Crypto mining uses up 1,310 times less energy than the entire world uses in a year Soaring energy prices and climate change are making Bitcoin’s powe
Crypto mining uses up 1,310 times less energy than the entire world uses in a year
Soaring energy prices and climate change are making Bitcoin’s power problem an increasingly hot topic, even if some inventive entrepreneurs are finding ‘cleaner’ sources of electricity.
Several Bitcoin miners have been using green energy and non-renewable waste to produce the crypto king.
For example, Square, founded by Twitter owner Jack Dorsey, said in July it’s funding a solar-powered Bitcoin mining facility with Blockstream, while Great American Mining now delivers portable Bitcoin mining machines to oil and gas fields.
Meanwhile, crypto mining company Argo Blockchain PLC (LSE:ARB, OTCQX:ARBKF, NASDAQ:ARBK, ETR:0XP) also said last year it bought two data centres in Canada powered almost entirely by hydropower.
Nevertheless, scrutiny over Bitcoin’s power burden won’t go away quickly – especially when the likes of the United Nations see only a 50% chance of limiting the rise of the Earth’s average temperature by 1.5C.
The Intergovernmental Panel on Climate Change (IPCC), a United Nations arm, on Tuesday, said cryptocurrencies will require greater volumes of energy in the future, whilst adding this was a “growing concern” in terms of climate change.
At the same time, however, it highlighted “considerable uncertainty” surrounding the energy use of blockchain infrastructure.
So this got us thinking… how green is the digital currency king and what is its energy outlook?
How damaging to the environment is Bitcoin?
Bitcoin uses proof of work (PoW), which is extremely energy-intensive, for coins to be mined and to validate transactions.
It is a form of cryptographic proof where one person solves a mathematical puzzle to prove to a verifier that a certain amount of processing power was used.
PoW is chosen because it is a decentralised method of verifying transactions, which makes it virtually impossible to misuse or hack the blockchain.
“If the value of the Bitcoin or Ethereum network rises, the energy consumed must generally also rise, as it is the cost of that energy that protects the value stored in the network,” one expert said.
One Bitcoin transaction uses 1,544 kilo-watts hour (kWh) to complete, which is equal to around 53 days of power for the average US household, according to CNet, citing the Digiconomist’s Bitcoin Energy Consumption Index.
At 121.36 terawatt-hours (TWh), crypto mining (much of it is attributed to Bitcoin production) would be ranked in the top 30 countries by energy consumption, an analysis from Cambridge University said last February.
Meanwhile, 143,000kWh is required to mine one Bitcoin, on average.
That is roughly equivalent to a one-hour flight on a Boeing 747, the planemaker said, or the power needed in a year to run 39 UK homes, according to Home Serve estimates.
“While it is clear that the energy requirements of global Bitcoin mining have grown significantly since 2017, recent literature indicates a wide range of estimates for 2020 (47 TWh to 125 TWh) due to data gaps and differences in modelling approaches,” the IPCC said.
Although some experts believe this is because crypto widely grew in popularity, so the increased energy requirements were simply due to higher demand, not rising inefficiencies.
Naeem Aslam, Avatrade chief market analyst, said: “Bitcoin is a lot greener today than it was 10 years ago or five years ago and this is what we need to focus on.
“The people who question Bitcoin about being green or not need to think about fiat [currencies] and how green [that is].”
What are the greener options for Bitcoin?
If Bitcoin were to be mined via the proof of stake process, the energy consumed would be 99.99% lower, NBC News said, citing Danny Ryan, an Ethereum Foundation researcher, of decentralised computer systems and blockchain technology.
Proof of stake requires users to stake their coins to become a validator in the network, where they then help order transactions and create new blocks so nodes can agree on the state of the network.
Ethereum, which is the second-largest crypto by market value, announced in January it is in the process of moving to the consensus mechanism PoS.
Some of the best-known altcoins that also use PoS are Cardano, Solana, Polkadot, Cosmos, Tezos and VeChain.
PoS has been proven to not be as secure or stable as proof of work, Business Insider added, as validation power constantly given to the largest stakeholders may result in a form of centralisation, which cannot occur in PoW.
Is Bitcoin partly to blame for surging energy prices?
Crypto mining, which is largely made up by Bitcoin, uses approximately 123 TWh globally per year, Money Supermarket said.
The annual global consumption was estimated to be 580mln terajoules (TJ), according to the World Counts.
One TWh is equal to 3600TJ.
So, using Money Supermarket’s estimate rather than Cambridge University’s, crypto mining uses up 1,310 times less energy than the entire world uses in a year.
“Bitcoin has no relation to energy prices; energy prices are up mainly due to sanctions on Russia and less oil supply,” Aslam commented.
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