It has astonished people for over a decade regarding how much power is actually needed to produce cryptocurrency. It has been estimated that the total electricity consumption for miners on a global scale, is at least 22 terawatt hours, about enough to power a small country. In comparison, the search engine known as google, uses 5.7 Terawatt hours globally per year. When comparing miners from 2017 to 2018, it has been said that the utilization of power has increased five-fold.
So why exactly does it require so much power?
The majority of cryptocurrencies are based on the idea of a fixed ledger called blockchain, which is made up of transfers of value from one point to another. The miners are responsible for solving an algorithm, and it’s all a race in the end. It usually takes about ten minutes for the it to find a satisfactory solution, when this happens the miner is rewarded with an amount of whatever cryptocurrency it happens to be mining. This solution and transaction is added to the blockchain ledger mentioned before, essentially tracking all movements of cryptocurrency. A number of blocks need to be connected before they are validated on the ledger, often the blocks enter the system simultaneously and the system needs time to figure out which is the winning fork in the chain. All miners take into account an “Orphaned block,” budget of rejection percentage usually between 0.5-1%, if you happen to be the losing block on the fork. Making sure that this whole process doesn’t happen too fast, the computational power increases while the bitcoin protocol forces the a more challenging algorithm to find. The system re-calebrates once every two weeks, forcing the miners to upgrade in order to be fast enough to compete with other miners. Basically, the newer the miner, the more electricity it demands. We know what you’re thinking, how is this sustainable? Well, that’s just it.
Companies producing chips are actively improving the efficiency of the miners regarding power. If the bear market continues, mining becomes less and less profitable to the point where it wouldn’t make any sense to continue. Theoretically if bitcoins price was to stay around $6000, power usage would spike at 67 terawatt hours of energy a year.
China and America are the two places that majority of current mining is taking place, and due to underutilizes hydro power the prices can be found at a discount compared to many other countries. However in parts of the U.S some utility companies have frozen accounts to cryptocurrency mining endeavours or charging them a premium rate. Where in China, authorities have destroyed some mining farms and as well as connecting some to the national hydro grid.
Time will tell if a more efficient way of solving the algorithm will be invented.
