Rohit Singh London in Artificial Intelligence, Technology, Creative and Media Professionals Director - Head of Innovation & Digital Disruption • KPMG Aug 29, 2019 · 1 min read · 1.1K

How the World is Mining Bitcoin

How the World is Mining Bitcoin

When Satoshi Nakamoto created Bitcoin cryptocurrency in 2009, he created an important provision. The cryptocurrency can only ever have 21 million bitcoins in existence. In the first week of August 2019, we surpassed the 85% mark for total Bitcoin mined.

That means there is only around 3,000,000 Bitcoin left to be mined. Bitcoin's limited supply is what makes it inherently valuable. It also helps the cryptocurrency avoid inflation. It cannot be devalued by a limitless supply of currency, which is how most fiat currencies operate.

Bitcoins are created when miners verify blocks of transactions to be added to the blockchain. Miners are given a reward for each block mined, which mints more Bitcoin in circulation. This mining reward is halved every 210,000 blocks have been added to the chain. The halving of the Bitcoin blockchain reward generally occurs about every four years.

The current reward for Bitcoin mining is 12.5 BTC for each block mined. Current hash rates predict the next halving of BTC rewards will happen in May 2020. After that halving, miners will only receive 6.25 BTC per block. Once the 21 million coin limit has been reached, mining becomes insignificant.

Until then, the world has focused on Bitcoin mining as a professional endeavor. Bitcion currently consumes around 73.7 terawatt-hours per year. That's an energy consumption rate that has been compared to an entire country like Ireland.

The cost of maintaining these massive electricity-hogging farms means most miners operate where electricity is cheap. A report published by Coinshare shows that around 50% of the global Bitcoin mining operation is located in China's Sichuan province. Electricity costs there during the wet season can be as low as $0.01 USD per watt. Some miners have even harnessed geothermal power for an unlimited source of energy for their miners.

The electricity impact of Bitcoin and its miners has led to different responses from governments. The Quebec government offered discounted electricity rates to lure in miners for a boost to the economy. Meanwhile, China has considered outright banning cryptocurrency. The government there sees miners as a drain on the environment who are wasting resources for immaterial gain.

Regardless of how the world's governments view Bitcoin, one universal truth is that miners will go where it's cheapest to mine.