The bitcoin market now-exceeds $1 trillion with its price rising tenfold in a year, but focus is shifting towards the huge power requirements needed to sustain the online currency.
Here are some questions & answers about bitcoin:
How much energy does it consume?
Total energy consumed-by the bitcoin mining process could reach 128 TWh (terawatt-hours) this year, consistent with the Cambridge Bitcoin Electricity Consumption Index (CBECI), which is compiled-by Cambridge University researchers.
That is 0.6% of the world’s total electricity production or more than the entire consumption of Norway.
“These numbers can appear large, when compared to medium-sized countries or emerging technologies like electric vehicles (80 TWh in 2019), but small when compared to other end-uses,” like air conditioning & fans, said International Energy Agency analyst George Kamiya.
Google’s entire operation consumed 12.2 TWh in 2019 and all the data-centers in the world, excluding those that mine bitcoin, jointly consume around 200 TWh annually.
Economist Alex de Vries, who put together one among the first indices on the subject in 2016, is even more pessimistic.
He believes, the recent rise in bitcoin’s price will intensify its use and drive-its energy consumption beyond that of all other data centers combined.
Why is bitcoin so energy intensive?
The promise of a juicy reward has fueled the increase in giant data centers dedicated to bitcoin.
Bitcoins are earned-by people in the network called “miners“, who solve deliberately-complicated equations using brute force processing power, under the so-called “proof of work“ protocol.
The protocol is designed to-maintain network integrity, ensuring a stable supply of the currency by-making the calculations more difficult, when many people are mining & easier when few miners are at work.
The system is designed in order that around every 10 minutes, the network awards some bitcoin to those, who have successfully cracked the puzzle.
“Proof of work” was one among the founding principles of the best-known cryptocurrency, created in 2008 by an anonymous person, or group that wanted a decentralized digital currency.
“If you’ve new machines that are more efficient, you are going to use more machines,” to corner a larger share of the mining market, said Michel Rauchs, who led the team that created CBECI.
With the price of bitcoin now-running at more than $55,000, miners are running at full-capacity.
Bitcoin struck an all-time peak at $61,742 last Saturday on feverish investor demand.
What is the environmental impact?
Bitcoin advocates say, rapid development of renewable energy in the power plants sectors, means, the currency has a moderate effect on the environment.
But researchers at University of New Mexico, estimated in 2019, before the recent price take-off that every dollar of value created-by bitcoin generated 49 cents of health & environmental damage in United States.
In addition, critics of cryptocurrencies point-out the strong geographical concentration of its use in countries like Iran.
Hit-by international sanctions that prevent it from exporting its oil and benefitting from cheap, and abundant electricity, miners have multiplied in the Middle Eastern nation so as escape the eye of Washington.
“There is about 5 to 10 percent of mining that can be traced to Iran,” calculated Michel Rauchs.
But the vast-majority of activity is in China, where for part of the year, Chinese miners take advantage of strong hydroelectric power generation in the south of country, he added.
But they migrate north during the dry season, where electricity is produced-by lignite, a certain polluting coal.
“If you try to see the footprint of bitcoin at any given time, you are going to get completely different numbers,” explained Rauchs.
Is change possible?
Critics became more vocal with bitcoin’s rising popularity.
The second-most used cryptocurrency, ethereum, is considering moving from the proof of work protocol to a less energy intensive system that would avoid some of the energy guzzling processes.
But bitcoin would face huge difficulties in adopting such-changes, which run the risk of creating the network less decentralized & secure.
Proof of work “is so-deeply ingrained in its value, in its culture, it would amount to a sacrilege,” to abandon the protocol, said Rauchs.
He pointed-out that no major reform of the cryptocurrency has been adopted by its community, despite numerous attempts.
