Bitcoin Mining and its Energy Footprint

* Article: Bitcoin Mining and its Energy Footprint. By Karl J. O’Dwyer and David Malone. ISSC 2014 / CIICT 2014, Limerick, June 26–27

URL = https://karlodwyer.github.io/publications/pdf/bitcoin_KJOD_2014.pdf

Abstract

"Bitcoin is a digital cryptocurrency that has generated considerable public interest, including both booms in value and busts of exchanges dealing in Bitcoins. One of the fundamental concepts of Bitcoin is that work, called mining, must be done in checking all monetary transactions, which in turn creates Bitcoins as a reward. In this paper we look at the energy consumption of Bitcoin mining. We consider if and when Bitcoin mining has been profitable compared to the energy cost of performing the mining, and conclude that specialist hardware is usually required to make Bitcoin mining profitable. We also show that the power currently used for Bitcoin mining is comparable to Ireland’s electricity consumption."

Discussion

Why Does Bitcoin Consume So Much Energy?

John Schmidt:

" it’s Bitcoin’s decentralized structure that drives its huge carbon emissions footprint.

To verify transactions, Bitcoin requires computers to solve ever more complex math problems. This proof of work consensus mechanism is drastically more energy-intensive than many people realize.

“In the case of Bitcoin, this is done by having many different competitors all conduct a race to see how quickly they can package the transactions and solve a small mathematical problem,” says Paul Brody, global blockchain leader at EY.

The miner who completes the mathematical equation the fastest not only certifies the transaction but also gets a small reward for their trouble in the form of a Bitcoin payment.

In Bitcoin’s early days, this process didn’t consume nation-state amounts of electricity. But inherent to the cryptocurrency’s technology is for the math puzzles to become much, much harder as more people compete to solve them—and this dynamic will only accelerate as more people attempt to buy into Bitcoin.

Multiple miners are using electricity in competition for rewards. Even though there may be hundreds of thousands of computers racing to solve the same problem, only one can ultimately receive the Bitcoin honorarium.

“Of course, this is wasteful in the sense that 99.99% of all the machines that did work just throw away the result since they didn’t win the race,” says Brody. While this process produces a fair and secure result, it also creates a ton of carbon emissions. “I very much doubt [whoever founded] Bitcoin anticipated such enormous success in the future and, consequently, the enormous amounts of power we’re talking about,” Brody says.

This process also takes an immense amount of time: Upwards of 10 minutes per Bitcoin transaction. That’s the time it takes for a new block to be mined.

Other digital transactions, like those powered by Visa, are faster and rely on less energy. Visa, for instance, can handle around 1,700 transactions per second (TPS) compared with Bitcoin’s 4 TPS.

In terms of crypto mining, the U.S. holds the lion’s share of the global Bitcoin mining market, with nearly 38% of global hashrate recovery—meaning lots of blockchain computations—according to May 2022 report from the Cambridge Digital Assets Program (CDAP).

CDAP also found that China is the second biggest Bitcoin mining hub, despite Beijing’s crackdown to eliminate Bitcoin mining within its borders, with more than 20% of the global market share.

Other Bitcoin mining hubs include Kazakhstan with a 13% global share, Canada at more than 6% and Russia at nearly 5%, with the rest scattered across the globe."

(https://www.forbes.com/advisor/investing/cryptocurrency/bitcoins-energy-usage-explained/)