Analyst Claims 98% of Mining Rigs Fail to Verify Transactions

Published on by Cointele | Published on

Alex de Vries, the founder of the Digiconomist, has given a damning assessment of the electricity consumed by Bitcoin mining in an interview with British media outlet, The Telegraph.

The article asserts that the annual returns generated from Bitcoin mining are nearly $5.9 billion - with approximately 4 billion mining units competing for a share of the bounty worldwide.

De Vries asserts that 98% of mining rigs will never verify a transaction, resulting in an enormous and unproductive electricity expenditure.

"The shocking thing is the average lifetime of a bitcoin mining machine is one and a half years, because we have a new generation of machines which are better at doing these calculations. That means it's impossible for 98 percent of the devices during their lifetime to make the calculation that actually results in a reward. So the rest are just running pointlessly for a few years, using up energy, and producing heat, and then they will just get trashed because they can't be repurposed. It's insane."

He fails to substantiate his claim that there are 4 billion active mining rigs on the Bitcoin network.

Criticisms of Digitconomist's estimated power consumption of mining.

According to BECI, Bitcoin mining currently consumes roughly 77.78 terawatt-hours per year - roughly equal to that of the entire country of Chile, and exceeding that of the Czech Republic by 13.9%. However, the index also provides a minimum estimate of roughly 50 terawatt-hours annually - equal to that of Romania.

Coinshares' 2018 report found that bitcoin mining is largely powered by cheap renewable energy, particularly hydro, with fossil fuels representing the minority share of the network's total electricity demand.

Alex Liegl, the CEO of Layer1 Technologies, recently stated that Texas offers large-scale miners "The cheapest power in the world." Layer1 Technologies is a US-based mining company that launched operations at its Texas facility in January.

While the sheer quantity of electricity used in BTC mining may appear large, three-quarters of the power consumed by the network comes from a renewable source - much of which may not have otherwise found use.

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