According to a recent report by Morgan Stanley, Bitcoin mining consumes as much energy as the entire country of Morocco. Bitcoin mining consumes more energy than some countries, and a single Bitcoin transaction uses as much energy as the average American household does in a week. Bitcoin’s energy consumption is expected to grow with the network’s popularity – and this is showing little sign of slowing down.
On the other hand, Bitcoin mining is beginning to become a major driver of demand for renewable energy. It is a natural fit for renewable energy, such as hydroelectric and solar. By harnessing the power of water or sunlight, miners are able to offset their carbon footprint. Green energy is always a good thing, even if it is for a process that is as controversial as Bitcoin mining.
So what will the ultimate environmental impact of Bitcoin be?
Background
In the early days of Bitcoin, mining was done primarily with the CPU. When Bitcoin was created, it was possible to mine Bitcoin on a desktop computer. As more people started mining, people attempted to figure out how to build more powerful computers and dedicated mining machines. As mining difficulty increased, mining shifted to GPU mining. When mining shifted to GPUs, Bitcoin mining started to be dominated by a few big players.
A few years ago, Bitcoin mining shifted to ASICs. These are specialized computers built just for mining Bitcoin. The increased efficiency and speed of these devices has made mining Bitcoin much more centralized. Today, the majority of mining is done in China, by large mining companies.
As mining difficulty increases, Bitcoin mining requires more energy. This drives up the cost of mining. As the price of Bitcoin increases, the mining arms race continues.
Environmental concerns
When it comes to Bitcoin mining and the environment, it’s important to look at both sides of the issue. Bitcoin mining consumes a lot of energy, there’s no doubt about that. The reason for this is fundamental to the design of the blockchain itself: security.
Bitcoin mining is about making sure the blockchain is valid and secure. This is done by solving the computational problem of the proof of work. The winner of the computational puzzle has his or her block added to the blockchain. In order to make sure the computational puzzle is hard enough to solve but not too hard, the Bitcoin protocol automatically adjusts the difficulty based on the speed of mining. In order to determine the speed of mining, you need to look at the hash rate. The higher the hash rate, the harder it is to solve the computational problem. The Bitcoin protocol adjusts the hash rate to keep the average time between blocks at ten minutes.
The hashing process is basically a very complex mathematical puzzle that must be solved in order to add a block to the blockchain. The more difficult the puzzle, the more energy is required to solve it. The proof of work algorithm was designed to make sure the average time between blocks is ten minutes. That’s the whole point of the Bitcoin protocol: to make the creation of new blocks roughly ten minutes apart.
So the bottom line is that without the energy expenditure, there would be no way of ensuring that the system remains secure, and the whole premise of Bitcoin as a secure, trustless system would fall apart.
Looking towards renewables
As Bitcoin mining grows and its energy usage increases, it is important to figure out how to make it sustainable. That’s where the growing interest in renewable energy comes in. There are several mining companies that have already begun to harness the power of the wind, the sun and water.
For example, HydroMiner, which operates out of the Austrian Alps has a number of green energy sources at its disposal. The company is able to use green energy sources such as hydroelectric power, solar power and wind power. Another example is the company, BlockBox, which runs off of solar panels.
This is the direction that the mining business is moving in. Those that are looking to stand out from the crowd and provide a more environmentally friendly service are going to be the ones that come out on top. Companies that choose to use green energy sources will have a competitive advantage over those that don’t.
Increasing efficiency
The first thing to consider is the hardware that is being used. If the hardware is old and inefficient, it may be time to upgrade to more efficient hardware. The more efficient the hardware, the less energy is required. If miners are using old hardware, it may be time to upgrade to more efficient mining hardware.
The next thing to consider is, as mentioned, the electricity source. Miners should consider moving to renewable energy sources such as hydroelectric power, solar power and wind power.
The third thing to consider is the cooling. Miners should look into techniques for cooling mining rigs that don’t require as much energy. For example, there are mining rigs that can be submerged underwater for cooling.
Do we really need blockchain?
Amidst the frenzied rise of cryptocurrencies in recent years, we often forget to ask the most fundamental question: what does blockchain, and all its associated energy usage, really gain us? Is it really necessary?
Bitcoin, and cryptocurrency hype, have infiltrated almost every sector of our economy. People are trying to market everything from Bitcoin property trusts to vending machines. But property investors were quite happy without blockchain-secured property ledgers, and custom vending machines available on the market today far outperform their niche crypto-powered alternatives in terms of flexibility and function. We need to keep this in mind when discussing energy usage and possible alternatives – Bitcoin definitely has advantages, and offers a lot of potential. But for certain applications, perhaps the best alternative is not to use blockchain at all.
On the energy side, the bottom line is that nobody knows exactly what the ultimate impact of Bitcoin mining will be on the environment. What we do know is that there is a lot of potential for green energy to be harnessed in the mining space. The future of green energy lies in mobile mining. As Bitcoin mining becomes more powerful and more energy intensive, the future lies in being able to harness the power of green energy wherever possible.