Cryptocurrency on an energy guzzling power trip

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Even as the adoption of cryptocurrency gains momentum, the sky-rocketing cost of energy required to maintain such networks has emerged as a major point of concern. To earn cryptocurrencies and ensure a stable reservoir of coins on the network, miners are required to solve cryptographic equations using high-end computers. The energy-intensive process of crypto-mining involves the verification of data blocks. These transaction records are in-turn added to a public ledger using blockchain technology.

Consider this: the process of mining Bitcoin to spend or trade consumes around 91 terawatt-hours of electricity annually, which is more than the quantum used by Finland, a nation of about 5.5 million. That usage, which amounts to half-a-per cent of all the global electricity consumed, has risen ten-fold in just the past five years. The Bitcoin network uses about the same amount of electricity annually as the state of Washington. It’s over a third of what residential cooling in the US uses up and over seven times as much electricity as all of Google’s global operations.

Cryptocurrency networks require thousands of expensive hardware components to be housed in massive warehouses with enough cooling power to keep the constantly running machinery from overheating. That’s why mining now happens in giant data centres owned by companies or groups of people. In fact, operations have consolidated to an extent where only seven mining groups own nearly 80 pc of all computing power on the network. In India, the cost of power consumption for crypto-mining ranges from Rs 30,000 to Rs 50,000 a month. A cryptocurrency mining infrastructure could involve a spend of Rs 50,000 to Rs 4 lakh depending upon the complexity and use case requirements, as per a report.

Mining happens all over the world, often wherever there’s an abundance of cheap energy. For years, Bitcoin mining was concentrated in China, although recently, the country has started cracking down. Researchers at the University of Cambridge who have been tracking Bitcoin mining said recently that China’s share of global Bitcoin mining had fallen to 46 pc in April from 75 pc in late 2019. Meanwhile, the US’ share of mining grew to 16 pc from 4 pc during the same period.

Crypto mining implies hardware piling up, too. Alex de Vries, a Parisian economist, estimates that every year and a half or so, the computational power of mining hardware doubles, making older machines obsolete. At the start of 2021, Bitcoin alone was generating more e-waste than many midsize countries, he says.

Thankfully, India has been witnessing a rise in the number of conscientious miners. Crypto miners in the country are hoping to keep power bills low by setting up solar rooftop power units and battery back-up in residential facilities. Some of them are even considering colder countries to set up their crypto infrastructure which would bring down heat-related issues and operating costs.

The big question is whether we can make crypto sustainable? What if Bitcoin could be mined using more sources of renewable energy, like wind, solar or hydropower? It’s tricky to figure out exactly how much of Bitcoin mining is powered by renewables due to the very nature of Bitcoin: a decentralised currency whose miners are largely anonymous. Globally, estimates of Bitcoin’s use of renewables range from about 40 pc to almost 75 pc. Experts say, using renewable energy to power Bitcoin mining means it won’t be available to power a home, a factory or an electric car.

In India, the cost of power consumption for crypto-mining ranges from Rs 30,000 to Rs 50,000 a month