Despite a sluggish price performance through summer 2019 Bitcoin’s hashrate has reached new peaks, with a record 80 quintillion (80 followed by 18 zeroes) hashes per second on the 29th of August 2019. The hashrate has been climbing steeply since March, initially coinciding with BTC’s rise in value from $3,300 upwards, but maintaining growth even as the value topped out in late June. The current hashrate levels are more than 8 times higher than those observed in December 2017, when Bitcoin reached its all time high in USD value.
A number of factors may contribute to this surge. Primarily, it is an indicator of confidence in Bitcoin’s potential, as miners believe the depths of the bear market are behind us and better days lie ahead. Of course, mining equipment has also improved greatly in the past two years, offering many times the computational power of predecessors. Take for example the Antminer S17 delivering up to 53 TH/s, as compared to 2016’s S9 which maxed out at 13.5 TH/s. This represents a 400% increase in hashing power in a single unit, albeit accompanied with almost twice the energy consumption. Of course, other mining equipment manufacturers have similarly increased the power of their machines.
This leads to what will surely be a hot debate in the years to come. As Bitcoin mining grows, so does the energy required to facilitate it. Current estimates have Bitcoin’s proof-of-work powered by 73 terawatt hours per year. This is almost twice as much resource consumption as seen in late 2017, when Bitcoin’s price and market cap were both twice as high.
This figure would put energy consumption for Bitcoin mining ahead of electricity use by most countries — using more power than countries like Austria, Switzerland, Portugal and Denmark, while falling just shy of Venezuela and Belgium. Palo Verde, the United States’ largest nuclear power plant, even if running at full capacity for 24 hours per day for every day of the year, would not be capable of powering half of this 73 terawatt hour number.
Until this year, regulators have been apprehensive to level concrete regulatory actions at Bitcoin specifically for its resource-intensive mining process. This is partially due to mining efforts being located near sources of renewable energy, with a 2019 study finding that roughly 74% of all mining is powered by renewables. Further, large mining operations are often located near sources of energy with greater supply than demand, the relevance for renewals being that the excess energy often cannot be stored, and thus Bitcoin mining is seen as a way to capitalize on extra demand when supplies are greater.
Recently however, governments have begun to take aim at Bitcoin precisely for its energy usage. In April, China’s National Development and Reform Commission (NDRC) mentioned cryptocurrency mining in a list of industrial activities to be phased out, however no concrete regulations have emerged from this so far. Iran seized 1,000 mining units from two mining farms in June, after energy consumption in the country suddenly rose 7%. In the US, Missoula County of Montana passed a resolution requiring miners to either use renewable energy for their activities or fund renewable projects as an alternative.
The concerns regarding proof-of-work based energy consumption is a contributor to the decision by some platforms to work towards alternatives. Ethereum, which currently uses 7 terawatt hours of energy annually (one tenth of Bitcoin’s use, on par with consumption in Mongolia and Albania), is finalizing code for a proof-of-stake consensus algorithm launch in early 2020.
The trend towards non-resource intensive consensus algorithms and the use of renewable energy are two ways in which cryptocurrency mining might retain the ability to persist and grow, in the face of pressure from lawmakers and public pressure. As Andreas Antonopoulos has mentioned in the past, there is the opportunity for miners to capitalize on excess renewable energy which cannot be stored, and in doing so even subsidize the growth of these sources — a win-win outcome which might elicit a more favourable view of the industry from lawmakers.
Article by Byron Murphy, Editor at Viewnodes. Viewnodes provides passive token income opportunities through staking, delegating and masternodes. You can find us at viewnodes.com.