Featured: Is Crypto Mining Worth It?

According to Digiconomist, Bitcoin’s current estimated annual electricity consumption is 48.01 terawatt hours (TWh), which is more than the country of Singapore at 47.18 TWh. To put this more into perspective, in 2016 the tech giant Google used 6.5 TWh. The amount of energy expended for Bitcoin and cryptocurrency mining has been rising each year leading many to be concerned about the environmental cost of creating digital coins.

In November last year, The Guardian newspaper also reported that the amount of energy required to mine one dollar’s worth of Bitcoin is more than double that amount required to mine the same value of copper, gold or platinum. This high level of energy consumption isn’t specific to Bitcoin, as Monero and Ethereum are better but not by much, and still worse than platinum, gold, and copper when it comes to mining. In the journal Nature Sustainability, the researchers report that the cost per dollar of Monero is 14MJ and the cost per dollar of Ethereum is 7MJ; The cost per dollar of mining gold is 5MJ, Copper 4 MJ and Platinum 6 MJ.

You may be wondering why mining for crypto coins uses such a great amount of energy for something that only exists in the electronic space.

The concept of crypto mining having such a high environmental cost is something that makes people both confused and uncomfortable. The traditional mining industry has long suffered from a reputation of being somewhat dirty and polluting, but computers? Surely not. Cryptocurrency mining involves solving a mathematical puzzle, and one of these puzzles is solved every ten minutes. These mathematical algorithms are so difficult that the only way or at least the fastest and thus most efficient way of solving them is to guess over and over again. The more powerful a computer is, the more times is can guess within the same time period as a slower computer. The more guesses, the more chance of solving the puzzle, and the more energy consumed.

There seems to be a misconception in public opinion here. People have mixed opinions on cryptocurrency, some are avid supporters and others are cautious and believe it may be merely passing technology. Yet I’d bet if you asked people about their opinions on cryptocurrency, very few would mention the environmental cost. The effects aren’t so in your face as they are with other types of mining. When people see young children helping mining efforts in Africa or birds covered in oil from oil drilling gone wrong, that sparks public outrage. The same can’t be said for slowly poisoning the planet.

The Bitcoin network is designed in such a way that it will automatically adjust the difficulty of mining to ensure that one block is produced every ten minutes. The network could be upgraded in a way that would able it to handle more transactions at the same energy consumption . At the time of publishing, there are 3,437,125.0 Bitcoins left to be mined, there are 1,800 new Bitcoins per day and there are 17,562,875 Bitcoins in existence. There are currently 12.5 Bitcoins per block, which is significantly lower than it was in the past once being 50 Bitcoins per block and then 25, finally falling to 12.5. Miners are competing to be the first to solve the block, and to be the first you need a fast and high performing computer, that will burn a lot of electricity .

Another option for lowering Bitcoin’s carbon footprint is to get governments onboard. This isn’t a straightforward process since if one government decided to force a change, companies would just jump to another country where mining is more profitable. We have already seen this happen with Norway. In November 2018 the Norwegian government decided to scrap tax subsidy offered to crypto miners, leading companies to look to Sweden for their operations instead. In order for governments to force change, it would have to be globally agreed on between governments so it would be effective.

Cryptocurrency is often considered to be the future, a digital currency that will fundamentally change the way we live and overhaul the current system. It is true that cryptocurrency does offer a lot of benefits and solve a lot of the issues with the current system, but the environmental cost is a major hurdle to overcome. If Bitcoin does become the global digital currency we have all been waiting for then its price would increase. If the price of Bitcoin increases then so as the amount of electricity that the miners will burn.

It isn’t just environmentalists who are concerned about Bitcoin’s carbon footprint; Vitalik Buterin, the creator of Ethereum also expressed his concerns:

“I would personally feel very unhappy if my main contribution to the world was adding Cyprus’s worth of electricity consumption to global warming.”

There is no obvious solution to the problem here. We could make more power efficient computers, but would this encourage miners to just use more of them and the cost would be roughly the same anyway. There are cleaner ways of producing this electricity of course. If you consider Iceland, it is a volcanically active country with plenty of geothermal energy ready to be converted into electricity. This has a very low environmental cost compared with other methods of electricity generation. Iceland, as its name would suggest, is also cold which helps keep costs low when it comes to preventing overheating and removing heat from the mining centers.

Miner Marc Bevand sets out some counter arguments to the issue on his blog post titled ‘Bitcoin Mining is Not Wasteful. ’

“Miners currently use approximately only 0.0012% of the energy consumed by the world. Most are forced to use hydroelectric power (zero carbon footprint!)… Bitcoin’s 0.0012% should be contrasted to many instances of energy waste that occur on much larger scales. A 3-ton car wastes 97.5% of its energy transporting a 75-kg person (1-75/3000=0.975). Power plants waste enormous amounts of energy. The US waste 61% of its energy (and similarly for the rest of the world). These are real and significant wastes. Bitcoin is not.

“Bitcoin is already a net benefit to the economy. Venture capitalists invested more than $1 billion into at least 729 Bitcoin companies which created thousands of jobs….When looking at the big picture, Bitcoin is a system that consumes 150 MW costing $131 million per year, and effectively created 729+ tech companies, thousands of jobs, and increased economic trade. Is this worth it? Yes, it is!”

He also added that “[t]he energy cost per transaction is currently declining thanks to the transaction rate increasing faster than the network’s energy consumption.”

The question we should also be asking is “Is it worth it?” and for many people, such as Marc Bevand, it is. Humans have a way of innovating our way through the tough times solving problems we once thought were unsolvable. Cryptocurrency offers an alternative to a system many people feel powerless in, the banks, governments, and institutions that control your money and data.

Bitcoin has also provided stability for countries whose local economy is in ruin like Argentina, Venezuela, and Zimbabwe. In these countries, citizens can protect their money by holding it in Bitcoin rather than their local currency which is often rapidly deteriorating.