Elon Musk, one of the world’s most renowned and respected tech entrepreneurs, who is, literally sending space rockets to Mars, recently pointed out in a podcast how the cost & energy consumption associated with maintaining the bitcoin network through mining is too high at the moment. He said;
I think actually one of the downsides of crypto is that computationally, it’s quite energy intensive.
Complex computational puzzle is required to be solved to mine bitcoins that costs intensive energy. Mining is a process through which new bitcoins come into circulation in the global bitcoin blockchain. Specialized hardware is needed in order to perform this mining operation and solve the puzzle. Anyone can solve this puzzle by becoming a miner to participate in the network but there is a cost associated with becoming a miner and generating new bitcoins; a lot of computational power!
The latest record of transactions taking place on a blockchain network is called a block. After an average of 10 minutes, a new block is added to the existing blockchain with the complete record of previous transactions. This block addition is done by a miner after solving that complex puzzle and a reward of newly minted bitcoin is given to that miner. These miners are the nodes which help maintain the bitcoin network. In order to run the nodes with specialized hardware, a large amount of energy is required.
This energy consumption has a huge cost associated with it. If bitcoin’s price drops below the cost associated with mining one bitcoin, the entire workflow becomes unprofitable for the miners. Back in December, Sam Doctor, the head of data science at Fundstrat Global Advisors, said;
Our model suggests the cash cost of mining each BTC on the Antminer S9 is now $4,500, down from $5,300 in September.
This price was even more than a bitcoin’s price itself back then. As a result of such a scenario, miners start to leave the network and hence maintaining the bitcoin blockchain becomes an issue as miners are the ones running it.
So can Elon Musk do anything to reduce this energy consumption?
Looking at Elon Reeve Musk’s career, one can totally infer that he has been involved in large-scale over-the-top projects that aim at helping humanity overall, well…for the most part. Elon has some pretty hard hitting company names like PayPal, SpaceX, Tesla, Neuralink and The Boring Company under his belt, although most of his time is taken up by Tesla & SpaceX through which he is planning to give the world electric vehicles for saving fuel burning and rockets to reach planets like Mars.
The issue of energy consumption associated with bitcoin mining can be solved by Tesla’s subsidiary, Solar City. Solar City specializes in green energy production and it can look into the possibilities of providing renewable energy solutions to the bitcoin miners at a lower cost.
Here are some of the figures that provide a hunch regarding how much savings solar energy might provide for bitcoin miners. Approximately 35,518 kWh of energy is utilized for mining per bitcoin. In the U.S., the average price that one pays for 1 kWh of energy usage is 12 cents. So the total costs amount to around $426.216.
Now for residential solar installations, the average price per kWh is 7 cents. Using this source of energy the costs amount to around $248.626, a figure much less than $426. For utility-scale installations, price per kWh is even low for solar installations. This just gives one an idea how much profitable mining through solar energy can be for the miners. And if Solar City decides to step in, huge benefits can be gained by the company as well.
Although Solar City can help the miners get more profits through the usage of solar energy but sadly as of now, Elon is not focusing on cryptos.
I mean I think the bitcoin structure was quite brilliant. It seems like there’s some merit to Ethereum as well, and maybe some of the others. But, you know, I’m not sure if it would be a good use of Tesla resources to get into crypto,
said Elon during the podcast.
Elon Musk’s Solar City can totally revamp the cost associated with bitcoin mining. The big question is, will Elon Musk ever do this? With the eccentricities he has shown in the past with his ideas like creating flamethrowers and underground tunnels, this idea surely does not seem very far-fetched.