Alon Musk, CEO of Tesla and cryptocurrency promoter, shocked the crypto market when he recently said that his company would no longer accept bitcoin to buy cars. Consequences of the tweet: The price of bitcoin fell by 14%, and it continued to fall in the following days.
While the value of cryptocurrencies such as Bitcoin, Atrium and Dogcoin has broken value records this year to the delight of stakeholders in its success, there has been growing concern in the world about the amounts of electricity needed to mine the coins.
Just last month several U.S. cities tried to restrict or outright ban bitcoin mining in their areas, citing climate concerns. , And noted the concerns about the environmental impact of bitcoin mining.
Like the old saying “when chopping wood flies chips”, so it is with coin production: as the electricity bill on crypto mining increases, so does the degree of coal and environmental pollution, and the climate crisis worsens.
Here’s what’s interesting to know about digital coin mining and its energy consumption.
What is cryptocurrency mining?
When Bitcoin is traded, computers around the world compete with each other to complete a calculation that produces a number based on the 64-digit hexadecimal base, a hash number, for that bitcoin. According to the Davidson Institute, “To prevent fraudsters from modifying existing documentation or documenting a fictitious transaction, their documentation is done using a ‘one-way stacking function’ – a complicated concept that represents a simple principle. Stacked text. “Every small change in the input will yield a completely different output.”
This number then goes through a public registration so that each person can verify that the transaction on that particular bitcoin has indeed happened. The computer that solves the equation first receives a prize of 6.2 bitcoins, which today is worth about $ 200,000 or about NIS 654,000, at the current price.
But Bitcoin is not alone. Other cryptocurrencies use similar mining technology, and these of course add more electrical pollution.
How much energy does mining consume?
It is estimated that a single bitcoin transaction consumes 1,544 kilowatt hours (kWh) until it is completed. For comparison, an average home in Israel needs about 8,000 kWh per year. In other words, one bitcoin transaction consumes about 20% of the annual energy consumption of an Israeli home or about two and a half months of electricity.
To put it in terms of money, the price of a kilowatt hour in new shekels is currently about 54 cents. This means that one bitcoin transaction costs more than NIS 833.
According to a study published by researchers at the University of Cambridge in February this year, bitcoin mining worldwide alone in 2020 consumed 121.36 terawatt hours (TWH), three times more than in 2019 and more energy than Argentina consumes. If cryptocurrency mining was a country, it would be among the 30 countries consuming the largest amount of electricity in the world.
Why does crypto mining require so much energy?
Mining rigs – basic computers with a few powerful graphics cards to conduct complex calculations – often use high-power power supplies that consume a lot of power. Mining around the world has become so popular, because of the financial potential inherent in it, that there is currently a shortage of graphics cards.
The graphics cards in the rigs work 24 hours a day – a job that requires much more electricity than a normal internet browsing. A rig with three graphics cards, for example, can consume a thousand watts when turned on. This is a consumption that is equivalent to a medium-sized air conditioner.
Not only do the rigs consume energy, they also produce heat. The more rigs there are, the more heat there is. If you do not want them to melt, you need cooling. Many rigs have some internal fans, but when there are many rigs, the room also heats up quickly, and then needs external cooling. A home mining rig, like the ones people run at home, can get by with a fan. But large mining farms such as Kazakhstan where there are 50,000 mining rigs, need much more cooling which increases power consumption.
Why do so many miners choose China?
The bitcoin mining economy requires the miner to look for the cheapest electricity to reduce expenses and maximize profits – and so miners often come to China where they rely on coal-fired power plants. No wonder then that China is the world leader in bitcoin mining – 75% of all mining in the world is done in it. China also manufactures most of the world’s cryptographic mining equipment.
40% of bitcoin mines in China are fueled by coal. That is, bitcoin mining not only harms the climate and jeopardizes humanity’s ability to abide by the Paris Agreements and halt global warming, but also actually harms human health, causing air pollution.
Although currency proponents argue that after falling renewable energy prices it becomes cheaper for bitcoin mining, most of the mining under Cambridge is done as stated in China, where it is very difficult to know what source of electricity on which the mining was based. This is because there is no government body or organization that officially monitors and knows exactly where Bitcoin is mined and what type of electricity is used.
However, just nine days after Musk’s announcement on May 21, 2021, Chinese Deputy Prime Minister Liu Hu announced that the country would “restrict bitcoin mining and currency trading activities.” This is partly due to the estimate that by 2024 bitcoin mining in China will generate more than 130 million tons of carbon emissions.
How much coal does it take to mine Bitcoin?
To mine Bitcoin or more or less do any action with a cryptocurrency needs electricity. In various places in the world with a shaky electricity infrastructure, massive mining operations can disrupt the proper agenda. In Iran, for example, it was recently decided to ban crypto mining for four months after a series of unplanned power outages in cities due to mining farms. President Hassan Rouhani said, according to a BBC report, that crypto mining draws 2 gigawatts of electricity from the Iranian electricity grid.
According to the University of Cambridge, while in 2015 when it started tracking Bitcoin power consumption, electricity consumption required an annual generation capacity of 2.25 gigawatts, today, bitcoin mining utilizes 13.81 gigawatts – quite a bit for Anyone who was here in the 1980s and remembers the movie “Back to the Future”. In the second film in the trilogy, Doc Brown needs 1.21 gigawatts to travel in time on the Delorian. Here are some more realistic examples that illustrate how much a gigabyte is, according to the U.S. Department of Energy: 3.125 million solar panels; 412 average wind turbines; 110 million LED lights; Or 1.3 million horsepower.
How much coal is needed to run one gigawatt? According to the US Energy Information Administration, in order to produce kilowatts per hour of electricity, you need about half a kilogram of coal. Gigawatts (the amount of generation required to mine Bitcoin for a year), needs 6.9 million kilograms of coal.
In 2018, the Oak Ridge Institute in Ohio found that one-dollar bitcoin requires 17 mega-jewels of energy, more than double the amount of energy required to mine one-dollar copper, gold and platinum.
Another study from the UK published last year said that the computer power required to mine bitcoin quadrupled in 2019 compared to the year before, and that mining had an impact on prices in some electricity markets.
Why is using so much electricity bad for the environment?
Fossil fuels – coal, oil and natural gas that contain a large amount of carbon – are responsible for about 85% of the world’s energy consumption. When using fuel, carbon dioxide is released into the atmosphere, where it absorbs heat from the sun and creates the greenhouse effect.
As mining rigs consume more electricity, nearby power plants need to generate more electricity to meet demand, which raises the likelihood that more fossil fuels will be used. In the US, for example, countries that have coal-fired power plants, such as Montana, New York and Kentucky, are trying to make a profit by attracting crypto-mining companies. The effect on local residents and the climate system is almost immediate.
What is being done about this energy problem?
Not much. A third global crypto asset study conducted at Cambridge University found that 70% of miners based their decision on which currency to mine on a daily basis. Energy consumption was only 30% of their choice.
Access to renewable energy at a low cost, however, attracts crypto miners. Sichuan Province in China has the second largest concentration of reactors in the country due to the cheap and available hydroelectric energy. The rainy season produces so much electricity Gates in the district are looking for blockchain companies and offering them to move there in order to avoid wasting energy.
Musk said in May he spoke with coin miners in North America, and they pledged to use renewable energy sources. He then tweeted on June 13 that Tesla would return to doing bitcoin transactions when there would be “reasonable use of clean energy” which indicated at least 50% of the energy.
Despite criticism at the UN, there are environmental and social benefits to cryptocurrencies as they can prevent corruption within countries by reliably and transparently documenting transactions – especially important in areas with weak institutions and high levels of corruption. The organization notes that atrium developers are talking about almost complete emission reductions.
Indeed, atrium operators, the second most popular digital currency after Bitcoin, are trying to reduce the amount of energy consumed by miners. Atherium 2.0 is an upgrade of the currency, which will be completed sometime this year or in 2022. Instead of computers solving complicated exercises that produce bitcoin coins at the end of the process, computers will be randomly selected to create blockchain blocks. The unselected computers will validate the new blocks that will be created.
To make sure the miners do their job, each miner will have to pay in 32 atrium coins, equivalent to $ 85,000, so the term for this protocol is called “proof of commitment.” This change is expected to reduce the amount of energy needed to mine atrium.
What other cryptocurrencies are more energy efficient than Bitcoin?
An increasing number of currencies – there are more than 10,000 in total – use a commitment-proof protocol that Atrium 2.0 will switch to, which will lead to a decrease in energy consumption.
The Cardano currency, for example, uses its “proof of work” protocol and consumes 6 gigawatt per hour annually. By comparison, the use of this currency in energy is slightly below the amount of electricity consumed by the Niva Island in the South Pacific, which has a population of 1,620 people. For comparison, Bitcoin uses 121 terawatt hours per year, slightly less than twice Israel’s electricity consumption (67.6 terawatt hours), which is equivalent to the annual use of Pakistan, a country with a population of 225 million.
After Musk’s tweet of May 13, Cardano reached a record price because it seemed to be an environmentally friendly alternative to Bitcoin.