Bitcoin could consume more electric energy than all of Austria before the end of the year, expert warns
- Bitcoin relies on a network of computers performing non-stop calculations
- Study estimates it will account for half a percent of world’s electric consumption
- Experts warn this could soon jump to 5 percent as networks continue to grow
By the end of last year, it seemed ‘Bitcoin’ was the word on everybody’s lips.
The hype has died down some in the last few months, but the cryptocurrency is still generating substantial demand – so much that one expert estimates it will use up as much electricity as all of Austria by the end of this year.
As Bitcoin relies on a network of computers performing non-stop calculations, each transaction requires a staggering amount of energy.
A new study quantifying Bitcoin’s energy requirements estimates it will use about half a percent of the world’s total consumption before the end of the year; in the near future, the study shows it could consume as much as 5 percent.
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Experts estimate Bitcoin will use up as much electricity as all of Austria by the end of this year. As Bitcoin relies on a network of computers performing non-stop calculations, each transaction requires a staggering amount of energy
‘We’ve seen a lot of back-of-the-envelope calculations, but we need more scientific discussion on where this network is headed,’ says financial economist and blockchain specialist Alex de Vries.
‘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.’
In a paper published to the journal Joule, the researcher uses a new technique to assess the future of Bitcoin’s electric energy consumption.
Soon, the researcher says it will likely use up about half a percent of the world’s total consumption.
It might not sound like much, but with a minimum usage now estimated to be at 2.55 gigawatts, it means Bitcoin already uses nearly as much electricity as Ireland.
According to de Vries, a single transaction uses roughly the same amount of electricity as an average household in the Netherlands consumes in a whole month.
When it hits half a percent, it will be using as much as 7.7 gigawatts – or as much as Austria.
‘To me, half a percent is already quite shocking,’ de Vries says.
‘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.’
A new study quantifying Bitcoin’s energy requirements estimates it will use about half a percent of the world’s total consumption before the end of the year; in the near future, the study shows it could consume as much as 5 percent
If it jumps to 5 percent, as de Vries believes it someday could, the researcher says ‘that would be quite bad.’
Computers in the Bitcoin network are constantly performing calculations, as they must time-stamp the transactions in the ongoing chain.
As a result, even those who don’t win are drawing power.
‘You are generating numbers the whole time and the machines you’re using for that use electricity,’ says de Vries.
‘But if you want to get a bigger slice of the pie, you need to increase your computing power. So there’s a big incentive for people to increase how much they’re spending on electricity and on machines.’
WHAT IS A BITCOIN? A LOOK AT THE DIGITAL CURRENCY
What is a Bitcoin?
Bitcoin is what is referred to as a ‘crypto-currency.’
It is the internet’s version of money – a unique pieces of digital property that can be transferred from one person to another.
Bitcoins are generated by using an open-source computer program to solve complex math problems. This process is known as mining.
Each Bitcoin has it’s own unique fingerprint and is defined by a public address and a private key – or strings of numbers and letters that give each a specific identity.
They are also characterized by their position in a public database of all Bitcoin transactions known as the blockchain.
The blockchain is maintained by a distributed network of computers around the world.
Because Bitcoins allow people to trade money without a third party getting involved, they have become popular with libertarians as well as technophiles, speculators — and criminals.
Where do Bitcoins come from?
People create Bitcoins through mining.
Mining is the process of solving complex math problems using computers running Bitcoin software.
These mining puzzles get increasingly harder as more Bitcoins enter circulation.
The rewards are cut in half at regular intervals due to a deliberate slowdown in the rate at which new Bitcoins enter circulation.
Who’s behind the currency?
Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto and then adopted by a small clutch of enthusiasts.
Nakamoto dropped off the map as Bitcoin began to attract widespread attention, but proponents say that doesn’t matter: the currency obeys its own, internal logic.
Dr Craig Wright was suspected as the creator following a report by Wired last year and he has now confirmed his identity as the cryptocurrency’s founder.
What’s a bitcoin worth?
Like any other currency, Bitcoins are only worth as much as you and your counterpart want them to be.
Bitcoins are lines of computer code that are digitally signed each time they travel from one owner to the next. Physical coin used as an illustration
In its early days, boosters swapped Bitcoins back and forth for minor favours or just as a game.
One website even gave them away for free.
As the market matured, the value of each Bitcoin grew.
Is the currency widely used?
Businesses ranging from blogging platform WordPress to retailer Overstock have jumped on the Bitcoin bandwagon amid a flurry of media coverage, but it’s not clear whether the currency has really taken off.
On the one hand, leading Bitcoin payment processor BitPay works with more than 20,000 businesses – roughly five times more than it did last year.
On the other, the total number of Bitcoin transactions has stayed roughly constant at between 60,000 and 70,000 per day over the same period, according to Bitcoin wallet site blockchain.info.
Is Bitcoin particularly vulnerable to counterfeiting?
The Bitcoin network works by harnessing individuals’ greed for the collective good.
A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction.
The blockchain prevents rogues from spending the same bitcoin twice, and the miners are rewarded for their efforts by being gifted with the occasional Bitcoin.
As long as miners keep the blockchain secure, counterfeiting shouldn’t be an issue.
While the researcher has dived further into the methods than prior studies, the secretive nature of the industry makes obtaining information somewhat of a challenge.
‘Sometimes the best information we’ve got is really shaky eyewitness accounts,’ says de Vries.
‘That’s the stuff we have to work with.’
The new estimates, however, could be useful in assessing the sustainability of cryptocurrencies, and developing policies around them, the researcher says.
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