Bitcoin Mining Consumes More Electricity Annually Than Argentina

Bitcoin would rank 30th in annual energy if it were a country. It consumes around 121.36 terawatt-hours (TWh) worth of electricity annually – or nearly 0.5% of the world’s energy production. That means that mining for bitcoin consumes more electricity than Argentina (121 TWh), the United Arab Emirates (113.20 TWh), and the Netherlands (108.8 TWh), and it ranks just under Norway (122.20 TWh).

This data is from an analysis by Cambridge University, where researchers have created an online energy tracker tool (The Cambridge Bitcoin Electricity Consumption Index) that estimates bitcoin’s annual electricity consumption. The instrument was made to track global bitcoin energy use and deliver a “best-guess estimate.” It assumes all the Bitcoin mining machines work at various efficiencies, thus averaging the electricity price to $0.05 per kilowatt-hour. The tool uses this price average and the Bitcoin network’s energy demands to get the best possible figure of consumption at any one time.

Bitcoin is a digital cryptocurrency, meaning it requires no physical form of a bank to be used. It’s created through mining, which requires powerful computer components (graphics cards) to verify transactions made by people who send or receive Bitcoin. Most of these miners use a BTC mining pool.

The mining process involves the computer solving puzzles. It’s a hurdle to ensure no one can hack the global record of all transactions. Unfortunately, mining is power-hungry; because the computers are continually working on completing the puzzles.

The computers are connected to a cryptocurrency network, and the users occasionally receive bitcoin for mining – in what is often likened to a lottery. So, people often connect many miners (sometimes warehouses-full) to the network to increase profit.

David Gerard, the author of Attack of the 50 Foot Blockchain, explained:

“Bitcoin is literally anti-efficient. So, more efficient mining hardware won’t help – it’ll just be competing against other efficient mining hardware. “This means that Bitcoin’s energy use, and hence its CO2 production, only spirals outwards. It’s very bad that all this energy is being literally wasted in a lottery.”

Michel Rauchs, a researcher who co-created the Cambridge tool, told BBC’s Tech Tent podcast:

“It is really by design that Bitcoin consumes that much electricity. This is not something that will change in the future unless the Bitcoin price is going to go down significantly.”

Now, miners worldwide are hooking up power-sucking computing rigs to create the encrypted currency due to a recent surge in the Bitcoin price. The cryptocurrency has a limited supply because, at some point, no more can be created. Since it’s starting to reach that point, big names in celebrity realms and industries are investing.

For example, Tesla recently purchased $1.5 billion of Bitcoin and agreed to accept it as payment in the future. The move caused Bitcoin’s value to rise substantially, hitting a record $48,000 (£34,820). As the price rises, Bitcoin miners rush to run more machines, consuming more electricity. Because of this, critics are outraged by Tesla’s decision to invest heavily in Bitcoin, saying it undermines its environmental image.

Mr. Gerard said:

“Elon Musk has thrown away a lot of Tesla’s good work promoting energy transition. This is very bad… I don’t know how he can walk this back effectively. Tesla got $1.5bn in environmental subsidies in 2020, funded by the taxpayer. It turned around and spent $1.5bn on Bitcoin, which is mostly mined with electricity from coal. Their subsidy needs to be examined.”

To make matters worse, bitcoin isn’t the only cryptocurrency that miners are scrambling for – there were more than 1,650 cryptocurrencies available as of 2020. So, cryptocurrency’s energy footprint is likely much more extensive. And more will enter the market in competition. Meaning mining will increase, and so will its electricity use. At the rate it’s going, the environmental impact of cryptocurrency is only expected to get worse.

However, it is worth noting that other cryptocurrencies, such as Nano, can complete 6 million transactions with the same energy as 1 Bitcoin transaction, and it’s instant and without fees. The average Bitcoin transaction fee, on the other hand, is 0.00043 BTC ($22.70).

Mr. Gerard suggests a carbon tax on cryptocurrencies to balance out some of the harmful consumption.