Why Electricity Could Hypothetically be Backing Bitcoin

Digital assets came with several different methods of completing transactions. In some digital coins, users only need to stake a digital asset. Staking a higher amount gives users the highest chance of becoming validators. Other assets, such as Bitcoin, use the PoW method to handle transactions.

Bitcoin’s operations usually need a source of energy. Without electricity, miners cannot complete transaction processes. Blockchains also need to keep running since it is the network’s main driver. As such, we take a look at how electricity could be backing Bitcoin.

How Electricity Supports Bitcoin

Blockchain plays an essential role in the transaction process. The launch of Bitcoin had the goal of creating a decentralized payment system. More importantly, it meant users could enjoy fast and cheaper transactions. Maintaining this future comes at the price of electricity consumption. As mentioned earlier, energy is an essential resource that could be backing Bitcoin.

In a blockchain, miners compete with each other to solve complex equations. Working out the equations requires a significant amount of computational power. Since the competition is high, miners need electricity to calculate the equations.

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Remember, the difficulty level of these algorithms keeps changing over time. At the time of writing, the difficulty level stands at 17.62T. For miners to achieve performance, an energy source needs to be present.

That way, miners can be able to issue more coins at a stable pace. The presence of electricity also allows miners to secure passive incomes. Rewards come after miners use electricity to solve equations. Hence, Bitcoin needs electrical power to manage blockchain activities.

The topic takes us further to the type of equipment miners use.

GPU and ASIC Mining Tools

Miners came to realize that graphic cards perform better at completing transactions. To some extent, GPUs give better results than regular CPUs can deliver. The tool needs electricity to handle the PoW algorithms.

Nvidia GeForce 1070 is one example of a GPU mining device. It carries a computing power of 300MH/s. As a bonus, the GeForce tool uses minimal electricity of 150Watts per unit. The AMD Radeon RX580 is another GPU device miners use. Radeon also consumes little power and has a hash rate of 29MH/s.

Application-Specific Integrated Circuits came later as an alternative to GPU devices. However, the ASIC’s design only helps to solve the SHA-256 algorithms. Hence, ASICs work much faster than GPU tools. Bitmain is the largest mining rig developer in the market today.

In 2019, the company launched the Antminer S17 Pro, which has a hash rate of 56TH/s. Within an hour, the S17 Pro uses an electrical power of about 2568 Watts. As such, the mining tool can mine almost 0.0004 BTC in a day.

An additional ASIC device from Bitmain is the Antminer S19. The device carries a hash rate of 95TH/s and can produce 0.0007 BTC daily. In terms of electricity, the S19 takes up almost 3250 Watts of power.

Whether miners use GPUs or ASICs, enough electrical power needs to be available. In the end, miners can manage Bitcoin’s network with these tools and enough energy supply.

China’s War on Bitcoin

China was home to most of the mining activity taking place in Bitcoin. A 2020 report shows that China accounts for the highest Bitcoin mining power. The region holds 65% of the global hash rate, closely followed by the U.S. Yet, the mining industry faces massive opposition from the Chinese government. The reason is that mining activity causes harmful carbon emissions.

Furthermore, a study shows that China is the leading producer of electricity. Thus, mining in China was appropriate to maintain Bitcoin’s stability.

The outcome was different since the coin’s value fell below $30,000 after the ban. Later, mining rigs shut down, forcing miners to look for new locations.

Final Thoughts

Electricity has a direct relationship with Bitcoin’s network. The availability of energy allows miners to handle blockchain operations. Through electricity, miners can calculate complex equations in the network.

Moreover, mining equipment requires a certain amount of energy to run. The absence of electricity means that miners cannot work out the algorithms.

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A slow calculation process might cause a negative outcome on Bitcoin. On the other hand, quicker calculations enable positive effects for the coin. In theory, the asset’s future is inevitable with an adequate electrical supply.