These countries include Algeria, Nepal, Russia, Bolivia, Egypt, Morocco, Ecuador, Pakistan, Bangladesh, China, Dominican Republic, North Macedonia, Qatar, and Vietnam.
Is Bitcoin mining taxable?
Bitcoin mining is considered a regular business and is, therefore, taxed as ordinary income . As a general rule, capital gains must also be paid if the mined bitcoin is sold over time with an increased value.
Is mining profitable?
Bitcoin mining is generally profitable, although its rewards largely depend on a series of factors, such as electricity costs, the price of ASIC mining devices, and cooling expenses. Also, a falling bitcoin price can lead to reduced miners’ margins.
How much do bitcoin miners make?
In dollar terms, miners gain the amount of bitcoin multiplied by the current price depending on the block reward. Considering an average price of $20,000 and a block reward of 6.25 bitcoin, in 2022, a miner would make $125,000 per block.
How hard is bitcoin mining?
It is increasingly hard to mine bitcoin, considering that upon its launch, Bitcoin’s mining difficulty was 1, while the current difficulty level is around 30 trillion. This figure means that ASICS mining hardware needs to perform, on average, over 30 trillion hashes before finding a valid block to remain competitive.
How long does it take to mine 1 bitcoin?
It takes on average 10 minutes to mine 1 bitcoin. However, currently, as that bitcoin is mined, so will another 5.25 BTC. This is because Bitcoin is mined as a new block is successfully added to the blockchain, which currently generates 6.25 BTC and takes on average 10 minutes. It might only be possible to mine close to one single bitcoin by block number 1,050,000 –– by 2028 –– when the block reward is expected to be about 1.56 BTC . Still, it will take on average 10 minutes to mine that block.
Debunking common misconceptions about Bitcoin energy usage
#1 “Bitcoin uses dirty, non-renewable energy.”
If truth be told, bitcoin mining offers a new market to the electricity industry that challenges the longstanding notion of energy generation from grid restrictions. This new opportunity reveals and incentivizes global renewables’ potential to achieve significant carbon-free power production.
Soon, bitcoin mining will be key to an abundant, clean energy future . Let’s explore how and why.
Solar and wind energy generation capacity is key to this reasoning because the Bitcoin network can act as a unique energy buyer of such renewables, facilitating the global transition to cleaner energy production and storage.
As solar and wind energy is becoming increasingly affordable, bitcoin miners are inclined to use it as they typically settle where electricity is cheaper to be more competitive and ensure their business remains profitable.
Solar and wind energy costs are now even cheaper than fossil fuels. Indeed, they are currently 3–4 cents /kWh and 2–5 cents / kWh, respectively, in contrast with fossil fuels such as coal or natural gas, whose costs are ~5–7 cents / kWh.
However, solar and wind energy intermittency is a significant drawback compared to natural gas or nuclear power. With the sun shining only during the day and the wind blowing unpredictably, their energy production can be either abundant or negligible.
Bitcoin mining is a viable technological solution providing increased transmission and energy storage capacity to overcome intermittency. The pathway to carbon-free energy generation has already been molded, with new mining facilities settling down where natural resources are widely available.
West Texas, for instance, provides an excess of wind and solar energy that has already prompted bitcoin miners to flock to that region to exploit the enormous opportunity.
Hydropower is another fundamental natural resource exploited by bitcoin miners where it is abundantly available. In Norway, for example, 100% of the country’s electricity is generated from renewable energy, setting up the perfect location for bitcoin miners who can enjoy cost-effective electricity fees and a climate properly fit for equipment cooling.
#2 “Bitcoin wastes energy.”
According to the Cambridge Center for Alternative Finance (CCAF), Bitcoin currently consumes roughly 87 Terawatt Hours per year which equals 0.55% of global electricity production, or the annual energy draw of small countries like Malaysia and Sweden.
While this could alarm Bitcoin’s detractors, overall attention should be directed to the carbon emission levels and not consumption. This is a critical distinction because Bitcoin could consume the entire globe’s electricity, but if it comes 100% from renewables, its impact on carbon emissions would be negligible.
Determining Bitcoin electricity consumption is straightforward to estimate, just by looking at its hashrate over the defined period.
On the other hand, the main issue is determining carbon emissions from bitcoin mining, and a few factors make this task harder to perform without knowing the exact energy mix utilized.
For various reasons, miners have a typical reticence in providing mining data. Due to Bitcoin nodes’ anonymity, we often do not even have data on miners’ existence in some regions of the world. When we do know, we can just guess their carbon impact based on the energy resources in that region.
Due to such inaccuracy of data, estimates for what percentage of bitcoin mining uses renewable energy could vary widely.
The Bitcoin mining council estimated that the global mining industry’s sustainable electricity mix was 59.5% in Q2 2022 and had increased by approximately 6% year-on-year from Q2 2021 to Q2 2022.
In 2019, Coinshare published a report suggesting that 73% of Bitcoin’s energy consumption was carbon neutral, primarily due to the abundance of hydropower in major mining hubs such as Southwest China and Scandinavia.
In 2020, the CCAF estimated that the figure was closer to 39%, suggesting that considering energy consumption alone is hardly a reliable method for determining Bitcoin’s carbon emissions.
What would be more beneficial to the debate is whether we consider mining bitcoin a worthwhile activity to utilize energy on or not. Here the gate is open to a broad and sometimes fierce discussion depending on the level of appreciation for the alternative monetary system that Bitcoin represents.
#3 “Bitcoin uses more energy than Visa per transaction.”
We already mentioned that it’s essential to consider the clear distinction between how energy to mine and use Bitcoin is issued and how Bitcoin actually consumes power.
Many Bitcoin detractors may be heard mentioning that Bitcoin’s per-transaction energy cost is very high, especially compared to other payment system transactions, for example.
In reality, they do not have a clue, and that’s only another way to attack Bitcoin. The vast majority of Bitcoin’s energy consumption happens during the mining process. Once coins have been issued, the energy required to validate transactions is minimal.
Many calculate Bitcoin’s total energy consumption to date by dividing it by the number of transactions. However, that doesn’t offer an accurate perspective since most of that energy was used to mine Bitcoins, not to support transactions.
We can go one step forward and claim that Bitcoin is a final “cash” settlement layer without needing a trusted party. Popular payments networks, like PayPal or Visa, do not provide instant irreversible settlements between banks.
All traditional retail payment systems are based upon a complex multiple-layered structure that might require as much as six months to finalize a transaction Besides being lengthy, how much energy is wasted during that long period? This is why the comparison cannot be regarded as valid.
The opportunity to turn Bitcoin mining from an “environmental disaster” narrative to a beneficial aid to cut CO2 emissions is real and already unfolding before our eyes.
New emerging methods and natural resources are continuously being explored, such as unlocking ocean energy to benefit as many as one billion people worldwide with 2 to 8 terawatts of continuous clean power.