The exploding price of the cryptocurrency, bitcoin, in recent months has triggered doubts not only about the financial sustainability of the rally, but also about the environmental sustainability of the currency itself.
One alarmist article in Newsweek said that bitcoin computer operations could consume "all of the world's energy by 2020". The website Digiconomist claims that bitcoin operations use as much energy as Denmark, or enough to power 3,071,823 US households.
Other analysts say the true figure is smaller, albeit hard to measure because it is spread around the world, generated by an unclear mix of machines and co-mingled with other sources of electricity demand. But several experts told The Washington Post that bitcoin probably uses as much as 1 gigawatt to 4 gigawatts, or billion watts, of electricity, roughly the output of one to three nuclear reactors. That would amount to less than 1 per cent of US electricity.
That won't devour the world's entire electricity resources, but it's a significant drain – and it's growing fast. Moreover, some of the electricity used, in China in particular, could come from burning coal – a fossil fuel that contributes most heavily to climate change.
The reason bitcoin uses a lot of energy is rooted in the way the bitcoin network operates. Unlike other forms of currency, there is no central issuing authority. And unlike payment processors, there is no corporate core. The bitcoin network is designed to be distributed but secure, and is agnostic to energy consumption. In a world where bitcoin is considered a valuable asset, as it currently is, a significant – and growing – burden on global energy consumption is inevitable.
To compile this comprehensive record, the bitcoin network relies on "miners". Bitcoin miners have to perform a phenomenally large number of computer calculations to track and verify transactions and solve complex puzzles to obtain bitcoin rewards. As bitcoins become more popular and valuable, the puzzles grow more difficult, and therefore the demand for high-powered computer processing grows as well. That means more energy usage.
The difficulty of uncovering a new block has increased along an exponential curve of late, even as the number of calculations per second has grown sharply as well since late last year. The bitcoin network is now generating some 14 million trillion "hashes" or possible solutions to a problem, per second.
“If the price of bitcoin continues to rise, it will continue to use more energy,” said Mike Reed, director of the Blockchain Program Office for Intel Corp. The reason, he said, is that the price represents “an economic incentive to add more mining equipment to the network … and that incentive is built in.”
“At the moment, the value of bitcoin is crazily high, a lot of people want to get into the mining game,” explains David Malone, a lecturer at Maynooth University in Ireland who co-authored a paper in 2014 finding that at that time, the bitcoin network was using up about as much electricity as his entire country. “And then … bitcoin responds by making the problems more difficult.”
Malone and a colleague calculated in 2014 that the total power required for bitcoin calculations could be between .1 and 10 gigawatts, or billion watts, of instantaneous power. Ireland at the time was consuming about 3 gigawatts steadily, so he compared the two in terms of order of magnitude.
Still, there are sceptics. Jonathan Koomey, an energy researcher and lecturer at Stanford University who studies the energy consumption of data centres, has found that they consume about 1.8 per cent of US electricity, of which he sees bitcoin as a small fraction.
"While bitcoin mining electricity use may have grown, it is a tiny part of all US data-centre electricity use, and that conclusion is true for the world as well," says Koomey. "As we transition more and more workloads to the cloud, it is unlikely that total data centre electricity use will grow much in the next few years."
If bitcoin’s price, and concurrent energy consumption, continued to rise at the clip seen this year, that could be a serious problem. But it’s less clear whether the current rate of growth in consumption would continue.
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