Why we should not be too worried about Bitcoins energy consumption.
Mining is Bitcoin’s charcoal
Every time a miner solves a problem in the algorithm, he validates and secures a transaction in the blockchain. Everytime a transaction is created, the next problem -in the next block- is much more complex to solve and so on. Meanings much more energy -electricity consumption- to spend to solve the problem. It’s like a vicious circle: the more value Bitcoin gets, the more interest it gets. So more people do more transactions that need to be validated, becoming more and more difficult for the miners to solve the problem. It makes them adding more and more computing power to their machines to chase Bitcoins and the transaction fees, consequently consuming a huge amount of electricity which leads us to problems and questioning.
« Bitcoin’s surge in price has sent its electricity consumption soaring. »
Today, there are currently about 300,000 transactions per day and one Bitcoin transaction uses as much energy as your house in a week or about 4,000 times as a credit card transaction or almost enough energy to fully charge the battery of a Tesla Model S or run an efficient fridge for a full year! Anyway, you got the point… If you have some time to kill check those beautiful charts (because we all love chart)!
The first problem is carbon emissions. Because miners take energy where it’s cheaper (a lot in China, eastern countries or middle Europe) where pollution issues are already happening at a big scale. For example, a coal-powered Bitcoin mine in Mongolia is responsible for 13,000 kg CO2 emissions per Bitcoin it mines, and 24,000 – 40,000 kg of CO2 per hour.
That’s… a lot. We need to keep in mind that Bitcoins and Blockchain are used by a very small amount of people. If those kind of currencies are democratized and use by the masses, the electricity consumption will exponentially increase as well as the carbon footprint.
The second problem is that most of this energy is spent for… nothing! Only one miner will validate the transaction and be rewarded. All the other miners run their machines at the same time because they judge that it’s still profitable for them to spend this energy against the chance of being rewarded. It’s about 1 billion $ smoked yearly.
How could one bitcoin transaction possibly use this much electricity? Can we stop this super-high-energy-consuming monster ? It is worth asking ourselves questions about Bitcoin’s environmental footprint ? In a context where carbon taxes and climate change are about to happen, this should greatly concern bitcoin users, programmers, and advocates.
Sorry, your mood is close to depression mode now, all of this sounds like a disaster but there is hope and potential solutions! Let’s go through some good vibes and optimism now!
Bitcoin more economical than banking system ?
Bitcoin’s defenders believe that yes, it is. The balance of the blockchain is positive when we take into account the higher cost of banking services that this one replaces. According Pierre Noizat (Paymium & BitcoinFrance) the carbon footprint can be reduced thanks to Bitcoin if we take into account all the ATM’s energy consumption in the world, plus the printing of banknotes on high quality paper and their transportation by armored trucks, « the mass adoption of Bitcoin as electronic cash would divide the carbon footprint of payment systems by three or four ».
Spending a lot of energy might be worth it because Bitcoin can really change the world if it gives access to equivalent, decentralized, banking services to the populations in Africa, India or anywhere else where having a bank account today is not possible or not affordable. We must work on solutions and support those who try to make the best out of the blockchain in a cleaner and less energy-consumming way.
It’s a beginning, what’s next ?
What can we do to take advantage of that huge energy consumption ? Solutions ? Ideas ? Anyone ?
Ok… Some solutions are easy, like set up a mine in a cold country where it requires less energy to cool down the warehouses hosting the machines with air conditioning. That’s one.
The community can also propose improvements, like SegWit2x, the fork that was supposed to happen and which has been canceled was also meant to increase the number of transactions that Bitcoin can handle by at least double, and decrease network congestion and energy consumption.
What about the protocol ? Proof-of-work was the first consensus algorithm that managed to prove itself, but it isn’t the only consensus algorithm. More energy efficient algorithms, like proof-of-stake, have been in development the last years. In proof-of-stake the blocks are created by coin owners rather than miners, thus not requiring such power hungry machines. Because of this, the energy consumption of proof-of-stake is much much smaller compared to proof-of-work. Bitcoin could potentially switch to this kind of consensus algorithm, which would improve sustainability a lot! The work on these algorithms offers good hope for the future.
Since the technology evolves and progress fast, more computing power requires less energy consumption year after year. The miners can perform much more computation for less power, and there are many more transactions per day than before. So it should be better soon, right ?
Startups & ICO on the front
There may be hope for the future, however, it’s not because bitcoin transactions are secured by mining that the total amount of mining is related to the number of possible transactions as you know ! So projects like Teechan « show initial promise as a way to massively increase the number of bitcoin transactions per second », as do “payment channels” like the Lightning Network. This project would make bitcoin able to perform more useful transactions without requiring additional electricity, which is good!
Many companies and startups like Qarnot are working on developing solutions to take back the energy spent uselessly by the blockchain by using the principle of the Shared value economy consisting in recuperating the energy made by the calculation and using it for different purposes, the most obvious one being heating systems! This recuperation energy allows to heat up your place by bringing the calculation in domestical or professional environments and save a lot of money on AC in the mines. Some heat recuperation systems were successfully integrated to the blockchain by Stimergy as well, developping the distributed ledger while reducing the carbon footprint. This shows as well the huge potential of blockchain for alternative energies and other fields of application. Don’t be shy and don’t hesitate to help and support those startups!
As examples, you can check out the fantastic work –and invest or participate to the ICOs– of :
WePower A Blockchain based green energy trading platform.
It enables green energy project financing as well as green energy investment and trade at scale.
HydroMiner Green Mining using Hydro energy.
Among the most environmentally friendly and efficient ways to generate electricity. Eco-friendly and profitable.
Grid+ Encourages the adoption of distributed energy resources (DERs).
Allowing more efficient utilization of existing grid infrastructure.
Greeneum Decentralized and sustainable energy market.
Enables smart monetization for real time energy transactions.
And this special one, Chia is a kind of a better Bitcoin.
Instead of using wasted electricity for security it leverages the already widely distributed large sunk cost of unutilized storage space. This results in a system which is much more distributed, secure, and green.
We suggest you keep an eye on this one! …And much more out there!
Thank you for taking the time to read until here! I hope this article helped Bitcoin’s skeptics and enthusiasts to think a little bit differently! Let’s be aware of what’s coming up soon… Feel free to share your thoughts or complete the reflection.
Pierre Noizat Blog http://e-ducat.fr/links/archive/#allposts
Blockchain Info https://blockchain.info/charts
Harvard Business Review https://hbr.org/2011/01/the-big-idea-creating-shared-value