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The Energy to Sustain Bitcoin - Part 2

Posted by Shea Karssing on 7 June 2018 at 12:06 pm

The debate rages on as the energy consumption increases

Earlier this year, we published an article on Bitcoin energy consumption, reporting how Iceland has become one of the top locations for cryptocurrency servers, which now exceed the consumption of private energy users.

Now, the criticism amongst ecological circles and the debates around Bitcoin energy consumption have been fuelled by a paper by Alex de Vries of PwC’s Experience Centre in Amsterdam.

His paper, Bitcoin’s Growing Energy Problem, concludes that Bitcoin’s energy consumption could soon be heading above a consumption rate of 8 gigawatts (GW) per year.

The paper’s findings:

  • At the moment, the Bitcoin network consumes at least 2.55 GW of electricity - as high as the annual energy consumption of Ireland.
  • This could reach a consumption of 7.67 GW in the future - close to the energy consumption of Austria (8.2 GW).
  • By the end of 2018, the mining of Bitcoin could be using as much as 0.005% of the entire world’s energy use.

The reality is that Bitcoin uses a massive amount of energy. Author Alex de Vries says: “The Bitcoin development community is experimenting with solutions such as the Lightning Network to improve the throughput of the network, which may alleviate the situation. For now, however, Bitcoin is a big problem and it is growing fast.”

 

Why does Bitcoin mining require so much energy?

The Bitcoin mining process uses computers with software that can solve complex mathematical problems. A new block is added to the blockchain every time a new problem is solved, rewarding the miner with Bitcoins. This process requires a lot of energy because the computers need to use a ledger for all transactions so that the same coins aren’t spent twice - this takes time and consumes a lot of electricity.

 

How can Bitcoin mining become sustainable?

De Vries’ research reveals that if the price of Bitcoin continues to go down, and the amount of energy needed to mine it continues to rise, Bitcoin investment could become uneconomical.

A report from Elite Fixtures looked at the cost of mining Bitcoin around the world. They found that the cost to mine a Bitcoin varies significantly, from as little as £400 (Venezuela) to a whopping £19,648 (South Korea)! These figures are based on the average electricity rates in 115 different countries.

  • The current value of 1 Bitcoin: £5563
  • The current estimated cost to mine 1 Bitcoin in the UK: £8402

At its current value, it is therefore uneconomical to mine Bitcoin in the UK, as the cost to mine 1 Bitcoin exceeds its potential profit. Popular mining destinations (where miners can make a profit) include Russia and Iceland.

One of the ways Bitcoin mining can be made more sustainable is if the world shifts to 100% renewable energy in the years ahead. Although renewable energy still comes with its costs, mining Bitcoin using renewables could make it a more feasible investment into the future.

For example, a state-owned wind farm in Estonia opened cryptocurrency mine on Friday, 1 June. The windswept Baltic Sea island is able to harness this unlimited, sustainable energy supply to get a better return and better on their cryptocurrency.

 

But is it possible to go 100% green?

New research from Renewable and Sustainable Energy Reviews journal found that a shift to total renewable energy using contemporary technology is both possible and affordable.

Co-author of the research, Brian Vad Mathiesen of Aalborg University says: “There are some persistent myths that 100 percent renewable systems are not possible. Our contribution deals with these myths one-by-one, using all the latest research. Now let’s get back to the business of modelling low-cost scenarios to eliminate fossil fuels from our energy system, so we can tackle the climate and health challenges they pose.”

It’s not impossible to imagine a world in which Bitcoin is used exclusively, backed by green energy. If there’s one thing we’ve learnt over time, it’s to ‘never say never’...

 

Image credit: Tiger Pixel

 

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. 

If you have a question about anything in the above blog, please ask it in the comments section below.

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