Key points of this article:
Quarterly data report of the Bitcoin Mining Council (BMC)
Analyze the impact of the migration of Chinese miners from data
The Bitcoin Mining Council (BMC) released the results of its survey on the energy consumption and power mix of Bitcoin mining. This result is positive and is expected to create a greener Bitcoin network.
At the first online meeting of the Bitcoin Mining Council (BMC) at Twitter Spaces, Michael Saylor showed us their true goal: to spread information about the energy consumption of Bitcoin mining and educate the public, Thus fighting against negative and misleading media reports. And they promised to release a quarterly report, reviewing the recent global mining landscape.
Recently, the first quarterly report of the Bitcoin Mining Council has been released. Michael Saylor conducted a live broadcast on YouTube that was watched online by more than 12,000 people and showed us all the data they surveyed.
Data summary report
At the beginning of the live broadcast, Saylor explained that they collected data from 23 mining companies that voluntarily signed up for the survey. These companies include some of the founding members of the board of directors, which account for 32% of Bitcoin’s global mining power. To be honest, this is an impressive sample.
The survey includes energy-related issues related to mining, such as:
- Estimate their hash rate.
- Estimate their energy consumption.
- Percentage of sustainable energy used—renewable energy, nuclear energy and carbon credits that the company receives.
The committee then aggregated all the data obtained and submitted it anonymously to energy experts inside and outside the committee in order to calculate the results and compare them with other industries.
Data report summary
The report starts with a very shocking summary and can directly negate some of the most popular skeptical views of opponents. The report concluded: “The energy consumed by Bitcoin mining is negligible, and these energy sources are rapidly becoming more efficient, which can power the sustainable energy mix of any mining country or industry.”
The survey shows that compared with the world’s total energy consumption, the electricity consumption of Bitcoin mining is insignificant. To be precise, the energy consumed by Bitcoin mining only accounts for about 0.117% of the global energy, which is about 189 TW/h. This is a far cry from China’s 39,361 TW/h. More importantly, due to low efficiency, the entire hash rate may only consume 0.4% of the world’s wasted energy. Bitcoin can actually help the power grid improve efficiency while creating wealth.
The use of Bitcoin mining energy on a global scale
Of course, this does not change the fact that Bitcoin mining consumes more energy than some small countries, but it only means that the energy consumption of these countries is as insignificant as Bitcoin in the world.
In addition, the study also proves that Bitcoin’s argument for using fossil fuel energy is wrong. The results show that 56% of electricity mining comes from renewable energy sources, and this proportion is much higher than any other country or industry in the world. In fact, this is easy to understand, because this kind of energy is the cheapest. This is why miners always seek to switch to renewable energy sources for higher profits.
Sustainable Energy Use for Bitcoin Mining
Energy is becoming greener
Another point of the BMC research is that it is now different from the situation we were in a few months ago. As we predicted, the departure of miners from China has profoundly affected the pattern of the Bitcoin mining industry.
In fact, when comparing the first quarter and the second quarter of 2021, we can see a significant increase in Bitcoin network efficiency (15%) and sustainable energy usage (52%). The increase in the use of sustainable energy is due to miners starting to use cheaper and cleaner energy. According to Saylor, the high efficiency of the Bitcoin network is related to the fact that miners began to use new and better equipment to replace outdated mining equipment.
The data shows that the Bitcoin network is moving towards a greener and more efficient mining method. Obviously, China’s computing power has not yet been fully migrated, and new computing power gathering areas are promoting more attractive measures for miners, so it is foreseeable that this trend will continue in the future.
Bitcoin mining indicators for the first and second quarters of 2021
Limitations and deficiencies of research reports
Although the results of the report are positive, it has to mention its shortcomings in several respects.
The first is the current state of Bitcoin hash rate. The previous article mentioned that Chinese miners have not yet completed the migration. Although the trend seems to be positive, it is still a blind spot in research. Although we can expect them to follow other miners to find cleaner alternatives, we cannot really be sure until they settle down.
The same is true for hash rates that did not participate in this survey. 32% is an acceptable sample, but more than two-thirds of global miners did not participate in the survey, which means that most of the results are only estimates (although based on accurate information and professional analysis, they are still estimates).
Review of major events in the migration of Chinese miners
On May 21, the State Council of China called for a ban on mining. On May 25, the Inner Mongolia region proposed 8 measures to phase out the cryptocurrency mining industry, which took effect on June 1. Other parts of China have followed suit, such as Xinjiang and Sichuan, which implemented similar bans within a few weeks. These measures have led to what many people call a major mining migration.
During the entire migration process, Bitcoin has experienced huge resistance in the short term, and these measures may lead to long-term decentralization and resilience of Bitcoin.
Review the impact of China’s mining ban from a data point of view
1. The government’s prohibition policy on mining has directly affected the total computing power of the Bitcoin network. Since these measures were first exposed, the hash rate has dropped sharply.
Bitcoin’s hash rate dropped by 40% in June, which became one of the biggest declines in Bitcoin’s history. Although miners continue to mine, the drop in hash rate has reduced the cost of trying to attack the Bitcoin network.
However, Bitcoin has incentives to attract miners to return to mining. First, because the price of Bitcoin has fallen less than its hash rate, although mining revenue is still relatively high, its mining competitiveness is low. This makes the mining of Bitcoin more profitable, thereby attracting more miners.
In addition, the difficulty of Bitcoin mining has just dropped by a record 28%. Because the network difficulty will be dynamically adjusted, it aims to make Bitcoin mining easier and reduce mining costs, making it more attractive for new and old miners to return to mining.
2. Bitcoin miners seem to have been selling
Since mid-May, the number of bitcoins in miner addresses has dropped significantly. After a slight increase in the spring, mining reserves seem to have reached a peak of 2.14 million.
Since then, miners’ Bitcoin holdings have decreased by 100,000, or 5% of the peak value. Although expressed as a percentage may make people feel very little, it is enough to cause selling pressure on short-term bitcoin prices. The trend of funds flowing out of miner addresses is also reflected in the outflow and net outflow of miners.
As the name suggests, miner outflow is to track the number of bitcoins leaving the miner’s address, while net outflow is the value after subtracting the inflow.
Since the Chinese government began to take measures, miners have left their addresses with more than 90,000 bitcoins within two days. The net outflow recorded two sharp declines of 30,000 bitcoins, which means that the bitcoins leaving the miner’s address are 30,000 more than their total amount from rewards or hoarding. The continuous increase in miner outflow and the negative net outflow strongly indicate that miner addresses have been sold throughout the mining migration process.
3. Bitcoin mining is more decentralized and flexible
The mining pool aggregates the computing power between different miners, providing them with higher block rewards and more predictable income probability. Although mining pools have been increasing their hash rate to a large extent, the mining pools that have a large presence in China have been negatively affected by the migration.
The impact on Chinese miners is reflected in the sharp decline in the number of blocks mined daily by Binance and Huobi mining pools, down 35% and 63% respectively. At the same time, in the past few months, independent mining pools and unidentified independent miners marked as “unknown” have increased significantly from 0.03 blocks per day to more than 10.
These data indicate that Bitcoin mining has become more decentralized and less dependent on Chinese miners. As much as 65% of the computing power once came from China, which has brought long-term risks to the Bitcoin network, causing the foreign crypto community to worry that the Chinese government may exert power on Bitcoin. After the mining migration, this risk has been significantly reduced as the hash rate is redistributed in a more decentralized and global manner. Ultimately, this makes Bitcoin more resilient and decentralized than it was at the beginning of the year.
4. Reward: Miners have less impact on the market than before
Although miners are still vital to ensuring the security of the blockchain, their importance to Bitcoin transaction volume has dropped sharply. The transaction volume of miners as a percentage of the total transaction volume has dropped from 20% in 2013 to 3% in 2021.
This is mainly due to the halving every four years and the reduction of rewards for miners. Transaction fees have always been low, which means that miners usually rely on block rewards for more than 90% of their income. As a result, the percentage of mining rewards in total transactions on the chain has further decreased.
Overall, this indicates that during the entire migration period, the selling pressure of miners may not be as strong as initially thought. Since the Chinese government cracked down on cryptocurrency mining, it may have caused some selling pressure, but this is relatively small compared to the billions of daily on-chain transactions. As the proportion of miners in the total transaction volume continues to decrease, such events are unlikely to affect the market.
to sum up
The author believes that we should have reservations about the quarterly report of the Bitcoin Mining Council (BMC).
Although BMC has always been extremely serious, and has stated that they want to promote the use of green energy mining in Bitcoin’s ambitious goal. But this report is not comprehensive, because it is impossible to conduct surveys of miners around the world.
Although the ongoing large-scale miner migration may have adverse effects in the short term in the future, it is building a more decentralized and resilient future for Bitcoin.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/bitcoin-mining-council-quarterly-report-global-bitcoin-mining-data-and-miner-migration-review/
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