Recently, there has been some recurring fear, uncertainty, and doubt (FUD) about whether transaction fees on the Bitcoin network will be sufficient to sustain miners and thus maintain security once the block subsidy diminishes or disappears. This concern has prompted a deeper reflection on how incentives might evolve in the future.
In this context, two primary assumptions need reevaluation:
1. Mining hardware will continue to exist as standalone, single-use devices.
2. Mining companies will continue to operate as large, independent entities that must remain profitable to survive.
Rethinking Mining Hardware: One Man’s Trash is Another Man’s Treasure
The central issue with current heating systems is their inefficiency. Traditional electric heating elements generate heat through resistors, which dissipate electrical energy as heat—a notably wasteful process.
In contrast, Bitcoin miners primarily produce heat as a byproduct. Envision a future where Bitcoin-specific ASIC chips replace traditional electrical resistors in furnaces and water heaters. These chips could serve dual purposes, generating necessary heat while mining Bitcoin. MintGreen in Canada has already implemented this concept on a large scale, using waste heat from miners to warm local businesses such as breweries, sea salt distilleries, and greenhouses.
This shift could significantly alter the home mining-profitability equation. When mining applications are integrated into everyday heating systems, the need for standalone profitability diminishes. The newest generation of ASIC chips isn't required for these heating applications; they just need to use electricity as efficiently as or more efficiently than their non-mining counterparts. Any Bitcoin mined is simply a bonus, an incentive for upgrading systems or incorporating them into new homes.
Why continue to waste electricity just to heat a home? A Bitcoin smart home would not only provide warmth but also generate income. This dual-purpose approach makes heating systems more efficient and adds a financial benefit.
Understanding the Electric System
To grasp the second assumption, it's essential to understand how electricity is generated. Electricity generation capacity consists of three main types: base load, peak load, and intermediate load. Base load power meets the minimum level of demand consistently. Peak load generation caters to demand spikes and is less efficient and more expensive due to its variability. Intermediate load generation adjusts to changes in demand, bridging the gap between base and peak loads.
This variable capacity means that electricity producers often have unused capacity, representing valuable capital that isn't always utilized. Consequently, electricity costs must cover not only production costs but also the costs of maintaining this necessary, yet unused, capacity.
Demand for electricity is highly volatile, varying by region and season. Overproduction can damage the grid, leading to blackouts. Techniques like pumped storage hydropower exist to store excess energy, but they have limitations related to water access, space, and battery technology. Once storage is full, excess energy can lead to power curtailment, which is why intermittent sources like wind and solar can't be sole power sources for the grid.
Bitcoin as a Solution
Bitcoin miners don't need to be profitable in the traditional sense. Currently, miners operate as standalone companies, buying electricity from power companies. When Bitcoin prices drop or costs rise, miners face financial pressure. However, what if mining became a service rather than a standalone business?
A sustainable energy system based on nuclear power could utilize Bitcoin mining as a variable demand tool to smooth electricity demand curves. This paradigm shift would enable continuous use of all energy-producing capacity. Power companies could integrate Bitcoin mining into their operations, increasing revenue and allowing further investment in infrastructure. Consequently, Bitcoin mining wouldn't need to be profitable by traditional standards; it would simply need to outweigh the opportunity cost of unused electricity.
Increased utilization would reduce consumer subsidies for unused capacity, potentially leading to stable or even lower electricity rates. A grid powered by nuclear energy, with Bitcoin mining to manage variability, could be clean, sustainable, resilient, reliable, and affordable.
Turning Waste into Value
Various waste products, such as natural gas and methane, have historically been costly byproducts of activities like oil drilling, landfill operations, and wastewater treatment. These gases can now be harnessed for Bitcoin mining, transforming waste into an asset.
ExxonMobil, for example, has begun using natural gas, a byproduct of oil extraction, for Bitcoin mining instead of flaring or venting it. This approach incentivizes careful handling of waste gases, reducing environmental impact. Similarly, landfills and wastewater treatment plants can use methane produced during waste breakdown for Bitcoin mining, turning a liability into an asset.
No Profits Needed
Satoshi Nakamoto’s revolutionary thinking led to the creation of a new monetary network. To ensure the continued survival and growth of this network, we must adopt innovative approaches. Energy is abundant, and Bitcoin provides the incentive needed to drive innovation and ensure the availability of cheap, clean energy for all.
Bitcoin mining doesn’t need to be profitable in the traditional sense. By integrating mining into various systems and using waste products efficiently, Bitcoin can drive human flourishing and support a sustainable energy future.
