While the future of Bitcoin might be bright, environmentalists don’t think so. The more popular that coins—and mining—get the more power is consumed due to the computing power needed to do so. Are miners really making that much of an impact on the environment?
Where Does the Power Go?
Current numbers put Bitcoin mining at about 1800 new coins per day. Computers are needed to mine these coins. Specifically, computers with significant processing power that can complete complex mathematical equations and validate the cryptocurrency blockchain network. Higher processing computers require more electricity than average computing.
Digiconomist has the formula to decipher the energy consumption. It looks at total Bitcoin revenue, estimates operational costs to miners as a percentage of revenue, then it cost-converts to energy consumption based on average electricity prices. Currently, they are running around the average amount of energy consumption that Belarus and Denmark have, at 32.71TWh (terawatt hours). Estimates have that figure increasing in the future.
Comparison to Other Industries
People, in general, seem to accept that industry that makes things causes pollution, but can they wrap their heads around a digital item making pollution? Will they accept that? We have many data centers around the world that house and compute our data, and they run using electricity and require cooling causing a higher need for electricity. Storing data is causing pollution like steel mills and coal mines.
Our largest energy consumers though seem to be steel and iron, refining, basic chemical production, pulp and paper making, metal production (nonferrous) such as aluminum, and nonmetallic minerals (primarily cement). Together these industries account for half of the delivered energy. Bitcoin is a drop in the energy bucket compared to any of these behemoths.
Comparison to Other Monetary Systems
Considering that Bitcoin is hedging itself between a currency and an asset its hard to compare it to another item that is exactly its equal. Its original goal was to replace fiat currency. However, it is emerging as an asset much like gold.
Matt Petersen takes a stab at this and decides to compare Bitcoin to Visa’s entire banking network. They handle 200 million transactions a day at 97Twh. But the argument is that Visa can do far more and reaches almost everyone. They do far more transactions per second –24,000—than Bitcoin at 2 or 3 (max 7).
Will Bitcoins Energy Consumption Continue to Grow?
The short answer is yes, for the short term it will continue to grow. Its surging prices attracted more investors and minors, and it will, in turn, put more demand on the energy supply. Here’s why it won’t take over the world:
- Mining Equipment
When mining first began the equations were solvable by less complex computers. You now need to join a mining pool or have a complex machine to do it. It will become more and more complex and constantly improved machinery will be necessary for the future of mining.
- Self-Adjusting Bitcoin
Block rewards aren’t as high as they used to be. Rewards have halved several times and as it stands the current reward is 12.5 Bitcoins per block plus transaction fees. Every four years the rewards halve so the interest should halve as well as it becomes less profitable to mine with expensive equipment.
- Alternative Mining Algorithms
Bitcoin uses Proof of Work algorithm which is a piece of data that is easy to produce but is easy to verify. Proof of Stake is another algorithm compares the amount of stake a miner holds and allows them a chance to mine that amount. Currently, those who are richest in mining equipment seem to be the ones who earn the most.
- Network Alterations
Considerations such as taking the computing off the network and doing it peer-to-peer on the lightning network for less strain on the network and other power consumption ideas.
Ethereum is another cryptocurrency that uses less power and uses the Proof of Stake mining system. It has a huge amount of potential and is the base start-up of other stunning cryptocurrency-startups