Since the development and launch of this digital network back in January 2009, it has grown to be the most valuable cryptocurrency in the world. While this crypto has experienced an unprecedented rise in value, it has become a matter of debate. One of the latest debates is the amount of energy that is consumed through mining on the Bitcoin network. A recent article published by Forbes points that Bitcoin mining drastically plays a role in the increase of global energy consumption.
How Mining Works On The Bitcoin Network
Before we dive into how much energy is consumed by miners on the Bitcoin network, we’ll take a look at the functions of these miners and how they work.
Generally, the Bitcoin network has a block time of ten (10) minutes which means that new transactions or blocks (as it is referred to) are added to the network’s blockchain every ten minutes. As these miners work on the network’s blockchain, they are not required to trust anyone other than the code that runs the network. These codes to be trusted are made up of a number of rules that miners must adhere to if they must validate transactions. To explain better, one of the many rules is that for each transaction to be validated by a miner, the funds sent should be that of the sender. With this in mind, each miner on the network will follow the rules of the code to determine if a transaction should be validated or not without having to trust other miners on the network.
Okay, but why?
The idea behind mining on the network is to ensure that all miners agree on the transaction history. While each miner is tasked with the responsibility of preparing the next set of transactions to be validated by the blockchain, it is selected randomly. With random selection being a difficult task in a distributed ledger network, the need for a proof-of-work algorithm emerges. The proof-of-work algorithm or POW is designed in such a way that the next block or transaction to be validated by the blockchain will come from the very first miner on the network to produce a valid block.
While this may sound simple, it is not as simple as you would imagine. The Bitcoin protocol has been designed in such a way that it makes it difficult for miners to validate blocks. In fact, it ensures that only one transaction or block is selected to be validated on the network every ten minutes. Once a miner on the network manages to produce a valid block within that time, other miners are informed to confirm if the block adheres to the rules. If it adheres, they would have to discard or do away with the block they are working on. The miner who produces a valid block is given a stipulated amount of coins as well as the transaction fee paid for the transaction by the sender.
This is simply how mining works on the Bitcoin network and to do this, miners would have to make use of advanced mining rigs and a reasonable amount of energy.
Energy Consumption Level For Bitcoin Mining
While this issue is becoming one of the most talked about, a number of researches have been carried out to determine the amount of energy that is consumed by miners on the network.
One of the recent studies has revealed that cars in the United States consume about the same energy in three days as Bitcoin miners have consumed in the last ten years. Generally, cars in the United States alone consume over 1.3 million tons of oil each day. In three days, these cars consume approximately 3.9 million tons of oil. On the other hand, Bitcoin mining since the inception of the cryptocurrency back in 2009 has consumed a total of 4.1 million tons of oil. This clearly shows that the amount of energy consumed by miners on the Bitcoin network is not as much as most people would claim.
Yet, Oil Is Not The Energy That Bitcoin Mining Consumes
Surprisingly, only a little of Bitcoin mining has been carried out with oil power. Coal power is significantly being used for Bitcoin mining throughout the mining centers in China. While coal power is used for Bitcoin mining throughout China, you will find it surprising to know that carbon emissions that are based on coal-powered plants happen to be quite lower than that of the United States. This is one of the very few facts that most people have overlooked in this debate. If you are familiar with Bitcoin mining, you’ll definitely know that China is the country with the largest mining centers in the world.
While we have stated that the energy consumed by miners on the Bitcoin network is not as much as most scholars and mining experts would claim, you will find it surprising to know that about thirty (30) terrawatt was consumed by Bitcoin miners in 2017 alone. This is exactly as much electricity it takes to power Ireland in a year. While you will definitely agree that this energy consumption is high, you will find it disheartening to know that the banking industry consumes over a hundred (100) terrawatt of power each year. It has been revealed that even if the Bitcoin network is about 100 times more mature, it would only consume about 2% of energy.
Impact Of Bitcoin Mining On The Environment
While we cannot dismiss the fact that Bitcoin mining leaves a carbon footprint, one thing to bear in mind is that the claims that have been made prior to this time that Bitcoin mining is consuming more energy than most countries are not entirely true (except in the case of Ireland). The recent concerns of mining-related activities are why there are a number of alternative algorithms that seek to offer miners an opportunity to mine without leaving carbon footprints. One of these algorithms is the proof-of-stake which according to reports is soon to be adopted by the Ethereum network.
Interestingly, founder of BitTorrent Bran Cohen has created a Chia cryptocurrency which will make use of available storage as an alternative to the use of coal power to verify blocks on the network.
New Bitcoin Mining Locations
With an emphasis being placed on Bitcoin mining, miners are moving to locations with cheaper electricity. One of these new locations is Northwest Pacific where power is considerably cheaper because of the availability of hydropower. While China is becoming one of the major contributors to carbon emissions, miners are moving to other locations.
Iceland is currently becoming the next best location for Bitcoin mining and this is because the country relies on 100% renewable energy for all production. With an abundant supply of hydropower energy and geothermal energy, power becomes incredibly cheap. One of the exciting facts about these new mining locations is the fact that miners are able to make huge profits, pay less for electricity, and not contribute heavily to global carbon emission.
Most scholars are of the opinion that the discussion of the amount of energy consumed by Bitcoin mining is one-sided. They argue that new technologies and industries should be taken into consideration as well. Instead of simply discussing energy consumption, it is best that they discuss towns where mining is adding to the already heavy burden of the environment.