Sunday, June 23, 2024

    The Bitcoin Network Uses as Much Electricity as Ireland: Study

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    According to a new study, the Bitcoin network could be consuming as much as 0.5% of the world’s total electricity — a number comparable to the amount of power used by the entire country of Ireland. 

    Bitcoin and Electricity Usage

    That said, determining exactly how much electricity the Bitcoin network uses, necessary for understanding its impact and implementing policy in the future, is not straightforward.

    According to blockchain specialist Alex de Vries, who works at the tax advising firm PwC in the Netherlands:

    “We’ve seen a lot of back-of-the-envelope calculations, but we need more scientific discussion on where this network is headed. Right now, the information available is pretty poor quality overall, so I’m hoping that people will use this paper as a foundation for more research.”

    The estimates, based on de Vries’ background in economics, put the minimum current usage of the Bitcoin network at 2.55 gigawatts — as noted, almost as much electricity as Ireland. Another comparison puts a single transaction as using about as much electricity as an average household in the Netherlands uses in an entire month.

    One of the biggest factors that contributes to the coin’s high electricity usage is also an inherent part of its design. Since its inception Bitcoin’s decentralized consensus has been enabled by its proof-of-work (PoW) algorithm, and the mining machines that perform this ‘work’ need tremendous amounts of energy to do so.

    According to research published in April by equity analyst Charlie Chan and his team at Morgan Stanley, the key price point for Bitcoin mining profitability is $8,600. As per their simulation, if the coin can’t stay above $8,600, many Bitcoin miners will likely find it unprofitable to keep creating the cryptocurrency.

    Bitcoin’s Energy Cost Moving Forward

    Moving forward, the electricity needed to operate the Bitcoin network is only going to increase. By the end of  2018, de Vries predicts the network could be using as much as 7.7 gigawatts — as much electricity as the European country of Austria. Looking further ahead, if the price of Bitcoin continues to increase as some experts predict, de Vries believes the network could someday consume as much as 5% of the world’s total electricity, a tenfold increase from today’s 0.5%. 

    “To me, half a per cent is already quite shocking. It’s an extreme difference compared to the regular financial system, and this increasing electricity demand is definitely not going to help us reach our climate goals,” he said.

    Another consideration environmentally is Bitcoin’s carbon footprint. The problem is that much of the coin’s network is fueled by coal-fired power plants in China, where electricity is produced at very low rates, but the impact on the environment is more marked. 

    Based on ‘conservative’ estimates from the Bitcoin Energy Consumption Index, the carbon footprint for each unique Bitcoin transaction totals almost 450 kilograms of CO2, which translates to 32,898 kilotons annually for the entire network.

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