POWER SURGE
Bitcoin mining network uses as much energy as some medium-size countries each day,
SAN FRANCISCO— Creating a new bitcoin requires electricity. A lot of it.
In the virtual currency world this creation process is called “mining.” There is no physical digging, since bitcoins are purely digital. But the computer power needed to create each digital token consumes at least as much electricity as the average American household burns through in two years, according to figures from Morgan Stanley and Alex de Vries, an economist who tracks energy use in the industry.
The total network of computers plugged into the Bitcoin network consumes as much energy each day as some medium-size countries — which country depends on whose estimates you believe. And the network supporting Ethereum, the second-most valuable virtual currency, gobbles up another country’s worth of electricity each day.
The energy consumption of these systems has risen as the prices of virtual currencies have skyrocketed, leading to a vigorous debate among Bitcoin and Ethereum enthusiasts about burning so much electricity.
The creator of Ethereum, Vitalik Buterin, is leading an experiment with a more energy-efficient way to create tokens, in part because of his concern about the effect that the net- work’s electricity use could have on global warming.
“I would personally feel very unhappy if my main contribution to the world was adding Cyprus’ worth of electricity consumption to global warming,” Buterin said in an interview.
But many virtual currency aficionados argue that the energy consumption is worth it for the grander cause of securing the Bitcoin and Ethereum networks and making a new kind of financial infrastructure, free from the meddling of banks or governments.
“The electricity usage is really essential,” said Peter Van Valkenburgh, the director of research at Coin Center, a group that advocates for virtual currency technology. “Because of the costs, we know the only people participating are serious, that they are economically invested. That creates the incentives for co-operation.”
This dispute has its foundations in the complex systems that produce tokens such as bitcoin; ether, the cur- rency on the Ethereum network; and many other new virtual currencies.
All of the computers trying to mine tokens are in a computational race, trying to find a particular, somewhat random answer to a math algorithm. The algorithm is so complicated that the only way to get the answer is to make a lot of guesses. The more guesses, the better a computer’s chances. But each time the computers try new guesses, they use computational power and electricity.
The lure of new bitcoins encourag- es people to use a lot of fast computers, and lots of electricity, to find the right answer and unlock the new bitcoins that are distributed every 10 minutes or so.
This process was defined by the original bitcoin software, released in 2009.
The goal was to distribute new coins to people on the Bitcoin network without a central institution handing out the money.
Early on, it was possible to win the contest with just a laptop computer. But the rules of the network dictate that as more computers join in the race, the algorithm automatically adjusts to get harder, requiring anyone who wants to compete to use more computers and more electricity.
This explains why there are now enormous server farms around the world dedicated to mining bitcoins.
For people who consider Bitcoin nothing more than a speculative bubble — or a speculative bubble that has enabled online drug sales and ransom payments — any new contribution toward global warming is probably not worth it.
But Bitcoin aficionados counter that it has allowed for the creation of the first financial network with no government or company in charge. In countries such as Zimbabwe and Argentina, Bitcoin has sometimes provided a more stable place to park money than the local currency. And in countries with more stable economies, Bitcoin has led to a flurry of new investments, jobs and startup companies.