Bitcoin Energy Use Growing Much Faster than Previously Thought

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By Eric Holthaus, a meteorologist and staff writer for Grist, covering climate science, policy, and solutions. He has previously written for the Wall Street Journal, Slate, and a variety of other publications. Originally published at Grist

Bitcoin’s energy footprint has more than doubled since Grist first wrote about itsix months ago.

It’s expected to double again by the end of the year, according to a new peer-reviewed studyout Wednesday. And if that happens, bitcoin would be gobbling up 0.5 percent of the world’s electricity, about as much as the Netherlands.

That’s a troubling trajectory, especially for a world that should be working overtime to root out energy waste and fight climate change. By late next year, bitcoin could be consuming more electricity than all the world’s solar panels currently produce — about 1.8 percentof global electricity, according to a simple extrapolation of the study’s predictions. That would effectively erase decades of progress on renewable energy.

Although the author of the study, Alex de Vries, an economist and data consultant based in the Netherlands, has shared these calculations publicly before, this is the first time that an analysis of bitcoin’s energy appetite has appeared in a peer-reviewed journal.

Bitcoin continues to soar in popularity — mostly as a speculative investment. And like any supercharged speculative investment, it swings wildly. Within the past 18 months, the price of bitcoinhas soared ten-fold, crashed by 75 percent, only to double again, all while hedge funds and wealthy libertarians debate the future of the virtual currency.

Beyond its tentative success as a get-rich-quick scheme, bitcoin has an increasingly real-world cost. The process of “mining” for coins requires a globally distributed computer network racing to solve math problems — and also helps keep any individual transaction confidential and tamper-proof. That, in turn, requires an ever-escalating arms race of computing power — and electricity use — which, at the moment, has no end in sight. A single bitcoin transaction is so energy intensive that it could power the average U.S. household for a month.

A fluctuating bitcoin price, along with increases in computer efficiency, has slowed the cryptocurrency’s energy footprint growth rate to “just” 20 percent per month so far in this year. If that keeps up, bitcoin would consume all the world’s electricity by January 2021.

That simply won’t happen — government regulators would surely come to their senses by then — but it is a sign of bitcoin’s disastrous growth rate. In recent months, bitcoin supporters have criticized de Vriesfor being too pessimistic about its energy usage. But, as de Vries writes in the study, his estimates could also be missing out on secretive or illegal participation in the network, meaning there’s maybe even more happening than meets the eye. In at least one instance that de Vries found, a researcher was caught diverting a National Science Foundation supercomputer to mining bitcoin.

It’s a telling social phenomenon of late capitalism that we are willing to construct elaborate computer networks to conduct secure transactions with each other — and in the process torpedoing our hopes at a clean energy future.

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  1. clarky90

    Re. “If that keeps up, bitcoin would consume all the world’s electricity by January 2021”

    That is 32 months from now!

    I had the thought that if computers were to achieve “self-aware consciousness” they would likely mimic the obsessions of their their nerdy creators. (I like shoes like my Dad did- and wild yards, like my Mom did)

    So, “An Intelligent Computer network” might direct all of it’s attention towards bitcoin. The dreaded singularity. .

    Via the Internet of Everything, AI would direct every resource towards the creation and maintenance of more and more bitcoins. And of course pushing the bitcoin price to infinity!

    OUR digital World would stop. All electricity would be diverted to mining

      1. JTMcPhee

        Do electric dreamers get off on t!ts and A$$es and watching humans pork each other? Maybe they will get into snuff flicks… What is the “code” equivalent of getting off?

        Wonder what the mastodons thought of those little two-legged critters with their sticks with sharp rocks ligatured to the ends, and if they were ever going to be smart enough to avoid being driven (like the bison were) over cliffs, by noise and fire and such other disruptive innovations?

  2. drumlin woodchuckles

    The US could force a solution to this problem by taking two steps.

    1: A long drawn-out painful march to energy autarky involving adoption of the Hansen fossil-carbon fee-at-the-minemouth-and/or-wellhead . . . rising sharp and hard to torturously punitive levels . . . with the fees collected rebated-dividended to all legal residents of the US in exactly equal amounts of money per capita.
    That would benefit people who spent their received dividend-feebate on low-fossil-carbon-intensive goods and services more than it would benefit people who spent their received dividend-feebate on high-fossil-carbon-intensive goods and services . . . while swiftly price-torturing fossil-carbon out of the energy marketplace altogether.

    2: once fossil-carbon had been driven down to zero percentage of the Autarkamerican Energy Portfolio, ban all economic contact between America and any country which adopted any different approach to torturously punitive fossil carbon feetaxes and feebate-dividends . . . no matter by how small a jot or a tittle such a foreign country approach mightdiffer. That would force foreign countries to price the use of fossil energy up higher than a bitcoin could ever be worth, hopefully. If not right away, then just keep raising the Hansen tax higher and Higher and HIGHer and HIGHER and HIGHHHER!!! until finally it no longer “paid” to burn coal, gas and oil even for bitcoin.

    1. Harvey RV

      Apparently, the people who run the government have $$$$billions or $$$trillions in bitcoin salted away on private secure servers. By people who run the government, I mean the people who fund the major parties at election time. So the ultra-rich. Therefore, imho, bitcoin will not be banned.

      1. drumlin woodchuckles

        Maybe systems and civilizations go bankrupt just the way Ernest Hemingway said people go bankrupt . . . . little by little and then all at once.

        Perhaps some of these Overclass BicCoiners will find their billions or trillions in bitcoin stranded if the grids and systems which breath life into the bitcoin all go down and stay dark. All the beautiful bitcoin! Buried forever in the dead computers of a dead civilization. Oh the humanity!

        Cry the beloved money.

  3. Disturbed Voter

    Misallocation of resources? Fiat money, government or private, causes that. Bitcoin enthusiasts are simply trying to run their own fiat money system. It is being temporarily allowed, to catch self-indicting tax dodging and money laundering. Doing a crooked IPO isn’t enough for these jokers … that is how you get unearned income the normal way.

    1. False Solace

      In a fiat money system the currency issuer creates new money whenever necessary. Bitcoin is an attempt at a currency that cannot simply be created by an authority. Bitcoin refers to “mining” new Bitcoins for a reason — the supposed similarity to archaic gold-backed currencies– but it’s worse that. Bitcoin is tied to a cryptographic algorithm designed with built-in deflation and an explicit upper bound. It becomes harder and harder to generate new Bitcoins over time because of the processing time. Meaning, Bitcoin intentionally sucks more and more energy. From what I’ve observed, Bitcoin fans really like this. It means their Bitcoin wallet automatically increases in value without any effort on their part (assuming the user base continues to grow). I mean, it’s not the people at the top of a Ponzi scheme who complain. For them, the increased energy usage is a feature not a bug.

      1. drumlin woodchuckles

        They all hope to be among the lucky sell-at-the-top bitcoiners who receive millions of real moneys for their bitcoins as all the bitcoins drain down into the social and intellectual sump of Greatest Fools.

        Pray these Bitcoin Millionaires lose their estates to the flood of a rising ocean. Pray they all suffer from torturous tropical diseases . . . like the very worst and most painful sorts of dengue fever. Pray they suffer through Category 6 hurricanes and F6 tornados. Pray their bodies become quadriplegic pain machines for the longest conceivable life spans upon being smashed by grapefruit-sized hailstones.

        1. Aumua

          Why again? I just don’t understand why it bothers you so much, that you would wish suffering and death on people, many of whom just happened to get lucky. Does that burn you up? Why.

          1. drumlin woodchuckles

            There is a saying: ” I’d rather be lucky than good.”

            The bitcoiners are not lucky. They’re good.

            What are they good at? Burning exponentially rising amounts of energy to make the exponentially rising amounts of electricity they consume on their computer farm plantations ” mining bitcoin”. They are fast-forwarding the terminal decline of human civilization into the Heat Death entropy pit. The carbon they help skydump faster, faster and ever faster is burning us all up . . . which you will understand when a Death Valley Heat Wave comes to your town.

            I want them to share in the suffering they are imposing on all the rest of us.

            If they had merely won a lottery through buying a lottery ticket with money and get back a whole bunch of more money, I would not be burned up. I don’t get burned up when I hear about the lucky Powerball winner who just won a hundred million dollars.
            I don’t play, so how could I win? So the lottery ticket winner’s luck does not burn me up.

            You might consider re-reading this article again, and then going back and re-reading past articles about the ever-growing bottomless pit of energy suckage opened up by the spreading plague of bitcoin miners.

      2. George Phillies

        It appears to me that in best libertarian fashion most cryptocoins are the first spontaneously self-organized, crowd-funded, government-mostly-free Ponzi scheme.

        I say most because I am not going to waste my time doing a complete search just in case there is a counterexample.

      3. milesc

        > Bitcoin is tied to a cryptographic algorithm designed with built-in deflation and an explicit upper bound. It becomes harder and harder to generate new Bitcoins over time because of the processing time. Meaning, Bitcoin intentionally sucks more and more energy.

        That is not quite right, simply because miners will not pour more and more energy into something that is not profitable.

        Bitcoins becoming “harder and harder to generate”, all other things being equal, would make bitcoin mining less profitable — eventually to the point of zero profit or even loss making. Some miners will be squeezed out and there well be a reduction in the hash rate and overall consumption of electricity.

        That hasn’t happened yet because reductions in the block reward (miners used to get 50 bitcoins per block, now they get 12.5 and in 2020 that number will fall to 6.25) have been more than offset by increases in the price of bitcoin. Mining is still very profitable but the price can’t increase forever. I suspect we will see the hash rate and energy consumption plateau — there’s certainly nothing in the protocol that _requires_ it to increase.

  4. The Rev Kev

    I originally thought that bitcoin was an interesting innovation but ever since it came out how much energy that it is sopping up I had to change my mind. If this energy usage keeps up, they will have to commission swarms of nuclear power stations to try to keep up with the demand. The whole concept has become toxic as no matter how much the world saves on energy and gets more efficient, bitcoin will be there grabbing all that new excess for its own demands. The sooner it is outlawed the better.

    1. Wukchumni

      The powers that be in the USA rather recently disallowed escorts from advertising their wares online, and there’s a lot more involved in the world’s oldest profession than cryptomoney, methinks.

      Wouldn’t be hard to pull off, no?

  5. Steve H.

    A question: I saw a single-source note that China is supplying the free lunch in the form of servers at Chinese expense.

    At this rate Bitcoin is doomed within a decade, but what happens when China closes the buffet? And

    > government regulators would surely come to their senses by then

    except that the inside information value of not regulating increases with fewer options. Whoever wants to win the biggest short holds out the longest. (Or maybe second longest?)

  6. Steve H.

    From the primary source:

    “This means that the ratio of hash calculations to processed transactions is 8.7 quintillion to 1 at best. The primary fuel for each of these calculations is electricity.”

    That is aMAZingly inefficient! This beats biochemical cascades for number of subevents needed to trigger an event, which has been my benchmark for noncosmological TBTUnderstand concrete material processes.

    1. Synoia

      Which underscores the efficiency of biological processes, driven by competition for energy (food), processes (evolution) which make the most of what’s available.

      Especially when one considered the theoretical at best 50% efficiency for energy conversion, aka Second Law of Thermodynamics.

      Perhaps they’d be better off mining entropy (/s).

      1. JTMcPhee

        ?Is the model of biological processes “competition for energy?” Lots of biological processes are (remove all value-laden word freight here) cooperative and symbiotic. The notion of categorizing bioprocesses as “efficient” might seem to be kind of anthropocentric?

    2. Other JL

      This is roughly by design. The algorithm is supposed to automatically scale to maintain a roughly constant mining rate, 1 block every 20 minutes IIRC. With so many active miners, and so much hashing power available, there has to be a lot of wasted work.

      So the higher the price, the less efficient mining is. If Bitcoin approaches 20K for some extended period of time, it’ll become much less efficient.

      1. drumlin woodchuckles

        If there ever became a spot market in electricity ( if such a thing is possible), electricity traders could make a lot of munny by withholding electricity from going to bitmine computer plantations until the bitmine owners and bitcoin owners were ready to pay a very high price ( in real munny) to keep the power flowing and the lights on inside their bitcoins.

      2. Steve H.

        This is so messed up. It’s like the incentive structure is designed to create and dump waste heat. Is this evil yet?

        1. milesc

          10 minutes per block is somewhat arbitrary (it could have been 6 or 8 or 9), but it does reflect an interesting trade-off. On the one hand, you want to process transactions reasonably quickly. On the other, if you make mining too easy, you increase the chances of ‘orphan’ blocks (perfectly valid blocks that are necessarily ignored the network because only one valid block can be added to the blockchain at a time).

          From a security perspective, the 10 minute block time helps to maximise the number of hashes that make up the cumulative ‘proof-of-work’ (security) of the blockchain; they increase the amount of work a bad actor would have to do if he or she wanted to unwind or censor a transaction.

          You could argue that Bitcoin is currently massively over-secured right now, relative to its usage, and you might be right — but exactly how much electricity is burned by miners generating proofs-of-work is just a function of relatively simple market forces. There’s really nothing sinister about it. There’s nothing in the protocol that says hash rate or electricity consumption must continue to increase. Quite the opposite, in fact: the block reward (number of newly minted bitcoins earned per block) _halves_ roughly every four years!

  7. Peter L.

    Hopefully, this trivial and petty comment will be a bit amusing. The phrase “solve math problems” always irks me when it comes to bitcoin, because I think this makes the mining operation sound more interesting and sophisticated than it is it. Please correct me if I’m wrong, but aren’t the “miners” doing nothing more than trivial application of some kind of a hash function over and over and over and over . . . ? Essentially this is just using a computer to count really fast.

    This utterly wasteful activity reminds me of something I heard Warren Mosler say about gold. Gold is mined out of the ground at great expense and harm to human life only to be stored back underground in central bank vaults where it take up more resources to guard and keep. Entirely wasteful, although gold has some use at least in electronics and industry, while bitcoin is just pure waste.

    These activities are simple waste and drain on our planet and on human life

    1. OpenThePodBayDoorsHAL

      Yes, it is an increasingly difficult math problem, different each time, not just more and more of the same calculation.

      One credible observer believes crypto-currencies are currently consuming > 50% of all global computing power, measured by MIPS (millions of instructions processed per second). Astounding if true, given how many calculations are required to run Google, Amazon, and the NSA.

      But “mining” is a jar full of stupid, all it does is keep out spam transactions (by making them too costly) and reach consensus on the state of the ledger. But there are ways that do that with minimal energy, just now going into production with a number of “Blockchain 3.0” platforms.

  8. Jason Boxman

    It seems like it’s only going to get worse. I get AngelList emails and blockchain startups continue to hire like crazy for all positions. Just got one today:

    “When there’s a gold rush, start selling pickaxes.

    Some of the most successful entrepreneurs of the California Gold Rush never touched an ounce of gold, selling pickaxes, jeans, and tents to gold miners looking to strike it rich. You can even still buy a pair of Gold Rush-era Levi’s to this day.

    Cryptocurrencies are the new gold. Coinbase, one of the largest cryptocurrency exchanges, supports more accounts than Charles Schwab.

    A new set of companies is working behind the scenes to provide infrastructure and services – pickaxes – to power the cryptocurrency and blockchain boom.”

    There’s hiring in 5 areas: Mining, exchanges, taxes, hedge funds, and investment banking (think ICOs).

    1. Mel

      ““When there’s a gold rush, start selling pickaxes.”

      Yeah. And when there’s a pickaxe rush, start selling pickaxes to people who plan on getting rich selling pickaxes. Just don’t be the last to buy.
      I saw a footnote one time, I thought it was in Veblen, but I can not find it anywhere. That $6 was spent in one of those gold fields for every $1 of gold that came out. Of course, the $1 was a stock and the $6 was a flow, and the $1 wound up circulating and enabling commerce for years afterward. But sure does show how the deals went down for the short-term players.

    2. JTMcPhee

      Another way the slicks got and get rich in all the “rushes,” gold and silver and oil and such, is selling the sexual favors of mostly women, providing house-always-wins gambling spots, and of course ladling out “sophisticated” (that used to mean “adulterated”) rotgut booze. And of course there were ‘banks” of various sorts who found many ways to grift off the rest of the grifters… lots of people wearing slick suits and stiff collars and ties, going about being “respectable.”

    3. OpenThePodBayDoorsHAL

      The funniest thing about Bitcoin is the discussion around “adoption”. No. Coinbase may have >20M customers, but those customers have not “adopted” Bitcoin. Coinbase customers do not have their own Bitcoin addresses (accounts), they have gifted their funds to a centralized, unregulated exchange and the exchange owes them the current value back to them. The exchange has around a dozen Bitcoin addresses.

  9. Wukchumni

    Aside from ‘mining’ cryptocurrency, what use does one of these mega thousand dollar machines have?

    1. diptherio

      Well, they’re full of GPUs, I’m told, so you could probably do some ultra hi-def gaming on them…

      1. OpenThePodBayDoorsHAL

        No, the chips are manufactured solely to perform crypto-currency transactions. Useless for anything else.

  10. BondsOfSteel

    The solution to the problem should be obvious. An off market (non-computational) exchange that uses a central authority. Of course, this would remove the anonymity of the transactions… but then most transactions don’t require anonymity.

    Currently, the Bitcoin Investment Trust provides this functionality… but the costs are way too high.

  11. warpig1

    Please, this electricity consumption problem will be solved by tech advancement (efficient server), software advancement (other forms of proof other than ‘proof of work’ will be enabled and a few other things not thought of at this time. Stop hyper ventilating people.

    A bigger concern to me is overpopulation of the world in general. I think that is a bigger issue and what keeps me up at night, not whether bitcoin will suck up all electricity in the world. Solutions will come forth for that.

    There is zero awareness of a need for de-population as of yet.

    1. Aumua

      I don’t know about your second point, but you’re right about the first. There are other far more energy efficient ways of implementing cryptocurrencies, and they will be switching to those ways as the need and/or pressure to do so arises. Of course I’m sure when that happens, our heros Warren Buffet, Paul Krugman, and Jaime Dimon will drudge up new reasons to call Bitcoin an evil, ponzi, bubble of rat poison, and the NC commentariat will dutifully fall in line in calling for the BANNING of Bitcoin.

  12. drumlin woodchuckles

    hmmm . . . . I posted a comment but it seems to have not appeared . . . not with an “awaiting moderation” . . . just not appeared.

    ( Must be a technological glitch, because this comment appears).

  13. drumlin woodchuckles

    If somebody wanted to destroy bitcoin from within, could they pose as a miner and keep putting kiddie-porn pictures into all the downstream iterations of the blockchains they add to?

    I don’t know how these things work, but environmental guerillas might start thinking about how to “stuxnetify” the bitmines.

  14. gus van der laan

    I think this is incredibly overblown. How much does the existing financial system cost to operate? How much do ATMs, Private financial networks, money security, transportation, staff, legal, etc, etc. Comparing per transaction cost does not even begin to account for the energy costs of the current financial system. Even with the escalating cost of mining we are getting a deal compared to the way things are now. Hopefully research will yield significantly better incentive structures than pure proof-of-work, but in the mean time it has proven to be remarkably effective.

    1. drumlin woodchuckles

      How much money-denominated exchange of goods, services, savings, investment and every other sort of money-denominated behavior all over the earth does the current financial system mediate the performance of and the interoperationalization of?

      Now, how much bitcoin-denominated exchange of goods, services, savings etc etc etc does the bitcoin system permit the carrying-out-of?

      Assigning a single piece of currency’s pro-rated share of all the energy it takes to run the whole financial system . . . how much carbon does it take to run a penny? Or a nickel? Or a dollar? Or keep them useful right up through the day they get used?

      Now, assigning a single piece of bitcoin’s pro-rated share of all the energy it takes to run the whole bitcoin system . . . how much carbon does it take to make a bitcoin? Or to keep it useful right up through the day it gets used?

      I live within the body political-economic which is permitted to keep its separate parts alive and communicating with eachother via the financial system. The existence of the financial system helps me keep myself alive. I can’t keep myself alive alone by myself in the woods.

      Now, what has bitcoin ever helped me do? In any way? Even once?

  15. alan zundel

    I’ve made some amout with BTCPeek but I found on google that bitcoin of america atm

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