The Bitcoin (BTC) market now exceeds $1 trillion, with its price rising tenfold in a year, but the focus is shifting towards the massive power requirements needed to sustain the online currency.
Here are some questions and answers about bitcoin:
How much energy does it consume?
The bitcoin mining process’s total energy could reach 128 TWh (terawatt-hours) this year, according to the Cambridge Bitcoin Electricity Consumption Index (CBECI), which Cambridge University researchers compile.
That is 0.6 percent of the world’s total electricity production, or more than Norway’s entire consumption.
“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,” such as air conditioning and 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 of the first indices on the subject in 2016, is even more pessimistic.
He believes that 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 rise 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 complicated when many people are mining and easier when few miners are at work.
The system is designed so that around every 10 minutes, the network awards some bitcoin to those who have successfully cracked the puzzle.
“Proof of work” was one of 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 have new machines that are more efficient, you’re going to use more machines” to corner a larger share of the mining market, said Michel Rauchs, who led the team that created the CBECI.
With bitcoin’s price now running at more than $55,000, miners are running at total capacity.
Bitcoin struck an all-time peak at $61,742 last Saturday on feverish investor demand.
What is the environmental impact?
Bitcoin advocates say that the rapid development of renewable energy in the power plant sectors means that the currency has a moderate effect on the environment.
But researchers at the University of New Mexico estimated in 2019 that every dollar of value created by bitcoin generated 49 cents of health and environmental damage in the United States before the recent price takeoff.
Also, critics of cryptocurrencies point out the solid geographical concentration of its use in countries such as 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 to escape the eye of Washington.
“There’s about five 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 hydroelectric solid power generation in the south of the country, he added.
But they migrate north during the dry season, where lignite, a particularly polluting coal, produces electricity.
“If you try to see the footprint of bitcoin at any given time, you’re going to get completely different numbers,” explained Rauchs.
Is change possible?
Critics have become more vocal with bitcoin’s rising popularity.
The second most used cryptocurrency, ethereum, consider 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 considerable difficulties in adopting such changes, which run the risk of making the network less decentralized and 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 significant reform of the cryptocurrency has been adopted by its community, despite numerous attempts.
To receive the latest breaking Crypto News delivered to you, join Cryptonetwork.News Telegram Channel here