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Analyst Claims 98% of Mining Rigs Fail to Verify Transactions

Alex de Vries, the founder of the Digiconomist, has given a damning assessment of the electricity consumed by Bitcoin (BTC) mining in an interview with British media outlet, The Telegraph.

According to de Vries, a single Bitcoin transaction expends the same quantity of electricity needed to power a British household for 59 days, 780,650 Visa transactions, or 52,043 hours of video streaming on Youtube.

The article asserts that the annual returns generated from Bitcoin mining are nearly $5.9 billion — with approximately 4 billion mining units competing for a share of the bounty worldwide. At the end of August 2019, Bitcoin miners were estimated to have generated $14 billion in profits since the technology’s inception.

De Vries asserts that 98% of mining rigs will never verify a transaction, resulting in an enormous and unproductive electricity expenditure. “They are sort of participating in a massive lottery and every 10 minutes one gets lucky and gets to produce the next block,” he states.

“The shocking thing is the average lifetime of a bitcoin mining machine is one and a half years, because we have a new generation of machines which are better at doing these calculations. That means it’s impossible for 98 percent of the devices during their lifetime to make the calculation that actually results in a reward. So the rest are just running pointlessly for a few years, using up energy, and producing heat, and then they will just get trashed because they can’t be repurposed. It's insane.”

There are a number of factual issues with de Vries’ statements. He fails to substantiate his claim that there are 4 billion active mining rigs on the Bitcoin network. Cointelegraph’s internal calculations indicate this number is closer to 2.5 million. De Vries also asserts that miners who do not succeed in releasing new blocks are pointlessly wasting energy. However, this does not consider the dynamics of mining pools, and ignores the benefits that a large hash power affords to the security of the Bitcoin network.

Criticisms of Digitconomist’s estimated power consumption of mining

De Vries’ calculations are derived from Digiconomist’s Bitcoin Electricity Consumption Index (BECI) — which shows Bitcoin’s power consumption has recently broken into record highs.

According to BECI, Bitcoin mining currently consumes roughly 77.78 terawatt-hours per year — roughly equal to that of the entire country of Chile, and exceeding that of the Czech Republic by 13.9%. However, the index also provides a minimum estimate of roughly 50 terawatt-hours annually — equal to that of Romania. Read More...