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Even though Ethereum has shifted to Proof of Stake, the energy consumption by Bitcoin mining is still concerning to many environmentalists. Even though it consumes only 0.10% of the world’s energy, the carbon emissions still need to be handled wisely.
Last updated Oct 29, 2022 at 12:47 PM
Posted Oct 28, 2022 at 12:43 PM
Globally the demand for energy consumption in mining and transacting the cryptocurrency industry has triggered debate in recent years. In 2009 When the perplexed Satoshi Nakamoto issued the world’s 1st cryptocurrency, he planned to develop a decentralized payment platform that may transform the basic selling and purchasing method for everything. Bitcoin creation aims to enable borderless and quick transactions.
Ten years later there’s no doubt that Bitcoin has reached the mainstream, but not exactly as Nakamoto imagined. Rather than facilitating daily transactions, cryptocurrencies have largely become speculative assets, a kind of digital gold, fascinating traders who think they can exchange their holdings for massive future profits. This virtual gold rush has also caused huge electricity consumption.
To know how it is happening, we must first understand how Bitcoin impacts the electricity consumption rate.
Bitcoin's electricity consumption is estimated at 127 terawatt hours (TWh) – even more than Norway's yearly electricity consumption rate. In real terms, Bitcoin consumes 707 kilowatt hours (kWh) of electricity against each transaction, eleven times what Ethereum requires.
The independent nodes of Bitcoins are active worldwide and the network is evenly distributed all across the planet.
Ordinary Bitcoin users who just have to point & tap/click on their smartphone screens to sell and buy the cryptocurrency may not even realize that Bitcoin needs to use this extensive quantity of electricity. But running the decentralized Bitcoin structure produces a massive carbon ejection footprint.
To verify cryptocurrency transactions, Bitcoin needs computers/machines to resolve ever more complicated math obstacles. The proof of work (POW) consensus mechanism is much more energy-exhaustive than people realize. Various miners consume electricity in mining competitions for the sake of rewards. At any time, there may be thousands & thousands of computers competing to resolve the same mathematical problem, even though only a single user can eventually get the Bitcoin remuneration.
This is a wasteful process because 99.99% of all the computers/machines (all of the attempts) that worked just to bring out the result can't win the race. The whole of this procedure generates a fast and fair result but simultaneously releases masses of carbon emissions.
Therefore, one of the primary points to consider against Bitcoin is the energy consumption of mining novice blocks. Regulators contemplate restricting Blockchain energy consumption & reducing its environmental effects greatly. Under this process, the latest findings show that the energy used in Bitcoin mining takes up only a small proportion of worldwide energy production.
In Austin Texas, on the 18th of October 2022, The Bitcoin Mining Council (BMC) reported its research and analysis based on the energy consumed by Bitcoin miners. These Bitcoin miners let the Bitcoin network perform transactions in spite of its exceptionally decentralized structure. In terms of this
Michael Saylor, the BMC founder and former Chief Executive Officer of Micro strategy, explained in a video that Bitcoin's energy consumption is quite low compared to worldwide electricity consumption. He also believes that the quantity of electricity consumed for mining is just 0.16% of the total electricity used globally.
Saylor also believes that Bitcoin currently works on a 59.4% renewable energy mix, making it a precursor in the Blockchain's Proof-of-work industry. The survey mentioned that the renewable mix has focused on three metrics: technological efficiency, sustainable power mix & electricity consumption.
Bitcoin miners have come under pressure from environmental activists who say their wasteful energy consumption harms the environment. The BMC reports that mining Bitcoin generates only 0.10% of worldwide carbon emissions – an almost negligible amount. The report also states that worldwide Bitcoin mining carries the largest sustainable energy mix as compared to nations.
Saylor's says that 1/3 of the total world's energy consumed is actually wasted energy; it is impossible to use and Bitcoin accounts for "just a small fraction". The total energy consumed globally is 165,317 TWh; Bitcoin mining uses just 266 TWh of that power.
The price of Bitcoin always goes up if we look at the right time frame and so do the rewards for minors. Even though the Bitcoin halving cuts this reward by half, the overall value goes down.
Value of Bitcoin
Though Bitcoin consumes less energy than many other industries, the BMC survey report also explains that Bitcoin energy consumption YoY has escalated by 41%. Here you must consider that the crypto mining efficiency shot up by 23% in the 3rd quarter of 2022 as compared to the previous year's same quarter.
The growth in energy consumption is linked to the 8.3% & 73% increase in the BTC hash rate of the 3rd quarter and YOY, respectively, despite the Bitcoin price decline and the reduction in the amount of BTC blocks mined.
Glassnode firm, the Blockchain data analyst, thinks that the rise in the BTC hash rate results from its more efficient and effective mining hardware coming online or/and BTC miners with high-level balance sheets with a bigger hash power network's share.
Although the European Union (EU) negated a proposal to ban cryptocurrency mining earlier this year, new regulations may soon be executed to mitigate the risks of environmental impacts of cryptocurrency mining. Although the power consumption issues have been addressed by the cryptocurrency miners, soon the regulatory authorities may step in & suppress the crypto industry. Therefore stricter rules and regulations could loom on the horizon.
On 18th of October 2022, the EU released documents highlighting an action strategy to impose the EU Green Deal & the Re-Power EU Plan to monitor cryptocurrency mining activities & their environmental impacts.
The EU Blockchain Observatory & Forum (EUBOG) also recommends that the EU impose mitigation strategies to reduce the negative impacts on the climate by the digital asset industry. This recommendation has already had an effect to some extent, as the European Union demands that the member states apply proportionate measures to reduce the electricity consumption of cryptocurrency-asset miners to fight the deep cuts in the power supplied by Russia.
The United States of America's regulatory movements are following its European Union counterpart. In September 2022, the science office of the White House printed a 46-page document that explained the energy & climate implications of cryptocurrency assets.
In 2009 when bitcoin (BTC), the 1st pioneering crypto, was released, it was seen as an apolitical currency. The possible impacts of BTC & other cryptocurrencies on financial markets and their transactions have been discussed globally. However, the environmental effects of cryptocurrency demand have been ignored.
As a result, recently Bitcoin mining has been under fire and criticized in recent months for the huge energy consumption needed to keep running the Bitcoin network. The main thing the Bitcoin critics fail to understand and realize, though, is that Bitcoin mining is increasingly becoming green, and BTC mining motivates the creation of more efficient and effective renewable energy solutions. Bitcoin mining's power consumption is only 0.10% compared to the global whole energy consumption, making this rate almost negligible.