According to a new report, bitcoin mining now accounts for almost one percent of the world’s energy consumption, enough energy to power a state like Ohio or New York.
Bitcoin has been alarming people for years because of the amount of electricity needed to mine new virtual coins. The amount of energy required to run a cryptocurrency network in exchange for a chance to win some free coins, is quite a lot.
Especially the large-scale mining companies that spend huge amount of energy on mining operations, suffer with this energy problem.
Even though many mining companies are now coming towards green energy and deploying many ways to make the mining process more energy efficient. But as researchers point out it’s just a drop in the bucket compared to the overall network’s mind boggling energy consumption.
Princeton computer scientist Arvind Narayanan derived a connection between the energy that is used to mine a bitcoin and the price of the bitcoin. He said that if the price of a cryptocurrency goes up, more energy will be used in mining it; if it goes down, less energy will be used.
Narayanan estimates that Bitcoin mining now uses about five gigawatts of electricity per day.
In addition to the energy that is consumed by a computer to mine bitcoins, electricity is also used to cool up the computers when they get hot during the mining process, ultimately increasing the overall cost associated with the mining.
Bitcoin and most other cryptocurrencies were found on the notion of an immutable ledger, called the blockchain, which comprises transfers of value from one party to another.
Cryptocurrency miners set up computers that seek results to an algorithmic puzzle that demands a very specific set of requirements. An acceptable solution is mostly found by a computer on average of ten minutes and the miner gets a reward from the bitcoin system for that.
The reward that is currently served by system to miners is 12.5 bitcoins (worth around $85,000) and about $1,000 in transaction fees. So it’s a big business for cryptocurrency miners.
But the Bitcoin system makes sure that the coins are not minted too quickly by continuously making it harder to find a putative solution to the puzzle.
After almost 2 weeks (every 2016 blocks) the system recalibrates itself and miners left up with no other option than to upgrade their computers if they want to get rewards as fast as competitors.
This whole system of blockchain then requires more and more computing power and more computing power requires more electricity.