Have you ever wondered why Bitcoin is so expensive or how long Bitcoin will last?
Bitcoin transactions are recorded and validated by a decentralized network of miners. Miners use computational power to solve complex mathematical puzzles, ensuring the integrity and security of the blockchain. In return, they are rewarded with newly minted bitcoins (block rewards) and transaction fees.
When all 21 million bitcoins have been mined, miners will no longer earn block rewards. Instead, they will rely solely on transaction fees as their incentive to continue validating and securing the network, assuming transaction volume and fees are sufficient to support mining operations.
Mining Bitcoin is extremely energy intensive and expensive. Though new technology makes mining much quicker and will exhaust all available Bitcoin sooner than original projections, the energy required grows exponentially with the number of transactions. It is likely that Bitcoin transaction costs will turn the “asset” into a liability in the near future.
As Bitcoin transaction costs rise, its value may decline due to volatility and diminishing usability. Individuals paying for the costly process of verifying and recording transactions could avoid using Bitcoin for payments, reducing its appeal as a currency. This raises the critical question: who will perform the necessary validations if transaction fees become insufficient to incentivize miners? Without a clear solution, the network might face difficulties in completing transactions, threatening its long-term viability as a functional and secure system.
2025: Current Cost
The cost to produce 1 Bitcoin varies significantly based on mining conditions, energy sources, and equipment efficiency. Currently, the direct cash cost for mining one Bitcoin averages about $49,500, but when factoring in expenses like equipment depreciation and administrative costs, the total can rise to approximately $96,100. These figures reflect the high electricity usage and operational expenses required to maintain mining operations, particularly as Bitcoin’s mining difficulty continues to increase.
As the network hash rate grows, miners are investing in more efficient technologies and seeking cost-effective energy sources to stay competitive. However, energy consumption and rising costs remain major concerns for the industry, especially as the next Bitcoin halving event approaches, which will further cut mining rewards in half, increasing production costs even more. Some publicly traded Bitcoin miners are even investing in or constructing nuclear power plants, raising concerns about the potential disruption their off-grid electricity supply could pose to the broader electric grid.
This dynamic highlights the balance miners must strike between operational costs, infrastructure investments, and the anticipated future value of Bitcoin.
Unsustainable
The issue lies in both the time frame until the last Bitcoin is mined and the current transaction costs already incurred. Bitcoin’s transaction costs have grown so high that they often outweigh its perceived value. For example, the total cost of a transaction for a single Bitcoin—including mining costs, energy usage, and operational expenses—can approach $100,000.
In contrast, traditional currency transactions, such as those facilitated by credit cards or bank transfers, typically range between 0-3% of the transaction amount. This stark difference highlights Bitcoin’s inefficiency as a medium of exchange, particularly for everyday transactions.
Additionally, Bitcoin’s mining model is designed to become increasingly resource-intensive over time, further driving up costs. As the Bitcoin supply approaches its capped limit of 21 million, miners rely more heavily on transaction fees for revenue, potentially making Bitcoin transactions even less viable compared to traditional payment systems.
This economic inefficiency, coupled with its environmental impact and scalability challenges, raises questions about Bitcoin’s long-term sustainability as a widely adopted currency or store of value.