Bitcoin (BTC), the world’s most valuable cryptocurrency, has the potential to become a major energy consumer in the future, but only if it reaches multi-million dollars, according to new estimates from Arcane Research.
Cryptocurrency research and analysis firm Arcane Research released a report on Monday estimating the evolution of bitcoin energy consumption by 2040.
Written by Arcane Research analyst Jaran Mellerud, the report highlights that the future energy consumption of the Bitcoin network varies greatly depending on the future price of Bitcoin, as well as factors such as transaction fees, electricity prices and others.
If the price of bitcoin reaches $2 million in 17 years, bitcoin could consume 894 terawatt hours (TWh) per year, 10 times more than today, the report says. Despite huge growth, this energy consumption would be only 0.36% of the estimated global energy consumption in 2040, compared to 0.05% for bitcoin today, the analyst estimates.
“Currently, based on their energy consumption of 88 TWh and an average energy price of $50 per MWh, bitcoin miners spend about 50% of their income on energy,” Mellerud said.
Bitcoin’s future energy consumption would be much lower under less optimistic scenarios. The price of bitcoin is expected to reach $500,000 by 2040 for bitcoin to consume 223 TWh per year. If bitcoin trades at $100,000 in 17 years, bitcoin mining consumes only 45 TWh per year, the report says.
The analyst then cited the significant impact of bitcoin’s spread, a four-year event that saw a 50% reduction in miners’ rewards. According to the report, the price of BTC is poised to rise at breakneck speed due to the halving, and the latter’s “mitigating effect” could be offset by rising transaction fees in the future. “Such an increase will only happen if there is significant demand for the use of bitcoin as a payment system,” Mellerud wrote, adding:
“The price of bitcoin depends on market demand for bitcoin as a store of value, and transaction fees are determined by using bitcoin as a medium of exchange.”
Since the store of value and medium of exchange are two of the most important functions of money, the report also suggests that bitcoin’s energy consumption will only reach a significant level if bitcoin becomes a currency.
Also read: What will happen when all 21 million bitcoins are fully mined? Expert Answers
Since many bitcoin skeptics believe that such a scenario is hardly possible, they should not worry about bitcoin’s energy consumption, Mellerud said:
“I have good news for those of you who want to see the power consumption of the bitcoin network decrease: You can relax in your chair, because your wishes will be granted if bitcoin fails as a monetary system. And you believe that bitcoin will fail, don’t you? “.
The bitcoin mining industry suffered a significant downturn in 2022 amid the current cryptocurrency winter, and many major cryptocurrency miners chose to sell their BTC holdings to continue operating. US mining companies have also faced pressure from regulators, with US lawmakers demanding power consumption data from four major BTC mining companies.
Despite this increasingly bearish outlook, many bitcoin miners remain optimistic about bitcoin’s short-term and long-term price outlook. According to Edward Lu, Canaan’s senior vice president, the mining industry is a “healthy and profitable business” in the long run.