It costs the U.S. Mint more money to produce the penny than the one-cent coin is currently worth. While some cryptocurrency proponents use this fact to encourage greater use of Bitcoin, this form of currency also comes with considerable financial and environmental costs.
Many of us give little thought to the pennies and other spare change floating around in our homes, cars, inside vending machines, and at the bottom of our purses. In fact, as more of us rely on debit and credit cards for all of our spending rather than cash, it’s less often that we even find ourselves with pennies.
And while pennies and other small-value coins may seem insignificant to us, they still represent a significant amount of government spending because of their production costs. In fact, the manufacturing unit cost to produce one penny actually exceeds the coin’s face value.
In this article, we’ll discuss the cost to make one penny — both the financial costs and the environmental ones. We’ll also talk about how those compare to the costs to make Bitcoin and discuss which has a greater impact.
How much does it cost to make a penny?
When we talk about the cost to produce pennies — sometimes referred to as Lincoln cents — there are two major costs to consider: the financial costs and the environmental ones. We’ll discuss both of those below.
According to a 2021 report from the United States Mint, it costs about 2.1 cents to make each one-cent coin, more than twice the coin’s face value. That cost includes 1.8 cents to produce the penny, 0.26 cents for administrative costs, and 0.003 cents for distribution to Reserve Banks. Despite this cost, the US Mint produces millions of pennies each year.
|Costs of Goods Sold||$0.0181||$0.0744||$0.0386||$0.0843|
|Selling, General & Administrative||$0.0026||$0.0095||$0.0047||$0.0106|
|Distribution to FRB||$0.0003||$0.0013||$0.0006||$0.0014|
Unfortunately, the cost to produce most coins — including the penny — has actually increased in recent years. The penny specifically increased more than 19% in cost. Part of the cost increase could be explained by the decrease in circulating coins. Total production has decreased, leading to an increase in the cost per individual coin.
The penny is currently the cheapest piece of U.S currency to create. It’s about half of the cost of the next cheapest coin, which is the dime and the nickel. The quarter and half-dollar are the most expensive.
How does this cost compare to other currencies?
According to that same U.S. Mint report, pennies are the cheapest currency to produce, followed by dimes, nickels, quarters, and half dollars. (The dollar coin was not included in this study.) As for paper money, the U.S. $1 and $2 bills are the cheapest to produce, at about 6.2 cents each. The next cheapest bills, in order, are the $5, $10, $50, $20, and finally, $100 bills.
As you can see, the federal government isn’t exactly losing money by producing money, thanks to the fact that bills cost considerably less than their face value to produce. The U.S. Mint is also required to put out a biennial report where it shares its research into alternative metal compositions that could be used for American coins. However, so far nothing has come of those reports.
How does the cost of making a “penny” compare to a “Bitcoin penny”?
It depends on what you mean by a Bitcoin penny. As we show below, the average Bitcoin costs around $17,000 to mine. So if you define a Bitcoin penny as a hundredth of a Bitcoin, then it costs $170 to make one vs. the 2.1 cents of a Lincoln cent.
However, since a hundredth of a Bitcoin is worth $436 (at the date of publishing), that does not seem like a fair comparison.
If you look at the cost of mining the equivalent of a dollar cent ($0.01) in Bitcoin, that would be ₿2.3 x 10-7 or ₿0.0000002291 (based on a Bitcoin value of $43,650 — 4/6/2022) The cost to produce that would be $0.0039, which is 5.4 times less than what it costs to make a penny (Lincoln cent).
|Dollar value||Cost to mine/make|
|1 Bitcoin (₿)||$43,650 (as of 4/6/2022)||~$17,000|
The financial costs of producing the Lincoln cent aren’t the only ones worth discussing. There are also notable environmental impacts. The production of pennies requires copper and zinc, both of which require mining. Mining results in carbon dioxide emissions, as well as the release of other pollutants. The process also involves considerable water and electricity use.
It’s also worth noting that even though the United States recycles more than 80 million tons of metal each year, the U.S. Mint doesn’t use recycled materials to create any of our coins. And because pennies tend to fall through the cracks — both literally and figuratively — it’s likely their lifespans are significantly shorter than intended.
Should the U.S. keep using pennies?
Over the past decade especially, there have been plenty of proponents of getting rid of the penny altogether. Some vendors may even refuse to accept pennies because of their declining value.
While that doesn’t seem to be a serious consideration for the federal government, there are plenty of proposals to decrease the cost of production of coins.
How does the environmental cost of making a penny compare to a Bitcoin penny?
Finding reliable data on the environmental cost of manufacturing pennies and mining Bitcoin is not easy. Even reliable reports have to rely on many assumptions that come with varying degrees of certainty. For example, you have to make educated guesses on the source of the zinc used to mint a penny or the origin of the electric energy that runs the computers used to mine Bitcoin. Here is our best guest based on currently available research.
|Kilowatt-hours||CO2 emmissions||Cost to make|
|A penny (Lincoln cent)||2.58 kWh to mint||2.21 pounds (0.017 to mine the zinc)||$0.0210|
|$0.01 worth of Bitcoin||0.033 to mine||0.028 pounds||$0.0039|
Mining the zinc (pennies are 95% zinc) necessary for one penny (~2.5 grams) generates around 0.017 pounds of CO2. Minting a penny generates much higher emissions. According to a report by the U.S. Mint and estimates by a MarketWatch report, each cent requires 2.58 kWh, which is the equivalent of 2.064 pounds of CO2. Mining and minting generates around 0.017 pounds of CO2 for a total of 2.08 pounds of CO2.
Mining one Bitcoin requires an average of 143,000 kWh. The $0.01 equivalent of Bitcoin (assuming a Bitcoin value of $43,650) would require 0.033 kWh, which comes to around 0.028 pounds of CO2. This, of course, does not include the cost of maintaining the Bitcoin ledger and powering transactions.
Bottom line: Making a penny is — if you focus exclusively on the mining and manufacturing costs — is much more harmful to the environment than mining the equivalent in Bitcoin. However, there are several caveats.
- If you only consider the CO2 emissions required to mine the zinc used in a penny and the cost of mining a Bitcoin, penny’s have a smaller carbon footprint (0.017 vs 0.028 pounds of CO2).
- Bitcoin comes with energy hungry transaction costs, which pennies don’t require. So, although the mining of a Bitcoin penny costs much less to the environment than minting a penny, its lifetime cost is much higher.
- Pennies have a shelflife and they need to be replaced. On the other hand there will only ever be 21 million Bitcoins and they do not need replacing.
Note: our estimates are based on a Bitcoin value of $43,650 (4/6/2022) and an average of 0.85 pounds of CO2 emissions per kWh.
How much does it cost to make Bitcoin?
Bitcoin was the first digital currency. Created in 2009, it helped to launch today’s popularity of cryptocurrency and served as one of the launchpads for the blockchain technology that exists today. While Bitcoin isn’t technically a currency, according to the federal government, many people believe it should be. And people point to the costs of producing U.S. currency — and the fact that some pieces are becoming obsolete — as a further reason why we should turn to Bitcoin instead.
However, Bitcoin isn’t without its costs, both financial and environmental. Below we’ll talk about the financial costs of creating Bitcoin, as well as the environmental impact it has had.
Bitcoin is created through a process called mining. New Bitcoins enter into circulation when miners solve complex mathematical formulas. This process is known as proof-of-work since miners have to prove that they’ve completed the math problem.
The cost of mining the equivalent of $0.01 in Bitcoin is more than five times cheaper than making a penny, but the costs are still substantial. Completing the mathematical formulas to mine Bitcoin requires expensive and powerful computer equipment, known as an application-specific integrated circuit (ASIC) miner. The process also requires a significant amount of energy. According to Mining Daily, the average lifetime cost to mine a single Bitcoin ranges from $15,000 to $19,000.
It’s worth noting that, unlike pennies, it’s not our tax dollars paying to mine Bitcoin. Instead, individuals take on those costs. However, the environmental costs we’ll discuss below can affect everyone.
Even more important than the financial costs for many critics are the environmental costs of mining Bitcoin. Recent data from the University of Cambridge shows that Bitcoin uses more energy per year than some entire countries, including Norway, Ukraine, and Poland.
Just mining one Bitcoin requires an average of 143,000 kWh. The $0.01 equivalent of Bitcoin (assuming a Bitcoin value of $43,650) would require 0.033 kWh, which comes to around 0.028 pounds of CO2. This, of course, does not include the transactions costs required to process transfers and maintain the Bitcoin ledger.
In addition to this overwhelming electrical energy usage, Bitcoin production has also demonstrated a high carbon footprint and electronic waste. And while it may not seem like it, the usage of that much extra electricity has major environmental impacts. Many countries, including the United States, still rely heavily on dirty energy sources for our electricity, which means additional power results in more carbon emissions, which contribute to climate change.
- A U.S. penny costs roughly 2.1 cents to produce, which is more than twice its face value.
- In addition to its financial costs, the production of pennies and other currency also has environmental impacts.
- Proponents of Bitcoin and other cryptocurrencies use these costs as a reason why consumers should rely more heavily on digital currencies.
- Bitcoin also has major costs associated with it, including the cost of the hardware and electricity to mine it, as well as the environmental impact of each Bitcoin transaction.
View Article Sources
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- How do I find out information about my student loans? — Consumer Financial Protection Bureau
- U.S. Mint Sustainability Report — U.S. Mint
- Here’s the one currency worse for the environment than bitcoin — MarketWatch
- How much does it cost to mine? (Update) — MinerDaily
- How much carbon dioxide is produced per kilowatthour of U.S. electricity generation? — EIA
- Money Facts: Fun Facts About Money in America — SuperMoney
- 11 Smart Money Moves You Can Try Today — SuperMoney
- The Mystery of Bitcoin Revealed : Myth, Hype & The Truth Behind It All — SuperMoney
- How to Buy Bitcoin with a Credit Card: Top 5 Places With the Lowest Fees in 2022 — SuperMoney
- Best Online Brokers for Stock Trading in 2022 — SuperMoney