- BBC World News
If bitcoin were a country, it would consume more electricity per year than Finland, Switzerland or Argentina, according to an analysis by the Center for Alternative Finance at the University of Cambridge (CCAF).
This happens because the process of “mining” the cryptocurrency – using gigantic servers that do not stop working – consumes a lot of energy.
According to the researchers, bitcoin mining uses about 121.36 teravatios-hour (TWh) of electricity per year, a record that has a strong impact on the environment and surpasses a long list of countries.
The issue returned to debate after Elon Musk, through its electric car company Tesla, reported the purchase of US $ 1.5 billion in bitcoin, triggering the price of the currency and igniting criticism for the pollution it generates.
This latest rise in the price of bitcoin – which has followed a meteoric uptrend in recent months – has given new incentives to currency miners to run more and more computers in order to generate more cryptocurrencies.
As the price of bitcoin rises, electricity consumption risessays Michel Rauchs, a researcher at the CCAF, where they created an online tool that allows these types of calculations to be made.
“It really is by design that bitcoin consumes so much electricity,” Rauchs explains to the BBC. “This is not something that will change in the future, unless the price of bitcoin drops significantly.”
The researchers work with the Cambridge Bitcoin Electricity Consumption Index (CBECI), which provides real-time estimates of how much electricity generation of the currency consumes.
This index works based on a model that assumes that the machines used to mine in the world work with different levels of efficiency.
Following the relationship between a average price of electricity per kilowatt hour (US $ 0.05) and the energy demand of the bitcoin network, the tool estimates how much electricity is being consumed at any given time.
“Bitcoin is anti efficient”, dice David Gerard, autor del libro “Attack of the 50 Foot Blockchain”.
“It is very bad that all this energy is literally wasted in a lottery.”
Why does bitcoin consume so much electricity?
The machines dedicated to “mining” or extracting bitcoins are specialized computers that connect to the cryptocurrency network.
Their job is to verify the transactions made by the people who send or receive the currency, in a process that involves solving complex mathematical puzzles.
As a reward, miners occasionally receive small amounts of bitcoin in what is often compared to a lottery.
To increase profits, miners connect a large number of computers, in order to increase their chances of getting bitcoin.
And since computers work almost day and night to complete puzzles, electricity consumption is very high.
Electricity consumption vs carbon footprint
There is a big difference between energy consumption and carbon footprint, argues Nic Carter, founding partner of the venture capital firm Castle Island Ventures, specialized in the sector of blockchains (blockchains).
“If we only look at energy consumption we are not telling the whole story,” he tells BBC Mundo.
Although it is true that most of the electricity is produced from fossil fuels such as coal, oil or gas – which are highly polluting – renewable energies (such as hydroelectric or wind) or nuclear energy are also used.
So, while the level of electricity consumption matters, you also have to take into account how that electricity is generatedCarter points out.
For example, he notes, there are miners in China who take advantage of surplus hydroelectric power in dams. If they didn’t use it, that energy would simply be lost.
That explains why bitcoin mining has expanded so much in the provinces of Sichuan y Yunnan.
Another case occurs when some miners capture the discharged or burned methane (which is a by-product of oil extraction) and use it to generate the electricity required by their computers.
Many activists consider these examples to be specific cases that do not take environmental responsibility away from the bitcoin industry.
Still, Carter warns that bitcoin mining will be over in a few years, since the system was designed in such a way that the math puzzles that computers solve will come to an end.
“This process is 88% complete“, he points out, which in practice means that it is becoming increasingly difficult to continue mining.
However, as the price continues to skyrocket, energy consumption is likely to increase as well.
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Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.