[Cryptography] One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week

[Henry Baker]

FYI --

https://motherboard.vice.com/en_us/article/ywbbpm/bitcoin-mining-electricity-consumption-ethereum-energy-climate-change

One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week

Bitcoin's surge in price has sent its electricity consumption soaring.

Christopher Malmo   Nov 1 2017, 12:20pm

Bitcoin's incredible price run to break over $7,000 this year has sent
its overall electricity consumption soaring, as people worldwide bring
more energy-hungry computers online to mine the digital currency.

An index from cryptocurrency analyst Alex de Vries, aka Digiconomist,
estimates that with prices the way they are now, it would be
profitable for Bitcoin miners to burn through over 24 terawatt-hours
of electricity annually as they compete to solve increasingly
difficult cryptographic puzzles to "mine" more Bitcoins.  That's about
as much as Nigeria, a country of 186 million people, uses in a year.

This averages out to a shocking 215 kilowatt-hours (KWh) of juice used
by miners for each Bitcoin transaction (there are currently about
300,000 transactions per day).  Since the average American household
consumes 901 KWh per month, each Bitcoin transfer represents enough
energy to run a comfortable house, and everything in it, for nearly a
week.  On a larger scale, De Vries' index shows that bitcoin miners
worldwide could be using enough electricity to at any given time to
power about 2.26 million American homes.

Expressing Bitcoin's energy use on a per-transaction basis is a useful
abstraction.  Bitcoin uses x energy in total, and this energy
verifies/secures roughly 300k transactions per day.  So this measure
shows the value we get for all that electricity, since the verified
transaction (and our confidence in it) is ultimately the end product.

Since 2015, Bitcoin's electricity consumption has been very high
compared to conventional digital payment methods.  This is because the
dollar price of Bitcoin is directly proportional to the amount of
electricity that can profitably be used to mine it.  As the price
rises, miners add more computing power to chase new Bitcoins and
transaction fees.

It's impossible to know exactly how much electricity the Bitcoin
network uses.  But we can run a quick calculation of the minimum
energy Bitcoin could be using, assuming that all miners are running
the most efficient hardware with no efficiency losses due to waste
heat.  To do this, we'll use a simple methodology laid out in previous
coverage on Motherboard.  This would give us a constant total mining
draw of just over one gigawatt.

That means that, at a minimum, worldwide Bitcoin mining could power
the daily needs of 821,940 average American homes.

Put another way, global Bitcoin mining represents a minimum of 77KWh
of energy consumed per Bitcoin transaction.  Even as an unrealistic
lower boundary, this figure is high: As senior economist Teunis
Brosens from Dutch bank ING wrote, it's enough to power his own home
in the Netherlands for nearly two weeks.

Digiconomist's less optimistic estimate for per-transaction energy
costs now sits at around 215 KWh of electricity.  That's more than
enough to fill two Tesla batteries, run an efficient fridge/freezer
for a full year, or boil 1872 litres of water in a kettle.

It's important to remember that de Vries' model isn't exact.  It makes
assumptions about the economic incentives available to miners at a
given price level, and presents a forward-looking prediction for where
mining electricity consumption could go.  Despite this, it's quite
clear that even at the minimum level of 77 KWh per transaction, we
have a problem.  At 215 KWh, we have an even bigger problem.

That problem is carbon emissions.  De Vries has come up with some
estimates by diving into data made available on a coal-powered Bitcoin
mine in Mongolia.  He concluded that this single mine is responsible
for 8,000 to 13,000 kg CO2 emissions per Bitcoin it mines, and 24,000
- 40,000 kg of CO2 per hour.

As Twitter user Matthias Bartosik noted in some similar estimates, the
average European car emits 0.1181 kg of CO2 per kilometer driven.  So
for every hour the Mongolian Bitcoin mine operates, it's responsible
for (at least) the CO2 equivalent of over 203,000 car kilometers
travelled.

As goes the Bitcoin price, so goes its electricity consumption, and
therefore its overall carbon emissions.  I asked de Vries whether it
was possible for Bitcoin to scale its way out of this problem.

"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," he said via direct message.

This gets to the heart of Bitcoin's core innovation, and also its core
compromise.  In order to achieve a functional, trustworthy
decentralized payment system, Bitcoin imposes some very costly
inefficiencies on participants, for example voracious electricity
consumption and low transaction capacity.  Proposed improvements, like
SegWit2x, do promise to increase the number of transactions Bitcoin
can handle by at least double, and decrease network congestion.  But
since Bitcoin is thousands of times less efficient per transaction
than a credit card network, it will need to get thousands of times
better.

In the context of climate change, raging wildfires, and
record-breaking hurricanes, it's worth asking ourselves hard questions
about Bitcoin's environmental footprint, and what we want to use it
for.  Do most transactions actually need to bypass trusted third
parties like banks and credit card companies, which can operate much
more efficiently than Bitcoin's decentralized network? Imperfect as
these financial institutions are, for most of us, the answer is very
likely no.

Update: The piece has been updated to include the fact that Bitcoin's
price reached over $7,000 on November 2.

Correction: Because of a typo, this piece originally stated that the
coal-powered mine is responsible for 8,000 to 13,0000 kg CO2 emissions
per Bitcoin it mines.  The number is in fact 13,000 kg.  The piece has
been updated.

---
An obvious example of Herb Stein's Law:

"If something cannot go on forever, it will stop."