The price of Bitcoin in the cryptocurrency market is a benchmark, but what if someone who is going to buy 1 BTC pays with electricity instead of traditional fiat money. Is this possible? How?
The first question in the previous paragraph has a simple answer: yes, it is possible to pay with electricity for obtaining a bitcoin. To answer the how, it is necessary to talk a little about cryptocurrency mining and resource tokenization.
The truth is that the more than 19 million bitcoins that have been issued so far have been purchased with electricity. This is because the generation of new bitcoins depends on mining, which, in turn, is an activity that currently involves high electricity consumption.
Transaction verification on a network like Bitcoin is labor intensive on the part of the mining hardware used for it. In the beginning, it was possible to mine bitcoins with a common computer. Currently it is necessary to use specialized ASIC equipment to mine BTC.
When a miner manages to add a new block of verified transactions to the blockchain, he receives as a reward the commissions that the users paid for said transactions and a set of new, newly issued bitcoins. In a way, this fact could be considered as pay with electricity in exchange for bitcoins.
Another method by which bitcoin could be acquired in exchange for electricity would be the tokenization of this energy. Electricity does not have properties like gold or water, which are tangible, moldable, can be contained in containers, etc. Therefore, creating a token whose value is equivalent to a unit of electrical energy that is counted or generated sounds like an ideal method to negotiate this resource.
The Spanish company Grenb2e is one of those that has used to tokenize electrical energy, in its case, to measure and market the surplus electricity it generates. The only problem with this strategy is that it is not decentralized at all, since it is necessary to trust third parties to verify the existence of the energy to be tokenized and to verify the procedure. However, these electrical energy tokens could be an instrument used as payment in exchange for an amount in bitcoin, provided that both parties agree.
How to know how much electricity the price of a bitcoin covers?
Although a couple of ways were previously presented in which BTC can be acquired in exchange for electrical energy, the next thing is to determine the price of a bitcoin that will be paid with electricity.
The developer Ruben Somsen, in one of his publicationsexplains that the proof of work (PoW) is a tool that helps calculate the cost of a bitcoin in electrical energy.
PoW is a consensus mechanism used by the network, in this case Bitcoin, to verify the transactions that are made and avoid double spending of a coin. According to Sommen, proof of work is like a bridge that connects bitcoin to the real worldsince it allows you to know the effort that a miner prints, in order to add a new block to the chain.
It is the amount of work a miner is willing to put in in order to receive a specific amount of bitcoins. This is essentially a price discovery mechanism. Miners are buying bitcoin with electricity.
Although proof-of-work would make it easier to determine how much electricity a bitcoin costs, it cannot be counted on to be foolproof. This is because not all ASICs have similar levels of performance and efficiency. Some, especially the most recent ones, reach a very high hashrate while consuming relatively little energy; while others require a lot of energy and their mining power is not that high.
According to Sumsen, the day will come when a mining ASIC cannot be more powerful. The reason for such a statement is that thermodynamics has a limit that eventually cryptocurrency mining will reach and it will be impossible to develop a more powerful miner. However, the developer makes the caveat that we are still many years away from reaching that point in technology.
A token that evaluates the energy consumed by a bitcoin
A proposal by Ruben Somsen to estimate the energy cost of a bitcoin with the greatest possible transparency and effectiveness is the creation of a PPB (Proof of Work for Bitcoin) token. The development of this token is based on a work by cryptographer Hal Finney called Reusable Proofs of Work (reusable proof of work) also known as RPOW.
To calculate the PPB value, it would be necessary to divide the number of hashes that were executed during a certain period of time by the number of bitcoins that were mined in that same temporary parenthesis. Adding this proposal to the Bitcoin code would only imply a soft fork.
Somsen makes the clarification that it would be convenient to develop and implement a mechanism that does not take into account commissions of exaggerated size. This would have the purpose of preventing miners from manipulating the PPB by paying themselves high commissions.
In exclusive comments for CriptoNoticias, Ruben Somsen states that, despite being an article he published a while ago, all the information provided is still perfectly valid.
The developer also mentioned that the only thing he would add to this research is that something he worked on later that offers an alternative to convert bitcoins into PoW tokens via a kind of sidechain called a “spacechain”.
A sidechain or sidechain is an exchange network where payments are made with a token backed by the main network, in this case Bitcoin.
The biggest disadvantage of converting bitcoins to PoW tokens as Explain Somsen is that the BTCs are burned in the process, that is, they cease to exist forever. Although for some it may be a worthwhile experiment and to which they can find utility, for other potential users it is a pretty high bet.
Bitcoin and electricity: a story full of myths
Since Bitcoin mining became widespread around the world, accusations related to the amount of electrical energy that this activity consumes have not stopped coming. It is often compared to the energy expenditure of whole countries.
However, according to reports presented by analysts and specialists in the field, the amount of electricity used in Bitcoin mining is between 0.1% and 0.26% of production worldwide.
CriptoNoticas reported at the time a report presented by financial analyst and strategist Lyn Alden, in which she states that The entire Bitcoin network represents less than 0.1% of the world’s electricity consumption.. It should be noted that, to reach this conclusion, Alden used the same data provided by the University of Cambridge that many have used to discredit Bitcoin mining.