Do Bitcoins consume more electricity than our country?
Bitcoin has been the buzz for quite a few days throughout the world. It’s ever increasing price is becoming the major point of interest. This triggered me to look into what a crypto currency is and how it works.
Bitcoin is a currency which uses something called cryptography. In simple words, cryptography secures its networks from third parties accessing it. So such a currency, based on cryptography does not have its transactions recorded. So the network here is peer to peer and the transactions happen between users directly. Unlike notes or coins, bitcoins are not printed by traditional banks or governments and these largely exist
Around 3600 Bitcoins are created every day through a complex process called “mining”, where computers are rewarded with a Bitcoin for executing mathematical equations through specialized software. Since a lot of computers are involved in the processing of bitcoins, wouldn‘t it be interesting to know how much power these consume?
Energy consumed by Bitcoins
When we looked into detail, there was no recognized authoritative source which says how much energy does a digital currency like bitcoin consume. But we were pretty sure that people might have worked out details on it or at least tried calculating it. Going through popular Bitcoin blogs like Coindesk, Cryptocoins News, Digiconomist, we found a widely-used formula to calculate the energy consumption of bitcoins.
This formula takes total mining revenues as the starting point. Then, it estimates the total operational costs for miners which are taken as a percentage of the miner revenue. The total operating costs which is calculated is converted into energy consumption using average electricity prices.
What about carbon footprint?
A carbon footprint is the total greenhouse gas emissions caused by an individual, event or an organization which is expressed as a carbon-di-oxide equivalent. And Bitcoin biggest problem here is not its energy consumption, but the network through which it operates is mostly fueled by coal-fired power plants in China. One of the reasons coal power in China might have been selected is because of its very low rates i.e. Rs. 0.19/unit. We do know that coal power plants are major contributors to the carbon footprint. A coal power plant produces 3.5 million tons of CO2 per year. So, using such a resource is also a warning.
After studying such elements, it is estimated that Bitcoin current annual electricity consumption is 32.56 terawatt hours (TWh). Since this calculation uses some estimations and assumptions, we cannot be sure of its accuracy. But it does tell you the approximate energy consumption of Bitcoin.
When compared with the consumption of our country which consumes around 1050 TWh, it is far away from reaching our Indian consumption. Also from the recent sources, we have come to know that it stands in 62 nd place in energy consumption by a country.
By the time it reaches our country’s energy consumption, we have to make sure we have sustainable energy solutions in place, isn‘t it?
We always take pride in putting out the knowledge we have to you. There might be some important considerations which we missed but we expect a proper knowledge is gained through discussions. Please let us know your thoughts in the comments below.