Bitcoin is the future, or rather we should say that the crypto-economy is the future: a future that has come to our world and here to stay. But this does not automatically imply that all crypto-currencies and tokens are going to be part of that future. As with most progress of any kind, there are obviously also some great disadvantages in the specific case of Bitcoin.
Some of these disadvantages are already seen today, as its limitation of trades per second that various forks are trying to solve with so much internal controversy, and others we can only see as an unpredictable future arrives. But there is another disadvantage of Bitcoin that is already revealed as a major drawback in the era of global warming: the huge energy consumption that may be involved in maintaining those colossal Bitcoin mining farms. We analyze it today for you.
How much energy does the Bitcoin ecosystem consume?
Well, some will think that this question has an easy answer, and no. Nothing is further from reality. The truth is that estimating the total energy consumption that Bitcoin is absorbing is a difficult task, which by the way some crypto-enthusiasts have already faced, aware that the energy issue could be the Achilles heel of the entire Bitcoin ecosystem.
Practically all articles that put figures of energy consumption to the activity of the Bitcoiners, do so based on estimates from the Digiconomist website, which periodically publishes alleged consumption statistics with its “Bitcoin Energy Consumption Index.” Many people take this index as an axiom, in fact almost all of them.
The reality is that the “Bitcoin Energy Consumption Index” of Digiconomist is based on premises that imply really little accuracy in the figures of energy consumption that they publish. One of the fundamental premises is to assume (surprisingly) that on average, Bitcoin miners spend 60% of their income on operational costs, and that, of those costs, every 5 cents of spending implies a consumption of 1kWh of electricity. What is the empirical basis to be able to affirm that these assumptions are correct? Little or none, and the rigorous justifications that support this assumption are conspicuous by their absence.
So, unlike many other media, we will abstain in these lines from talking about figures that claim an impossible accuracy, and that are in danger of being very inflated. But what they allow is to make sensationalistic comparisons of the consumption of the Bitcoin ecosystem. These comparisons may have no more meaning than drawing the readers’ attention, and here we will simply limit ourselves to the maximum rigor that these estimates provide us: the minimum reference, the approximate order of magnitude, and its future projection. You may feel disappointed after this paragraph, but our commitment to rigor goes far beyond getting the click of our readers. We hope you know how to appreciate it.
Sticking to the facts. Your computer has a CPU.Â But many years ago, due to the consumption of computing capacity that videogames demandede, the hardware manufacturers produced specific plates for graphics operations, which were GPUs, with a processor and a specific purpose architecture.
These GPUs have turned out to be a cheaper and more efficient option for mining crypto-currencies. And to such an extent that the demand for these hardware plates has grown exponentially as the power and number of crypto-mining farms continue to increase.
Its price has multiplied by a lot, but there are also countries where it is practically impossible to buy GPUs from those dedicated to mining: all are monopolized by the insatiable miners. For example, recently in Russia reached the point where the bank Sberbank had to go out to publicly apologize for having monopolized almost all the GPUs available in the Russian market.
An alternative calculation of minimums that we can take as a reference
While Digiconomist estimates the energy consumption at 37 TWh per year, the WashingtonPosts’ group of experts estimates that Bitcoin needs a sustained power of between 1 and 4 GW. With some simple conversions, we can make the comparison between both magnitudes.
Obviously, the first obstacle is that the two figures in the previous paragraph can not be compared directly, since they are expressed in different units of measurement. One thing is electricity consumption (measured in KWh) and quite another is power (measured in GW-Gigawatios, Watts, etc.). Because you get an idea, with simple words, the power is what you have contracted at home as the maximum watts that you can take from the network at any time: if you exceed them, the differential jumps.
On the contrary, the consumption is expressed in Kilowatts, and it is the consumption that you have of Watts maintained during one hour. That is, 1 light bulb of 100 Watts of power during one hour supposes a consumption of 0.1 Kilowatt time (the “Kilo” obviously here also adds only one multiplier per thousands).
With this, we return to the estimated figures for the global consumption of Bitcoin. The power figure estimated by the Washington Post experts was in a range between 1 and 4 sustained GW, which translated into sustained consumption for one hour is between 1 and 4 GWh. Now, to be able to make a comparison between the low stringent estimates of Digiconomist and those of these experts, and thus to know to what extent we are being conservative about what many media are taking as market consensus, we only need to transform those 1-4 GWh to the annual consumption provided by Digiconomist. For this, obviously, we must multiply by the number of hours of the year, which is approximately 8,760. The 1-4 GWh is transformed into a fork between 8.76 TWh and 35 TWh.
We see then how the fork defined by the WashingtonPost practically coincides in its upper end with the little rigorous statistics of Digiconomist. To be conservative, and thus avoid falling into the same error of other means of taking those figures by consensus, we will take as reference consumption the lower end of the fork: 8.76 TWh.
With Established Minimum Figures, let’s go with the comparatives
Well, having laid the foundations of the comparison, let’s now go to the comparison itself. Assuming that more conservative scenario, those resulting 8.76 TWh are equivalent to the annual consumption of a whole country of such as Lithuania, Paraguay or Costa Rica. It may not seem like much, but it’s a small fraction of our socio-economic system andÂ as a whole supposes, with the aggravating circumstance that its energy inefficiency is a mere matter of design, and that this high consumption is really unnecessary.
If in the comparison equation, we now add the factor of the relative weight that should occupy the socioeconomic function of Bitcoin, we should enter to compare with the energy consumption of that company that plays a socio-economic role equivalent to Bitcoin.
According to the US administration, in 2016 an average household in that country made a consumption of 10,766 KWh. With this, our estimates imply that those 8.76 TWh of estimated annual consumption of Bitcoin equals the annual consumption of about 814,000 American households. Indeed, the figures roughly coincide with the quarter that we estimated earlier that is our conservative estimate of the Digiconomist estimate, and for which the same page estimated a Bitcoin consumption equivalent to just under 3.5 million homes Americans.Â But as always the comparisons are odious, especially when comparing oranges with apples.
What about a VISA comparison? In 2016, VISA processed some 82.3 billion transactions according to Digiconomist, which means that, with its equivalent of 50,000 households at a rate of 10,766 KWh per household, it means that each VISA transaction implies an average consumption of approximately 0.00655 KWh. Meanwhile, according to Digiconomist calculations that take into account the number of Bitcoin transactions, for their 37 TWh of consumption they get 285 KWh per transaction, so for our conservative estimate of 8.76 TWh we get 67.5 KWh per Bitcoin transaction.
That is to say, a transaction with Bitcoin consumes 10,000 times more energy than one of VISA. The comparison already becomes totally hateful when, now comparing apples to apples, we have that for that minimum scenario with only about 160 Bitcoin transactions we would already be consuming the same as a US home for a whole year. Put yourself in context, value all the things that energy allows you to do in your home for a year, and compare it in relative terms with those few 160 transactions.
Bear in mind that a single Bitcoin transaction consumes the equivalent of almost two and a half days of consumption of an average American household!!!!
At this point, and remembering that our position is as conservative as possible with the available estimates, we can affirm unambiguously that Bitcoin is an absolute energy disaster: even if our approximation is not exact, the order of magnitude is equally disastrous. Now let’s go to justify why this capital energy disaster is also a much greater environmental disaster.
Stay tuned for part 2…