Bitcoin's Electricity Use to Match Denmark, But It's Worth It
Over the years, there has been a lot of focus on the energy usage associated with Bitcoin mining. Given the growing demand for mining hashpower to keep the network going, more devices are being deployed by hardware manufacturers, all of which draw a significant amount of energy from the wall. A recent article shows how growing power consumption by Bitcoin miners could outpace the total electricity consumption of Denmark by 2020.
Also read: Bitfury Pays in Bitcoin to Join UK’s Innovate Finance
Growing Bitcoin Electricity Consumption
One thing to understand about the Bitcoin network is how transactions are being confirmed by the people actively mining blocks. Every transaction has an associated fee, which will pay for its inclusion in one of the next blocks on the Bitcoin network. However, mining Bitcoin is not an easy task, as the ecosystem has grown exponentially over the past seven years, and the mining world has undergone several changes as well.
Bitcoin mining hardware has become far more efficient compared to a few years ago, but there is also a hefty increase in electricity consumption per device. This is only normal, as more powerful hardware requires more energy to operate. However, in the Bitcoin mining world, power consumption has become so high that mining at home is all but impossible in most countries, due to mounting electricity costs.
A recent article on Motherboard Vice shows how one environmental researcher calculated that the total Bitcoin mining electricity consumption will be on the same level as the entire country of Denmark by 2020. Although electricity consumption in Bitcoin has been a point of considerable discussion for quite some time now, things seem to be getting out of hand.
Powering an entire financial ecosystem is not an easy task, and in the case of Bitcoin, individual miners play a significant role. If no more miners were directing their computers and hardware at the Bitcoin network, transactions would no longer be processed, and all payments come to a screeching halt.
Luckily, dedicated hardware manufacturers are rolling out new mining equipment on a regular basis. Mining chips become more efficient and smaller in size, resulting in lower energy consumption as well. However, as more of these chips are packed together on PCB boards within a Bitcoin miner, the total electricity consumption is not going down by all that much, even though its mining power is increasing compared to previous generations.
On paper, it should become easier to mine Bitcoin, as the machines become more efficient while drawing less energy. But at the same time, there is the mining difficulty on the network, a factor determined by how many people are actively mining. Although the difficulty will fluctuate, the rate will keep going up as long as new miners are coming to the network. A larger total hashrate on the Bitcoin network will make all mining hardware slightly less efficient over time, and lead to a growing demand for more equipment to be deployed.
The Good or the Bad Scenario
The Motherboard article points out there are two likely scenarios for Bitcoin mining in a few years from now. Assuming the technology becomes even more energy efficient, hardware evolves at a faster pace and high electricity usage devices will be replaced. As a result, the total hashrate growth should slow down over time. Given the upcoming Bitcoin block reward halving, that latter part is not that unlikely, depending on the price per bitcoin at that point. Such a scenario could, actually, lead to a slower increase in total electricity consumption.
What is a more likely scenario, however, is how there will be a stagnation as far as Bitcoin mining efficiency is concerned. On top of that, people owning a miner would be forced to run them five years to earn back some of their investment, at a higher power consumption rate. With a growing total hashrate and no measurable effect of the halving block reward, the total power consumption of the Bitcoin network could indeed reach the same level as the entire country of Denmark.
Although the article does mention all of these predictions should be taken with the proverbial pinch of salt, they give digital currency enthusiasts plenty to think about. There is no denying mining Bitcoin is a very costly business, and things will only get more costly every year unless a breakthrough in efficiency is made.
Everything Uses A Lot of Electricity
However, many critics are always quick to point out the electricity consumption by the Bitcoin network. But it is equally important to keep in mind Bitcoin offers the first ever global alternative financial ecosystem, which anyone in the world can access. Financial freedom has its price, and that price comes in the form of electricity, a resource that can be generated in a wide variety of way.
In fact, this is also why a lot of bigger mining operations are moving to countries where green, sustainable energy can be found in abundance such as Iceland, whose power consumption per capita is the highest in the world, and that’s probably not a coincidence.
Additionally, Bitcoin is not the only concept requiring more and more energy these days. A lot of people use their smartphone, tablet, and other electronic devices on a daily basis, and these items need to be charged on a regular basis. There is no denying electricity consumption is increasing all over the world, and painting Bitcoin as an energy hog is rather myopic. We can also expect Bitcoin mining companies to discover more efficient and sustainable energy sources not only to reduce costs but also boost their public image.
Our entire society is relying on electricity, ranging from turning on the lights to consuming media and being connected to the internet. All of these devices require electricity, and until smart grids come to fruition, there will be inequality regarding the prices and distribution. One particular Bitcoin startup is experimenting with a smart meter solution powered by digital currencies, which could be a sign of things to come.
How much energy will be needed to mine one Bitcoin by 2020 in your estimation? What type of improvements can be expected on the hardware side of things? Let us know in the comments below!
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