If you read news about finance these days, it is impossible to miss the story of the massive run-up in value of Bitcoin over the last year. Its value has rise over 1000 per cent since the beginning of the year, and some people who have owned Bitcoin since its early creation have become multimillionaires.
There is a huge amount of Bitcoin related news coverage these days, mostly about its current value, and how much money some investors have made so far and whether the bubble is about to burst, but in the midst of the current Bitcoin frenzy one thing that stands out is the discussion about the enormous amount of energy that is required to sustain the system. Here are a few quotes from one recently published article on Grist:
Today, each bitcoin transaction requires the same amount of energy used to power nine homes in the U.S. for one day. And miners are constantly installing more and faster computers. Already, the aggregate computing power of the bitcoin network is nearly 100,000 times larger than the world’s 500 fastest supercomputers combined.
The total energy use of this web of hardware is huge — an estimated 31 terawatt-hours per year. More than 150 individual countries in the world consume less energy annually. And that power-hungry network is currently increasing its energy use every day by about 450 gigawatt-hours, roughly the same amount of electricity the entire country of Haiti uses in a year.
That sort of electricity use is pulling energy from grids all over the world, where it could be charging electric vehicles and powering homes, to bitcoin-mining farms.
This same article goes on to say that if Bitcoin growth continues at its current rate, by February 2020 it will use the same amount of electricity as the whole world uses today. Obviously that would be a massive problem that would be very difficult for support in terms of power generation capacity.
Of course, it is probable that the current growth of Bitcoin won’t continue on its current trajectory.
An article in Ars Technica takes a rather more sober look at the situation.
Will the network’s energy consumption continue to rise over the longer run? Under Bitcoin’s current design, this depends entirely on what happens to the price of Bitcoin. If Bitcoin’s price doubles to $25,000, we can expect the Bitcoin network’s energy consumption to roughly double as well. If Bitcoin’s price falls significantly, on the other hand, miners will find their operations unprofitable and will start to switch off their least efficient equipment, causing energy use to decline.
Right now, Digiconomist estimates that Bitcoin is consuming less than 1 percent as much energy as the US economy. This means that, for Bitcoin’s energy consumption to exceed that of the United States, Bitcoin’s price would have to rise by roughly 100-fold to more than $1 million.
Could that happen before 2020? It doesn’t seem likely. Of course, in early 2015, Bitcoin was worth only $200—hardly anyone expected a 50-fold increase over the last two years. But here we are.
Many people think that what they consider to be the Bitcoin bubble is bound to burst, but it’s by far not the only cryptocurrency around, and all of them require power generation to operate, so it does seem like a significant portion of total electrical generation going forward will go towards sustaining the cryptocurrency system. Add to this the power requirements of the internet, the internet of things, artificial intelligence, robotics, etc., and we can see how much we need a rapid increase in energy production. The question is, how best to meet that need.