by Shannon Appelcline.
As the Bitmark blockchain becomes more popular for NFTs, health data, music royalties and other types of digital property, we are frequently asked about the energy impact of the Bitmark blockchain and of blockchains in general.
Energy & The Blockchain
The energy usage of blockchains has been in the news a lot lately. What’s that about?
Q: Why do Blockchains Use Energy?
A: The most widely used methodology for securing blockchains is the “proof-of-work” algorithm, which is at the heart of Bitcoin, as well as the Bitmark blockchain.This means that you have to do work in the form of extensive cryptographic calculations order to add a block of transactions to the blockchain. Since each block requires time and computational power, the blockchain grows more and more secure the more blocks are piled on top of each other, because it becomes increasingly difficult to go back and redo all those calculations.
Computers running calculations draw power.
Q: How Much Power is Needed?
A: The power needed to secure a blockchain is related to the total computational power working on a blockchain. The more computers that are trying to create blocks for the blockchain, the more power that’s required. That means that a very popular blockchain like Bitcoin has high energy requirements, while one focused on a much smaller area of expertise, like Bitmark, has a smaller power requirement.
That means that the power requirement of a blockchain can be directly measured by its computational power. That measurement is usually recorded as a “hashrate”: the number of hashes that can be made in a second by computers working on the blockchain, where a hash is the main cryptographic function used to make blocks and thus secure the blockchain.
Energy & Bitmark
Like many other blockchains, Bitmark uses a proof-of-work algorithm, which means that it uses energy to secure its blocks. How much and how does that compare to other energy uses?
Q: What is the Hashrate of the Bitmark Network?
A: The Bitmark Network runs at about 160 TH/s and remains rock solid at that level. That’s terahashes per Second, or trillion hashes per second. In other words: 160,000,000,000,000 hashes per second.
In comparison, the Bitcoin Network’s hash rate has been rapidly escalating since 2017 and is currently running a bit under 160 EX/s, which is 160 exahashes or quintillion hashes per second, which is to say: 160,000,000,000,000,000,000 hashes per second.
The hashrate of the Bitcoin Network is literally a million times that of the Bitmark network.
Q: How Much Energy Does That Mean Bitmark uses?
A: We can measure energy usage by looking at the power costs of the mining rigs that secure blocks on blockchains. A relatively modern rig, the Antminer S17 Pro, uses 39.5 joules per terahash, which is the same as .011 Wh, or .000011 KWh, for a trillion hashes.
If Bitmark were run entirely on Antminer S17 Pros, in year it would use .000011 KWh/TH * 160 terahashes per second * 60 seconds * 60 minutes * 24 hours * 365 days, which is 55,500 KwH or 55.5 MwH. That’s probably a lower boundary, as average energy usage is likely to be less efficient.
Q: How Does that Compare to Bitcoin?
In comparison, a variety of reports state Bitcoin energy usage currently runs 80 to 120 TwH, which is 80,000,000 MwH to 120,000,000 MwH.
That’s unsurprisingly the same one to a million comparison that we saw in hashrates between the networks: Bitmark’s energy usage is likely one one-millionth of Bitcoin’s.
Q: How Does that Compare to Centralized Financial Systems?
A: It’s very hard to compare a blockchain with centralized financial systems because the power costs of blockchains are quite transparent while those of centralized systems are full of hidden subsidies.
However, we can produce a quick thumbnail to reveal the scope of the cost of those centralized systems. Considering the financial sector as a whole, there are 9 million financial employees in the US, another 5 million or so in Europe, and even more in Asia, Australia, South America, and Africa, bringing the number to many tens of millions. They have a whole infrastructure of buildings, vehicles, computers, credit card machines, and stock markets underlying them. That energy cost is obviously astronomical.
Many of those employees work in skyscrapers, which allows for a more precise comparison: in New York City, a fairly average skyscraper can use 40 MwH of energy a year, which means that 1.5 skyscrapers would balance out Bitmark’s energy usage. However, the workers in the US centralized financial industry alone could fill 750 skyscrapers! That’s 500x more energy usage than Bitmark’s blockchain, just for the offices of those US workers.
So, even with all those hidden subsidies, it’s pretty easy to say that Bitmark at least uses a bare fraction of even the US financial market’s office energy.
For a more extensive look at the costs of the financial industry as a whole, please see our article, “Bitcoin: What are the Real Costs?”
Q: How Does that Compare to Other Property Blockchains?
A: Bitmark is specialized in digital property. We’ve worked to create the best combination of software technology with property law. Fundamentally, there aren’t any other major blockchains with that focus. The closest is Ethereum, which has created some standards for tokens to support property. However, what they’ve created is ultimately an add-on to an existing system, so unsurprisingly their implementation is less efficient.
Energy & Miners
It’s ultimately the miners who create (and secure) blocks that use the energy in a blockchain, thus examining them can tell us a bit more about energy costs.
Q: Where Are Miners Located?
A: Blockchain networks are decentralized, so they can be anywhere in the world. The University of Cambridge maintains a map that suggests that the US, China, and Russia are the biggest homes of Bitcoin miners. (Other sources say that China may have more than 50% of mining.)
The more general answer is that miners tend to be located where energy is cheap, and that also tends to mean where energy is cheap because it isn’t being used. A lot of the Bitcoin mining in China thus uses hydroelectric power that was built up but was not used or is underutilized. In fact, Chinese cities have been seeking Bitcoin miners because they literally have billions of KwH of power going to waste.
More importantly, Bitcoin energy usage is very green. The best report on the topic puts renewable energy usage at 74.1%.
Bitmark mining demographics are likely to closely follow Bitcoin demographics.
Q: How Distributed Are Miners?
A: Distribution is pretty much the heart of any blockchain.
A number of mining pools each mine between 10–20% of all blocks. There is certainly some centralization here, though a mining pool doesn’t require all the mining rigs to be in the same place.
For energy usage considerations, the most relevant fact here is this: miners distribute themselves to where the cheap energy is, and that often means clean energy and unused energy. Miners do not tend to cluster in locations with existing high energy costs, which would suggest high usage, because it’s just not economical to do so.
For a carefully footnoted look at the overall problems with the framing of blockchain energy arguments, especially in relationship to Bitcoin, see our article, “Bitcoin: What are the Real Costs?”