Bitcoin miners, just like gold miners, use real resources to produce bitcoins. How much? In April when bitcoins traded for around $100 the electricity consumption of bitcoin miners was an astounding 1000 MGW hours a day, enough to power about 31,000 US homes or some $150,000 in daily expenditure.
As the price of bitcoin rises, so do the mining costs. Thus, today with bitcoin trading around $1000 the costs are much higher. According to BlockChain’s Bitcoin Statistics, miners are currently using 98,000 MGW hours or $14 million dollars of electricity a day to mine bitcoins. (One wonders, whose electricity?) And that is just the electricity costs, miners are also spending on hardware which has evolved from CPUs, to graphics processors to field-programmable gate arrays (FPGAs) and now to application-specific integrated circuits (ASICs).
Unlike the resource costs of a gold standard, which Milton Friedman once (over?) estimated at some 2.5% of GDP ever year forever, bitcoin mining may slow once the bitcoin limit of 21 million bitcoins is reached. Even that is tricky, however, because bitcoin mining currently subsidizes transaction costs so these will rise as bitcoin mining declines. Transaction costs are a necessary cost for a useful purpose so not all the mining is a net cost. Printing money is cheaper than gold or bitcoin mining but don’t forget that moving around fiat currency, by Brink’s truck or electronically, also has resource costs.
Hat tip for discussion to Eli Dourado.
Addendum: It’s an interesting bit of economics to ask why the cost of electricity doesn’t impact these numbers (even though it is used to calculate these numbers!).