Bitcoins have been rising progressively for a long time now and the recent weeks saw a sudden surge in price exceeding $7,000. As more and more users gather online to mine for currency, the electricity bills rise with them. New sets of transaction blocks are added every ten minutes by miners. The process of building a valid block is based on completing a puzzle by trial and error. This means that many miners are trying to find the right value every second.
The effort per second is known as hash rate and is expressed in the form of Gigahash per second. Higher the price of bitcoins, higher the hash rate. With the current prices holding, miners would use 24 terawatt-hours of electricity every year. This is the same amount of power used by a nation of 100 million people. A rise in the prices could see an even greater rise in energy consumption.
“To put the energy consumed by the Bitcoin network into perspective, we can compare it to another payment system like VISA for example. Even though the available information on VISA’s energy consumption is limited, we can establish that the data centers that process VISA’s transactions consume energy equal to that of 50,000 U.S. households. We also know VISA processed 82.3 billion transactions in 2016. With the help of these numbers, it is possible to compare both networks and show that Bitcoin is extremely more energy intensive per transaction than VISA,” describes cryptocurrency analyst Alex de Vries aka Digiconomist, as reported by VICE’s Motherboard.
Around 215 kilowatt-hours of energy are used by a miner for every transaction and there are 300,000 transactions for bitcoins per day. The energy used by a typical American household consumes around 901 KWh per month. This puts the price of a single transaction same as that of the energy consumed in a fairly large home in an entire week.
Blockchain is designed inefficiently and needs to switch to other algorithms if it wishes to reverse some of the damage caused. “Blockchain is inefficient tech by design, as we create trust by building a system based on distrust. If you only trust yourself and a set of rules (the software), then you have to validate everything that happens against these rules yourself. That is the life of a blockchain node,” Digiconomist told Motherboard.
He further said “Bitcoin could potentially switch to such a consensus algorithm, which would significantly improve sustainability. The only downside is that there are many different versions of proof-of-stake, and none of these have fully proven themselves yet. Nevertheless, the work on these algorithms offers good hope for the future.”