major computing power to mine the virtual world and uncover these bitcoins, and where there’s computing power, there are electricity costs to consider. According to Blockchain.info, which tracks data about bitcoin mining, miners use up almost $150,000 worth of electricity per day to operate their hardware, assuming the average price per kilowatt hour as about 15 cents. Bloomberg was the first to report that amount.

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Of course that daily amount is in addition to how much bitcoin miners pay to purchase and build their mining computers. Blockchain.info estimates that daily profits from bitcoin mining are just under $700,000 because of the high value of bitcoins. But bitcoins may not always be trading at such a high value.

Bloomberg questions whether bitcoins are a “real-world environmental disaster” because of how much electricity is used to mine them. However, Forbes points out that what we don’t have here is a valuation of how much electricity is used to run equipment in industrial settings. After all, bitcoin mining is an industry, and its numbers are worth comparing those of other industries which require the use of equipment that is expensive to operate.

The price of bitcoins seems to have stabilized, at least for the time being. As of the moment of this writing, Mt. Gox, the top bitcoin exchange, reported that bitcoins are being traded at a little over $95 each. Just six days ago—before Mt. Gox’s system started to lag and cause panic sales and before a massive cyber-attack on the exchange—bitcoins were worth $225 each.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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