Bitcoin and other cryptocurrencies have promised a revolution in capital, but at what cost? The Bitcoin network alone is now burning a horrific 240 kilowatt-hours of electricity per transaction, using as much energy as the entire nation of Serbia, and heralding an environmental disaster.
The Bitcoin wave has surged so high in the last few months that it's become almost impossible to ignore. Prices have leapt from what seemed like a crazy US$30 per coin back in 2013 to heights few would have imagined – almost grazing $20,000 in the last couple of weeks and settling back around US$15,100 at the time of writing. Well, at the time of writing this paragraph; I'll check in again to see where it is when I'm finishing up.
It can be a wild ride, but this year's chart looks almost asymptotic; starting at around US$1,000 a coin, the rate of gain has jumped up month by month as more and more speculators have jumped on board. The new money has roughly doubled the coin's value in a month, and each time it hits a new ludicrous milestone, people further and further from the technology hear about it and pour fresh cash on top of the pile. And each time the value tanks – which it does semi-regularly, losing up to 40% of its value – the new money screams and flees while the old money chuckles and buys back in.
It's all very exciting. Millionaires and even billionaires are being made on the back of what's being described as either the biggest financial bubble in human history, or a replacement for gold as a store of wealth and a reserve currency. Few people see it as the transactional currency of the future, though, because it's now taking anywhere from 10 minutes to (on rare occasions) over 17 hours to confirm transactions.
And here's the problem: every single one of those transactions now requires a comically large computational effort. Bitcoin mining operations are now some of the most powerful supercomputing farms in existence. They aggregate staggering amounts of processing power, and run them flat stick, day and night, solving the incredibly complex computational math that keeps Bitcoin trustworthy.
The electricity usage rate is hideous. According to Digiconomist, each transaction is now estimated to use a ridiculous 240 kWh, which is enough to fully charge a Tesla P100D 2.4 times for an estimated range of 1,373 km (853 mi) or enough to power the average American home for eight days.
That's each transaction. And at the current rate of around 350,000 transactions per day, that means the Bitcoin network is currently using a touch more power than Serbia, and is fast catching up to Denmark. And as it becomes more popular, it's going to gobble even more power.
Where's that power coming from? Predominantly coal, estimates Digiconomist, although it's hard to tell as commercial-quantity Bitcoin mining is a fairly secretive game. But if estimates are correct, each transaction is putting about 117 kg (258 lb) of carbon dioxide into the atmosphere, and the Bitcoin network as a whole is responsible for almost 16,000 kilotons of carbon dioxide emissions annually, and growing.
That's just Bitcoin. Since the runaway success of the first big crypto party, a host of others have sprung up, each offering their own functionality and twist on the crypto theme and each adding further to what's starting to look like a rampant energy consumption issue. Rising star Ethereum, for example, which uses the power of blockchain technology not just to move and verify money, but to maintain and verify "smart contracts" between entities, is now burning 47 kWh per transaction. Then there's Dash, Ripple, Litecoin, and myriad other coins, either standalone crypto networks or built on top of other networks' core functionality.
And all this power consumption for what? Digital bookkeeping? Cryptocurrency has promised the world a future monetary system in which the value of capital can't be manipulated by any government, but if it's causing an entire decent-sized country's worth of power usage and belching kilotons of greenhouse gases into the atmosphere, you've got to start wondering when it starts becoming a net negative to humanity.
Oh, and let's check Bitcoin's price again... US$15,940, or about a 5.6 percent jump since I wrote that first paragraph. These are crazy times.
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