BITCOIN MINING IN PARAGUAY
Introduction
Bitcoin is a cryptocurrency created in 2008 by a pseudonymous known as Satoshi Nakamoto. The creation of new bitcoins occurs through mining. Since the commencement of Bitcoin mining, particularly in 2009, the computational power, known as hashrate, has significantly increased due to the growing number of miners in the network. Consequently, specialized mining machines, known as ASICs (Application Specific Integrated Circuit), are currently utilized. This research provides an estimate of the electrical energy consumption of bitcoin mining based on the type of ASIC machine employed in Paraguay.
How Does Bitcoin Really Work?
The Bitcoin whitepaper defines a digital currency as a chain of digital signatures. Each owner transfers the currency to the next one by digitally signing a hash of the previous transaction and the public key of the next owner, appending them to the end of the currency.
In other words, the owner of bitcoins needs to sign with a private key to execute a transaction. This way, when a bitcoin is transferred, the next owner becomes the recipient.
Bitcoins are not actually withdrawn from wallets; instead, there is a transfer of ownership through private keys. Consequently, bitcoins will always remain on the blockchain.
Each block represents a set of transactions made within a specific time frame and is placed on the blockchain chronologically. Every block consists of a timestamp and a hash to prevent manipulation.
The timestamp is a date and time mark that operates using the Proof-of-Work system. On the other hand, a hash is an algorithmic function that generates an identifier based on a predetermined calculation, known as SHA-256.
What Is the Role of Miners?
For users to successfully carry out a transaction, they require validation from miners. Miners are responsible for validating and recording information on the blockchain, and they are rewarded for this work.
In simple terms, miners’ job is to find the next hash in the blockchain. However, the reward for finding a hash is given randomly.
Understanding the Paraguayan Energy Market
Paraguay is a small country located in South America, currently hosting hundreds of miners in different parts of the national territory.
It is widely known for its extensive capacity for the production of cheap electrical energy and for having the world’s largest hydroelectric plant. The country’s electricity generation is entirely renewable, with a total of three hydroelectric plants.
The first and largest one, Itaipu Binacional, has 20 generating units with a capacity of 14,000 MW, situated between Paraguay and Brazil. The second, Yacyreta, is located between Paraguay and Argentina, with 20 generating units and a total capacity of 3,000 MW. Lastly, Acaray, housing 4 generators with a power capacity of 210 MW, is located in the city of Hernandarias.
Electricity is distributed and sold by the state-owned company ANDE (Administration Nacional of Electricity). In October 2022, they implemented a special tariff for the bitcoin mining sector.
Electricity Consumption of Mining in Paraguay
To make this study, three factors were taken into consideration.
First Factor
The first factor involves determining the total hashrate of the bitcoin network in the country. To achieve this, all mining pools in the bitcoin network were identified, and they are listed on BTC.com.
Once identified, each pool is individually analyzed using the traffic analysis website Semrush. This process associates web traffic from Paraguay with each pool’s domain.
The image shows the applied filters to determine the amount of traffic, such as the time range and location, in this case, Paraguay, which subsequently yields the results.
Traffic website of Paraguay in antpool.com
However, we are interested in knowing the percentage coming from Paraguay for each pool. To do this, we will navigate to the geographical distribution window, apply the filters, and obtain the desired results.
Geographical distribution — “Paraguay”
The process is repeated for each pool. The next graph illustrates the percentage from Paraguay in comparison to the total hashrate value of the network for that year. It can be observed that only a few pools are used in the country.
By associating the values, the total hashrate used in Paraguay during the year 2021 could be determined.
It is estimated that Paraguay contributes a hashrate of 0.139 EH/s to the network, equivalent to 0.83% of the total.
COMPARISON OF RESULTS (OWN METHODOLOGY VS. CAMBRIDGE)
To verify the results obtained through the methodology of geographical web traffic analysis, the University of Cambridge model, known as the “Cambridge Bitcoin Electricity Consumption Index (CBECI)” was used for comparison.
The University of Cambridge methodology takes into account four mining pools for analysis: BTC.com, Poolin, ViaBTC, and Foundry. It is important to note that the data used in this methodology were obtained through direct contact with the companies operating the pools.
According to the index data, Paraguay contributed 0.15% of computational power to the network for that year. When comparing them, practically identical results were obtained.
COMPARISON OF RESULTS (OWN METHODOLOGY VS. CAMBRIDGE)
Therefore, for this initial step, it was verified that in the year 2021, Paraguay’s hashrate was 0.139 EH/s, equivalent to 0.83% of the total global mining network. Additionally, it was observed that 8 pools were used in the country during that period. To confirm the results, a comparison with the Cambridge Bitcoin Electricity Consumption Index was conducted, yielding identical results considering 4 pools.
Second Factor
In this section, we will estimate the electricity consumption based on the quantity and model of ASIC machines used. Despite the existence of various ASIC machine models, it would be impractical to consider all of them due to factors such as disuse or inappropriateness for the objectives. Therefore, models were chosen from a market perspective.
For this purpose, the Braiins model (a mining company responsible for optimizing mining machines) was used. This model provides a list of the most commonly used machines that are still profitable. Fortunately, this list aligns with the models referenced in interviews during the research.
ASIC more popular for mining of bitcoin
Once the ten models were identified, along with their technical specifications such as computational power (TH/s), potential (W), mining efficiency (kWh/TH), among others, the next step was to determine the quantity of machines per model, considering the total hashrate determined in the previous section [first factor].
Number of ASIC Machines Operating in Paraguay
In this way, our range of the number of ASIC machines operating in Paraguay spans from 1,265 machines to 10,309 machines (from the most efficient to the least efficient). Although it’s challenging to identify how many types of machines each miner uses, we can assert that the range of models presented in this work is employed.
This is because as mining difficulty increases, miners naturally use machines that are profitable and discard obsolete ones. As described, the equipment considered in this work still generates and has generated profits in mining activities.
So, how much does it consume?
Now that we have identified the total hashrate and the range of machine quantities, we will proceed to calculate the total electricity consumption of mining according to the type of ASIC machine used in the country. The next graph illustrates the range of electricity consumption for mining in Paraguay.
Electricity Consumption of Mining in Paraguay
It can be observed if where all miners were using the most efficient machine, the Antminer S19 Pro, electricity consumption is considerably low compared to earlier machines. For the annual electricity consumption of Bitcoin mining, depending on the model of ASIC machine used, there is a range of electricity consumption from 36.02 GW/h to 119.5 GW/h.
Third Factor
It is important to understand electricity consumption across the entire Paraguayan territory. Although there are three categories of consumption, at that time, Bitcoin mining still fell within the Commercial and Others group, specifically under Others.
Electricity Consumption in Paraguay
The total consumption was 18,567 GW/h during 2021 in Paraguay. Within the Others group, it was 4,060 GW/h. However, miners were classified under category 412, where the consumption was 2,389 GW/h. The data were obtained directly from ANDE from a record spreadsheet.
Final Result
Here we provide an estimate of the percentage of electricity usage in the country for Bitcoin mining. The next graph illustrates the comparison of the total electricity consumption in Paraguay (18,567 GW/h) in relation to the range of Bitcoin mining consumption based on the model used.
“Estimate of Bitcoin Mining Electricity Consumption”
It can be observed that the range of electricity consumption for Bitcoin mining in Paraguay ranges from 0.20% to 0.64% in relation to the total annual energy consumed.
If we consider the exclusive group of miners in the country, within category 412, this consumption range would extend from 1.5% to 5%, still a relatively low value.
If we calculate an average of the consumption range and compare it with the major countries worldwide, we get the next table:
“Average Consumption in Different Countries”
Conclusion
Through this research, we can observe the current landscape of the economic activity practiced in the country and worldwide. There are various models of ASIC machines that can be used for Bitcoin mining; however, the criteria for choosing them depend solely on the miner.
All existing mining pools were analyzed, revealing that 0.83% of the Bitcoin network’s hashrate corresponds to Paraguay, a surprising but positive result from an economic perspective. Additionally, eight pools were used in Paraguay in 2021.
Regarding the consumption range, depending on the model of the machine used, it spans from 36.02 GW/h to 119.5 GW/h. In comparison to the country’s total electricity consumption, these values represent a range of 0.20% to 0.65%.
It is worth noting that there are other electrical equipment that supports the structure of a mining farm, although they vary in terms of quantity and power for each farm. Nevertheless, these consumptions remain minimal compared to the mining equipment.
Regulations in Paraguay have changed in the last year regarding the cost of electricity for miners. This change in tariffs will have an impact on the industries, and while it is impossible to predict the future, mining activities in Paraguay may or may not decline in the coming years.
