Bitcoin has made a dramatic comeback in recent months, and is now trading near record highs of $60,000 to $65,000.
The price increase indicates that people are rushing to “mine” more of the cryptocurrency. As a result, bitcoin’s energy consumption is increasing once more.
Bitcoin’s “hash rate,” or the amount of computing power dedicated to mining the digital currency, has risen dramatically, and analysts predict it will soon reach a new high. According to Cambridge University data, its electricity consumption has also increased and is approaching all-time highs.
Bitcoin currently consumes roughly the same amount of electricity per year as the Netherlands, an unsettling fact as world leaders gather in Glasgow, UK for COP26 to try to address climate change.
Bitcoin ‘mining’ — what is it?
Bitcoin consumes so much energy due to the system it employs to verify transactions and keep the network secure. The same system is used by Ethereum, the second-largest cryptocurrency, implying that the two dominant tokens are massive energy guzzlers.
Users known as miners use the system to connect massive computers and compete against one another to solve complex “cryptographic” puzzles. Solving these puzzles grants miners the ability to verify transactions and rewards them with cryptocurrency.
Obviously, as the price of bitcoin rises, mining becomes more appealing.
According to The Block data, miners’ revenues increased to $1.72 billion in October, just shy of the record high of $1.75 billion set in March.
The hash rate increases as more people begin mining. Given the current bitcoin price, Alex de Vries, founder of bitcoin energy data service Digiconomist, told Insider that it “seems inevitable” that the hash rate and electricity consumption will soon reach new highs.
In addition to consuming massive amounts of energy, the mining process generates massive amounts of electrical waste, as miners constantly replace old machines with more efficient new ones. According to a recent Digiconomist report, a single bitcoin transaction generates the same amount of waste as throwing away two iPhones.
A tense debate
However, just because bitcoin’s electricity consumption is increasing doesn’t mean its carbon emissions are as well.
Despite the fact that many bitcoin supporters argue that the currency’s electricity consumption isn’t a problem, many of the industry’s biggest players are working to clean up their act and shift to renewable energy.
Following Elon Musk’s criticism of bitcoin’s energy consumption, big crypto names like Michael Saylor’s tech firm MicroStrategy formed the Bitcoin Mining Council to promote greener mining.
Estimates are difficult to come by, but Cambridge University estimated that around 40% of bitcoin mining in 2020 would be powered by renewable energy. Last month, the Bitcoin Mining Council estimated that it could be as high as 58 percent. That would make it one of the world’s greenest industries, though bitcoin critics argue that energy could be put to better use elsewhere.
Bitcoin is likely to have become greener as a result of China’s major crackdown on crypto mining. The majority of mining used to take place in the country, where coal is the primary source of energy. The United States, on the other hand, is the new global mining hub, with renewables often being the most cost-effective energy source.
The financial industry’s major environmental push is also likely to make a difference, with less energy-intensive tokens and networks more likely to attract large sums of money from institutions.
By the end of 2022, Ethereum hopes to distinguish itself from bitcoin by switching to a much more environmentally friendly security and validation system. JPMorgan has expressed approval of the changes, indicating the direction in which the winds are blowing.