The bitcoin market now exceeds $1 trillion with its price rising tenfold in a year, but 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?
Total energy consumed by the bitcoin mining process could reach 128 TWh (terawatt-hours) this year, according to the Cambridge Bitcoin Electricity Consumption Index (CBECI), which is compiled by Cambridge University researchers.
That is 0.6 percent of the world’s total electricity production, or more than the entire consumption of Norway.
“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 difficult 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 the price of bitcoin now running at more than $55,000, miners are running at full 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 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, before the recent price takeoff, that every dollar of value created by bitcoin generated 49 cents of health and environmental damage in the United States.
In addition, critics of cryptocurrencies point out…