Energy Consumption Crisis
One of the lesser-known and rarely discussed topics of cryptocurrency has got to be the insane amounts of energy consumed within this space, whether it’s from mining or general processing. If we want to create an industry where we can ethically mine Bitcoin (BTC), then it’s just a matter of time before we must switch to renewable energy to continue at our current pace. You’d be quite surprised at the amount of energy required to mine just one BTC, as it’s become imperative to address this situation before we find ourselves quickly undoing decades of social and environmental progress.
This is not financial investment advice.
This article will inform readers of the large daily amounts of energy consumed throughout the global cryptocurrency industry.
The biggest form of energy consumption within the cryptocurrency space has to be through mining. Just mining a single Bitcoin consumes at least as much electricity as the average American household burns through in two years, according to figures from Morgan Stanley and Alex de Vries, an economist who tracks energy use in the industry.
But let’s take a step back for a second and look at it from a broader perspective. The entire Bitcoin network consumes as much energy each day as some medium-size countries. The network which supports Ethereum, the second-most valuable virtual currency, eats up a small country’s worth of electricity each day. So, just imagine paying your monthly power bill several million times each day to get an idea of just how much energy is converted into cryptos.
As digital assets have grown in popularity over recent years, so has energy consumption within the industry. Sure, you can just shrug it off and go on with your normal life while muttering, “Oh well, that’s not my problem to deal with.” However, all of this energy consumption is actually your problem to deal with, as excessive amounts of energy being consumed in large portions will contribute to possible climate change. If you think about it, it’s actually the world’s problem to deal with and prominent crypto figures have already taken responsibility for the damage that’s being done.
Vitalik Buterin is leading an experiment with a more energy-efficient way to create tokens, in part because of his concern about the impact that the network’s electricity use could have on climate changes. It’s our responsibility as informed and intelligent members of the cryptocurrency community to be aware of the environmental, social, and health impacts which could stem from the excessive usage of energy when mining and maintaining blockchain networks.
Just mining a single Bitcoin consumes at least as much electricity as the average American household burns through in two years. The entire BTC network consumes as much energy each day as some medium-size countries.
With all the electricity and energy required to keep your computer running when mining for coins or tokens, it could end up costing you some money if the energy that you do use is expensive. As such, miners are flocking to places that offer the lowest-priced electricity and favorable climates, as it costs less to cool down the servers in places that are already naturally cool or temperate. Keep this in mind, as that means that anyone around the world can theoretically add to the energy consumption that’s taking place no matter where they hang their hat.
According to Alex de Vries, electricity bills make up for 60% of the cost of mining a coin, so you can probably understand why it makes sense for someone who mines cryptocurrencies to relocate to an area where it would cost them less to use electricity. Regardless, all the energy that is used around the world to power the blockchain network negatively impacts the planet since it still adds up in the end. If you are going to discuss the decentralized capabilities of blockchain, then you should also be aware of the distributed consumption of energy which follows.
Miners are flocking to places that offer the lowest-priced electricity and favorable climates, as it costs less to cool down the servers in places that are already naturally favorable in climate. Keep this in mind, as that means that anyone around the world can theoretically add to the energy consumption.
So exactly how much electricity are we talking about when it comes to powering Bitcoin? Well, Eric Holthaus, a writer for Grist, projects that, at current growth rates, the BTC network will “use as much electricity as the entire world does today” by early 2020. This is not a feasible or sustainable path and will end with many negative consequences for the world.
Moreover, the industry is highly competitive, and electricity is one of its greatest costs. So when the price of BTC rises, we can expect miners to spend more and more on electricity until energy usage costs are roughly on par with revenues.
This is actually the methodology used by the Digiconomist website to estimate energy consumption on BTC’s network. It assumes that the industry will spend 60 percent of its revenue on electricity and then extrapolates from the current Bitcoin price and prevailing electricity prices.
The Bitcoin network will “use as much electricity as the entire world does today” by early 2020. So when the price of BTC rises, we can expect miners to spend more and more on electricity until electricity costs are roughly on par with revenues.
It’s not all bad news when it comes to the amount of energy that is being consumed. In fact, increased awareness regarding the excessive amounts of energy being used, coupled with improved technology has actually lowered the energy consumption rate slightly. That’s not all! The fundamental Bitcoin mining process is scheduled to decrease the block reward every few years or so.
When Bitcoin launched in 2009, each block came with a 50 BTC reward for the miner who created it. This figure is scheduled to fall by half every four years. It fell to 25 BTC in 2012 and 12.5 BTC in 2016. The block reward will decrease again to 6.25 BTC in 2020. When the mining industry’s revenue falls by half, its energy consumption should fall by the same proportion, since, if it didn’t fall, mining would become an unprofitable activity.
When the mining industry’s revenue falls by half, its energy consumption should fall by the same proportion, since, if it didn’t fall, mining would become an unprofitable activity.
Hopefully, you have a better understanding of how energy consumption within the cryptocurrency industry works and — more importantly — why it’s so important for all of us. If someone tries to tell you otherwise, just remind them of all the negative impacts which could quickly destroy all of the recent environmental initiatives put place to fight global warming. Even Vitalik Buterin has made an effort to lower the amount of energy that’s consumed through crypto-mining.
Moving forward, as the block reward continues to reduce by a half every four years, we must make it our responsibility as innovative crypto-users to advocate for renewable energy sources when it comes to mining coins, or we’ll find ourselves self-destructing our own future.
Do you have any cool ideas to reduce energy consumption?
Let us know in the comments!
