Bitcoin Forecast to Rise to 0.5 per cent of World’s energy Usage
A year ago, the bitcoin blockchain was annually using a little over half as much electricity as all of New Zealand — certainly a considerable figure any way you look at it. But in the intervening 12 months, the cryptocurrency’s appetite for electricity has skyrocketed, reaching around 70 terawatt-hours, or about as much electricity as Chile uses every year.
Looking ahead, the picture gets even worse. According to blockchain expert and economist Alex de Vries, by the end of 2018, bitcoin’s electricity consumption will rival that of Austria, amounting to a full 0.5 per cent of global use.
In addition to working for PwC’s Experience Centre in Amsterdam, de Vries is also founder of Digiconomist, a site exploring the economics of cryptocurrencies.
Calculating the actual energy footprint of the bitcoin network poses numerous challenges. First, bitcoin miners don’t tend to disclose a lot of public information about their power usage effectiveness (PUE) and other metrics. Second, manufacturers of bitcoin mining equipment don’t usually publicise their costs and profit margins, which also makes it difficult to understand the underlying economics of mining.
By building on previous research, best estimates about the bitcoin network and what little mining and manufacturing data is available, de Vries recently determined that the cryptocurrency is currently using at least 2.55 gigawatts of electricity. By year’s end, he calculated, that figure could shoot up to 7.67 gigawatts.
Here’s how de Vries came to those numbers: First, he calculated how much mining revenues currently amount to. He then estimated — based on the minimum requirements for profitability — miners spend about 60 per cent of revenues on operational costs, including electricity (at a price of five cents per kilowatt-hour). Finally, using those cost estimates, he determined how they translate to total electricity consumption.
In a press statement about his findings, de Vries acknowledged it is debatable how much bitcoin’s energy consumption might grow in the near future. He added that part of the reason for his study, published in May in the journal Joule, was to encourage further research and “get this conversation started”.
“We’ve seen a lot of back-of-the-envelope calculations, but we need more scientific discussion on where this network is headed,” de Vries said. “Right now, the information available is pretty poor quality overall, so I’m hoping that people will use this paper as a foundation for more research.”
One area that bears more investigating is how much energy is being consumed by all the other cryptocurrencies using hash-based proof-of-work. While bitcoin may be the most recognised and most capitalised digital currency, other cryptocurrencies — including Bitcoin Cash, Bytecoin, Ethereum, Litecoin, Monero, Tether and Zcash, among others — also use proof-of-work and have active networks of their own.
