Bitcoin uses more power than Serbia – the environmental cost of cryptocurrencies

Bitcoin uses more power than S...
The energy consumption of Bitcoin and other cryptocurrencies is cause for concern
The energy consumption of Bitcoin and other cryptocurrencies is cause for concern
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The energy consumption of Bitcoin and other cryptocurrencies is cause for concern
The energy consumption of Bitcoin and other cryptocurrencies is cause for concern
Every single transactions now requires a comically large computational effort
Every single transactions now requires a comically large computational effort

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.

This article was written 3 hours ago and now BTC is $16,859 so another 5.6% jump. That's about as much volatility in 3 hours as the USD has in 3 years. Something else of note is for all of that power consumed BTC only handles about 4 transactions per second on the block and it's only theoretically capable of like 7 transactions per second. Visa and paypal can handle thousands (and hundreds of thousands) of transactions per second meaning BTC could never possibly scale for that use. Right now because the verification time is so long for BTC people use centralized exchanges to act as intermediaries in transactions (they transfer funds immediately and then wait for the verification on their end) which is functionally like using a bank anyway. These exchanges are unregulated and sometimes get hacked (NiceHash) or are suspected in stealing the funds themselves (Mt. Gox). ETH smart contracts and blockchain itself has more merit but BTC as a cryptocurrency in its current form will never scale. ETH is slowly moving off of cryptocurrency more towards proof of state (smart contracts) due in part to the massive power draw used to verify cryptocurrencies. It already has higher theoretical scale than BTC though not by much (only a couple more transactions per second).
George Strnad
I love this site.. I read it often. but.. this article is a bit disingenuous. Please don't mislead the reader when you use the word "transaction". and compare that transaction to the power of Serbia. So.. you mean to say that when I buy or sell a bitcoin, that I could possibly brownout Serbia? Really? that makes sense to you? Or did you possibly mean to say that mining is getting harder and harder, and there is an increase in computation power or some time, that may seem to be high.. Also, you didn't mention how much Serbia consumes per hour, or minute, or were you referring to seconds? You are a scientific site, please get your facts straight.
Brian M
Daishi's comment nicely sums up the stupidity of this type of currency. Some of them can be solved by using cryptocurrency as a standard, and have 'working' currencies based on them - similar to the gold standards.
However its still early day for cryptocurrencies and we still can't be sure how unbreakable block chain is - The answer to that based on previous history of cryptography is everything is eventually breakable or hackable.
So on top of the environmental issues - its just basically a bad system and its advantages of non-traceability/accountability etc., is likely to be legislated away.
Its a good investment while there are still idiots piling in - but long term don't bet your pension on it.
Bitcoin-is the most sophisticad Ponzi Scheme fraud ever invented, probably people standing first in chain, artificialy stimulate this rising trend sucrficing partly some of their capital and foolling the others in creating this psycho-fiber of gigantic missed opportunity for those who didn't step in. I will never invest a single dime in it, basically due to murky passt inlcuding using bitcoin as child pornography payment. Now this enviromental impact only adds to this sick madness...it is already showing that without regulation things are spinning out of control..sad but true
Rusty Harris
Surprised the "environmental" bunch isn't all up in a wad over the power required. Individuals really can't "mine" these anymore. I've seen photos of some of the server farms. Unbelievable!
El Bonko
I figure the Bitcoin bubble is nearing the end of the mania phase about now. It may already have had its bull trap, I haven't been keeping up lately. In any case, if you own any, now is the time to cash out. Tomorrow it may be too late.
It's an "horrific 240 kilowatt-hours of electricity per transaction"? In the U.S., the cost of electricity averages a tad over 10¢ per kwh, so someone is paying about $24 for a "transaction". What's a transaction? Last week, I transferred a single bitcoin from another wallet into the Coinbase exchange; their "transaction fee" was about $10. I do not believe Coinbase is subsidizing transfers, so the referenced "transaction" must be something else. Before the recent surge, the total cost of "mining" a bitcoin was roughly equal to the price of bitcoin on the exchanges. This was NOT a coincidence -- miners will ramp up operations if there is profit and will just quit if they're losing money. So, as of a month ago, the cost of mining one coin was about $6000. That is 250 times the referenced "transaction" cost.
The math doesn't work, but whatever the cost, it is being paid for by the participants. Absent subsidies, there is no reason for skeptics to be concerned about all the energy being "wasted".
Douglas Bennett Rogers
One property of money that bitcoin does have is significant energy consumption. This is true of all money: gold, silver, copper. Paper and electronic money do not have this property and do not serve well as money. Laws are passed to counter this but they are human, not natural laws. Bitcoin is not useful or recognizable like metals. Bitcoin is durable and portable to the extent that the required technology is present.
Still pretty hard to compare, however does anyone concerned about the environmental impact that Wall Street has? We will one day come up with solutions that will clean the environment (I hope sooner than later), but our way of life and us are the problem. As the world population keep growing there's no way to revert it, even if we just eat veggies and bugs... But yeah, bitcoins are still in their infancy... from now on, due going to mainstream, it will literally skyrocket.
Tony Morris
There is no way a crypto-currency could ever be viable if a $5 transaction costs $20 in electricity - let alone the other costs of providing the computation. Go check your numbers (and sources) again Loz.