The bitcoin craze is using up so much energy
One alarmist article in Newsweek said that bitcoin computer operations could consume ‘all of the world’s energy by 2020.’ The website Digiconomist claims that bitcoin operations use as much energy as Denmark, or enough to power 3,071,823 US households.
THE EXPLODING price of the cryptocurrency bitcoin in recent months has triggered doubts not only about the financial sustainability of the rally, but about the environmental sustainability of the currency itself.
One alarmist article in Newsweek said that bitcoin computer operations could consume “all of the world’s energy by 2020.” The website Digiconomist claims that bitcoin operations use as much energy as Denmark, or enough to power 3,071,823 US households.
Other analysts say the true figure is smaller, albeit hard to measure because it is spread around the world, generated by an unclear mix of machines and co-mingled with other sources of electricity demand. But several experts told The Washington Post that bitcoin probably uses as much as one to four gigawatts, or billion watts, of electricity, roughly the output of one to three nuclear reactors.
That would amount to less than one per cent of US electricity.
That won’t devour the world’s entire electricity resources, but it’s a significant drain - and it’s growing fast. Moreover, some of the electricity used, in China in particular, may come from burning coal - a fossil fuel that contributes most heavily to climate change.
The reason bitcoin uses a lot of energy is rooted in the way the bitcoin network operates. A digital currency, bitcoin is not controlled by any central bank or commercial clearinghouse but by a network of users who expend large amounts of computing power, and thus energy, building a so- called “blockchain” of bitcoin payments transactions.
To compile this comprehensive record, the bitcoin network relies on “miners.” Bitcoin miners have to perform a phenomenally large number of computer calculations to track and verify transactions and solve complex puzzles to obtain bitcoin rewards. As bitcoins become more popular and valuable, the puzzles miners face grow more difficult, and therefore the demand for highpowered computer processing grows as well. That means more energy usage.
“If the price of bitcoin continues to rise, it will continue to use more energy,” said Mike Reed, director of the Blockchain Program Office for Intel Corp. The reason, he said, is that the price represents “an economic incentive to add more mining equipment to the network . . . and that incentive is built in.”
And that price is soaring driven by everything from a craze in South Korea to the international CME Group electronic exchange, which started trading bitcoin futures Dec 18.
“At the moment, the value of bitcoin is crazily high, a lot of people want to get into the mining game,” explains David Malone, a lecturer at Maynooth University in Ireland who coauthored a paper in 2014 finding that at that time, the bitcoin network was using up about as much electricity as his entire country. “And then . . . bitcoin responds by making the problems more difficult.”
The difficulty of uncovering a new block has increased along an exponential curve of late, even as the number of calculations per second has grown sharply as well since late last year. The bitcoin network is now generating some 14 million trillion “hashes” or possible solutions to a problem, per second.
How much energy is being consumed?
Malone and a colleague calculated in 2014 that the total power required for bitcoin calculations could be between .1 and 10 gigawatts, or billion watts, of instantaneous power. Ireland at the time was consuming about three gigawatts steadily, so he compared the two in terms of order of magnitude.
But since then he thinks the usage is a lot more. Computing efficiency has increased, but the number of calculations has gone up even more, meaning he thinks that 1.2 gigawatts is now probably the lowest the number can be, and that assumes everyone is using the most efficient computing hardware, which they certainly are not.
“That really is the lower bound,” said Malone. “It’s really unlikely everybody in the network is using that, so the 1.2 is the lowest it can possibly be.”
That’s roughly comparable to the electricity generated steadily by one of the larger utility- scale nuclear reactors in the United States. But there are 99 US nuclear reactors in total, which provide about 20 per cent of the nation’s electricity - so while bitcoin is clearly a large energy consumer, it would still be relatively small scale in the context of a major country like the United States or China.
Harald Vranken, a professor of management at the Open Universiteit in the Netherlands, has calculated a similar number. On Jan 1, he calculated the energy usage at .1 to .5 gigawatts, but with the bitcoin explosion this year, he thinks it has increased to between one and four gigawatts.
“It will only go up if things increase like they have been doing in the last four months,” said Vranken. “So at some point in time, I think, this situation cannot hold. I think that is clear.” Still, there are skeptics. Jonathan Koomey, an energy researcher and lecturer at Stanford University who studies the energy consumption of data centers, has found that they consume about 1.8 per cent of US electricity, of which he sees bitcoin as a small fraction.
“While bitcoin mining electricity use may have grown, it is a tiny part of all US data center electricity use, and that conclusion is true for the world as well,” said Koomey by email. “As we transition more and more workloads to the cloud, it is unlikely that total data centre electricity use will grow much in the next few years.”
Still, that bitcoin mining is energy intensive is shown not just in the calculations by experts, but in the stark reality of how this business works. Energy consumption is a major factor governing the strategies behind where, and how, miners conduct their work.
“The economics of bitcoin mining mean that most miners need access to reliable and very cheap power on the order of two or three cents per kilowatt hour. As a result, a lot are located near sources of hydro power, where it’s cheap,” said Sam Hartnett, an associate at the Rocky Mountain Institute, a nonprofit energy research and consulting group.
“The amount of energy going into mining is largely a product of the price of bitcoin and the type of hardware being used,” Hartnett said. “As the price goes up, there are stronger incentives for miners to add new computing power or new hardware or attract new operations to mining. In either case, you’d be adding to total computing power of the network, which influences the difficulty of the hash problems that miners are raising.”
If bitcoin’s price, and concurrent energy consumption, continued to rise at the clip seen this year, that could be a serious problem. But it’s less clear whether the current rate of growth in consumption would continue. — WP-Bloomberg