The rise in demand for cryptocurrencies, particularly Bitcoin (BTC), has led to an unprecedented increase in consumption of energy.
Bengaluru: A single Bitcoin (BTC) transaction now needs roughly five times the energy required to complete 100,000 VISA (debit/credit card) transactions. According to a new report by digiconomist, it takes 821 kWH of energy to complete a single bitcoin transaction while 100,000 VISA transactions take less than 150 kWH. The former is roughly equivalent to the power required to watch a YouTube video for seven years.
The world’s oldest and most popular cryptocurrency has seen resurgence in the past year to soar to new heights in valuation and demand. The increase in demand for the crypto comes with an increase in energy consumption.
Bitcoin’s annualized footprint in electricity consumption reached an all-time high to 128 tWH in March 2021—roughly equivalent to Finland’s annual power consumption—from 71.07 tWH in early 2020, according to Cambridge’s Centre for Alternative Finance.
Crypto mining is highly energy-intensive and is the major contributor to Bitcoin’s vast energy footprint. Miners spend hundreds of thousands of dollars on expensive equipment and electricity in order to “efficiently” mine crypto and sell them at a premium.
Despite the ongoing silicon shortages, the demand for graphics cards for mining has increased over the past year. So much so that Nvidia even tried to limit the mining efficiency of their 3000 series “ampere” line up of graphics cards in a bid to discourage miners from gobbling up cards intended for regular consumers. The attempt has so far failed.
The recent surge in valuation of Bitcoin (BTC) to a new high of $60,000 from the lows of $3000 in late 2018, has also increased the demand of other cryptocurrencies. Ethereum (ETH), the second most popular cryptocurrency by trading, is especially popular with miners.
Mining is the process of recording each and every transaction in the network by creating “Blocks”. For their efforts, miners are awarded a piece of whatever currency they are mining. The reward miners receive decreases as the crypto is mined more and more, requiring miners to use more and more hardware, in turn more energy.
Blockchain, the underlying technology that solves problems such as double spending and hence the foundation for cryptocurrencies, is at the core of the problem. Blockchain technology is acclaimed for its benefits such as anonymity, transparency, decentralization and security.
It has found many uses beyond the crypto landscape. Music artists use it to transparently track their revenue across music platforms, while big chain retailers like Walmart are using it accurately track inventory, optimize freight and payments.
While Blockchain has been acclaimed for its benefits, its near-unsustainable energy requirements, in most cases, is often overlooked.
According to an estimate by Alex de Vries, a data scientist at the Dutch Central Bank, every single bitcoin transaction releases an average 300 kg of carbon dioxide (CO2) both directly (in case of mining rigs) and indirectly (through energy produced through fossil fuels).
“The sustainability problem is something that needs closer attention,” said K Prof. Kshitija Joshi, professor of economics at NIAS. “As of now the technology behind Crypto currencies is still in its infancy. As cryptocurrencies mature and sees more wider adoption, the energy requirement will be unsustainable.”