Bitcoin may be a useful way to send and receive money, but cryptocurrency isn't made for free. The computer-based miners who create bitcoins use vast amounts of electrical power in the process. The energy-heavy process leads some experts to suggest that bitcoin harms the environment.
The process, known as "mining," requires computers around the world to complete rapid calculations to try to solve the same puzzle. It always takes 10 minutes, and the winner is rewarded with some digital bitcoin. Then a new puzzle is generated, and the whole process repeats for another 10 minutes.
In August 2018, a Princeton University associate professor expert in cryptocurrency testified at a hearing of the U.S. Senate Committee on Energy and Natural Resources.
The testimony said that bitcoin mining accounts for nearly 5 gigawatts—or about 1% of the world's energy use. That is slightly more than what is used by the entire state of Ohio.
Electricity must be made from other sources. The process creates large amounts of greenhouse gases, such as carbon dioxide, methane, and ozone. These allow sunlight to enter the Earth's atmosphere, but then trap the heat. So, the more electricity produced, the hotter the planet gets.
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As more people learn about bitcoin and mining—and as the price of bitcoin increases—more are using their computers to mine bitcoins. As more people join the network and try to solve these math puzzles, you might expect each puzzle to be solved sooner, but bitcoin is not designed that way.
The software that mines bitcoin is designed so that it always will take 10 minutes for everyone on the network to solve the puzzle. It does that by scaling the difficulty of the puzzle, depending on how many people are trying to solve it.
The more people mining, the harder the puzzle gets. That is why it always will take 10 minutes.
In other words, although the time taken to produce a bitcoin doesn’t vary, the computing power used to produce it does. As more people join the bitcoin network and try to mine bitcoins, it becomes harder, and more computing power and electricity are used for each bitcoin produced. The best bitcoin mining software doesn't just let you participate. It minimizes downtime, so you can mine more efficiently. That means a near-constant cycle of electricity use.
Calculating the Cost
To understand how to calculate the electrical energy used to power the bitcoin network, you'll need to learn how bitcoin creation works. First, you calculate how many sums are conducted per second to solve the puzzles. Then find out how much electricity it takes to do each sum.
These sums are called "hashes." There are so many, you must think in terms of millions (known as megahashes) or billions (gigahashes) to make any sense of them. In early 2020, the computers on the bitcoin network were cranking out close to 120 exahashes per second.
One terahash is a trillion hashes per second, One petahash is a quadrillion hashes per second, and one exahash is one quintillion hashes per second. (That's a one followed by 18 zeros.)
There are various bitcoin-mining computers out there, but many companies have focused on Application-Specific Integrated Circuit (ASIC) mining computers. These use less energy to conduct their calculations. Mining companies running lots of ASIC miners as businesses claim to use only one watt of power for every gigahash per second of computing performed when mining for bitcoins.
If this data is correct, the bitcoin network in 2020 consumes 120 gigawatts (GW) per second. This converts to about 63 terawatt-hours (TWh) per year. Here's how energy use relates to hashtag volume.
One Gigahash Per Second = One Watt
One Terahash Per Second = One Kilowatt
One Petahash Per Second = One Megawatt
One Exahash Per Second = One Gigawatt
This amount of power equates to 156 million horses (1.3 million horses per GW) or 49,440 wind turbines (412 turbines per GW) generating power at peak production per second.
No matter how many miners, it still takes 10 minutes to mine one bitcoin. At 600 seconds (10 minutes), all else being equal, it will take 72,000 GW (or 72 Terawatts) of power to mine a bitcoin using the average power usage provided by ASIC miners.
One watt per gigahash per second is fairly efficient, so this is likely a conservative estimate. Media outlets and bloggers have produced various estimates of the electrical energy used in bitcoin mining, so the accuracy of reported power use is sketchy at best. Many residential miners use more power.
Bitcoin Mining Costs Vary by Region
To calculate the cost of how much power it would take you to create a bitcoin, you need to know a few things first. First, what is the cost of electricity where you live? Second, how much power would you consume? More efficient computer equipment uses less power, which means lower power bills. The lower the price of electricity, the less cost there is to miners. This increases the value of the bitcoin to miners where the costs are lower to produce.
Bitcoin's exchange rate has moved wildly up and down during its history. If the price stays above the cost to produce a coin, doing the work in an area where energy costs are very low is important to make the practice worthwhile.
Is It Worth the Environmental Cost?
The price that bitcoin extracts in terms of energy use and environmental impact depends on how useful it will be to society. Judging an ever-moving target is hard. The interest in Bitcoin continues to rise, which in turn leads to more power used to serve more people in the market. Whether Bitcoin mining will ultimately be worth the cost to the environment is an open question.