In case you missed it, bitcoin is worth a lot of fucking money these days. In fact, just 1 bitcoin is, at the time of writing, worth $9,297.45 AUD – a fivefold increase in value this year alone.
There’s two ways to get bitcoin: buying it like any other currency, or mining it with a very, very powerful computer. The first is pretty self explanatory, but let’s talk about mining for a second.
The underlying technology that bitcoin uses is called blockchain, a digital ledger that’s designed to be un-hackable due to its decentralised nature. Unlike a normal database, the blockchain master ledger exists simultaneously on every user’s computer, rather than just one location. If someone wanted to fraudulently add an entry to the ledger they’d have to hack all of them at the same time, and that’s just not possible.
For a transaction to take place, every user on the blockchain must agree that it’s valid by solving increasingly difficult problems. Once all machines agree that the transaction is legit, it’s added to the ledger. By helping solve these problems, users are rewarded with the currency itself, a process called mining.
As the cryptocurrency has grown, the amount of computing power required to run a mining rig has grown substantially and as such, it’s most commonly done by companies who can afford to pay for the required hardware.
As you can imagine, all this computer power chews up a shitload of energy. Cryptocurrency analyst Alex de Vries reckons that the price of bitcoin is now so high, it’s actually profitable for miners to chew through the roughly 24 terawatt-hours of electricity every year to do it. To put that into perspective, that’s around as much energy as the entire country of Nigeria uses annually.
Considering there’s currently about 300,000 bitcoin transactions per day, that amount averages out to 215 kilowatt-hours worth of electricity for a single transaction.
The average Australian household uses 126 kWh of electricity weekly, which definitely puts it all into perspective.
Of course, it’s important to note that this is just one model of working out power usage for bitcoin mining, while others are a little more conservative. One such estimation puts it, at its lowest level, at 77 kWh per transaction, which is still a bloody lot when you weigh it up.
At the end of the day, you gotta wonder whether the environmental costs of bitcoin mining are worth the increase in value, and will they continue to grow?