value volatility – Are there any educational papers on the hyperlink between power markets and Bitcoin mining?


I’m eager to see if there have been any educational papers which have studied the hyperlink between bitcoin miners and power markets, in-particular, if there’s a so referred to as ‘no-arbitrage’ requirement, or a hedging technique for miners, that exists.

Suppose there’s a miner, Bob, who’s mining tools produces a set hashrate and isn’t part of any mining pool. The choice, whether or not Bob ought to mine or not, is determined by the next variables (some are random):

  • The spot value of electrical energy (Random)
  • The spot value of Bitcoin (Random)
  • The community problem (Random)
  • The community hashrate (Random)
  • Block reward (Deterministic)
  • Gear depreciation (Deterministic)
  • Transaction charges (Random)

Bob needs to make sure that in expectation, mining yields a revenue. After all this is determined by these aforementioned variables. Bob additionally needs to make sure that if mining is not worthwhile with the spot costs, maybe there’s a method he may nonetheless mine, by utilizing power market or cryptocurrency derivatives to hedge in opposition to this.

Or, if it will not be worthwhile to mine, he may lease his computation as cloud providers for a set, deterministic fee per given time interval, to make sure his equipment is not idle. Conversely, he may select to mine a wholly totally different cryptocurrency that may yield a revenue, after all, in expectation.

My fast, non-academic “hunch” tells me that there’s a hyperlink right here, or a method to make sure that miners have extra certainty when mining, utilizing by-product merchandise to hedge themselves in opposition to sudden drops within the value of Bitcoin, or sudden will increase in the price of electrical energy. And the dynamics could be fascinating to review.

I used to be questioning if there have been any educational papers revealed, which could deviate from what I’ve talked about above, however embrace some related ideas. I’ve seen different solutions on this web site which have explored related questions, seen right here. In addition to an educational paper on the sustainability of bitcoin mining, seen right here.

Supply hyperlink

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