Serious concerns are beginning to surface on the cryptoworld energy consumption and one estimate puts it at the equivalent of energy needed by 26 households in a day to mine a single bitcoin! Does that constitute a doomsday prediction when all the energy produced by the world will be guzzled by a single industry – cryptocoin mining? Perhaps not and here is why:-
In recent times we have seen many reports, stemming mainly from an article in digiconomist and widely covered by many news channels. The article points out that a singular bitcoin transaction would consume electrical energy equivalent to the needs of a U.S. household for about 1.6 days. This is about 5,000 times more compared to a simple credit card transaction. The question posed therefore is whether we should prefer paying by cash or credit card nor continue using bitcoin and other altcoins and face a potential blackout across the planet.
Bitcoin was born a decade ago and cryptoworld energy consumption has not seriously impacted us
Bitcoin has been in existence for nearly a decade now, and to-date, we have not seen any report of any part of the globe facing or having faced a blackout on account of Bitcoin or other altcoin. The digiconomist article states that bitcoin mining consumes 31 terrawatt of energy every year and that the whole of Ireland consumes only 23 terrawatt in an year while it is about 309 terrawatts for UK for a whole year. Agreeably, these extrapolations do serve to inject an element of caution and fear into all stakeholders which includes every one of us because we certainly do not wish to live in darkness merely on account of bitcoin or similar altcoins. If you consider this article carefully you can easily see a disconnect between the title and the content. The article states further that in China, 25,000 computers engaged in bitcoin mining run up a bill of $40,000 per day. In terms of cost it translates to just about $1.6 per computer per day and 20 kWh @8 cents per kWh which is the going rate in China. Interestingly, nearly every report on the subject draws heavily from the digiconomist analysis, extrapolating in their own way.
Cryptoworld energy consumption may not be a big worry for the Chinese
China also occupies a predominant position in bitcoin mining with about 80% of all activity centered in or around China. As for power generation or power consumption, China is unlikely to be worried given its vast reserves of coal and ever expanding renewable energy sector. But, China could be worried on one count and that is the potential increase in carbon footprint if more coal is burned to produce electricity to meet the demands of the bitcoin/altcoin industry. Therefore, there should be very little impact on cryptoworld energy consumption from bitcoin activities on Chinese soil.
On the other side, this article says that many experts are not in agreement with the numbers played out by digconomics as well as the future projection of electricity consumption. Koomey, a lecturer at the Stanford University holds the view that the Digiconomist model has many assumptions baked into its model. He claims further that the model suffers from fundamental flaws because its estimates of power consumption by bitcoin is through estimate of the revenue and expense of the miners. However, there is limited or rather no means of verifying the numbers. According to Digiconomics, the power consumed in bitcoin mining is the equivalent of all the power consumed by Amazon, Google, Microsoft, Apple and Facebook in recent times. Another hypothesis is that if all bitcoins were mined using the fastest machines available, the annual power consumption can drop to 13 to 14 terrawatts, down about 50% from the original estimates published by Digiconomist.
More accurate figures needed to determine cryptoworld energy consumption
What all these discussions lead us to, is the fact that more accurate figures are necessary, to gauge the present and future impact of bitcoins and possibly the other altcoins on cryptoworld energy consumption and then examine a potential demand/supply gap. Let us also not forget that Bitcoin mining in China consumes just about 0.2% of all the electricity the nation produces across the year.
China’s cryptoworld energy consumption can head south
With China clamping down on cryptocurrencies and crypto exchanges, many of its bitcoin miners are moving to destinations like Canada and India. The average price of electricity in Canada is about 13 cents. India, which is more geographically proximate to China, is on the verge of becoming a power surplus nation in 2019 and more capacity in the anvil, particularly from the renewable energy sector. The cost of power in India is about 8 cents per unit though solar power from massive plants across the nation is expected to be selling power at about 3 cents per unit. Given sustainable demand, India will also be able to add further to its renewable energy capacities. Thus, there is also new sources of energy to meet the demand spikes of cryptoworld energy consumption.
The concern should ideally shift to more efficient distribution of power
While many people are apparently eager to project Bitcoin and its siblings as a power guzzler and predict a potential black-out for the entire humanity, there are others who are equally enthusiastic about bringing in blockchain technology to the entire gamut of electricity generation and distribution. In many nations where solar energy is gaining roots, surplus power generated by home owners needs to be transferred to a utility grid so that it reaches others who need the power. The utility company tends to pay a significantly lower price for power transferred to the grid and obviously charges a higher price to the consumer who needs the power. When the blockchain technology is effectively introduced into the power distribution system, the consumer can buy power directly from the producer. When that happens, obviously there will be many who would support blockchain technology and potentially be much less concerned about cryptoworld energy consumption.