Cryptocurrency mining is frowned upon because of the amount of energy required. Long Hash data shows that around $87.3 billion annually is spent mining gold, while $4.3 billion is spent mining Bitcoin.
Bitcoin mining is 20 times more expensive and requires 20x the energy required for gold mining. All the stories about Bitcoin’s negative effects on the environment, which surfaced in the wake of the surge in token prices in early 2017, should also be applied to Gold.
The market cap of these commodities is a bigger problem than electric consumption. The market cap of cryptocurrency is around $200 billion, while gold is valued at $8 trillion. An analyst could argue that gold’s mining costs are justified by its market value and price.
Gold mining costs
Mining is a necessity to keep sufficient tokens in circulation and meet the growing demand for bitcoin. Mining is required to settle transactions for bitcoin and all other proof-of work cryptocurrency on the market. The cost of mining Bitcoin should be compared with the total cost to mine and transfer gold.
London bullion market oversees the transfer of the traditional store value. It is the largest wholesale over-the counter market for trading gold and silver. UBS, JPMorgan, HSBC and Scotiabank are its clearing partners. The huge discrepancy could be reversed if both the clearing house and agency costs to move gold to overseas markets and energy costs are combined.
The rapid adoption of renewable energy sources is another argument for digital coins. Australia will soon be home to the First Solar Powered Bitcoin Mining Farm. In some areas, such as Chile and Southwest China where there is abundant supply of renewable energy, it is available free to corporations and households.
It is true that non-renewable energy sources are more affordable and most crypto mining centers rely on them to mine it. Bitcoin isn’t the only high-energy consumer. Gold, silver and fiat all sail in the same boat.
John Lilic, a member of ConsenSys’ Ethereum blockchain development studio, stated that the current unit cost for each transaction in crypto is more expensive than legacy systems and banks. The industry is hopeful that energy optimization systems will soon make energy consumption a non-issue. Lilic explains:
“The real question is whether crypto’s gross energy inefficiency is worth the benefits such as custody over assets. My argument is yes! It’s worth it, but only if the industry prioritizes and continues to work towards energy efficiency gains such as Proof of Stake.