It was one of those weekends when a friend pinged the “close friends” WhatsApp group and suggested we have a FIFA (soccer video game) night. Little did I know that the real purpose behind planning the entire evening was to brag about his newly purchased PlayStation 5; which, I may add, has been difficult to obtain in India.
About 20 minutes into the first game the power went out and we were on backup. We had to shut down all the appliances in the house (including the mosquito machine) to make sure we wouldn’t overload the circuit board because the PlayStation was eating up all the generator juice. The price we had to pay for entertainment.
Like any device running a powerful graphics processor that needs a lot of power to operate, a Bitcoin mining rig works the same way.
A Bitcoin mining rig runs several processors at a time and consumes large amounts of watts. But instead of providing entertainment, it creates digital money. Ironically, we live in a world where gaming commands respect for being a multi-billion dollar industry and provides employment to millions of people globally, and crypto, with a market cap of nearly $1 trillion, is ostracized as a “Ponzi scheme” and exposed for criticism due to the energy consumption of many.
THE CURRENCY 24×7
Bitcoin mining has received huge criticism from environmentalists and even politicians due to the increasing energy needs of this sector. Bitcoin mining rigs are said to run all day, 24×7. Estimates say that the Bitcoin network alone uses the same amount of energy in a year as Argentina and has a carbon footprint equivalent to the nation of Greece! A crypto mining operation can have thousands of rigs in one location. For example, a mining center in Kazakhstan houses 50,000 mining rigs, while a mining farm in China incurs a $1 million electricity bill to mine 750 Bitcoins!
Compared to the energy consumption of countries such as China (8,310 TWh per year) and the United States (3,930 TWh per year), Bitcoin uses much less energy (127 TWh per year).
Ever since the fall in Bitcoin’s value, there has been misery galore with mining becoming more energy intensive and expensive due to rising electricity costs. While Bitcoin is the benevolent leader of the entire crypto ecosystem, non-believers often question the existence of such technology and whether it even serves a purpose. As I recall, that’s what someone said about the Internet in the 90s.
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Yes, Bitcoin is energy intensive, and its core foundation requires it to be. This energy is used to solve complex mathematical equations that keep the network impregnable and give the whole process value in the form of BTC (Bitcoin tokens). Each BTC token today is worth $19,000 (was $69,000 in November 2021), which is why people in droves are investing in hardware and electricity to mine Bitcoin. More miners mean more power, which has become a pressing issue among Bitcoin antagonists.
Last November, Bitcoin mining was banned in China when the government claimed it had concerns about the country’s power supplies for this year’s winter season. In August 2021, Bitcoin mining had to be shut down in the state of Texas to balance demand from households and other industries.
Undoubtedly, households and important industries must be prioritized over Bitcoin mining (obviously). However, one cannot help but wonder why Bitcoin was singled out as the root of the problem, while industries such as gaming, traditional banking and even gold mining have consumed more energy and resources.
“WHAT” ABOUT THE OTHERS?
Ever since blockchain technology burst onto the scene, there have been many debates about whether it will be able to replace the traditional banking infrastructure. I’m not even going to open that can of worms. But interestingly enough, today’s banking system is no exception when you talk about energy consumption. A 2022 value chain report stated that today’s banking system uses 56 times more energy than the Bitcoin blockchain. In retrospect, one also has to consider that traditional banking also takes care of many more transactions on a daily basis than Bitcoin, but that does not mean that you start lobbing eco-bombs at Bitcoin.
Gaming is another industry that uses massive energy and has boomed in the last couple of years. As more advanced hardware joins the illustrious lineup of gaming consoles and PCs globally, the graphics-intensive devices have demanded more power, leading to an increase in the power consumption of these devices. Estimates suggest that the global gaming industry consumed around 104.7 TWh of electricity in 2020; that is still more than what Bitcoin has consumed. This estimate may be higher now considering more power-hungry hardware and consoles are being launched for gaming.
There are those who refer to Bitcoin as digital gold due to its limited supply and a common association with the word “mining”.
Gold has considerable influence in today’s financial world and is used as a store of value by many countries globally. This physical asset has provided economic stability to the global financial system as countries have printed currency based on the amount of gold they have in reserves. But gold doesn’t grow on trees, it has to be mined (physically).
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Estimates suggest that gold mining consumes 132 TWh per year, and at today’s rate, mining gold is much more valuable than Bitcoin. However, gold mining leaves a lot of waste and tons of debris and rocks are misplaced.
One should also remember that the value of gold has risen over hundreds of years to be so valuable today, and I think crypto (especially Bitcoin) needs to be given that opportunity and not labeled as a power-hungry danger. I know it’s hard to put your money into something that has no physical value, but the future of money is digital and crypto is going to find a way to work its way into the banking system one way or another (it’s already happening).
A MORE SUSTAINABLE APPROACH
As the Bitcoin hash rate continues to rise, miners are turning to more sustainable ways to power their rigs. Recently, the Bitcoin hash rate reached its all-time high after a 55 percent increase, which means that Bitcoin mining is at its most difficult level right now. This means that miners must resort to sustainable energy sources such as hydropower and geothermal energy to run their business, otherwise fossil fuels will drive their business to the ground.
Many other cryptocurrencies are also switching to more energy-efficient proof-of-stake mechanisms that reduce energy consumption by 99 percent (such as Ethereum). This will help crypto build a more long-lasting and sustainable ecosystem.
Since Bitcoin is not moving to a proof-of-stake mechanism anytime soon, Bitcoin miners and maximalists will be on the receiving end of many brickbats since the energy demand is not going to decrease. However, it is possible that Bitcoin will gain more utility and the use of this digital currency will increase in the future. Only then will it be able to shield itself from the constant criticism it has received.
Mining must take place 24×7 for the network to be secure and efficient. While Ecuadorians have thought about using volcanoes to power their mining operations, other Bitcoin mining companies need to move to sustainable sources sooner if they want to be accepted and survive in the long run.
These days, Bitcoin has a target painted on its back, and policy makers and governments are looking for ways to pull the plug on Bitcoin mining. I understand that Bitcoin is not perfect and has its drawbacks. Yes, it uses significant electricity and leaves a huge carbon footprint. But putting it aside for the above reasons, when there are other industries with similar energy needs and dealing with almost as much damage to the environment, I think it’s a bit too harsh.
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