Energy consumption is one of the main topics in the crypto industry. And Bitcoin may be the main concern, as the Bitcoin hash rate has increased with 52.4% from last year (at the time of writing).
SIDENOTE The hash rate refers to the processing power of the Bitcoin network. The higher this rate is, the more people are mining for this cryptocurrency at a specific moment.
As the Bitcoin market starts to rebound, a renewed focus is being put on this industry’s problems. While market instability is a concern for some, the amount of power consumed by the Bitcoin network is a bit more troubling.
With a current hash rate close to 300 million TH/s, it is estimated that Bitcoin consumes in a year more energy than Argentina does, emitting approximately 65 megatons of CO2 annually. Many economists and energy experts agree that the current energy usage trajectory Bitcoin is on is not sustainable. Every time you turn on the news, you see more stories about how global energy production needs to ramp down.
Therefore, many in the Bitcoin community are touting changes to fix the looming energy crisis this cryptocurrency is threatening to cause.
Here are some of the things you need to know about Bitcoin energy consumption and what can be done to fix the issues that may occur in the future.
Why Does Bitcoin Need So Much Electricity?
If you are new to the world of Bitcoin mining, you are probably wondering why mining this cryptocurrency is such a drain on the world’s energy supply.
The answer to this question is both multi-faceted and complicated. Before we dive into the energy consumption problems Bitcoin faces, you need to understand more about the Bitcoin mining process.
What Is Bitcoin Mining?
In short, Bitcoin mining involves generating new cryptocurrency while simultaneously updating and sharing the Bitcoin network’s transaction ledger.
Since thousands of people around the world mine Bitcoin daily, it can cause a lot of activity on the network. The current block reward is 6.25 BTC. As the price of Bitcoin rises, more and more miners will start to use higher amounts of electricity. If the electricity rates a miner is paying are far lower than the price of Bitcoin, the end justifies the means.
Estimates show that the Bitcoin network consumes over 92 TWh of electricity annually. The overall level of energy consumption used by the Bitcoin network depends heavily on the value of this cryptocurrency. If there is a sharp decline in the value of Bitcoin, you will also see a significant decrease in the power used by the network. Since the overall value of Bitcoin is a bit unpredictable, only time will tell how this electricity crisis will pan out.
What Makes Assessing Bitcoin’s Electricity Usage Difficult?
As you may have noticed, the actual numbers regarding how much energy the Bitcoin network and miners use are a bit up in the air.
Without a definite figure on how much energy is being used, many Bitcoin enthusiasts consider this energy crisis as nothing more than a scare tactic used by traditional banking institutions. Tracking the exact amount of electricity is difficult for the following reasons.
Bitcoin Mining Rigs Aren’t Being Tracked
Initially, companies like IDC and Dataquest supplied conventional servers for Bitcoin mining.
As time has gone by, more and more Bitcoin miners have developed customized computing devices to handle the work involved in the mining process. Since these customized rigs are hard to track, estimating how much energy they use is almost impossible.
The number of servers mining for Bitcoin is essential information used to determine energy usage. Still, most newcomers are not using traditional servers, which is where the problems occur.
Rapid Changes in the Bitcoin Mining World
Most people need to realize that the world of cryptocurrency changes much faster than other industries.
When Bitcoin servers undergo drastic changes, it can cause instability in the market. The rise and fall of Bitcoin’s value determine how much electricity is used in the network.
This market volatility is what has many on edge about the future value of Bitcoin. If the prices were to rise substantially in a short period, the amount of energy used by Bitcoin miners could overwhelm the existing power grids in the United States and other countries.
The Varying Efficiency of Computational Loads
The amount of electricity used to complete Bitcoin mining is also affected by the total computation load, the number of servers a miner has, and the mining difficulty on the Bitcoin network. Each of these factors can change at a moment’s notice, which means the amount of electricity used for a single Bitcoin mining transaction can also change.
Possible Solutions to the Bitcoin Energy Consumption Crisis
Solving the looming Bitcoin energy crisis is much more complex than most people realize. One of the main things you can do as a Bitcoin miner trying to lower this investment’s cost is to find the most efficient energy rates.
In the past, companies like Google allowed people in the Bitcoin mining community to purchase clean energy assets. A large-scale campaign to sell these pure energy assets can help to offset the environmental impact of Bitcoin mining.
Many people have also encouraged Bitcoin to use renewable energy sources to power its network. The belief is that others in the cryptocurrency and mining communities would follow suit if Bitcoin was to consider renewable energy a solution.
The Future is Uncertain
Only time will tell how the cryptocurrency industry will handle the energy crisis building at the current moment.
As more data shows how much of a drain mining is on the world’s energy supply, governments may start to pass regulations to fix this issue.