Complex Made Simple

Energy Alarm: Bitcoin mining consuming more power than individual countries do

What do Switzerland, Sri Lanka, Jordan and Kansas City all have in common? 

They each produce as much or less electricity per year than Bitcoin (BTC) mining. 

if Bitcoin was a country, it would be the 41st most-energy-demanding nation on earth, says Statista.com. 

It writes that among other things, Bitcoin has proven highly controversial for the sheer amount of energy it requires

It said the University of Cambridge has released a new online tool that estimates the level of electricity the crypto-currency network uses and compares it with other entities. 

“It estimates that Bitcoin uses 61.76 terawatt-hours (TWh) of electricty per year, more than many countries and around 0.28 percent of worldwide electricity consumption,” Statista.com reports.

The current annual estimate of 50 terawatt-hours (TWh) could power all European tea kettles used to boil water for a year, or satisfy the energy needs of the University of Cambridge for 365 years.

Bitcoin Mining explained  

Puzzle solving is something most of us enjoy as mind teasers. For Bitcoin miners, it’s a living.

BBC.com said in order to "mine" Bitcoin, computers known as mining machines are connected to the crypto-currency network.

They are tasked with verifying transactions made by people who send or receive Bitcoin. This process involves solving puzzles.

The puzzles simply provide a hurdle to ensure no-one fraudulently edits the global record of all transactions, and the system awards miners small amounts of Bitcoin for their effort.

New bitcoins are issued on average every 10 minutes where one bitcoin (1BTC is equal to 100 million satoshi, the smallest base unit), can be divided out to eight decimal places. 

“To make as much money from this process as possible, people often connect large numbers of miners to the network – even entire warehouses full of them,” said BBC.

“That uses lots of electricity because the miners are more or less constantly working.”

How much energy is needed to produce Bitcoins?

Late in 2018, a study suggested that the total electricity usage of global cryptocurrency mining had surpassed that of mineral mining. 

The University of Cambridge tool uses an average electricity price per kilowatt hour ($0.05, £0.04) and the energy demands of the Bitcoin network.

Bitcoin energy expert Alex de Vries, from accountants PwC, built a similar tool to estimate Bitcoin's energy use last year.

He told BBC News that the most important thing was the carbon footprint of Bitcoin's energy consumption, which he thinks is a lot despite processing fewer than 100 million financial transactions per year (traditional financial industry processes 500 billion transactions per year).

de Vries said that Bitcoin appears to use far more energy per transaction than all the world's banks put together.

The electricity used for Bitcoin produces about 22 megatons of CO2 annually, a study in the scientific journal Joule estimated. That is as much as Kansas City in the US nations but also similar to those of Jordan and Sri Lanka.

Top Bitcoin mining countries

China: China-based mining pools reportedly mining potentially 70% of all the coins created yearly. The Sichuan province, which is considered to be the Bitcoin mining capital of China.

Iran: The Iranian energy ministry believes that mining operations are to blame for an irregular 7% spike in electricity consumption amid fears of its grid is taking undue strain and intends to cut power to crypto mining operators until it has approved new energy tariffs.

Canada: In May 2018, Quebec’s provincial government lifted a moratorium on the sale of power to cryptocurrency mining operators. In June 2018, Hydro-Québec then introduced rules that required prospective cryptocurrency mining companies to bid for electricity. In April 2019, Hydro-Québec was ordered to allocate 300 megawatts to the blockchain industry over and above the 158 MW that it had already been providing to its existing customers, along with 210 MW supplied by municipal distributors. 

Czech Republic: The Czech Republic is home to Slushpool, one of the biggest mining pools in the world. The pool accounts for 7.5% of the total hash rate distribution. 

Iceland:Iceland became a hub for cryptocurrency mining, given its cold climate and abundance of renewable energy sources. 

The US: Louisiana was identified as the cheapest location to mine the first cryptocurrency. It was followed by Idaho, Washington, Tennessee and Arkansas.