Although Bitcoin has suffered a dramatic fall in value over the past several days, 2017 has seen Bitcoin’s value reach new heights – and the cryptocurrency has an enormous energy footprint. Even simple transactions with Bitcoin consume large amounts of energy. Roughly 300,000 Bitcoin transactions occur each day – and each one uses 215 kilowatt-hours (KWh) of energy – enough to power an American household for a week.
Bitcoins are created by “mining,” a process which involves running a powerful computing system so that it may solve complex cryptographic puzzles and produce a Bitcoin. The price of Bitcoin is proportional to the amount of electricity that can profitably be used to extract Bitcoin from a computing rig. When the price rises, miners must compensate by adding more powerful computing components, which then adds to the energy bill. Motherboard estimates that, at a minimum, the energy used by global Bitcoin extraction network at present could power 821,940 average American homes daily.
What does this energy consumption mean for climate change and the environment? Using data available from a coal-powered Bitcoin mine in Mongolia, the Digiconomist determined that this single mine produces the emissions equivalent of 203,000 car kilometers traveled per hour of mining. When asked by Motherboard whether this energy problem might be fixed as the system matures, the Digiconomist responded that “Blockchain is inefficient tech by design, as we create trust by building a system based on distrust.” Bitcoin transactions are thousands of times less efficient than credit card transactions, by design. In the brave new world of Bitcoin, it seems that unless drastic changes are made, the cryptocurrency will continue to consume enormous amounts of energy.