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When the mining industry's revenue falls by half, its energy consumption should fall by the same proportion, since, if it didn't fall, mining would become an unprofitable activity.Īnother important point: that fixed 12.5 bitcoin reward doesn't depend on the number of transactions the Bitcoin network processes. The reward will fall again to 6.25 bitcoins in 2020. It fell to 25 bitcoins in 2012 and 12.5 bitcoins in 2016. This figure is scheduled to fall by half every four years. When Bitcoin launched in 2009, each block came with a 50-bitcoin reward for the miner who created it. The Bitcoin network is designed to automatically adjust the difficulty of mining to ensure that one block is produced every 10 minutes, no matter how much (or how little) computing power there is on the network. There's a widespread misconception that Bitcoin mining is based on a mathematical process that gets steadily harder as more and more bitcoins are produced. Bitcoin’s energy use should decline in the long run Of course, in early 2015, Bitcoin was worth only $200-hardly anyone expected a 50-fold increase over the last two years. This means that, for Bitcoin's energy consumption to exceed that of the United States, Bitcoin's price would have to rise by roughly 100-fold to more than $1 million.Ĭould that happen before 2020? It doesn't seem likely. Right now, Digiconomist estimates that Bitcoin is consuming less than 1 percent as much energy as the US economy. If Bitcoin's price falls significantly, on the other hand, miners will find their operations unprofitable and will start to switch off their least efficient equipment, causing energy use to decline. If Bitcoin's price doubles to $25,000, we can expect the Bitcoin network's energy consumption to roughly double as well. Will the network's energy consumption continue to rise over the longer run? Under Bitcoin's current design, this depends entirely on what happens to the price of Bitcoin. This means that, if Bitcoin stays above $12,000, we can expect this figure to rise further in the coming weeks. It also assumes that the network takes time to adjust to big price increases like we've seen in recent days. So when the price of bitcoins rises, we can expect miners to spend more and more on electricity until electricity costs are roughly on par with revenues. Moreover, the industry is highly competitive, and electricity is one of its biggest costs.
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For starters, we know the industry's revenue: Bitcoin miners currently generate 75 bitcoins per hour, which, at the current price of around $12,500 per bitcoin, translates to $937,500 per hour, or more than $8 billion per year. However, we can make some educated guesses. The Bitcoin network consumes massive amounts of energyīitcoin mining-the process that generates new bitcoins while maintaining the network's shared transaction ledger-is a secretive global industry. No one knows exactly how much energy it consumes. That means that increasing use of the network won't necessarily impose a high environmental cost. And Bitcoin's energy consumption isn't tied to the number of transactions the network handles. Indeed, Bitcoin's energy consumption is designed to fall in the long run.
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Fortunately, while the Bitcoin network consumes a ridiculous amount of energy, particularly on a per-transaction basis, the situation isn't as dire as critics like Holthaus claim.īitcoin's energy consumption won't necessarily march steadily upward. Global energy production obviously can't double in two years, and it would be an environmental disaster if it did.
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"This is an unsustainable trajectory," he writes. Eric Holthaus, a writer for Grist, projects that, at current growth rates, the Bitcoin network will "use as much electricity as the entire world does today" by early 2020. Naturally, this is leading to concerns about sustainability. By the site's calculations, each Bitcoin transaction consumes 250kWh, enough to power homes for nine days. According to one widely cited website that tracks the subject, the Bitcoin network is consuming power at an annual rate of 32TWh-about as much as Denmark. The skyrocketing value of Bitcoin is leading to soaring energy consumption.