Comparison of Gold Mining and Bitcoin Mining
Bitcoin mining is the process by which transactions are verified and added to a public ledger, called blockchain, and new bitcoins are produced. It becomes harder as times goes by to ensure scarcity of the cryptocurrency. Recently, some energy activist shows concern over the level of electric energy consumption and cost of bitcoin mining.
However, as a thumb rule, every valuable commodity must be scarce. For thousands of years, mankind has been mining Gold and using it for several economic social purposes. To date, Gold remains one of the most valuable resources nature offers. Gold is highly valuable simply because of its scarcity! Being a rare mineral, gold mining is a very costly and energy consuming endeavor.
There are several methods of mining gold, depending on the nature of the gold source. All these methods on average require a sizeable amount of energy for the mining process to have any economic value. For instance, when mining gold by dredging, several thousands of tonnes of water, sand, and dirt washes obtaining a few grams of gold.
What’s the Process?
The dredging machine takes it energy in the form of electricity for smaller machines or fossil fuels for large machines. When the total energy consumption for producing gold sums up figures ranging between 25%-40% of the total production costs of retrieval. However, most gold mining intentionally reports smaller figures.
Adding up the other production costs like labor, machines, logistics, and others, commercially producing gold becomes one of the most expensive ventures. The fact clarifies that small companies can not commercially mine gold. However, only Large corporations with a vast capital resource base can realize some profits.
Unlike Gold, Bitcoin mining becomes hard over time. As more and more bitcoins are produced the mining algorithm gets harder. The harder algorithm means more computer processing powers, more electricity and more time. In 2009 when bitcoin was just launched, one could easily mine 50 BTC in a few hours using a basic home computer!
What Does it Require?
Currently, it requires several hundreds of specialized Bitcoin mining computers to realize any economic gain in mining bitcoin. The most Bitcoin mining ASIC in the market currently is the Halong Mining’s DragonMint 16T ASIC. The ASIC grosses produce bitcoin worth $3.74 per day. The ASIC costs $2,844 to buy. While adding power cost to the equation buying only one of these ASICS will never make any profit.
However, for more than one unit of the mining ASIC, some profits can be realized for some time. Bitcoin mining ASICS produces a lot of heat and sound in as there operate. For large mining facilities, adequate cooling systems are required. The cost of purchasing the cooling systems and their power consumption adds up to the mining costs.
Since the machines are running constantly, breakage is common bringing another cost for repairs and replacing the ASICS. With the cost of labor and technicians required in a large bitcoin mining plant, bitcoin mining becomes expensive. However, the most annoying element in bitcoin mining is the difficulty factor adjustment.
Bitcoin mining difficulty factor is automatically grown after every two weeks. This greatly reduces the miner’s profits. To keep up with the difficulty factor, the miner would need to keep updating their hashing powers. This means adding new ASICS and all associated costs.
You can also watch out this video to get the concept more clear:
However, there are 21 million bitcoin’s mining that can ever accomplish. About 80 percent of this figure is already attainable. Mining the remaining 20 percent of bitcoin will extend until the year 2140. This clearly means at some point the price of bitcoin will abnormally shoot up and remain there.
Following the explained factors we can conclude that it’s more costly and energy intensive to mine Gold than Bitcoin. It takes far less energy and cost to obtain one bitcoin valued at $6633.01 than to obtain an equivalent value of gold through mining.