Everywhere you turn, it seems that someone is talking about the possibility of striking it rich with cryptocurrency. From the news anchor to your co-worker, the types of people tapping into this new technology span myriad age groups, demographics, careers and more. The allure of this type of digital currency, of which bitcoin mining is the most popular subset, is that it’s an unregulated form of currency that, at the onset, could mean unlimited potential for cashing in.
The crux of the concept is that to access or trade the funds, web users have to solve a complex computing algorithm. As such, persons with advanced computer knowledge and coding capabilities stand to gain the most, as they’re best equipped to crack these veritable “codes” and remove the barriers that restrict the currency from the rest of the public.
Sounds simple enough, right? Partner up with someone who graduated with a degree in computer engineering and start building your bottom line. The only problem? As cryptocurrency makes the transition from an underground, techie-focused system into the mainstream, the algorithms are becoming harder and more complex, which only serves to fuel the fervor.
As a result, we’re left with another, more detrimental problem. These advanced computing functions require a tremendous amount of energy to complete due to their significantly high levels of encryption. They also utilize high-powered computer networks, meaning you can’t just take your laptop into your local coffee shop and expect to mine for bitcoin all day. Each transaction is stored on a public “blockchain” which immediately becomes a part of an ongoing online record that stores the data surrounding every bitcoin ever mined. As you can imagine, it’s a massive record that only gets bigger the wider out you take it. Aside from the primary blockchain, there are also sidechains, which developers can attach to expand the network even farther.
Let’s take a look at how much power is required to facilitate those transactions. Research reveals that, on average, a new block is found and added to the blockchain every 10 minutes or so. Then, the algorithm is reconfigured and the entire cycle begins up again. Moreover, the computing systems used to create and maintain the blockchain require as much energy as 30 nuclear reactors acting at their highest capacity, every single day. Just how much power is this? Let’s run the math:
The individual sums created to solve bitcoin’s complex puzzles are known as “hashes.” There are so many of them conducted every second that it’s impossible to break them down into a singular level, so industry experts refer to them in millions of hashes, or megahashes. Billions of hashes are referred to as gigahashes. On average, bitcoin miners are performing 342,934,450 gigahashes every single second.
Using a mining computer machine known as an ASIC miner as a point of reference, let’s calculate how much power those gigahashes are utilizing every second. These mining systems use a slightly lower amount of energy to perform transactions than other machines, so even these estimates are conservative at best. Miners using an ASIC machine perform use about one watt of power for every gigahash/second that they perform. That means the network as a whole runs at 342934450 watts, or about 343 megawatts. If data from the U.S. Energy Information Association (EIA) holds true and the average American household uses 1.2 kilowatts of power per year, then 343 megawatts could power 285,833 homes in the United States alone.
China has already taken measures to reduce this consumption, cracking down on web users who are taking advantage of the country’s notoriously low energy costs to facilitate robust, ongoing cryptocurrency exchanges. As a result, miners are increasingly looking toward green, renewable energy alternatives to make the process easier on the environment. To facilitate and encourage this change, countries from Iceland to Canada are developing mines powered by these eco-friendly resources, such as solar power and wind power.
Moving forward, while the rise of cryptocurrency might be inevitable (security concerns and development bugs aside), it’s introducing the need for an urgent dialogue around how utility providers can cater to this past-time by partnering with leaders in the renewables sector to drive energy costs lower. As these greener alternatives become more fully integrated into traditional, electric power offerings, it could change the mining process for the good -- and greatly reduce the overall carbon footprint along the way.