A new analysis by Cambridge University shows bitcoin consumes around 121.36 terawatt-hours a year, which is more than an entire country.
The cryptocurrency has been around since 2006, but back when it was first created, it could be “mined” on a personal laptop. Mining is the method by which new bitcoin is created, with a finite number ever going to be made.
The method of creating new bitcoin involves solving increasingly complex mathematical algorithms, with the computer that solves the next step in the puzzle being rewarded with the newly minted bitcoin.
In the early days, the value of bitcoin was virtually nothing, so not a lot of effort was put into creating it. As word spread about the cryptocurrency, and people began to realise its importance, the value increased. This meant that soon there was real financial incentive for people to mine bitcoin.
Huge mining operations involving rows and rows of specialist machines churning over numbers sprung up, particularly in countries like China where the price of electricity was low.
With the price for a single bitcoin now sitting above USD $60,000, it’s safe to say that “mining” for the cryptocurrency is a power-hungry game.
Bitcoin mining is now an industry that depends heavily on our environment, draining resources such as electricity and power, as it is essential to the existence of the cryptocurrency.
With Tesla’s heavy investment in Bitcoin earlier this year, and the public offering of bitcoin trading giant Coinbase, it’s pretty clear the cryptocurrency isn’t going to die down.
The currency’s value has reached a new all-time high of AUD $83,000 today, as the price has been steadily increasing following Tesla’s announcement. Not only have they bought around $1.5bn Bitcoin, they’re also planning to accept it as payment in the future.
For some, this may undermine Tesla’s environmental image, and overlook our current climate change crisis. With a new report from the Climate Council breaking the news this morning that our global temperature rise will top 1.5 degrees celsius by the 2030s, we should be rethinking where our electricity is going and currently, cryptocurrency is getting a lot of it.
But, as the price rises on Bitcoin, the more incentive is found among Bitcoin miners to run more and more machines. It’s the nature of the beast that is power and money.
And as the price increases, so does the energy consumption, says Michel Rauchs, researcher at The Cambridge Centre for Alternative Finance, who co-created the online tool that generates these estimates.
“It is really by design that Bitcoin consumes that much electricity,” Mr Rauchs told BBC’s Tech Tent podcast. “This is not something that will change in the future unless the Bitcoin price is going to significantly go down.”
The online tool, created by Cambridge researchers and that works to estimate and compare the amount of electricity used by Bitcoin vs. other countries, has ranked Bitcoin’s electricity consumption above Argentina (121 TWh), the Netherlands (108.8 TWh), the United Arab Emirates (113.20 TWh) – and is gradually creeping up on Norway (122.20 TWh) as well.
The energy it uses could power all kettles used in the UK for 27 years, it said.
Energy consumption in the production of bitcoin has historically been an issue, though the price increase and the focus on the cryptocurrency is only making it worse. Given much of the mining takes place in parts of the world where regulations over the use of energy are low – and fossil fuels are the main sources of power – it’s not likely to be resolved anytime soon.
Bitcoin is however an extremely volatile asset, being hoarded like digital gold rather than used as a functional currency. The price surge we are seeing now could very well continue, with some experts predicting it could reach as high as $400,000 USD by the end of the year. These price spikes however are often followed by long periods of decline, where the price bottoms out to a fraction of what it once was.
It’s likely that we will see these types of corrections again. When that happens, the cost of mining bitcoin versus the reward for doing so could become uneconomical for the large mining operators. It seems unlikely that they would cease operations entirely, though we could see a decline in power usage when the price drops.
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