As Bitcoin enters mainstream consciousness, it has never had so much media attention. Bitcoin’s price continues soaring towards new all-time-highs as more and more investors enter the market place.
The hype behind Bitcoin is undeniable, and with this hype comes more demand on the Bitcoin network. However, its popularity has negative implications when it comes to power consumption.
The bitcoin network
Miners who offer their computing power run the current Bitcoin network. When originally designed, the concept of mining focused on computers connected to the network that all help process Bitcoin’s transactions.
Miners who help maintain the network receive an amount of Bitcoin as a reward, called a block, relative to the amount of processing power they add to the network. This process is known as known as Proof-Of-Work mining.
Once miners saw the profitability of mining Bitcoin, they looked for new ways to increase profits. The desire for faster miners led to the development of application-specific integrated circuits (ASIC) that could mine Bitcoin significantly faster than any standard CPU found in a computer.
ASICs also use significantly more electricity to both run the ASIC and power the large fans which cool them.
Soon massive warehouses full of ASICs, known as mining farms, opened. With the new farms, however, came huge electrical demands.
Bitcoin’s mind-boggling power consumption
The increase in demand for Bitcoin, therefore, isn’t only driving the price up, it’s also driving up the network’s power consumption.
According to one UK company Powercompare, Bitcoin’s power consumption is now more than 159 individual countries including Ireland and most African countries.
The power consumption of the network increased by an estimated 30% in the past month. If the power consumption continues to grow at this rate, the Bitcoin network would surpass the power consumption of the USA by July 2019 and the whole world by February 2020.
Of course, these are all estimates, the decentralized and global nature of Bitcoin makes it impossible to accurately measure the true power consumption.
Environmental implications of Bitcoin
Based on Powercompare’s data, Bitcoin’s estimated power consumption is roughly equivalent to the annual carbon footprint of 4.5 million cars.
Another redflag is that Bitcoin mining farms are often opened in countries like China, where electricity is less expensive. The issue with cheaper power is that the electricity is often less expensive because it is created using less environmentally friendly methods, like coal.
There are of course skeptics who say the current estimations are wildly inflated number, and that the number does not take into account newer, more efficient ASIC miners. The truth is, though, that even with efficient miners the electricity consumption would still be startlingly high.
No solution in sight
For the foreseeable future, there is no solution to Bitcoin’s power consumption problem.
As Bitcoin’s profitability increases, more companies invest in mining farms, which increases the demand for electricity.
Bitcoin is not the only digital currency though, and there are digital currencies emerging that are more eco-friendly.
There is a new trend towards Proof-Of-Stake mining towards a virtual mining process. People wishing to mine a Proof-Of-Stake currency buy the digital currency and store it in their wallet. If someone owns 1% of a currency, for instance, they receive 1% of the new blocks mined as a reward. In essence, this behaves a lot like a dividend from a stock.
Traditional CPU and ASIC miners don’t need to maintain the network because Proof-of-Stake is virtual, significantly reducing the environmental impact of the currency.
Ethereum is planning to make the move to Proof-Of-Stake with an upgrade to the network called Casper, for now, though it is still in the experimental phase and there is no release date. Some other digital currencies are already using a Proof-Of-Stake system, such as Dash and Ark.
For now, there is no solution to Bitcoin’s power consumption on the horizon. Sadly, even a good solution would require the consensus of all miners. Since these miners have have invested millions in power-hungry ASIC’s, it’s unlikely that any new solution would find quick consensus.