Bitcoin mining uses energy – a lot of it.
So much so, that in 2017, Newsweek declared mining for the cryptocurrency will ‘consume all of the world’s energy by 2020’. It’s a fanciful headline but the fact that Bitcoin mining uses more energy than some entire countries in a single year, does make it hard to refute that crypto mining uses more than its fair share.
But how does this translate into real terms; what are the potential implications for miners in terms of cost and feasibility; and what can we do about it?
How Much Energy Does Bitcoin Mining Actually Use?
According to Digiconomist, Bitcoin’s annual energy consumption is around the 60TWh (terawatt hour) mark. To put that into perspective – that’s the same amount of energy used in a single year in Colombia; it’s also more than the annual use of Israel, Switzerland, Ireland, and Hong Kong.
The situation isn’t likely to get much better. Bitcoins are ‘mined’ by solving complex mathematical puzzles. The more Bitcoins that are produced, the harder those puzzles become – increasing the need for greater computational power – and therefore, electricity.
With nearly 17 million Bitcoins mined out of a possible 21 million – those mathematical problems are becoming increasingly complicated, to the extent where some predictions have put 2140 as the year in which all Bitcoins will have been mined. With more than one hundred years to go that’s a huge amount of energy to consume.
Will Countries ‘Run Out’ Of Energy?
There’s no getting away from the fact that fossil fuels will eventually run out, and with it, some of our ability to generate power – the first to go will be oil (predicted to run dry by 2052); followed by gas (2060); then coal (2088). With the last Bitcoin not expected to be mined until 2140, that’s an energy void of half a century.
Of course, most of us recognise that the depletion of fossil fuels won’t leave us in total blackout, as investment and use of renewable energy increases – but the heavy use of fossil fuels to mine cryptocurrency certainly raises more than just a few eyebrows.
It’s even ruffled feathers in China – where around three quarters of Bitcoin is mined, and where coal consumption is one of the world’s highest. In January this year, the Chinese government issued guidelines that encouraged regional officials to enforce existing policies on electricity and land use, as well as the environment.
It’s not a direct order to clamp down on Bitcoin mining, but it is a nod to a greater awareness that crypto mining has the potential to undo the good work achieved so far in China’s commitment to reduce carbon emissions. As a result, some miners are already looking for new locations from which to base their operations – with Iceland being one of the favoured new hot spots.
Iceland’s rise as the location du jour can be put down to the combination of a naturally colder climate (good for cooling down overworked computer processors), and the fact that almost 100% of all the country’s electricity is from renewable sources. Such is Iceland’s popularity, that 2018 will see cryptocurrency mining use more energy than all Icelandic households put together.
What Now For Bitcoin Miners?
Bitcoin mining isn’t cheap and the quest for a location that ticks all the boxes when it comes to cost, being legal, and being environmentally friendly, is becoming increasingly like searching for the Holy Grail.
But just how much actual money will you have to part with if you wanted to mine your own Bitcoin?
Research by Elite Fixtures found that mining a single Bitcoin can set you back anything from a relatively modest $531 in Venezuela, to an eye watering $26,170 in South Korea. If you wanted to mine from right here in the UK, it’d set you back $8,402 – roughly £5,900 (more than the current market price at the time of writing).
It’s clear then, that the trick to Bitcoin mining is you’ll need to speculate (quite a bit) to accumulate – although naturally, you don’t have to buy a whole Bitcoin. Evidently, Bitcoin mining is for the seriously wealthy, or the seriously in debt, so if you don’t fall into either camp (and definitely want to stay away from the latter) what’s the solution?
Buy Now, Cash In Later?
The simplest solution is typically the easiest and most obvious – let someone else mine it for you and buy your Bitcoins on the market – with the value slightly depressed, buying on an exchange is more financially viable (and practical) than setting up your own mining operation.
Purists may argue that mining your own Bitcoins is part of the whole crypto experience; but let’s put it another way – would you dig your own coal to create your own energy, or filtrate your own water; or would you flick a switch and turn on a tap? After all, for most people, it is the commodity that they want, rather than experiencing the process from which it derives. The same logic can be applied to Bitcoin and mining.
Currently, Bitcoin mining only represents 0.27% of the world’s energy consumption making it highly unlikely that it will consume the world’s energy by 2020. Whilst it’s not quite panic stations, it is a good opportunity to think about how digital concepts impact our commitment to reducing energy consumption and the potential effects on climate change.