Dutch researcher Alex de Vries recently published a study titled “Bitcoin’s Growing Energy Problem” where he concluded that the Bitcoin network consumes as much electricity as the entire nation of Ireland. The average price can be high, but the marginal cost is much lower. It’s something completely different that performs a few of the same functions, but tackles them from a completely different angle. Historically, there have been people who wanted to establish their system with a bloody revolution. These are, of course, silly numbers, but that’s the point. by Tibi Puiu. It corresponds to only about 2% of the US Federal budget for social security. Yet, because these mass energy-consuming elements aren’t routinely discussed, they are often forgotten. At a price of 13.26 cents per KWh that’s just $28.5. By 2024, the bitcoin network is set to use as much energy as a medium-sized country like Italy. Why did I mention the year 2033? We do not learn this directly from the article, but they assume that more electricity will be burned. Energy consumption has become the latest flashpoint for cryptocurrency. Referring to de Vries’ digiconomist data, Newsweek wrote about Bitcoin that, “If such growth were to continue, this would see the network consume as much energy … Those new to Bitcoin and mining Bitcoin may not realize how controversial energy consumption is within the financial community. Plenty of mainstream media outlets have taken aim at Bitcoin, jumping on minor stories and using them to create myth and rumor. The Bitcoin blockchain is regularly reviewed by the entire network, making attacks on the Bitcoin itself highly unlikely. Electricity with a carbon footprint is rarely cheap enough for profitable mining, unless subsidized. Then the marginal cost of the first beer is ten dollars and the second one dollar. Today, we are looking at power, specifically the belief that Bitcoin – to function, operate, and be mined – requires a huge amount of energy consumption. It seems it’s not only journalists who are spreading Bitcoin myths, but scientists, too. by Dominik Stroukal — Economic Expert at SatoshiLabs and External contributor to Trezor Blog. Bitcoin VS VISA Electricity Consumption Fallacy Those new to Bitcoin and mining Bitcoin may not realize how controversial energy consumption is within the financial community. Similar articles build the myths in two emotive ways. Economists like marginal values. ... Never short of ideas to attack Bitcoin, its opponents have also pointed to its high energy consumption. $88,000. The simple confusion of the word “electricity” with the word “energy” may be negligible in your home but, in addressing the whole economy, we transform the real figure into a mythical giant. Today, we are looking at power, specifically the belief that Bitcoin – to function, operate, and be mined – requires a huge amount of energy consumption. We do it for Visa), like trade transactions on crypto exchanges, for example, the average cost would also be much lower. In the article, this is not described in dollars, but in kilowatt-hours (KWh): an incredible 215 KWh. In contrast, averages are a common arithmetic mean. Another factor that appears to contribute to the great Bitcoin energy myth is that many of those bashing Bitcoin’s energy consumption are doing so off non-existent or somewhat questionable statistics. To be fair, scientists at Nature estimate that Bitcoin will handle more than 100 billion transactions a year at the time. But if bitcoin didn’t cost $160 million, then each transaction would have to cost almost $80 to make it worth it. Both of these sites, and others, are doing their best with the data available, but as one recent critical report in the Guardian said, “there is no way of knowing whether miners are using electricity that is fueled by renewable energy or fossil fuels”. For that reason, it’s worth looking at these statements and effectively debunking them. ... are trying to replace centralized finance which is a massively inefficient industry that dwarfs crypto in terms of energy usage and most of that energy is not clean energy. That’s almost as much as SatoshiLabs’ homeland, the Czech Republic. It’s important to say that journalists like to compare the average cost of Bitcoin with the marginal cost of Visa. In the end, Bitcoin will have almost 21 million units which, in 2009, were produced at a rate of 50 BTC every 10 minutes, on average. This is energy being consumed in areas where electricity is high demand, like cities. In fact, the Bitcoin network’s demand will push the research for efficient energy benefitting everyone in the long run. Digiconomist also estimates that miners spend approximately 60% of all revenues on operational costs, with 1 kWh consumed for every 5c spent. The BECI updates every thirty seconds, and provides an estimate energy consumption figure alongside a theoretical upper and lower limit. The majority of arguments stem from comparisons of Bitcoin’s electricity use to that of particular countries, or some other apples-to-oranges comparison. You’ve heard it before, “Bitcoin burns as much energy as Switzerland, so much that it will accelerate global warming by a few degrees Celsius over the next few years”. Plenty of mainstream media outlets have taken aim at Bitcoin, as one recent critical report in the Guardian, The Cambridge Bitcoin Electricity Consumption Index, Bitcoin’s energy use is also just half of that of internet video streaming. And Bitcoin’s figure is in constant flux. For example, The Cambridge Bitcoin Electricity Consumption Index says that Bitcoin uses 128.77 tWh annually, whereas Digiconomist puts the figure at 82 tWh. Bitcoin’s energy consumption and environmental impact are commented on very regularly, but ultimately, they are rarely understood. Three Myths about Bitcoin’s Energy Consumption ! Plenty of mainstream media outlets have taken aim at Bitcoin, jumping on minor stories and using them to create myth and rumor. A division of the Cambridge Centre for Alternative Finance, the department estimates the crypto’s annualized energy consumption to be around 127.48 terawatt-hours (TWh). It is possible, although it is a lot. Explore, If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. Did you buy a beer for ten dollars and have another for only a dollar? It might be a stretch to label Bitcoin as a “Green Coin”, but it isn’t a stretch to say that it has the potential to be the most efficient way to conduct transactions on a global scale. For mining Bitcoin on a mass-scale, thousands of ASICs (Application-Specific Integrated Circuit) – hardware designed exclusively for mining cryptocurrencies – are required to handle the graft. Bitcoin actually doesn’t need a huge amount of power to function, especially when it is compared to fiat currency operations and other heavy users of energy, such as precious metal mining and internet video streaming. When you weigh up Bitcoin and its digital presence against that of “standard” currencies, things don’t exactly look as awful as some would have you believe. In other words, in order to burn the same amount of electricity, the price of bitcoin must double every four years. Satoshi Nakamoto instead gave us a peaceful instrument of change, and we alone can decide if it is worth it. Ethereum $ 2,691.36 ETH 5.21 % Don’t Believe the Data. (What would you rather have, by the way?). According to the statistics, I will die by the time the reward reaches 0.00076293 BTC. It can be tedious, but it works. Bitcoin’s energy consumption ‘equals that of Switzerland’, writes the BBC. After the last halving, it is now 6.25 BTC. You already know that, but let’s repeat it to be sure. A single bitcoin transaction uses roughly 707.6 kilowatt-hours of electrical energy–equivalent to the power consumed by an average U.S. … A nation’s total energy consumption includes oil used for transportation, as well as fuels used for heating, like natural gas, coal, and wood — electricity is just one part of the whole energy system. At times, the data related to Bitcoin energy consumption can be misleading, but that isn’t the only thing that is perpetuating the myth that Bitcoin is a power drain. No, those are both myths. The average cost is then $5.5. Virtually all articles that you may come across on this topic use the word “energy”. The miners would therefore fight for half of the current reward. Trezor Suite and Firmware Updates: RBF and Spending now live! I use several energy sources in my house, including gas and gasoline. Bitcoin’s annual consumption is estimated at around 77.8 terawatt-hours, up from 9.6 terawatt-hours in 2017, according to Digiconomist. Can we really imagine that? So, is that figure even possible? Energy consumption derives from coin issuance Today, bitcoin miners earn around $50 million/day, which annualizes to around $18.2 billion in miner revenue. amount of electricity, if we discount fee contributions from for simplicity’s sake (these are currently negligible but will increase). But crucially, if someone says it will burn a thousand times more electricity in 52 years when I die, just because historically the amount of electricity burned increased, then they implicitly assume that the price of bitcoin will be $90 billion in today’s dollars! You know how you could use wasted energy? If you don’t have a car or gas at home, energy consumption may only mean electricity for you, but … According to the index, the amount of energy consumed by mining bitcoin surged about 26 percent in November alone and now totals nearly 36 terawatt hours, enough energy to … It also ignores the fact that Bitcoin mining operations are getting ever greener, and it won’t be long before coal-powered operations are in the minority. Sounds fair. Innovating since we founded the industry in 2013 with production of the first crypto hardware wallet, the Trezor One. Many are levelling criticism at Bitcoin’s energy consumption because its energy use seems obvious in the public eye. For that reason, it’s worth looking at these statements and effectively debunking them. It is no coincidence that mining is concentrated in places with excess electricity, such as oil extraction sites or areas in China that are home to hydropower plants producing more power than people and companies demand. How to Hodl: a Guide to Saving in Bitcoin, What the recent string of regulations tells us about cryptocurrencies’ future, Multisig and split backups: two ways to make your bitcoin more secure. Cambridge University’s Centre for Alternative Energy uses an index called the Bitcoin Electricity Consumption Index (BECI) to calculate Bitcoin’s energy consumption. Bitcoin will have the opposite problem in the distant future: unless there are more expensive on-chain transactions or the price doubles every two years, then less electricity will be burned in the future. At the time of writing, that’s about $70,000. Debunked and dismissed, next time you hear someone say that Bitcoin is “power hungry”, you can now see that such statements are based on little more than estimates and don’t actually hold much water. When it comes to Bitcoin and energy consumption you need to deal in facts. Bitcoin is a super commodity, minted from energy, the fundamental commodity of the universe. Just for comparison, 1000 BTC at that price would buy the entire world GDP. Bitcoin Energy Use Myths Debunked Bitcoin is most profitable when using cheap electricity. Every time you use a debit or credit card, the transaction must pass through thousands upon thousands of large data centres that conduct data processing and extensive fraud detection. It’s not just words. We each have a different answer, so I can only speak for myself and a few of my friends in SatoshiLabs. That would mean we put into circulation coins worth $200 billion for a tenth of their price. So, on a base level it is fair to say that Bitcoin is not – at least in its current form – an energy-light commodity. Many media have falsely compared the amount of electricity needed to process a single VISA credit card transaction to Bitcoin … Mastercard: 4 in 10 Plan to Use Crypto as a Payment Method, Why You Should be Comparing Your Alts to BTC Not Fiat, Ledger Hack Fallout Leaves Company With a PR Dilemma, Thailand to Impose New Crypto ID Verification Rules, New Hampshire Joins the Crypto Taxation Bandwagon, Jeffrey Robinson: “Bitcoin is Already Pogs”, Hong Kong Set to Create New Rules for Crypto Exchanges, TE-FOOD-Auchan Collaboration Set for International Expansion, Eminence Creator Andre Cronje Could Face Lawsuit, QuadrigaCX Owes More Than Seven Times Its Bank Balance, Bitcoin’s energy usage has come in for criticism over the years, This criticism has ramped up in recent months as its price has rocketed, However, the arguments are based on very unscientific and often contrary data. no Lightning Network, but directly in the blockchain). He has also been following the situation for years and publishes his research on Digiconomist's Bitcoin Energy Consumption Index. Today, we are looking at power, specifically the belief that Bitcoin – to function, operate, and be mined – requires a huge amount of energy consumption. Bitcoin's energy consumption won't necessarily march steadily upward. It’s a lot of money, but let’s put in context. Miners would love to burn more if there were more transactions, and therefore more fees. The Bitcoin ledger can only be immutable if and only if it is costly to produce.The fact that Proof of Work (PoW) is “costly” is a feature, not a bug. The official blog of the world’s first and most trusted hardware wallet — Trezor. The Ripple cofounder notes that Bitcoin network participants have been committing to renewable energy and green sources of fuel, but Larsen stresses this is only “part of the solution.” In a proof-of-work (PoW) system, miners secure the system and get rewards by using computational power and specialized machines. If we were to compare that with the energy (yes, including gas and other fossil fuels this time) expended in sending a bank transfer, which involves multiple institutions, physical buildings with facilities costs, and staff wages, this exercise quickly loses its footing, as shown by this article from 2017. Criticism and potential validation of the estimate is discussed here. PoW transmutes electricity into digital gold. And, if we included those managed by third parties (why not? That would not be profitable. So even that comparison wouldn’t make much sense. While terawatt-hours (TWh) are a standard unit used to measure electricity consumption, it can be difficult for some to put these figures into perspective without additional context. Copyright © 2021 FullyCrypto. On the contrary, Bitcoin has the exact opposite problem — it will burn less electricity in the future than we probably want it to. Write on Medium, One Bitcoin Transaction Consumes As Much Energy As Your House Uses in a Week, Bitcoin using more electricity per transaction than a British household in two months. Comparing it to the entire world of banking when Bitcoin handles a fraction of the worlds transactions. Thanks to COVID-19, we are now all experts in exponential growth, but still, how much would bitcoin have to cost in 2033 to burn as much electricity as it does today? When talking about blockchain technology in academia, business, and society, frequently generalizations are still heared about its – supposedly inherent – enormous energy consumption. Bitcoin may be expensive but let’s compare like with like: the current monetary system is not cheap. On February 13, 2019, the minimum benchmark was changed to Is the Economy Bad Enough for Bitcoin’s Blessings? That’s one-eighth of today’s 6.25 BTC. Again, it’s a case of Digiconomist doing its best to present the data it has, but it isn’t anything that anyone can take as gospel, although sadly mainstream media outlets do because it serves their narrative.
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