The increase in the price of Bitcoin has increased its electricity consumption.
The incredible increase in the price of Bitcoin last year has raised its overall electricity consumption, as people around the world are putting more energy-hungry computers online to exploit the digital currency.
An index of cryptocurrency analyst Alex de Vries, aka Digiconomist, estimates that with current prices, it would be profitable for Bitcoin miners to spend more than 24 terawatt-hours of electricity annually as they compete to solve increasingly difficult cryptographic puzzles to exploit the coin. That's almost the same amount of energy used by Nigeria, a country of 186 million people, in a year.
This translates into the use of a staggering 215 kilowatt-hours (KWh) per Bitcoin transaction (there are currently around 300,000 transactions per day). Since the average American household consumes 901 kWh per month, each Bitcoin transfer uses enough energy to meet the needs of a comfortable home, and everything in it, for almost a week. On a larger scale, the De Vries index shows that bitcoin miners around the world at one time may be using enough electricity to power approximately 2.26 million American households.
Expressing the use of Bitcoin energy based on transactions is a useful abstraction. Bitcoin uses x energy in total, and this energy guarantees / assures approximately 300 thousand transactions per day. Thus, this measure shows the value we get for all that electricity, since the transaction verified (and our confidence in it) is, ultimately, the final product.
It's worth asking us difficult questions about the environmental
footprint left by Bitcoin
Since 2015, Bitcoin's electricity consumption has been very high compared to conventional digital payment methods. This is because the price in dollars of Bitcoin is directly proportional to the amount of electricity that can be used profitably to exploit it. As the price increases, miners add more computing power to get new Bitcoins and transaction fees.
It is impossible to know exactly how much electricity the Bitcoin network uses. But we can perform a quick calculation of the minimum energy that Bitcoin could use, assuming that all miners run the most efficient hardware without loss of efficiency due to residual heat. To do this, we will use a simple methodology that we already present in a previous Motherboard coverage. Which would give us a constant total operating factor of just over one gigawatt.
That means, at a minimum, the global Bitcoin mining could meet the daily needs of 821,940 average American households.
In other words, the global mining of Bitcoin represents a minimum of 77KWh of energy consumed per Bitcoin transaction. Even as an unrealistic lower minimum, this figure is high: as wrote the senior economist Teunis Brosens of the Dutch bank ING, it is enough to satisfy all the electrical needs of his own house in the Netherlands for almost two weeks.
Digiconomist's less optimistic estimate for energy costs per transaction now amounts to roughly 215 kWh of electricity. That's more than enough to fill two Tesla batteries, run an efficient fridge / freezer for a full year or boil 1,872 liters of water in a boiler.
It is important to remember that the De Vries model is not accurate. It makes assumptions about the economic incentives available to miners at a given price level, and presents a prospective prediction of where the miners' electricity consumption might go. Despite this, it is quite clear that even at the lowest level of 77 KWh per transaction, we have a problem. At the 215 KWh level, we have an even bigger problem.
That problem is carbon emissions. De Vries has come up with some estimates by reviewing the available data on a Bitcoin mine powered by coal in Mongolia. He concluded that only this mine is responsible for 8,000 to 13,000 kg of CO2 emissions for each Bitcoin it extracts, and 24,000 to 40,000 kg of CO2 per hour.
As the Twitter user Matthias Bartosik mentioned in some similar estimates, the average European car emits 0.1181 kg of CO2 per kilometer driven. So, for every hour that the Mongolian Bitcoin mine operates, it is responsible for (at least) the CO2 equivalent of more than 203,000 kilometers traveled by car.
As the price of Bitcoin rises, so does its electricity consumption and, therefore, its global carbon emissions. I asked De Vries if it was possible that Bitcoin could find a way out of this problem.
"Blockchain is an inefficient technology by design, because we build trust by building a system based on distrust.If you just trust yourself and a set of rules (the software), you have to validate against those rules everything that it happens by yourself, that's the life of a blockchain nodule, "he said through a direct message.
This comes at the heart of Bitcoin's central innovation, and also to its central commitment. To achieve a functional and reliable decentralized payment system, Bitcoin imposes some very costly inefficiencies to the participants, for example, voracious electricity consumption and low transaction capacity. The proposed improvements, such as SegWit2x, promise to increase the number of transactions that Bitcoin can handle at least double and reduce network congestion. But, since Bitcoin is thousands of times less efficient per transaction than a credit card network, it will have to become thousands of times better.
In the context of climate change, uncontrolled fires and hurricanes break records, it is worth asking us difficult questions about the environmental footprint left by Bitcoin and what we want to use it for. Do most transactions really need to elude trusted third parties such as banks and credit card companies, which can operate much more efficiently than the decentralized Bitcoin network? However imperfect these financial institutions may be, for most of us, it is very likely that the answer is no.
Update: the article has been updated to include the fact that the Bitcoin price reached more than $ 7,000 on November 2.
Correction: Due to a typo, this article originally stated that the coal-driven mine is responsible for 8,000 to 13,0000 kg of CO2 emissions for each bitcoin it extracts. The figure is in fact 13,000 kg. The article has been updated. (infobae.com)