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Why does bitcoin use 10 times more electricity?

Why does bitcoin use 10 times more electricity?

The bitcoin, which has seen its price increase tenfold in one year, is regularly criticized for its massive electricity needs. Does the democratization of cryptocurrencies necessarily rhyme with ecological disaster, as the most virulent detractors of this sector claim?

What energy consumption?

The Cambridge bitcoin electricity consumption index (CBECI) estimates that the annual consumption of bitcoin could reach 128 TWh (terawatt-hour), or 0.6% of the world's electricity production, or a little more than the consumption of Norway.

Figures "impressive compared to medium-sized countries or other new technologies such as electric vehicles (80 TWh in 2019), but more moderate compared to other technologies, such as air conditioning and fans that consume 2,000 TWh per year," notes George Kamiya, analyst at the International Energy Agency (IEA).

According to him, Google thus consumed 12.2 TWh in 2019 and all data centers in the world, except those that mine bitcoin, consume about 200 TWh.

Economist Alex de Vries, who put together one of the first indices on the subject in 2016, is even more pessimistic: he estimates that with the recent rise in bitcoin's price, its electricity use will exceed that of all other data centers.

Why is bitcoin so energy intensive?

The reason giant data centers are dedicated to bitcoin around the world is because they covet a juicy reward.

Bitcoin's code requires that people who participate in the network, called "miners," prove their work by solving complex equations that have no direct connection to the transactions. In exchange, they automatically receive a bitcoin reward every ten minutes.

This is one of the founding principles of the star cryptocurrency, created in 2008 by an anonymous person or persons who wanted a decentralized digital currency: the "proof of work," which aims to guarantee the integrity of the network.

"Even if new machines use less electricity, you're going to use even more" to receive a larger share of the bitcoins paid to miners, says Michel Rauchs, who helped create the CBECI.

And with the price of bitcoin at more than $55,000, miners are running at full speed.

What impact on the environment?

Bitcoin advocates say that with the development of renewable energy, faster for power plants than in other sectors, bitcoin has a moderate effect on the environment.

But researchers at the University of New Mexico estimated in 2019, before the recent price takeoff, that every dollar of value created by bitcoin generated 49 cents of health and environmental damage in the United States.

In addition, the critics of cryptocurrencies point out for their part the strong geographical concentration in certain regions of the world, such as Iran: in a country hit by international sanctions that prevent it from exporting its oil and where the cost of electricity to melted, miners have multiplied, the cryptomurrency to escape the eye of Washington.

"Iran represents between 5 and 10% of bitcoin mining," estimates Michel Rauchs. The vast majority of the activity is in China.

According to him, part of the year, Chinese miners take advantage of the high hydroelectricity production in the south of the country. But in the dry season, they migrate to the north, where electricity is produced by particularly polluting coal, lignite.

"The carbon footprint of bitcoin changes completely from month to month," he concludes.

"The question is what would be the net positive effects, once the cost is taken into account, of bitcoin for society," comments Benjamin Jones, who participated in the University of New Mexico study.

Is change possible?

With the democratization of bitcoin, critics have become vocal. The second cryptocurrency, ethereum, is considering moving from proof of work to a less energy-intensive system that would avoid some of the processors.

But it's hard to see bitcoin adopting such a change, which would risk making the network less decentralized and secure.

Proof of work "is so ingrained in the values and culture of bitcoin, that it would be almost sacrilegious," Rauchs points out, recalling that despite numerous attempts, no major reform of the cryptocurrency has been adopted by the community.

Sourec: AFP