Bitcoin’s energy consumption falls after price falls

After taking a dive in June, the price of Bitcoin has remained that way low that it forces the blockchain’s massive electricity use to fall in the same way. Over the past few weeks, Bitcoin’s energy consumption has fallen by more than a third, according to estimates of the annual power consumption of digital currency economist Alex de Vries on his website digiconomist.net.

Bitcoin’s energy hunger, which has frightened environmentalists and consumer advocates worried about pollution and tool prices, comes from the process of extracting new tokens. Bitcoin miners earn new tokens by validating transactions through an inherently energy-efficient process, using specialized machines to solve complex puzzles. All that computing with all these machines has led to an energy appetite that competes with entire nations.

Bitcoin’s annual energy consumption has fallen from around 204 terawatt hours (TWh) per year on June 11 to around 132 TWh per year June 23. But even though power consumption has plummeted, it is still very high – about the same amount of electricity Argentina consumes in a single year.

How much energy the Bitcoin network uses is related to the value. The more valuable it is, the more incentive it is for miners to increase operations – perhaps by buying new machines. The price of Bitcoin peaked in November 2021, reaching around $ 69,000. Since that peak, de Vries has estimated that the blockchain’s annual power consumption varied between about 180 and 200 TWh. It’s about the same amount electricity used by everyone data centers in the world every year.

Bitcoin’s value has fallen for several months, but it did not result in an immediate fall in energy consumption because the price remained above a key threshold. If the price stays above $ 25,200, the Bitcoin network can maintain mining that uses up around 180 TWh annually, according to research de Vries published last year. Since miners have already invested in their machines, they are likely to keep them running as long as they can make money.

The problem is that if the price of Bitcoin becomes too low, miners risk losing money in electricity costs. So they can pause or retire older, less efficient machines that become unprofitable, something we’re starting to see now. The value of a Bitcoin has remained below $ 24,000 since June 13. “We are coming to price levels where it is becoming more challenging [for miners]”, said de Vries The Verge that day. “Where it not only limits their ability to grow further, but it will actually affect their daily operations.”

And it’s not just Bitcoin. Ethereum uses the same energy-intensive process to maintain its general ledger. The price has similarly fallen this month, although it has declined somewhat in the last week. Ethereum’s estimated power consumption yesterday was almost half of what it was at the end of May.

There has been a lot of pressure to clean up cryptocurrencies. Some blockchains are much less energy intensive because, unlike Bitcoin (and Ethereum so far), they do not use puzzles to validate transactions. The use of renewable energy can get rid of emissions, but skeptics are still concerned about crypto miners competing with nearby residents for electricity in that scenario. A Crypto Climate Accord has even been proposed to find out how to get rid of emissions. The problem they are all trying to solve will continue as long as some blockchains like Bitcoin continue to eat up huge amounts of electricity.