While the price of cryptocurrencies such as the Bitcoin continues to increase the interest of investors and crooks in this new industry is demonstrated by disconcerting data that I’m going to share with you.
According to new research conducted by energy tariff comparison service PowerCompare.co.uk, the electricity used to mine Bitcoin this year is bigger than the annual usage of almost 160 countries. The energy consumption has already exceeded the amount used on average by states such as Ireland and most African nations.
“That’s the equivalent of 0.13% of total global electricity consumption. While that may not sound like a lot, it means Bitcoin mining is now using more electricity than 159 individual countries (as you can see from the map above). More than Ireland or Nigeria.”
Bitcoin transactions use so much energy that the electricity used for a single trade could power a home for almost a whole month, according to a paper from Dutch bank ING.
“By making sure that verifying transactions is a costly business, the integrity of the network can be preserved as long as benevolent nodes control a majority of computing power,” wrote ING senior economist Teunis Brosens.
“Together, they will dominate the verification (mining) process. To make the verification (mining) costly, the verification algorithm requires a lot of processing power and thus electricity.”
Comparing the amount of energy used for a Bitcoin transaction to run his home in the Netherlands, Brosens says: “This number needs some context. 200kWh is enough to run over 200 washing cycles. In fact, it’s enough to run my entire home over four weeks, which consumes about 45 kWh per week costing €39 of electricity (at current Dutch consumer prices).”
It is amazing if we compare this data other payment systems, for example Visa takes about 0.01kWh (10Wh) per transaction which is 20000 times less energy.
The following graph shows the 159 countries whose energy usage is less than bitcoin-mining consumption.
Which is the concept behind the mining process?
To prevent the falsification of the records or the ownership changing, participants of the Bitcoin network must sign off on transactions in “blocks”.
The process requests a significant computational capability and involves several computers to solve complex cryptographic problems, people who verify blocks are rewarded with freshly created bitcoin. This process is known as Bitcoin “mining.”
According to the initial design of the Bitcoin virtual currency scheme, it limits the overall number of coins in circulation to 21 million, this is possible because the cryptographic problems involved in the mining process get progressively harder.
On the other side, miners are turning to more powerful computers to solve the complex problems behind the mining process.
The vast majority of “mining” activities is done in China because the energy costs are cheaper compared to Europe or US.
“The top six biggest mining pools from Antpool to BTCC are all largely based in China,” said Mati Greenspan, an analyst with trading platform eToro. “Some rough estimates put China’s hashpower at more than 80% of the total network.”
Of course, the environmental impact of all this electric usage is not negligible, don’t forget that the electricity generated in China comes from CO2 emitting fossil fuels.
Below a few other interesting facts about Bitcoin mining and electricity consumption published:
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(Security Affairs – pollution, mining)