The energy to sustain Blockchain - where does it come from?
Posted by Shea Karssing on 14 March 2018 at 12:15 pm
Bitcoin electricity concerns are growing. Even though the value of the cryptocurrency has stumbled in recent months, the demand for energy-intensive mines remains.
What is Bitcoin?
Bitcoin is a new currency that was created in 2009. Much of the hype around bitcoin relates to the trading of the currency.
What makes bitcoin different to normal currencies?
- Bitcoin transactions are made with no middleman or bank.
- There are no coins to mint, and no bills to print.
- Bitcoins are stored in a ‘digital wallet’ in the cloud or on the owner’s computer or device. This wallet functions as a virtual bank account.
- The currency is decentralised, with no government, or authority controlling it.
- Owners are anonymous, buying and selling using encryption keys rather than identification numbers.
- Bitcoin is ‘mined’ by powerful computers connected to the internet.
Bitcoin and cryptocurrencies appear to be the great gold rush of our current century, and crypto-mining has opened the door to a new industry. One country in particular has become one of the world’s top locations for cryptocurrency servers - Iceland.
Amid the positive promise of a growing sector in the economy comes the issue of bitcoin electricity supply. In fact, Iceland could soon face an energy shortage. The country’s servers now exceed the consumption of private energy users, and if Iceland continues to attract new companies investing in cryptocurrencies, energy producers are concerned that they won’t be able to keep up.
Although there are no recognised authoritative sources on cryptocurrency energy usage, estimates have claimed that:
- Bitcoin consumes 30x more electricity than Tesla cars.
- Bitcoin’s electricity usage is set to more than triple in 2018, consuming as much energy in a year as the entire nation of Argentina.
In 2017, Bitcoin consumed 36 terawatt hours of energy—as much as the country of Qatar.
Why is bitcoin electricity use so intensive?
Every cryptocurrency relies on a ‘blockchain’ platform which allows for the trade of digital currencies. Because there is no single network authorised to monitor payments, any transaction involves a massive number of mathematical calculations, and thus server capacity. This results in high electricity demand, which is embedded into the core of cryptocurrency mining.
In fact, offset against the costs of mining equipment and company profits, electricity makes up 60% of total mining revenue.
Why Iceland for bitcoin electricity?
Because crypto-mining is so energy-intensive, miners needs access to power that is both reliable and cheap. The energy in Iceland meets these criteria, but for how long? The future of bitcoin and other cryptocurrencies depends on how cost-effective it is to produce…
Image credit: CryptoCurrency 360.
About the author:
Shea Karssing is a writer for Smarter Business, one of the UK’s leading independent consultancies, helping businesses secure the most comprehensive savings solutions from utilities contract management and procurement to business loans and facilities maintenance. Smarter Business are experts on all things energy, and it’s the company’s mission to provide whole-of-market business comparisons, maximise savings and improve profitability for its clients.
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