By 2036, Bitcoin mining will not look like it did five years ago, let alone ten. Gone is the example of Bitcoin miners who dominated the early to mid-2020s. These large mining companies, which are often publicly traded, have focused on large-scale, low-cost power in many high-income countries. These organizations did not develop their own power, and many did not design and manufacture their own ASICs. They looked for a combination of the sound quality of the electronics from the electronics, the location available near the action point, and the timing of the purchase of ASICs for as short a payback period as possible.
The marginal cost had already crippled this industry by the middle of the decade. Then the explosion of artificial intelligence and high data processing centers (AI/HPC) created profitable uses for grid-connected electricity. This effectively ended the power supply of Bitcoin miners in the markets they switched to. Many simply took their model and modified it slightly to accommodate an AI/HPC data center buildout. The process was the same, and companies that did well were rewarded by their shareholders. The opposite was true for state-owned mining companies that failed to build data centers
As the era of the Bitcoin mining industry ended, governments began to realize the benefits of Bitcoin mining in expanding and managing the national grid. The rapid growth in systems often exceeds the transmission capacity needed to connect to the wider grid, creating pockets of electricity that cannot be supplied and used. Several states had more power during their off-peak hours, but less often in the mornings and evenings. Most of the grids in the Global South did not have a buyer or electricity transmission system capable of sending more energy to emerging markets.
There was a growing awareness that Bitcoin mining with more electricity was equivalent to sending energy over the internet, making the cheap cross-border equipment unnecessary for this transaction. Worlds began to use patterns of mineral extractions as archetypes. In that arrangement, a joint venture or special purpose vehicle was created between the foreign mining company and the government. The mining company was the one who extracted the mineral, but the country received an equal amount of wealth and a certain percentage of its profits as it was the country’s wealth.
Independent Bitcoin mining operations were similar. Renewable energy was a national resource like minerals, but the difference was that it was a temporary part of electricity. Every hour that extra was not money, that the electricity was unprofitable, thus the minute to change the economy of electricity generation. As the hours turn into days, months or years, the cost of electricity generated by the government is lost. Countries have closely followed pioneering countries like Bhutan into independent Bitcoin mining when they realized they could not afford to do so.
In the late 2020s, the US and China played a war against the global economy using their digital currencies. The Americans sent the dollar through stablecoins, while the Chinese offered cheap credit as if it was denominated in Renminbi and provided lines of exchange with countries in the Digital Yuan, their central bank currency issued directly from the Bank of China. The “Middle Powers”, or countries that have great wealth and ability to influence their region but were inferior to the great powers, wanted to remove themselves from the middle of the American-Sino economic war. For many, Bitcoin was a way of life.
For example, consider the proposal of the Strategic Bitcoin Reserve (SBR) law in Brazil in 2026. It not only confirmed the country’s ability to invest up to 5% of the world’s reserves in Bitcoin, but also abolished the income tax on Bitcoin and allowed to pay taxes in Bitcoin. Other central governments also adopted child rearing methods. By leaning towards a state-or-citizen approach with a secure economy not controlled by America or China, they were able to avoid the trap of choosing one economic path and distancing themselves from the other.
For the countries that adopted this strategy and had independent power, Bitcoin mining became the cheapest way to accumulate wealth. Some of the energy that was previously sent to neighbors was reserved for Bitcoin mining. The possibility of more energy without close proximity or grid connection that seemed impossible in development was now important. Such projects have now become a source of pride as they have expanded the country’s energy sector while enabling economic independence.
Examples of this type of parenting are known all over the world. Russia has pioneered the gradual transformation of remote energy production in Siberia into an asset in the war with Ukraine. Turkey has reduced exports to countries such as Bulgaria and Iraq and increased the production of electricity in the east of the country. Brazil and India have also developed large hydroelectric power plants in the Amazon and Himalayas, respectively, away from coastal areas. Indonesia and Malaysia finally found a good way to use geothermal energy on the island of Borneo. Ethiopia changed their electricity sales to Bitcoin miners into a government-backed system with a share of profits between the miners and their treasury.
These governments involved Bitcoin mining operations acted as a sandbox to improve grid management by using less energy or saving energy. Although experts have debated for years whether battery energy storage systems (BESS) or Bitcoin mining were the most important to deploy, it turned out that the solution was a combination of the two due to their diversity and legitimacy. Bitcoin mines can handle large drains or long drains, while batteries can respond in milliseconds with accuracy but lack long-term management capabilities due to limited storage and long lifetimes.
The combination of financial strength and the change of the group that these countries have enjoyed with Bitcoin mining has made their neighbors jealous. In about half a decade, independent Bitcoin mining operations have gone from being seen as risky to being necessary. Even countries with high electricity prices found it more expensive to set up Bitcoin mining than the flexibility of renewables and BESS alone. ASICs, even several generations old, sold at high prices for a while as FOMO-driven demand took hold. Before long, it was more unique to get a power service without connecting to Bitcoin mining than with such a program.
Now it is 2036, we will have the next small event this year where the block reward will drop to 0.39 Bitcoin per block. Fortunately, Bitcoin’s high value as a global currency, surpassing the amount of gold in the market, led countries to use the digital currency as a neutral asset for trade between financial blocks and currencies. This led to a large shift to non-volatile channels, which increased the amount of money collected that exceeded the cost of block payments. However, the limits of mining continue due to internationalization at the national level and lead to international competition.
The first Bitcoin fans complained about the capture of the mining world, but unfortunately it was inevitable from the gaming perspective. When Bitcoin was first introduced to power the global financial system, the creation of the asset became an important political issue. None of the private companies had the ability to compete with national governments in terms of information, coordination and control of power. In other words, the only way to avoid a surge in Bitcoin mining would have been for the Bitcoin network to have stood its ground at its inception somewhere to become the world’s most popular currency. If that were the case, Bitcoin mining would still be a private business, but the network would not gain meaning beyond the rest of the economy.
This does not mean that mining is completely controlled by governments. Public sector partnerships are the backbone of the space, much like the energy industry was a decade ago. Although the petrochemical industry is a private enterprise, it is highly dependent on governments that hold oil and gas licenses. Likewise, independent power producers build power plants to sell power for profit, but they have to jump through regulatory hoops and sell to power plants that are at least under government supervision, if not owned. Bitcoin mining began operating under the premise that private companies built and operated data centers but with government-approved contracts outside of certain circumstances.
The most profitable companies in the space are those that design and manufacture ASICs. The industry is highly specialized and export driven just like the chip industry was in the 2020s during the first AI boom. These organizations are located in the US, China, or countries closely related to one of the two. Other countries have not been able to compete with the advances in chip design and other technological aspects of the defense technology competition between the two superpowers.
Since mining is the source of the country’s profit, the research and development of the machine that provides the limit has been partially funded by the government and is encouraged by modern knowledge. In exchange for this aid, the government restricts or permits foreign trade through laws similar to the International Traffic in Arms Regulations (ITAR) or the CHIPS Act. Acquiring high-end ASICs by countries that are not advanced enough to design and manufacture their own is as sweet for business as acquiring NVIDIA chips was during the AI boom.
While cypherpunks from the early 1900s may be excited about the action of Bitcoin mining, surprisingly the network’s fragmentation is as strong as ever. The increasing number of hashes has ensured that no single player can destroy the network. In addition, any emerging threat to the network created by one country can quickly resolve conflicts and temporarily unite the world against that country as a terrorist threat to the global financial system. Although many countries keep their currency as the backbone of their economy, every country in the world realizes the importance of Bitcoin thus allowing people to live a Bitcoin life all over the world. If Satoshi could choose between a distributed currency or a proof of work algorithm, he would probably choose the former. Let’s hope so, because that’s what happened.
This section will be shown soon Print it issue of Bitcoin Magazine, Issue 2036. We share it here as an early look at the ideas explored throughout the article.
