Bitcoin mining electricity use

Why Bitcoin Mining Consumes More Electricity Than Entire Countries

New analysis shows Bitcoin’s electricity consumption tops Argentina.

Analysis by the University of Cambridge shows that Bitcoin (BTC) consumes more electricity than the entire country of Argentina, the BBC writes.

Cambridge researchers say cryptocurrency «mining» for Bitcoin — which uses heavy computer calculations to verify transactions — consumes around 121.36 terawatt-hours (TWh) a year.

Using an analysis tool that generates energy estimates for cryptocurrencies, the team of researchers ranked Bitcoin’s electricity consumption above Argentina (121 TWh), the Netherlands (108.8 TWh), and the United Arab Emirates (113.20 TWh) — and they say it is close to reaching the consumption levels of Norway (122.20 TWh).

The amount of energy could also meet the energy needs of the University of Cambridge itself for 688 years, the results show.

What’s more, the team behind the research say this level of energy consumption is unlikely to go down unless the value of the currency slumps.

As Bitcoin price increases, so does its energy consumption

After Bitcoin’s value rose to a record $48,000 this week following electric vehicle maker Tesla’s $1.5 billion investment in the currency, and its announcement that it might soon accept BTC payments, critics are questioning the company’s move.

They say that Tesla’s investment in Bitcoin contradicts its image as a force for environmental progress.

As the price of Bitcoin increases, so does the currency’s energy consumption, says Michael Rauchs, a researcher at The Cambridge Centre for Alternative Finance, who co-created the tool that generates energy consumption estimates for cryptocurrencies.

«It is really by design that Bitcoin consumes that much electricity,» Mr. Rauchs told the BBC. «This is not something that will change in the future unless the Bitcoin price is going to significantly go down.»

As a counter-point, the researchers do say that Bitcoin is one of a large subset of energy consumers that can rank alongside entire countries.

For example, always-on but inactive home devices in the U.S. alone could power the entire Bitcoin network for a year. Overall, the estimates show that Bitcoin accounts for 0.56 percent of the world’s energy consumption.

Bitcoin mining’s carbon footprint

Bitcoin «mining» involves using — often specialized — servers to connect to the cryptocurrency blockchain network.

These servers are tasked with verifying transactions made by people sending or receiving Bitcoin. The process involves solving puzzles that act as a barrier for anyone attempting to fraudulently edit the global Bitcoin transaction history.

Bitcoin miners are rewarded by occasionally receiving small amounts of Bitcoin in a feature that is often likened to a lottery.

Miners often fill entire warehouses with Bitcoin mining computers. This is a high-energy consumption practice as the servers are typically on around the clock in order to be able to carry out the verifications — a previous study from 2019 showed that Bitcoin mining produces around 22 megatons of CO2 emissions a year, which is comparable to the total emissions of Las Vegas.

The University of Cambridge’s tool models the economic lifetime of the world’s Bitcoin miners and assumes all the Bitcoin mining machines worldwide are working with various efficiencies.

Using an average electricity price per kilowatt hour ($0.05) and the energy demands of the Bitcoin network, the researchers estimated how much electricity is being consumed at any one moment in time.

The parallel between Tesla’s Bitcoin investment, environmental subsidies

Following Tesla’s $1.5 billion Bitcoin investment, commentators said they were surprised by the implications of the investment:

«Elon Musk has thrown away a lot of Tesla’s good work promoting energy transition,» David Gerard, author of Attack of the 50 Foot Blockchain, argued.

«Tesla got $1.5bn in environmental subsidies in 2020, funded by the taxpayer. It turned around and spent $1.5bn on Bitcoin, which is mostly mined with electricity from coal. Their subsidy needs to be examined,» he continued.

While some Bitcoin miners have used their servers to heat entire homes, there is still a worry that the cryptocurrency’s CO2 emissions will spiral outwards as the currency rises in price.

Tesla CEO Elon Musk’s recent comment — in an appearance on exclusive social network Clubhouse — that Bitcoin is «on the verge» of being widely accepted as a currency by the general public may work against the public image of the electric vehicle company.

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Bitcoin consumes ‘more electricity than Argentina’

By Cristina Criddle
Technology reporter

Bitcoin uses more electricity annually than the whole of Argentina, analysis by Cambridge University suggests.

«Mining» for the cryptocurrency is power-hungry, involving heavy computer calculations to verify transactions.

Cambridge researchers say it consumes around 121.36 terawatt-hours (TWh) a year — and is unlikely to fall unless the value of the currency slumps.

Critics say electric-car firm Tesla’s decision to invest heavily in Bitcoin undermines its environmental image.

The currency’s value hit a record $48,000 (ВЈ34,820) this week. following Tesla’s announcement that it had bought about $1.5bn bitcoin and planned to accept it as payment in future.

But the rising price offers even more incentive to Bitcoin miners to run more and more machines.

And as the price increases, so does the energy consumption, according to Michel Rauchs, researcher at The Cambridge Centre for Alternative Finance, who co-created the online tool that generates these estimates.

“It is really by design that Bitcoin consumes that much electricity,” Mr Rauchs told BBC’s Tech Tent podcast. “This is not something that will change in the future unless the Bitcoin price is going to significantly go down.»

The online tool has ranked Bitcoin’s electricity consumption above Argentina (121 TWh), the Netherlands (108.8 TWh) and the United Arab Emirates (113.20 TWh) — and it is gradually creeping up on Norway (122.20 TWh).

The energy it uses could power all kettles used in the UK for 27 years, it said.

However, it also suggests the amount of electricity consumed every year by always-on but inactive home devices in the US alone could power the entire Bitcoin network for a year.

Mining Bitcoin

In order to «mine» Bitcoin, computers — often specialised ones — are connected to the cryptocurrency network.

They have the job of verifying transactions made by people who send or receive Bitcoin.

This process involves solving puzzles, which, while not integral to verifying movements of the currency, provide a hurdle to ensure no-one fraudulently edits the global record of all transactions.

As a reward, miners occasionally receive small amounts of Bitcoin in what is often likened to a lottery.

To increase profits, people often connect large numbers of miners to the network — even entire warehouses full of them.

That uses lots of electricity because the computers are more or less constantly working to complete the puzzles.

The University of Cambridge tool models the economic lifetime of the world’s Bitcoin miners and assumes that all the Bitcoin mining machines worldwide are working with various efficiencies.

Using an average electricity price per kilowatt hour ($0.05) and the energy demands of the Bitcoin network, it is then possible to estimate how much electricity is being consumed at any one time.

Environmental conundrum

“Bitcoin is literally anti-efficient,” David Gerard, author of Attack of the 50 Foot Blockchain, explained. “So more efficient mining hardware won’t help — it’ll just be competing against other efficient mining hardware.

“This means that Bitcoin’s energy use, and hence its CO2 production, only spirals outwards.

“It’s very bad that all this energy is being literally wasted in a lottery.”

The price of Bitcoin rose rapidly on Monday after Tesla announced its investment.

But commentators say the investment clashes with the electric car firm’s previous environmental stance.

“Elon Musk has thrown away a lot of Tesla’s good work promoting energy transition,” Mr Gerard said. “This is very bad. I don’t know how he can walk this back effectively.

«Tesla got $1.5bn in environmental subsidies in 2020, funded by the taxpayer.

«It turned around and spent $1.5bn on Bitcoin, which is mostly mined with electricity from coal. Their subsidy needs to be examined.»

A carbon tax on cryptocurrencies could be introduced to balance out some of the negative consumption, Mr Gerard suggested.

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Electricity needed to mine bitcoin is more than used by ‘entire countries’

Bitcoin mining – the process in which a bitcoin is awarded to a computer that solves a complex series of algorithm – is a deeply energy intensive process

A man uses a bitcoin ATM in Hong Kong. Photograph: Kin Cheung/AP

A man uses a bitcoin ATM in Hong Kong. Photograph: Kin Cheung/AP

Last modified on Sat 27 Feb 2021 08.03 GMT

It’s not just the value of bitcoin that has soared in the last year – so has the huge amount of energy it consumes.

The cryptocurrency’s value has dipped recently after passing a high of $50,000 but the energy used to create it has continued to soar during its epic rise, climbing to the equivalent to the annual carbon footprint of Argentina, according to Cambridge Bitcoin Electricity Consumption Index, a tool from researchers at Cambridge University that measures the currency’s energy use.

Recent interest from major Wall Street institutions like JPMorgan and Goldman Sachs probably culminated in the currency’s rise in value and an endorsement by Tesla’s Elon Musk helped drive its recent high as investors bet the cryptocurrency will become more widely embraced in the near future.

While the recent fall has dented Musk’s fortune, bitcoin also poses a threat to the company’s mission toward a “zero-emission future” and poses serious questions for governments and corporations looking to curb their own carbon footprints.

Bitcoin mining – the process in which a bitcoin is awarded to a computer that solves a complex series of algorithms – is a deeply energy-intensive process.

“Mining” bitcoin involves solving complex math problems in order to create new bitcoins. Miners are rewarded in bitcoin.

Earlier in bitcoin’s relatively short history – the currency was created in 2009 – one could mine bitcoin on an average computer. But the way bitcoin mining has been set up by its creator (or creators – no one really knows for sure who created it) is that there is a finite number of bitcoins that can be mined: 21m. The more bitcoin that is mined, the harder the algorithms that must be solved to get a bitcoin become.

Now that over 18.5m bitcoin have been mined, the average computer can no longer mine bitcoins. Instead, mining now requires special computer equipment that can handle the intense processing power needed to get bitcoin today. And, of course, these special computers need a lot of electricity to run.

The amount of electricity used to mine bitcoin “has historically been more than [electricity used by] entire countries, like Ireland”, said Benjamin Jones, a professor of economics at the University of New Mexico who has researched bitcoin’s environmental impact. “We’re talking about multiple terawatts, dozens of terawatts a year of electricity being used just for bitcoin … That’s a lot of electricity.”

Proponents of bitcoin say that mining is increasingly being done with electricity from renewable sources as that type of energy becomes cheaper, and the energy used is far lower than that of other, more wasteful, uses of power. The energy wasted by plugged-in but inactive home devices in the US alone could power bitcoin mining for 1.8 years, according to the Cambridge Bitcoin Electricity Consumption Index.

But environmentalists say that mining is still a cause for concern particularly because miners will go wherever electricity is cheapest and that may mean places that use coal. According to Cambridge, China has the most bitcoin mining of any country by far. While the country has been slowly moving toward renewable energy, about two-thirds of its electricity comes from coal.

Since there is no government body or organization that officially tracks where bitcoin is being mined and what type of electricity miners are using, there is no way of knowing whether miners are using electricity that is fueled by renewable energy or fossil fuels.

Mining rigs can move from place to place depending on where energy is cheapest, which makes mining particularly hard to track.

“The places where you mine [bitcoin] can be moved around and, in some cases, you don’t even know where they are,” said Camilo Mora, a professor of geography and environment at the University of Hawaii.

Cambridge’s Centre for Alternative Finances estimates that bitcoin’s annualised electricity consumption hovers just above 115 terawatt-hours (TWh) while Digiconomist’s closely tracked index puts it closer to 80 TWh.

A single transaction of bitcoin has the same carbon footprint as 680,000 Visa transactions or 51,210 hours of watching YouTube, according to the site.

A paper from 2018 from the Oak Ridge Institute in Ohio found that one dollar’s worth of bitcoin took 17 megajoules of energy, more than double the amount of energy it took to mine one dollar’s worth of copper, gold and platinum. Another study from the UK published last year said that computer power required to mine Bitcoin quadrupled in 2019 compared with the year before, and that mining has had an influence in prices in some power and utility markets.

Bitcoin’s advocates have made it clear that they believe any environmental costs that come with mining bitcoin are worth the broader impacts it could have on society.

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How much electricity does bitcoin mining use?

Bitcoins are the most famous virtual currency. Anyone can participate in bitcoin transactions and receive compensation in exchange. However, to do so, you need to use electricity. Does bitcoin mining pay off if you compare what you earn to what you spend?

The latest financial trend operates in cryptocurrencies. These include litecoins, peercoins, and namecoins… but the first and most popular of them all is called bitcoin.

We’ll explain what bitcoin is, what bitcoin mining means, and whether it is profitable, taking into account the consumption of electricity it involves.

What is a bitcoin?

Bitcoin was the first cryptocurrency. It was founded in 2009, and like the other cryptocurrencies, it is digital money. You cannot touch it with your hands, but it can be used to both purchase and sell things, and for investments.

Cryptocurrencies like bitcoin allow you to carry out transfers of funds between individuals, without any intermediary. All transactions are anonymous, irreversible and guaranteed, in the sense that it is impossible to pay for something without having funds.

How do bitcoins work?

A good analogy is Wikipedia, an encyclopaedia written and revised by practically anonymous collaborators. Anyone can contribute, correct and add nuances in a decentralised structure that is continuously being tested.

The reliability of Wikipedia depends essentially on the question of viewpoint. It is clear that errors occasionally sneak through, but it is also certain that they are usually corrected with unimaginable speed compared to “traditional” encyclopaedias, which had to be sent to have a new edition printed in order to amend errors or incorporate new information.

“Bitcoin miners make their computers available to the system in exchange for a small remuneration.”

The security of cryptocurrencies is often questioned. There is no State or Central Bank behind the bitcoin system, and so it can only be protected from fraud and falsification through mining.

Bitcoin mining means using your computer to create and approve a large number of currency transactions. Like the editors of Wikipedia, the bitcoin users themselves generate and supervise the algorithms behind each transaction.

Unlike Wikipedia, bitcoin mining is not a selfless act. Bitcoin miners receive payment for their work.

Bitcoin transactions are grouped into blocks. Processing these blocks and encrypting them to guarantee security requires complex mathematical calculations. Bitcoin miners, with their machines, act as supervisory authorities in the market.

In exchange, the system distributes earnings between those who successfully participate in the coding and supervision of the transactions.

We’re talking about thousands of computers connected online and making calculations. It constitutes the most powerful computing body that currently exists. It’s bigger than Google. It’s bigger than NASA. As nobody has a comparable processing capacity, nobody can carry out scams or capital flight in the bitcoin universe.

“The bitcoin mining network is a more powerful and complex system than NASA’s.”

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