Bitcoin mining, which has received increased interest from both the public and investors over the past few years, is currently estimated to use at least 2.55 gigawatts of electricity.
However, the study found that this figure could potentially triple to 7.67 gigawatts as early as the end of 2018, which puts the consumption to roughly the same amount of energy the entire country of Austria consumes.
The bitcoin development community is experimenting with solutions such as the Lightning Network to improve the throughput of the network, which may alleviate the situation. For now, Bitcoin has a big problem and it is growing fast.
The so-called mining process of bitcoin involves computers with the necessary software to solve complex mathematical problems. When each problem is solved, a new block is added to the blockchain and the miner receives bitcoins as a reward.
The reason why the process requires so much energy is because computers need to time stamp transactions in the blockchain, making a ledger of transactions, so that it can be made sure that the same coins are not spent twice.
As noted, the amount of energy the bitcoin network consumes is just over 65 TWh per year, with annual global mining costs estimated at $3.26 billion. When compared to energy used for Visa (NYSE:V) transactions, the number is even more staggering. A Digiconomist chart shows that one bitcoin transaction uses 850 kWh compared to 169 kWH for every 100,000 Visa transactions.
Bitcoinblockhalf.com states there are approximately 144 blocks generated each day which amounts to 1,800 bitcoins created on a daily basis. The cost to mine just one bitcoin in the US is $4,758, according to a study conducted by EliteFixtures, which is the 41st cheapest country for mining the digital currency. As the popularity of bitcoin increases, the puzzles miners are to solve also increases in difficulty, which pushes the demand up for high-powered computer processing.
Based on research, if the price of bitcoin goes down and the amount of electricity needed to mine goes up, bitcoin could become an inefficient investment, causing miners to shut down.
Indeed, while the energy used to power blockchain technology may seem staggering, there are solutions to the mining process.
Some cryptocurrency mining companies like HIVE Blockchain have set up mining facilities in Sweden and Iceland where there is affordable hydropower and geothermal power.
One of the reasons HIVE Blockchain has one of its GPU-based data centre in Iceland is because the company claims the country has some of the lowest electricity costs in Europe due to “an abundance of hydro power and geothermal energy.” HIVE also has a GPU based digital currency mining complex in Sweden in addition to a data center acquired in Norway, which has the potential to expand to more than 1.0 GW or 1,000 MW of green hydroelectricity consumption.
In terms of overall energy reduction options, Digiconomist states “energy efficient” algorithms like proof-of-stake have come into play in recent years. Through this, coin owners make blocks instead of miners, which doesn’t require computers that need as much energy to create as many hashes per second. This could significantly reduce energy use and improve sustainability.
With more mining facilities undoubtedly coming online in the next several years, the more energy will be used–which could create ample opportunity for renewable energy developers.
A renewable energy could be generated at a lower cost than fossil-heavy power production, meaning the cost to mine cryptocurrencies could also drop.
On one hand, first mover advantage may prove meaningful in time, but there is also the bearish view of “winner-take-all” tech disruption as we’ve seen in many other sectors.
In short, it will be interesting to see how renewable energy will play a role in the blockchain sector.