Tech
Bitcoin consumes “more electricity than Argentina”
- By Cristina Criddle
- Technology reporter
February 10, 2021
Image source, Getty Images
Image caption, Cambridge University online tool estimates Bitcoin’s annual electricity consumption is higher than that of the Netherlands, United Arab Emirates and Argentina
Bitcoin consumes more electricity every year than the whole of Argentina, analysis by the University of Cambridge suggests.
“Mining” cryptocurrency requires a lot of energy and involves heavy computer calculations to verify transactions.
Cambridge researchers say it consumes around 121.36 terawatt hours (TWh) a year – and is unlikely to fall unless the value of the currency collapses.
This week the value of the currency hit a record $48,000 (£34,820). following Tesla’s announcement that it had purchased approximately $1.5 billion worth of bitcoin and planned to accept it as payment in the future.
But the price increase gives even more incentives to Bitcoin miners to run more and more machines.
And as prices rise, so does energy consumption, according to Michel Rauchs, a researcher at the Cambridge Center for Alternative Finance, who co-created the online tool that generates these estimates.
“It’s just by nature that Bitcoin consumes so much electricity,” Rauchs told the BBC’s Tech Tent podcast. “This is not something that will change in the future unless the price of Bitcoin drops significantly.”
The online tool ranked Bitcoin’s electricity consumption above Argentina (121 TWh), the Netherlands (108.8 TWh) and the United Arab Emirates (113.20 TWh) – and is gradually surpassing that of Norway (122, 20 TWh).
The energy used could power all the kettles used in the UK for 27 years.
However, it also suggests that the amount of electricity consumed each year by always-on but idle home devices in the United States alone could power the entire Bitcoin network for a year.
Bitcoin mining
To “mine” Bitcoin, computers, often specialized, are connected to the cryptocurrency network.
They are tasked with verifying transactions made by people who send or receive Bitcoin.
This process involves solving puzzles that, while not integral to verifying currency movements, provide an obstacle to ensuring that no one fraudulently changes the global ledger of all transactions.
As a reward, miners occasionally receive small amounts of Bitcoin in what is often compared to a lottery.
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Video caption, Bitcoin explained: how do cryptocurrencies work?
To increase profits, people often connect large numbers of miners to the network, even entire warehouses full of miners.
This consumes a lot of electricity because the computers work more or less constantly to complete the puzzles.
The University of Cambridge tool models the economic lives of the world’s Bitcoin miners and assumes that all Bitcoin mining machines around the world operate at various efficiencies.
Using the average price of electricity per kilowatt hour ($0.05) and the energy demand of the Bitcoin network, it is then possible to estimate the amount of electricity consumed at any given time.
Environmental conundrum
“Bitcoin is literally anti-efficient,” explained David Gerard, author of Attack of the 50 Foot Blockchain. “So more efficient mining hardware won’t help – it will just compete with other efficient mining hardware.
“This means that Bitcoin’s energy consumption, and therefore its CO2 production, only spirals outward.
“It’s very bad that all this energy is literally wasted on a lottery.”
The price of Bitcoin rose rapidly on Monday after Tesla announced its investment.
But commentators say the investment clashes with the electric car company’s previous environmental stance.
“Elon Musk has thrown away a lot of the good work Tesla has done in promoting the energy transition,” Gerard said. “It’s very bad… I don’t know how he can come back effectively.
“Tesla received $1.5 billion in environmental subsidies in 2020, funded by taxpayers.
“They turned around and spent $1.5 billion on Bitcoin, which is mined primarily with electricity from coal. Their subsidy needs to be looked at.”
A carbon tax on cryptocurrencies could be introduced to offset some of the negative consumption, Gerard suggested.
- You can listen to this story in more detail about the latest news Technological tent podcast on BBC Sounds this Friday 12 February.
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