The epic rise of Bitcoin in the past week saw the cryptocurrency surpass $7000 in value. Along with the windfall is a soaring increase in electricity consumption as more and more users are gathering online to mine for currency.
Miners add new sets of transaction blocks around every ten minutes, the process of building a valid block is largely based on completing a puzzle through trial and error, meaning miners make many attempts every second to try and find the right value for a component called a “nonce.”
All this effort per second is called a hash rate, and that is expressed in Gigahash per second. It is estimated that with the current prices, miners would use over 24 terawatt-hours of electricity annually. The same amount of power used by a country of over 100 million people.
“To put the energy consumed by the Bitcoin network into perspective, we can compare it to another payment system like VISA for example. Even though the available information on VISA’s energy consumption is limited, we can establish that the data centers that process VISA’s transactions consume energy equal to that of 50,000 U.S. households. We also know VISA processed 82.3 billion transactions in 2016. With the help of these numbers, it is possible to compare both networks and show that Bitcoin is extremely more energy intensive per transaction than VISA,” describes cryptocurrency analyst Alex de Vries aka Digiconomist, as reported by VICE’s Motherboard.
Miner average about 215 kilowatt-hours (KWh) used for each transaction, and there are 300,000 transactions per day. A typical American household consumes around 901KWh per month. Therefore every Bitcoin transfer equals the amount of power consumed in a fairly large home for an entire week.
Perhaps it’s time to consider Bitcoin’s environmental impact.
Carbon emissions play a significant role in powering Bitcoin. Digiconomist discovered that a single Bitcoin mine in Mongolia is responsible for 8,000 to 13,000 kg CO2 emissions per Bitcoin it mines, and 24,000 - 40,000 kg of CO2 per hour.
Is it possible for Bitcoin to reverse the damage?
"Blockchain is inefficient tech by design, as we create trust by building a system based on distrust. If you only trust yourself and a set of rules (the software), then you have to validate everything that happens against these rules yourself. That is the life of a blockchain node," he said via direct message, Digiconomist told Motherboard.
However, he believes there are alternatives, namely Proof-of-stake is a consensus algorithm which allows coin owners, as opposed to miners, create blocks. This removes the need for power-sucking machines that produce multiple hashes per second.
“Bitcoin could potentially switch to such a consensus algorithm, which would significantly improve sustainability. The only downside is that there are many different versions of proof-of-stake, and none of these have fully proven themselves yet. Nevertheless, the work on these algorithms offers good hope for the future, said de Vries.