//The Cost of Bitcoin

The Cost of Bitcoin

In just a year, the energy consumption of the bitcoin network exceeds that of Ireland’s, as well as 19 other European countries.

Five thousand. Ten thousand. Fifteen. Twenty.

After nearly a decade of languid growth since its inception, Bitcoin burst onto the global scene during its investment boom last year. Its value grew 20 times in the span of a year and quadrupled from $5,000 to $20,000 in the just the last quarter of 2017.

While the currency seems to have moved out of the fringes of cryptography and into the mainstream, new questions regarding its stability and sustainability have arisen.

One concern is Bitcoin’s environmental sustainability. “Mining” bitcoin may have unforeseen and significant energy costs. Bitcoin mining refers to the process by which independent “miners” verify transactions on a blockchain, a publicly-accessible ledger of all payments made using the currency.

To validate and process a new “block” containing recent transactions, miners compete to solve a mathematical problem as quickly as possible. Miners who finish first are rewarded with a newly-minted piece of bitcoin. As more blocks are added to the chain, the network makes the mathematical problem harder and harder to solve; this gives the currency value as new bitcoin becomes scarcer.

This system, known as proof-of-work, has resulted in an exponentially-increasing amount of electricity consumption, as miners pursue their voracious quests to perform arbitrary computations as fast as possible. The competitive nature of the system incentivizes miners to use more electricity, as faster systems require more of an energy input to power hardware and cooling devices.

A recent paper published by Nature Sustainability revealed some alarming statistics about the mining network. For instance, they found it takes more than twice as much energy to mine bitcoin than it does to mine real precious metals. It takes 14 Megajoules of energy to mine one dollar’s worth of bitcoin, while it takes only 5 Megajoules to mine an equivalent amount of gold and 7 Megajoules for platinum.

Additionally, in just a year, the energy consumption of the bitcoin network exceeds that of Ireland’s, as well as 19 other European countries. It also matches the annual CO2 emissions produced by one million transatlantic flights. The network’s consumption of natural resources and impact on the environment has put the footprint of the Bitcoin network on the map.

These issues raise pressing concerns for a currency that is poised for greater international adoption and investment. But are miners willing to give up potential profits as the world looks for a better solution? “Trends follow dollar signs,” says Shanee Halevi, co-chair of NJIT Green, the university’s student sustainability initiative. “People don’t get how pressing these issues are. To many, ‘climate change’ still brings up images of polar bears, and to a lot of people that doesn’t mean much.”

It is apparent now that resolving the sustainability issues of cryptocurrency mining is equivalent to managing the environmental impact of a small country.

Cheaper means of block validation have been experimented with by other cryptocurrency platforms, including Ethereum. One promising method is proof-of-stake, in which currency “forgers” place their own vault as collateral in their verification of new transactions, in exchange for newly-minted coins. This does not require the intensive computations demanded by proof-of-work systems.

However, Halevi argues that production systems should be built sustainably from the ground up. “The facts are, production [equals] environmental damage unless it is scrupulously designed to give back to the environment. This is often referred to as a circular economy.”

She mentions holistic farming as an example, in which “instead of synthesizing fertilizers, over-spraying fields, and dealing with the effect of runoff to produce a desired result of food, farmers can enable chickens and cows to fertilize the fields, take care of pests, and maintain a healthy growing environment.”

Bitcoin mining could be made more sustainable with “technological innovation required to improve efficiency or utilize the excess heat from mining.” Miners could offset their carbon footprint by “planting trees or investing in renewable energy.”

Responsibly designing systems is key to ensuring environmental preservation. The Bitcoin network must be critically examined to meet this standard. Though it built the future of cryptocurrency and promises a democratic, freer digital world, society must take steps to ensure that future is a sustainable one.

Advance the Conversation
The following two tabs change content below.

Ralph Legge

Senior Staff Writer

Latest posts by Ralph Legge (see all)