The “mining” activity of Bitcoin promises to create money out of nothing, first consuming copious amounts of electricity.
The scheme works like this: the entrepreneur eager for rapid enrichment first invests considerable sums in sophisticated hardware, hoping to recoup the investment and make a profit in the shortest possible time. The “product” obtained is purely virtual and without intrinsic value, this being given later by other investors who come to buy Bitcoin using real money, anticipating that in turn they will obtain considerable profits speculating the increase of Bitcoin quotation. This whole “industry” works by completely ignoring the impact it has had on the environment, by using huge volumes of accepted electricity from any source, as long as it is cheap enough. This is how we find out that Bitcoin “miners” have stormed countries such as Iran, where the electricity generated in coal-fired power plants is delivered at extremely low rates, intended for the reduced purchasing power of the local population.
Bitcoin and Ethereum, the so-called alternative virtual currencies, have given birth to one of the most enduring speculative bubbles of recent decades, capable of breaking and coming back after some time, as if nothing bad had happened to the capital of investors who have previously bankrupt. The difference is that if in the speculative bubble at the end of 2017 participated mainly amateur investors in the category “retail”, now came into play the so-called institutional investors, investment funds and companies with billion dollar funds (formerly Tesla). As a result, the potential for Bitcoin price growth is much higher this time around. The same can be said about the impact of the Bitcoin network on the environment.
The fact that the difficulty of the operation by which virtual currencies are generated is constantly increasing and there is even a limit on the total number of virtual currencies that can exist simultaneously ensures that the environmental impact of the Bitcoin network increases exponentially, even faster than its success. The more “Bitcoin farms” are put into operation, the lower the “production” of Bitcoin, the difficulty of the cryptographic algorithm amplifying instead the pollution footprint.
The argument is that the price of virtual currency increasingly difficult to generate using current means will also increase, based on the principle of supply and demand, thus justifying the effort to keep up with new hardware requirements and support increased energy consumption. Problems arise when the price of Bitcoin becomes unsustainable and begins to fall, leaving miners and investors caught on the other side of the pyramid with losses.
Currently, the mining activity of the main virtual currencies generates an estimated electricity consumption of 115 TWh (compared to only 14.54 TWh in July 2017). Other sources estimate a consumption of about 80 TWh.
To put things in perspective, a single Bitcoin transaction consumes as much energy as 68,000,000 conventional transactions in the Visa network, or 51210 hours of YouTube viewing.
If Bitcoin were selected globally as the preferred method for secure financial transactions, energy needs could exceed the total electricity consumption currently attributed to human civilization.
The creators of Ethereum, considered the second most popular cryptocurrency after Bitcoin, have promised to change the currency’s algorithm to make mining greener. In reality, the Ethereum network is based on the use of graphics accelerators and other energy-intensive devices, eliminating them from the circuit seems an equally insurmountable challenge.
Bitcoin currently generates energy consumption close to Argentina (approximately 45 million inhabitants), a country documented with an average annual consumption of almost 132 TWh.
If it had the status of a country, in terms of electricity consumption Bitcoin would be on the 31st place in the world, between Argentina and the Netherlands.
Robert J. Smith is still early into his career as tech reporter but has already had his work published in many major publications including JoyStiq and Android Authority. In regards to academics, Robert earned a degree in business from Fordham University. Robert has passion for emerging technology and covers upcoming products and breakthroughs in science and tech.