Bitcoin was the first and continues to be the most valuable cryptocurrency in the world. Its network is also the costliest to maintain, from an energy consumption perspective. The computers that calculate Bitcoin’s cryptographic proof-of-work algorithm—essential to Bitcoin transactions—require an enormous amount of electricity. In fact, many believe that the energy requirements of Bitcoin are not only unfriendly to the environment, but are also unsustainable.
Others, on the other hand, believe that the energy costs required by Bitcoin create an opportunity to advance the way energy is harvested. Companies like GEAR Token plan to use sustainable energy to power the computers that maintain the massive Bitcoin network. Before going deeper into the green energy solution, however, let’s take a closer look at the energy-sourcing problem Bitcoin presents.
Why Does the Bitcoin Network Require So Much Energy?
A global network of computer operators called “miners” work on the never-ending task of updating the Bitcoin ledger—in all its counterpart copies—to reflect every transaction made when one person sends Bitcoin to another. This network of miners is essential for a transaction to become valid. The miners independently confirm that a particular transaction follows the rules of the Bitcoin protocol,i.e., that it was sent by the true owner of the coin. Through the consensus of multiple confirmations, the transaction gets approved.
Once the miners have reached a consensus that the history of a particular block of transactions is correct, the “block” is added to the blockchain, and the miners begin work on the next one. The first miner to complete calculations for a block that gains consensus is the miner that gets paid for the work (with a fixed number of bitcoins). This process repeats approximately every 10 minutes. As computers get better and faster at completing blocks, the Bitcoin protocol adjusts the difficulty level so the average time remains 10 minutes.
Running the calculations required to test and prove that a particular block of transactions is correct is kind of like guesswork for computers. The more guesses they make, the faster they solve the block. In this sense, the more computer power a miner has, the better chances of solving a block. However, this computer power requires massive amounts of electricity. Since Bitcoin becomes more difficult to mine over time, the energy requirements to solve one block have skyrocketed with no end in sight.
Bitcoin, Sustainability and Trouble for the Environment
For the miners, running Bitcoin calculations provides a dependable stream of income that outpaces the financial costs of purchasing computer hardware and electricity. Historically, when a miner buys more computer equipment and pays for more electricity, the miner’s profits go up, so people throughout the world have been excited to run these power-hungry operations. This incentive, however, has caused the energy consumption of the Bitcoin network (including all its derivative coins) to be more than many countries. At the time of this writing, the Bitcoin network consumes more energy than the Czech Republic. In several years, it’s expected to consume more electricity than Denmark.
Here are some other statistics pertaining to the cost of mining Bitcoin:
- The energy required to mine one Bitcoin could power approximately 35 U.S. homes for a day.
- Bitcoin calculations account for .32 percent of the world’s power consumption.
- One Bitcoin transaction requires 1049 Kwh of power.
- It costs approximately $3,556,216,066 annually to mine Bitcoin.
The worst part is Bitcoin’s carbon footprint. The majority of Bitcoin mining rigs are in China, where coal-fired electric plants produce most of the electricity. Coal-based electricity is inexpensive in China, making the country an excellent location for Bitcoin mining operations. However, even the most energy-efficient application of coal-fired plant electricity for Bitcoin mining creates a massive and unnecessary carbon footprint.
Each Bitcoin transaction takes a deadly toll on the environment and contributes to global warming, and it’s only getting worse as mining difficulty increases exponentially with time.
Environmentally-Friendly Bitcoin Mining is Possible
For hundreds of years, humankind has mined deep into the Earth to pull out coal and oil to burn for electricity. This has fueled human advancement to unprecedented levels—but it has cost the planet dearly. The worst of these environmental effects is the widespread global warming phenomenon. Scientists have not only proven that global warming caused by carbon emissions is real, but anyone can observe that the polar ice caps are melting, species are going extinct, and drought, wildfires and mega-storms plague our neighborhoods and countrysides.
Cryptocurrency mining presents a new and bigger threat to the environment if it continues to be fueled by pollution-generating energy sources, but there’s another, more ethical way. New technology exists to create green energy from renewable sources. We now have the ability to satisfy the Earth’s energy requirements—even the Bitcoin network’s energy requirements—without burning more carbon emissions into the atmosphere.
Cryptocurrency projects like Gear Token hope to harness green, renewable energy, such as solar, biomass and hydropower, to mine Bitcoin. The Bitcoin earned can then be used to finance a green energy revolution. Unlike the industrial revolution of the past, the blockchain revolution of the future doesn’t have to endanger health and the environment.
Jeremy Hillpot is an investment fraud litigation consultant. Fascinated by emerging technologies like blockchain, and the laws and market trends that follow them, Jeremy’s background in consumer fraud litigation provides a unique perspective on a vast array of topics including investments, startups, cryptocurrencies and law.