The high price of one Bitcoin has greatly increased its electricity consumption.
With the price of bitcoin rising to more than $7,000 this year, the number of people around the world who are undermining the digital currency is also increasing, and the computers they use are becoming more energy intensive. As a result, Bitcoin’s total electricity consumption is skyrocketing.
Cryptocurrency analyst Alex de Vries, alias Digiconomist, estimates that at the current value, it would be profitable for minors to consume 24 terawatt hours of electricity annually to solve cryptographic puzzles of increasing complexity in order to undermine more than bitcoins. This is the equivalent of the electricity consumption of Nigeria, a country of 186 million people, for a whole year.
This gives an astounding average of 215 kilowatt hours (kWh) used by minors for each bitcoin transaction (currently about 300,000 transactions per day ). Since an average US household consumes 901 kWh per month , each bitcoin transfer requires enough electricity to provide electricity to an average household in almost a week. De Vries estimates that at any given time, bitcoin miners around the world consume as much electricity as about 2.26 million households in the United States.
It is relevant to compare Bitcoin’s environmental footprint with its benefits.
Expressing energy consumption in quantity per transaction is useful. Bitcoin consumes x Wh of energy in total, and this energy makes it possible to check about 300,000 transactions per day. This measure indicates the value you get in exchange for all that electricity used to audit the transactions (and the resulting trust), which in the end is the “end product”.
Since 2015, Bitcoin’s electricity consumption is very high compared to traditional digital payment methods. The value of bitcoins is directly proportional to the amount of electricity that can be used to mine. Given the rise in prices, miners add computing power.
It is impossible to know exactly how much electricity the Bitcoin network uses. However, one can calculate the minimum energy that Bitcoin uses, assuming that all miners are equipped with the most energy-efficient equipment. To do this, with a simple method presented in a previous article , we obtain a constant total mining consuming just more than one gigawatt.
This means that, at a minimum, bitcoin mining around the world could supply 821,940 US households with electricity for a day.
In other words, the global mining of bitcoins consumes at least 77 kWh of energy per transaction . Even if it is the most prudent estimate possible, too cautious even to be realistic, it is huge: as the economist Teonis Brosens of the ING Bank wrote , it is enough to provide his household in the Netherlands in electricity for almost two weeks.
The Digiconomist energy cost per transaction estimate is less optimistic, at 215 kWh. That’s more than enough to charge two Tesla batteries, run a refrigerator for a year, or boil 1872 liters of water with a kettle .
It is important to note that the de Vries model is not accurate. These are assumptions from the economic benefits for miners and a prediction of the possible consumption of electricity for mining at a given price. In spite of that, it’s quite obvious that even at a minimum of 77 kWh per transaction, we have a problem. And at 215 kWh, we have a bigger problem.
This problem is carbon emissions. Plunging into the data on a Bitcoin coal-fired mine in Mongolia, de Vries arrived at an estimated quantity. It concludes that this mine is responsible for the emission of between 8,000 and 13,000 kg of CO2 per bitcoin mined, and 24,000 to 40,000 kg of CO2 per hour.
As Twitter user Matthias Bartosik notes in presenting his similar estimate , an average European car emits 0.1181 kg of CO2 per kilometer. Thus, for every hour of mine operation in Mongolia, it is responsible for CO2 emissions equivalent to those of a car that travels 203,000 kilometers .
If the bitcoin price rises, electricity consumption will also rise, as will CO2 emissions. I asked de Vries if it was possible for Bitcoin to alleviate the problem.
“Blockchains are an inefficient technology. Trust is built by building a system based on distrust. If you trust only yourself and a set of rules (the software), you need to check for compliance with the rules of everything that happens on your own. It’s the life of a blockchain knot, “he explained.
We are at the heart of Bitcoin’s innovation, its great compromise. In order to achieve a functional, decentralized and trustworthy payment system, Bitcoin imposes very costly inefficiencies on participants, such as voracious consumption of electricity and low transaction capacity. Proposed improvements, such as SegWit2x , could at least double the number of transactions Bitcoin can handle and reduce congestion in the network. But, as Bitcoin is thousands of times less efficient than a credit card company’s network, it’s by 1000 that its efficiency should be multiplied.
With climate change, devastating wildfires and hurricanes more destructive than ever, and the environmental footprint of Bitcoin, one must ask: do most Transactions must really bypass third parties like banks and credit card companies? As imperfect as these financial institutions are, for the majority of us, the answer is no.