Bitcoin, the most volatile currency in the world

The course of bitcoin has just taken a new step. Thursday, November 2, the virtual currency has reached a new record exceeding the $7000 mark. But behind this monetary outbreak is also hiding an energy surge.

This correlation (increase in bitcoin and increase in energy consumption of its network) is directly related to the operating principle of the protocol on which the cryptocurrency is based. It is a decentralized public registry where volunteer network members, called miners, provide computing power to perform cryptographic operations that validate blocks of transactions and secure the network.

THE HIGHER THE PRICE, THE MORE PROFITABLE IT IS TO “MINE”

A competition is established between them because the first minor who finds a solution to the problem is rewarded in bitcoins. This reward includes transaction fees, payable by the payer, and the right to issue a transaction block where the transactions are recorded . “In this block, the miner will be able to include a transaction for itself in the amount of 12.5 bitcoins and this sum is halved every four years or so”, explained recently Alexander Stashchenko, co-founder of the start-up up Blockchain Partner and president of La Chaintech, an association of francophone actors of the blockchain.

We understand why the cost of bitcoin increases, the greater the number of minors who hope to win a reward in bitcoins is important. In this context, the computing power made available to record a transaction increases, which leads to an increase in energy consumption. “When the current is very high that allows minors to invest more, particularly in server farms, so mechanically it increases energy consumption” , explains Michel Berne, economist and director of studies at Telecom Business School.

THE WEEKLY ELECTRICITY CONSUMPTION OF A HOUSE

According to the figures gleaned from the MotherBoard website , with the current price, it would be profitable for bitcoin miners to burn more than 24 terawatt-hours of electricity per year, the equivalent of the annual consumption of Nigeria (which has 186 million ‘inhabitants). Still according to MotherBoard, each bitcoin transaction would require 215 kWh, which roughly represents the weekly consumption of a US household. “According to the figures that circulate, a bitcoin transaction would be more than 5000 times more energy consuming than a transaction made on the Visa network , ” says Michel Berne.

Is it possible to stop this energy chasm? Only a drop in the price of bitcoin would reduce the energy consumption of the network. The value of bitcoin depends entirely on people’s confidence in bitcoin and the ability to use it. “The uses of bitcoin are drawn by two major mechanisms: the speculation that we are in a bubble and activities that require high confidentiality (virtual currency that preserves the anonymity of its owners, ed.) But these activities will not decrease either , ” says Michel Berne.”The bitcoin can not go down as long as this bubble remains and as long as these uses exist, but bitcoin will not become a universal currency.” Contrary to what was said at the beginning, it will not be used to buy a currency. baguette , ” he continues.

MORE ENERGY-EFFICIENT BLOCKCHAINS

Note also that not all blockchains are as energy efficient as bitcoin. “Bitcoin works on a system called proof of work: you win bitcoins because you worked hard to verify the transaction, other blockchains rely on a proof of stake system, which is to delegate the decision to people who have the best interest in getting it right, this mechanism does not entail the same energy costs as bitcoin, ” explains Michel Berne. According to him, it is unlikely that other applications of the blockchain operate under the model “proof of work”. “For a blockchain register dedicated to diplomas it does not

You May Also Like

mm

About the Author: Ron Evans

Ron is the lead editor for BitCoinPlussNews. He is also a nationally syndicated newspaper columnist and a bestselling author. He lives in Los Vegas and covers the intersection of money, politics and finance. He appears periodically on national television shows and has been published in (among others) The National Post, Politico, The Atlantic, Harper’s, Wired.com, Vice and Salon.com. He also has served as a journalist and consultant on documentaries for NPR and ShowTime. In 2014, he was the winner of the Society of American Business Editors and Writers' investigative journalism award, and the winner of the Izzy Award for Journalism from Ithaca College's Park Center for Independent Media. He was also a finalist for UCLA's Gerald R. Loeb Award and Syracuse University's Mirror Award.

Leave a Reply

Your email address will not be published. Required fields are marked *

%d bloggers like this: