Bitcoin Mining: How Much Power It Takes and Why People Are Concerned

Tesla CEO Elon Musk shook the crypto market in 2021 when he said his company would do it no longer accepts bitcoin for vehicle purchases. His reasoning had to do with the large amount of fossil fuel-generated energy required to extract cryptocurrency. Musk has since taken a new grip, delivering Tesla Megapack batteries to a bitcoin mine in Texas in May.

Bitcoinethereum, dogecoin and other popular cryptos reached record highs in 2021the same did crypto-dependent NFTs, which raises concerns about the growing amount of energy needed to extract the coins. As the crypto markets crashed in 2022, cryptocurrency mining continued to consume about as much electricity as Argentina and to have a carbon footprint similar to Greece, according to a research report entitled “Revisiting bitcoin’s carbon footprint”, published in February. As the energy bill for crypto mining increases, so does the amount of carbon and waste, which contributes to the growing climate crisis.

Here’s what you need to know about crypto mining and its energy use.

What is crypto mining?

When bitcoins are traded, computers around the world race to complete a calculation that creates a 64-digit hexadecimal number, or hash, for that bitcoin. This hash goes into a public ledger so that anyone can confirm that the transaction for the bitcoin in question took place. The computer that solves the calculation first gets a reward of 6.2 bitcoins, or around 120,000 dollars in today’s prices.

Other cryptocurrencies and NFTs use similar mining technologies, which contributes to the total energy consumption.

What is a crypto mining rig?

It is a barebones computer and more graphics card, or GPUs, instead of the single-card standard, and it does the job of completing a calculation. Riggers typically use powerful GPUs from Nvidia and AMD to handle computing and require high-watt power supplies. The popularity of mining led to a shortage of graphics cards, which in turn led to their values ​​rising.

Why is crypto mining so energy intensive?

First, graphics cards work on mining rigs 24 hours a day. It takes a lot more power than surfing the internet. A rig with three GPUs can consume 1000 watts of power or more when running, equivalent to having a medium-sized window AC unit turned on.

Crypto mining companies can have hundreds or even thousands of rigs in one place. A mining center in Kazakhstan is equipped to operate 50,000 mining rigs, and another mining farm in China has a monthly electricity bill of more than $ 1 million as it extracts 750 bitcoins a month.

Not only do rigs absorb electricity, they also generate heat. The more rigs you have, the hotter it gets. If you do not want your rigs to melt, you need some cooling. Many mining rigs have several built-in computer fans. But if you have several rigs, the room quickly heats up and requires external cooling. Small operations, such as those run by individuals, can be done with a typical standing fan. Mining centers, however, need much more cooling, which in turn requires even more power.

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How much energy does mining take?

Digiconomist’s Bitcoin Energy Consumption Index estimated that a bitcoin transaction takes 1449 kWh to complete, or the equivalent of about 50 days of power for the average US household.

To put it in money, the average cost per kWh in the United States is close to 12 cents. This means that a bitcoin transaction will generate approximately an energy bill of $ 173.

Bitcoin mining uses about as much energy as Argentina, according to the Bitcoin Energy Consumption Index, and at the annual level of 131.26 terawatt hours, crypto mining will be among the top 30 countries based on energy consumption.

Energy consumption for bitcoin mining was at its peak at the end of 2021 and the first months of 2022, consuming more than 200 terawatt hours.

Why is it bad for the environment to use so much energy?

Fossil fuels account for more than 60% of energy sources in the United States. A majority of this percentage is natural gas and a minority is coal. The carbon dioxide produced by fossil fuels is released into the atmosphere, where it absorbs heat from the sun and causes the greenhouse effect.

As mining rigs use more energy, nearby power plants have to produce more electricity to compensate, which increases the likelihood that more fossil fuels will be used. States that have struggling coal-fired power plants, such as Montana, New York and Kentucky, are trying to make money by freeing up crypto-mining companies.

That is also the question electronic waste. This may include damaged computers, wires and other equipment that is no longer required by the mining facility. Bitcoin mining’s electronic waste is 34 kilotons, or comparable to the amount produced by the Netherlands.

What is being done about this energy problem?

Not much. The third global cryptoasset benchmarking study from the University of Cambridge found that 70% of miners based their decision on which coin to earn on the daily reward amount. Energy consumption accounted for only 30% of their choices.

However, access to renewable energy at a low cost attracts crypto miners. China’s Sichuan province has the country’s second largest number of miners due to its abundance of cheap hydropower. The rainy season helps generate so much energy that cities are looking for blockchain companies to relocate to avoid wasting electricity. Due to concerns about energy shortages, China shut down bitcoin mines in late 2021, but the farms went underground and recovered.

The operators of ethereum, the second most popular blockchain behind bitcoin, are doing something to change the amount of energy miners consume. Ethereum 2.0 is an upgrade that is being tested and set to go live in August. Instead of computers trying to solve calculations – referred to as proof of work – computers will be randomly selected to create blocks for the blockchain, while computers that were not selected will validate the created blocks.

To ensure that miners do their job, each miner must wager 32 ethereum coins, also called ether, which is equivalent to $ 32,000, and therefore the term for this protocol is called proof-of-stake. This change reduces the amount of energy needed for Ethereum mining by 99.95%.

What other cryptocurrencies are more energy efficient than bitcoin?

An increasing number of coins – more than 19,000 of them – are using the proof-of-stake protocol that ethereum 2.0 will switch to, resulting in a drop in power consumption.

Cardano, for example, uses its own proof-of-stake protocol and consumed 6 gigawatt hours in 2021. Chia is another coin with a low-energy approach called the proof-of-space protocol. Instead of requiring intensive computing, Chia requires farmers to allocate space on the computer’s hard drive, called a “plot,” which will be invoked by the blockchain based on certain factors.