It is shared by the minor editors that since the escalation of the war in Ukraine this year, the price of natural gas has doubled, and the price of coal has nearly doubled. European sanctions on Russian crude oil will take effect in December, which is expected to lead to tight demand and push up global oil prices. This makes many people want to know what impact the energy crisis will have on mining and infill mining in Bitcoin, because these industries are so closely linked to the energy market. How will rising energy prices affect cryptocurrency prices and miners? First, let's understand the connection between Bitcoin mining and energy.
1、 The relationship between Bitcoin mining and energy
The energy consumption of Bitcoin mining is a controversial topic. Some people feel that this is an integral part of Bitcoin's value proposition. Others think it is a kind of consumption, which is harmful to the surrounding environment. Apart from value orientation, energy is particularly important to the success of Bitcoin, whether in the field of network information security or economy. On the one hand, the greater the energy required for authentication transaction, the lower the chance of transaction fraud, because trying to cheat the network requires a lot of energy. On the other hand, the more energy needed to forge new Bitcoin, the higher the price, because the price reflects the cost of production.
But does Bitcoin actually need energy? In the early days of Bitcoin, it was very secure and consumed very little energy. Because the price of Bitcoin is very low, it is meaningless to spend a lot of money to try online fraud. However, with the rising price of Bitcoin, cheating has more potential benefits. Mining has also become more and more profitable, resulting in more and more miners joining the network, improving the safety factor.
Therefore, although Bitcoin depends on energy, it can also be scaled down according to different energy levels. This means that the energy shortage is unlikely to endanger Bitcoin. Even so, the energy dilemma will continue to affect infill mining in many ways. Rising energy prices may actually allow some miners to use cheaper electricity, but only those who are willing to adapt to the changing environment. Electricity production and power grids around the country are still very inefficient. One of the main reasons is the distance between energy production and energy consumption.
Of course, no one wants a coal-fired power plant in their backyard, and not everyone can live next to the hydropower dam. It is also difficult for power plants to expand or reduce energy production to meet demand. To ensure that there is always enough energy in the grid, the power plant must continue to produce additional electricity.
Bitcoin mining has unique properties and can purchase energy anytime, anywhere. This means that energy manufacturers can cooperate with Bitcoin miners to find redundant energy buyers in or near the production site. But so far, few energy manufacturers have taken advantage of this possibility.
2、 What impact will the energy crisis have on Bitcoin?
Will Bitcoin mining survive the energy crisis if the Bitcoin network keeps running? In the short term, the rise in energy prices will increase the cost of miners, which may force them to sell Bitcoin, thereby reducing the price. However, higher production costs may also mean that miners need higher prices to cover their expenses. The rise in electricity bills may cause a heavy blow to miners with limited capital reserves. If they do not have the cash to pay for these expenses, they may be forced to close their business and sell their equipment.
If the miners are closed, the same amount of Bitcoin will still be mined according to the block timing of Bitcoin, but the block rewards will flow to fewer miners. This means that the miners who have survived the difficult period will eventually get more profits. This also means that the production cost of the new Bitcoin may decline, which will also lead to a decline in prices, and even bring greater pressure on miners.
For Bitcoin Mining, this may sound like bad news, but it may also be a huge opportunity for miners in a favorable position.
The above content introduces the relationship between Bitcoin and energy, and answers to the question of whether the energy crisis will affect the price of Bitcoin. The rise in energy prices will cause the government and utility companies to face great pressure to reduce energy prices. If energy producers cooperate with Bitcoin miners, they can actually increase profits by selling energy that would otherwise be wasted. With the improvement of working efficiency and income of power plants, the energy cost of consumers will be reduced.