4. Economics

4. Economics:

Information about how the energy use of digital assets is affected by the value of, demand for, and supply of particular digital assets or their underlying infrastructure. This includes the environmental and infrastructural effects from cryptocurrency miners moving to areas with cheaper electricity, as well as the incentives that exist for cryptocurrency miners to use renewable energy sources for mining. This also includes information about impacts on the electric grid and about the need for potential incremental grid investments, along with the impacts on electricity bills for customers near or in affected service territories.

Economic Basics of Bitcoin

It's worth mentioning the most basic realizations about Bitcoin's economic design:

1. Bitcoin has real and lasting value because it takes real, and increasingly more work to mine it over time. This is because of the Proof of Work protocol. It cannot be created without real work.

2. The most basic laws of economic supply & demand are at play in Bitcoin because it also has a limited supply. Only 21 million Bitcoins can ever be mined/created.

These basic economic design features are NOT present in many other crypto projects/currencies, which means those crypto projects will be a less good store of value. These basic features of Bitcoin are very important in understanding how it can accelerate a sustainable solar future.

Bitcoin Mining is the tipping point factor for a Solar future

The solar generation and storage economic incentives created by the additional prospect of a Solar Bitcoin Mining load is massive. The simplest way to look at this is to think of current solar economic incentives as a pie chart for each scale of energy generation.

If a utility company has already invested in natural gas power generation infrastructures, they have very little or even a reverse current economic incentive to abandon their old infrastructure and invest in solar energy generation & storage. In this case, Bitcoin mining becomes the primary incentive to invest in solar, nearly 100% of the incentive pie chart.

At the commercial scale, the existing incentives to install solar generation are already higher than a typical utility because they are going to be buying energy in kWhs for all energy used. This creates an initial economic payback incentive to stop paying for energy from a utility and to invest in solar energy generation and storage. However, if a typical payback is 10 to 15 years, an additional incentive really helps. By adding bitcoin mining to the solar infrastructure, the payback may be shortened to just 2 years. In this case, bitcoin mining becomes about 80% of the incentive while the energy cost savings attained remain about 20% of the incentive pie chart.

For personal applications at the home or electric vehicle scale, the incentives are more similar to commercial, but the magnitude of the financial gains are less. A typical person with a monthly $100 electricity bill might not find it attractive enough to invest in solar energy generation and storage because it's not a large amount of money compared to their other expenses. With bitcoin mining added on, it pays back the costs of solar 5x faster and can create a future personal source of revenue, which for most people is the extra factor they need to make the investment.

All three scales of energy generation really benefit from adding solar bitcoin mining to the equation. When an analysis is done, it becomes clear that what the solar energy industry has always needed is the greater incentive for individuals and companies to invest in and switch to solar.

Why Solar Bitcoin Mining is the default economic choice?

Because Bitcoin's Proof of Work mining protocol and algorithms are very competitive, it's inherent in the design for miners to seek out the most abundant, lowest cost, energy sources. Solar energy is free after initial payback making it the lowest cost and most abundant energy source on the planet. Its operation is also very low maintenance.

These factors make Solar Bitcoin Mining extremely attractive now, and these incentives will likely increase by several orders of magnitude as the photovoltaic and battery industries experience massive gains in economies of scale and efficiency.

Waste energy will primarily power Bitcoin Mining in the future

It's well known that bitcoin mining is made up of fractional contributions by many mining ASIC chips in mining computers that contribute to mining pools for fair distribution of new bitcoin rewards.

This means that bitcoin is extremely resilient even if very large parts of the mining equipment are turned off or back on at any time or in any cadence. As mining ASICs age, they will become less competitive in the network over time and will naturally result in a smaller price per kWh for the operator. After the most profitable 2 to 3 years have passed and payback is reached, the operator will most typically be incentivized to ONLY ever use the excess waste solar energy to mine bitcoin.

So instead of wasting this extra free energy, some financial return can be earned through mining, and perhaps an even greater return from holding bitcoin as an investment.

For any solar energy generator, if they have a better use of the energy after 2-3 years (what we've called the "primary load"), the financial value of bitcoin mined per kWh will be below this primary load tradeoff price. It can be reasoned that over 99% of Solar Bitcoin Mining will only occur during periods of surplus waste energy generation. Because this happens globally, as the earth rotates relative to the sun, southern & northern hemisphere mining will balance each other, and solar time zones will result in mining switching on and off, but there will still be a collective continuous mining effort. This is a beautiful detail in bitcoin's design.