Bitcoin now consumes more energy than Argentina
The Bitcoin network, in order to operate, requires more energy than countries like Argentina (125TWh) or the Netherlands (110TWh). Power plants globally generate electricity to support the cryptocurrency’s blockchain network.
According to the University of Cambridge’s Bitcoin Electricity Consumption Index, an ongoing study, it is estimated that over a period of 1 year, more energy is required to power the Bitcoin network than an individual country’s needs like Norway (124TWh). As demand for Bitcoin grows, so does the demand for more electricity to power it. Critiques of Bitcoin’s energy usage should consider that traditional financial systems, printing money, and gold mining consume considerable amounts of energy too.
So, how much energy does Bitcoin really need?
Precise estimation is difficult to achieve due to the complexity of the global industry. In 2017, Bitcoin’s power needs were estimated at about 10 TWh annually. Noticeably, this figure has now risen to 128 TWh, surpassing Argentina’s consumption (125 TWh).
According to Cambridge researchers, this is adequate to power the university for seven decades. It is therefore an undeniable fact that Bitcoin’s network consumes extravagant amounts of power and is in a rising trend.
The computing power which the bitcoin network is performing in March of 2021 for the first time ever exceeded 153 EH/s. This makes the bitcoin network around four-million times more powerful than the world’s fastest supercomputer, the Fugaku (Japan), clocking in at ~415 PetaFLOPS. In theory, the network could be repurposed to run a neural net AI about ten thousand times as powerful as a human brain.
According to Cambridge’s estimations, ranking Bitcoin’s annual consumption rates among other countries, it is currently estimated that less than 30 countries globally consume more electricity than Bitcoin’s network. Bitcoin currently surpasses countries like Argentina (125 TWh), Norway (124 TWh), and UAE(119 TWh).
Evidently, Bitcoin transactions consume extravagant amounts of energy. To put it into perspective, it has been estimated that in 2018, one Bitcoin transaction required the same amount of energy as 80,000 Visa transactions. Now, this has risen to an equivalent of 133,000+ Visa transactions, according to Digiconomist. Similarly, the carbon footprint of one Bitcoin transaction is equivalent to the carbon footprint of 100,000+ Visa transactions, according to Statista.
But why does Bitcoin need energy?
As a digital currency, termed cryptocurrency, Bitcoin runs on a global peer-to-peer (P2P) computer network. All the transactions and relevant information are recorded and kept on a distributed ledger, known as the blockchain. It is possible for virtually anyone to become part of Bitcoin’s network, through what is known as mining. All they need is to own a powerful computer and they can become miner nodes in this global network. However, this comes at a cost, electricity.
In order for miners to successfully operate, they need electricity and computing power, which of course are costly. In exchange, the Bitcoin network rewards miners when they successfully mine a block that is added to the blockchain. Currently, the reward is 6.25BTC, and it gets halved every four years. In order for miners to have more chances of successfully mining a block and receiving their reward, they resort to adding more computing power and as a result, more electricity is needed. Additionally, when Bitcoin’s price rises, there are higher incentives for miners, which leads to new miners entering the network, but also existing ones increasing their computing power. It is an upward trend, which ultimately results in more electricity being consumed.
While this may be alarming for the environment, Bitcoin’s environmental damage only accounts for a tiny fraction of what other industries are responsible for. Most importantly, however, miners have been shifting away from coal power to alternative and more sustainable methods to source electricity. For instance, hydroelectric, photovoltaic, and other renewable and clean energy sources have been receiving more attention.
It appears that the future of Bitcoin mining lies in green energy, as mining pools increasingly resort to renewable and clean energy power plants.
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