How Bitcoin Mining Power Consumption is Actually Driving Green Energy Innovation
It certainly is one of the greatest challenges we have faced as a species, and for decades, the opinions of the public on the tender subject of global warming has cemented on the understanding that it must be battled against. For a number of decades, we have been able to conclude with relative ease, the extent to which heavily industrialized nations have contributed to the environmental damage done to the planet.
But in our quest to preserve Earth, and maybe even reverse some of the extensive damage done, we've began to poke and prod everything as being an environmental hazard, including Bitcoin mining, due to its high energy usage and the subsequent harm that it may be doing to the environment.
By the terminal point of last year, the Bitcoin network was running on a large volume of power, when measured, it took up enough to power more than 20 European nations. It was put forward even more recently by an article, that ‘Bitcoin mining now accounts for almost one percent of the world's total energy consumption. And under a certain light and perspective, that is true.
For Bitcoin mining to function, it hinges on the Proof-of-Work algorithm in order to maintain a stable ledger. This network, on its own is made up of, and subsequently powered by computers, which can consume a great deal of electricity. And as adoption increases, more computers will inevitably flock to the network, making the whole thing increasingly more demanding when it comes to energy demands.
For Bitcoin mining, the key attributes of profit and efficiency are invariably tied to energy input – a seemingly risky business model, especially when the pressing question of electricity sources are not taken into consideration.
So, while this existing data does indicate the Bitcoin uses one percent of the world's electricity, a statement which is more than enough to render it contemptible to many environmentalists, it misleadingly suggests that, if it weren't for Bitcoin, that electricity wouldn't be produced, or necessary.
This, in itself must be outed as a product of wishful thinking, in fact, as often is the case when it comes to electricity, especially that which is used for Bitcoin mining farms, it's electricity that comes from a surplus of energy that countries are often desperate to unload.
In the case of green energy solutions like hydroelectricity, wind power and solar, it's often incredibly difficult and costly to store, or even sell that energy, especially if supply outweighs demand by a considerable margin. This is a problem that is pretty common in areas of the world such as China, where up to 70 percent of Bitcoin in circulation is being mined.
According to Reuters, during its report from earlier this year: “wasted [Chinese] wind power amounted to around 12 percent of total generation in 2017,” and distributing that surplus is proving incredibly difficult because other countries in the region are also energy-rich.
Put in a simple way, countries that attract the eyes and attention of cryptocurrency miners with cheap electricity can do so because its supply . overwhelmingly outstrips the demand they have domestically. If anything, cryptocurrency mining plays an increasingly critical role in normalizing international energy markets by consuming power that would otherwise go to waste.
Andreas Antonopoulos, a prolific cryptocurrency researcher and influencer, has explained the situation in a rather eloquent way:
“The energy consumption in mining, I think, is misrepresented. […] What happens when you build a 50 megawatt plant in a place where they only have 15 megawatts of demand? In some cases, if it’s alternative energy, like wind, solar, or hydro, you can’t turn it off or turn it down. You’ve built it, and it will produce, and then what? You’re basically wasting energy.”
“Now what if, in that environment, you can find a way to turn that energy into an alternative store of value […] by using electricity that would be otherwise wasted. Now, Bitcoin is an environmental subsidy to alternative energy all around the world.”
If there's one thing that does need to be realized, it's that the advent of Bitcoin and the subsequent mining of it is driving the decentralization of energy production and usage, which Antonopolous points out as being “one of the most important trends in human history.”
Having this energy ‘stored' in the form of cryptocurrency allows it to offset the otherwise unattractive costs involved in developing alternative solutions. This, especially now that we know that there is a large quantity of renewable energy going to waste.
The Bitcoin mining industry does actually contribute to the development and implementation of alternative energy solutions through the conversion of any surplus volumes of energy into a highly valuable commodity, all this simply by making use of the electricity that is already being produced in bulk.
One of Canada's largest utility companies, Hydro-Quebec, is a perfect example of this. According to another report by the news outlet, Reuters, “the province estimates it will have an energy surplus equivalent to 100 terawatt hours over the next 10 years. One terawatt hour powers 60,000 homes in Quebec during a year.”
Along with this news, unsurprisingly, Bitcoin mining operations have since flooded Hydro-Quebec with large volumes of applications, all seeking to make use of the surplus that the company has reported. As a result, profits have remained relatively steady, with a major annual average of $3 billion over the past four years.
[Edit: Hydro-Quebec has been in contact and have clarified details of its profits, and this article has been updated recently to reflect its data. In Particular, the company pointed out that the numbers relate specifically to its profit, not revenue, as was originally reported. Surely, an important distinction.]
As a result of the applications, a great deal of money has already been generated by lucrative deals that it was ‘forced' to share $45 million with its existing customers, all due to the fact that its profits exceeded the regulator-approved rates of return. This will surely act as inspiration for other nations to create similar renewable energy solutions.
Putting the metaphorical screws to Bitcoin mining due to its increasing rate of energy consumption is certainly easy to do, as it does make for an obvious and easy target. In May of this year, Ars Technica issued a report stating that by the end of this years, Bitcoin could consume up to 7.7 gigawatts, which sounds like an intimidating figure, that is, of course, until you work it in with some comparisons.
Take for example the VISA Corporation, which has managed to consume more that 182 gigawatts of electricity over a span of seven years. If we were to take into consideration the rate of growth that Ars Technica estimate, it would take Bitcoin roughly 24 years to consume as much as VISA did and still do over the course of seven years. But, of course, it's Bitcoin that's the enemy of the environment, not VISA.
Antonopoulos does, however, conceded to the fact that there are challenges which are associated with managing Bitcoin and the electricity consumption associated with its extensive mining operations. But this presents a highly complex discussion that requires consideration from many angles. The idea that by simply using electricity, Bitcoin must be bad, is nothing short of narrow-minded.
“This is a long game, […] the implications and complexity of how cost is allocated and how energy is consumed is huge,” Antonopolous declared. “I don’t think we can afford two Proof-of-Work systems on this planet, but I think we only need one.”
To which extent, the power to drive energy innovation, in the end, could be Bitcoin‘s “killer app.”