Bitcoin mining has continued to grow over the years, but never more so than through this year as Bitcoin’s price surge draws in new miners.
Bitcoin’s price has surged over 1,000 percent year-to-date and cryptocurrency miners are only interested in mining for currencies with the highest possible returns.
While in the early days miners were able to use CPUs to mine for Bitcoin, today it’s a far different story, with miners set up warehouses of Application Specific Integrated Circuits (ASICs) in order to generate as much hashpower as possible to generate Bitcoins through the verification process of Bitcoin’s transactions on the new innovative blockchain technology.
The greater the hashpower, the more likely a miner is of being the first to complete the verification process and the greater the number of Bitcoin’s, the more income for the miner. So it’s with little surprise that miners have garnered so much attention in recent weeks.
As a result of the continued rise in miners that are set up with warehouses of ASICs equipment, energy consumption has also been on the rise. ASICs mining equipment uses significant amounts of energy and that’s before considering the cooling systems required to ensure that the expensive equipment does not overheat. In the search for Bitcoin, mining warehouses operate 24-7. The emphasis is so great on the impact of Bitcoin mining on energy consumption that a Bitcoin Energy Consumption Index has been created to record and demonstrate the rising demand for energy resulting from the mining of Bitcoin.
Why has Bitcoin attracted such a significant increase in miners? On an annualized basis, Bitcoin mining revenue is estimated to sit just shy of $9bn this year. That’s plenty of incentive for those looking to get into the mining game and have the required funds to set up a mining warehouse that is particularly costly. The high barrier to entry has certainly not deterred new entrants in spite of China’s miners being estimated to hold as much as 60% of Bitcoin’s hashpower. When including Georgia, Sweden, and the U.S, that rises to an estimated 80% of Bitcoin’s total hashpower. Energy costs are the key consideration for miners and for this reason China houses the world’s largest mining community, with electricity costs amongst the cheapest in the world.
So How Much Electricity Does Bitcoin Mining Really Consume?
It’s somewhat mind-boggling when looking at the statistics on how much energy Bitcoin mining consumes.
Recent reports have shown that, as at 30th November 2017, the Bitcoin Energy Consumption Index (“BECI”) reached 30.592 terawatt-hours (“TWh”). As an isolated value, it’s rather meaningless, but when considering the fact that the BECI was under 25 TWh on 1st November 2017, that’s quite a jump.
Bitcoin’s electricity consumption accounts for 0.14% of the world’s total electricity consumption. While 0.14% may not seem like a large number, the reality is that Bitcoin’s total energy consumption is greater than that of Morocco and close to 160 other individual countries around the world.
Bitcoin’s hash rate chart also reflects the jump in hashpower, reflecting the surge in Bitcoin mining through November. It wasn’t long ago that Bitcoin Cash’s hashpower had surpassed that of Bitcoin, as miners flip-flopped in search of the best possible returns. As things stand, there’s clearly no doubt that Bitcoin has drawn the attention of the world’s mining community, with the Bitcoin mining Cartel holding the vast majority of the hashpower.
Things could get a lot worse should Bitcoin’s value continue to move exponentially northwards, with some experts forecasting Bitcoin hitting $40,000 by the end of next year.
As the world becomes more environmentally conscious, with even China making large strides in addressing its old polluting ways, the focus on Bitcoin miners will likely intensify. It wasn’t long ago that the Chinese government had forced Bitcoin exchanges to shut down, could the government clamp down on the miners next? That would certainly burst Bitcoin’s bubble when considering Chinese miner hashpower contribution to the Bitcoin network.
Bitcoin Mining Cost – How Much of a problem and what’s the Solution?
As has been the case with the more commonly known world of Coal and Oil & Gas mining, an evolution is likely, with governments likely to step in to address energy consumption levels in the interest of the environment.
For now, there will be rising concern, justified by the increase in the mining community that has contributed to the BECI’s rise to stratospheric levels. From a fossil fuel demand perspective, we consider the heat rate, which is the amount of fuel (Coal, Oil, etc.) used to generate one Kilowatt-hour of electricity or the number of Kilowatt-hours generated by one unit of fuel (fuel heat content divided by the heat rate).
The heat rates vary depending upon the fuel and quality of fuel used. According to the EIA, the Btu per kWh for coal stood at 10,495 in 2015. For Petroleum, 10,687 and for Natural Gas and Nuclear, 7,878 and 10,458 respectively.
When this is then considered for Bitcoin’s 30.592TWh, that’s quite a lot of fuel. Based on the EIA’s latest figures on global energy supply, a total of 155,481 TWh of energy was supplied in 2014 (latest figures available), 70% of which was consumed by households, industries, and businesses. Broken down by fuel type, that’s equivalent to 24bn tonnes of coal or to 12bn tonnes of crude oil. So that means Bitcoin mining consumes an estimated 3.4bn tonnes of coal or 1.68bn tonnes of crude oil. Quite a number and the impact on the environment from the pollution element is damming.
It’s also worth noting that power station efficiencies across the globe will vary considerably and this will be a factor to consider. With China accounting for more than 50% of Bitcoin’s hashpower, the fact that Chinese power stations continue to use coal as fuel will be of concern, though the government is in the process of addressing these issues, with China’s coal consumption continuing to decline as power stations get upgraded.
We will, however, expect mining equipment to become far more efficient over time. The savvier miner, who will be looking to make efficiency gains in the interest of greater margins, will also be looking at how to make it more cost efficient to mine for Bitcoin.
It goes without saying that technological advancements will also contribute as the digital world continues to make up ground. Power generation is also shifting to cleaner energy, so this will also be a positive, though all of this takes time.
Disclaimer: The views expressed in the article are solely that of the author and do not represent those of, nor should they be attributed to CCN.