How much energy does bitcoin consume?
Cryptocurrencies have been extremely popular recently and it is mainly related to the possibility of (theoretically) large earnings, but it requires a lot of time and energy. The Bitcoin network itself, and therefore the most popular digital currency, consumes a lot of electricity. What is the impact of cryptocurrencies on the environment, how much electricity is consumed by the blockchain network and what is the so-called digging?
Cryptocurrencies are digital currencies that have no physical counterpart. Virtual coins are stored in wallets that can only be accessed by the owner. You cannot spend the same unit twice, so they are safe to deal with and somewhat "immune" to fraud.
What is bitcoin mining?
Cryptocurrency mining is a characteristic concept that refers to the times of the wild west and the famous gold rush. This time, however, instead of the physical extraction of the ore and the use of characteristic tools, everything is done virtually, using advanced computer equipment.
Digging is a very complicated process. The Bitcoin network is a virtual chain of blocks. Each of them is a highly advanced mathematical problem, the solution of which requires the use of hardware with high computing power. For this reason, you need to use not one computer, but the entire network. Graphics cards are the most desirable component. It was because of cryptocurrencies that their value could have increased a few years ago. Solving the mentioned math problem creates an additional block in the chain. For this reason, the main difference (apart from virtual reality, of course) between mining cryptocurrencies and gold is the fact that miners take the existing ore, while people mining virtual currencies create new "resources".
Why are we mentioning this? This is important from the perspective of energy consumption. A cryptocurrency excavator is a network of several, a dozen, sometimes even several dozen computers equipped with modern and efficient graphics cards. This network consumes a lot of electricity. Moreover, investors usually leave their equipment turned on around the clock. Currently, the creation of a new block provides the owner of the excavator with 6.25 BTC, which in PLN is about PLN 1,212,500.
It is worth mentioning that the Bitcoin network is growing all the time, which is why it is becoming more and more complicated. For this reason, cryptocurrency mining is becoming less and less profitable. At the same time, the value of bitcoins is increasing, but summing up the costs associated with the equipment and its increasing prices and the required complexity of systems, as well as electricity consumption, the profitability of the investment is actually decreasing. Interestingly, there are companies that deal with the provision of cryptocurrency mining equipment for a subscription, which is sometimes a better solution. But what about energy consumption?
How much energy does the Bitcoin network consume?
Bitcoin's energy consumption is difficult to determine, which is primarily related to the complexity of the network itself. After all, miners draw electricity, energy is also needed in the coin pool and in nodes. Experts estimate that in total it is approximately 110–130 TWh per year. It may seem like a lot and it is, but it is worth having an overview of the entire situation in relation to the financial industry. The annual demand for electricity in the grid is much higher than that of the entire Czech Republic (they need 70 TWh annually). Probably soon it will be a value higher than in the case of annual electricity consumption by Poland, which requires 165 TWh.
It must also be remembered that Bitcoin is not the only cryptocurrency. Summing up the energy consumption of the BTC network and its largest competitor - Ethereum, this gives a result of around 180 TWh, which outweighs the annual electricity consumption in our country. It may seem like a lot and in fact it is, but you should look at the cryptocurrency market from the perspective of other financial markets. It turns out that the annual gold-related energy consumption is almost 250 TWh, so much more. Banking systems (bank servers, credit and debit card systems, ATMs, etc.) have an even greater demand for energy, which need approximately 263 TWh.
The impact of cryptocurrencies on the environment
Do cryptocurrencies have a negative impact on the environment? Of course, such a huge energy consumption certainly affects nature, but still virtual currencies leave a much smaller footprint on nature than the gold market or banking systems. In the case of cryptocurrencies, the source of energy production plays an important role. Unfortunately, most of the electricity in Poland is generated by coal-fired power plants, which emit a lot of CO2 into the atmosphere. However, it can be noticed that currently more and more investments are made in RES (renewable energy sources), which are even more popular in other Western countries. In summary, cryptocurrencies interfere with the natural environment, but less than half as much as banking systems. Moreover, renewable energy sources used more and more often in the production of electricity limit their negative impact.
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