Hello dear reader! It's that time again. Let's take a quick look at energy markets and see what we can learn.
In the past we've looked at the cost of energy in BTC sat. The price of energy has generally been going down when priced in bitcoin, as more spare energy capacity is used to mine satoshis and the value of the satoshi vs. other goods has gone up. Water continues to (for the most part) flow downhill.
The interesting thing going on here, other than the price itself, is the comparison of the two directions of the energy-currency arbitrage cycle:
1) We can use energy to mine and obtain new currency
2) We can use currency to purchase energy
When we calculate the price of energy based on these two directions for bitcoin, we have come up with two numbers that are similar, at least well within an order of magnitude.
However, when we compare the price of energy based on these two directions for fiat currency, we come up with two numbers that are more than 20 orders of magnitude apart.
This outlines a problem which has been plaguing us for quite some time, (officially fifty three years stateside but really much longer) that of not being able to have sensible economics, free markets, or reasonable price discovery.
For a good example, take a look at energy prices vis a vis gasoline around the world at globalpetrolprices.com.
You can see that the price for a liter of gasoline varies from 40 sat in Venezuela to 4800 sat in Hong Kong. That's more than two orders of magnitude difference in price. Sure, transportation costs, dealing with border orcs and piracy, explain some of these discrepancies. However mostly the discrepancies exist because people are using fiat currencies to price them.
A liter of gasoline contains about 30 megajoules of energy so we can see that energy is selling for prices ranging from .00125 msat per joule to 1.6 msat per joule.
What about if we buy energy via electric mains? Apparently we pay anywhere from 60 sat per kwh in Qatar to 760 sat per kwh in Germany. Are you trying to make sense of these wildly variying electricity prices in comparison to petrol prices? Good luck : ) At 3600000 Joules per kwh, these numbers work out to .016 msat per joule and 0.21 msat per joule.
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Now lets go the other direction. How many joules do we need to mine a millisatoshi of BTC? The latest ASIC miners haven't improved all that much, with possibly a 25% gain on the top of the line bitmain antminer since our last check, clocking in at 40 terahash per joule. The network hash rate hasn't gone up all that much either, sitting now at about 600 EH/s. 600 EH is 600,000,000 terahash, so our one joule will give us 2.6e-7 of the total network reward. The total network reward in one second is 6.25e8/10/60 = 1.04 million satoshi (leaving out fees for now).
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