Why People Are Concerned About Bitcoin Mining and How Much Electricity It Uses?

 









To keep everything running, cryptocurrency uses a lot of energy.

When he announced that Tesla would stop accepting bitcoin for vehicle purchases in 2021, Tesla CEO Elon Musk shook the cryptocurrency market. His justification was the significant quantity of energy from fossil fuels needed to mine cryptocurrencies. Since then, Musk has changed his strategy, sending Tesla Megapack batteries to a Texas bitcoin mining operation in May.

 

 

In 2021, the price of popular cryptocurrencies like Bitcoin, Ethereum, Dogecoin, and others soared to all-time highs, as did the price of NFTs that depend on cryptocurrencies, raising questions about the rising energy costs associated with mining the coins. Crypto mining continued to use about as much energy as before the crypto markets fell in 2022.







What does mining of digital currencies entail?

As soon as a bitcoin is traded, computers all around the world compete to finish a calculation that generates a 64-digit hash (also known as a hexadecimal number) for that bitcoin. Anybody can verify that the transaction for that specific bitcoin actually took place by looking up this hash in a public ledger. A reward of 6.2 bitcoins, equivalent to around $134,000 at the time of writing, is given to the computer that completes the calculation first.

Similar mining technologies are employed by other cryptocurrencies and NFTs, which increases global energy consumption.

A cryptocurrency mining rig is what?

It's a basic computer that performs computations by using several GPUs rather than the industry standard of a single graphics card. Powerful GPUs like AMD and Nvidia are typically used in rigs to do calculations, which necessitates high-wattage power supplies. Since graphics cards were in limited supply as a result of the popularity of mining, their prices increased.








Why does crypto mining use so much energy?

To begin with, mining machines' graphics cards are constantly in use. That uses a lot more energy than just surfing the web. A computer system with three GPUs can use up to 1,000 watts of power when it is operating, which is comparable to turning on a medium-sized window air conditioner.

 

A single facility may house hundreds or even thousands of mining rigs used by cryptocurrency enterprises. A mining facility in Kazakhstan has the capacity to run 50,000 mining rigs, and a mining farm in China, which mines 750 bitcoins per month, has a monthly electricity expenditure of more than $1 million.

Rigs produce heat in addition to using electricity. It becomes hotter as you have more rigs. You require cooling if you don't want your computing equipment to melt. Numerous built-in computer fans are common in mining setups. But if you have numerous machines, the space rapidly becomes heated and needs extra cooling. A standard standing fan can suffice for small enterprises, such as those handled by one person. However, mining facilities require a lot more cooling, which in turn uses more electricity.

The amount of energy required for mining.

According to the Digiconomist's Bitcoin Energy Consumption Index, one bitcoin transaction requires 1,449 kWh to execute, which is roughly 50 days' worth of electricity for the typical US family.

To put that into financial terms, the US average price per kWh is close to 12 cents. Accordingly, a bitcoin transaction would result in an energy bill that is roughly $173. 

According to the Bitcoin Energy Consumption Index, the annualized energy demand of bitcoin mining is almost equivalent to that of Argentina, placing crypto mining in the top 30 energy-consuming nations.

At the end of 2021 and the beginning of 2022, energy use for bitcoin mining peaked.







What is being done to address the energy crisis?

Very little. The University of Cambridge's Third Global Cryptoasset Benchmarking Study discovered that 70% of miners choose their coin to mine based on the daily incentive amount. Only 30% of their choices were related to energy use.

 

 

But cryptocurrency miners are drawn by affordable access to renewable energy. Due to its abundance of cheap hydroelectric electricity, China's Sichuan Province boasts the second-largest population of miners. Since the rainy season contributes so much to energy production, cities are looking for blockchain companies to relocate in order to reduce electricity waste. In late 2021, China cracked down on bitcoin mining operations due to concerns about energy shortages, but the farms went underground and recovered.

The owners of Ethereum, the second most used and energy-intensive blockchain after bitcoin, are taking action to reduce the amount of energy that its miners use. A new version of Ethereum, 2.0, is now being tested. Computers will be randomly picked to build blocks for the blockchain in place of the proof-of-work protocol, which requires computers to try to solve calculations. Computers that weren't selected will then validate the blocks that were created.

 

The term "proof of stake" refers to the requirement that each miner stake 32 ether coins, or $47,000, in order to guarantee that they do their duties. The energy required for mining ethereum should be reduced by 99.95% as a result of this modification. Ethereum was supposed to switch to the new protocol on September 19, but that day is not accurate.

Why does utilizing a lot of energy harm the environment?

In the US, fossil fuels make up more than 60% of the energy sources. That percentage is primarily made up of natural gas, and only somewhat of coal. Fossil fuels produce carbon dioxide, which is discharged into the atmosphere and results in the greenhouse effect by absorbing solar heat.

 

 

Mining rigs need more energy, which forces surrounding power plants to generate more electricity to make up for it, increasing the possibility that fossil fuels will be used more frequently. States with faltering coal power facilities, like Montana, New York, and Kentucky, are attempting to profit by courting cryptocurrency mining firms.

Additionally, there is the issue of electronic trash. This can include outdated wiring, damaged computers, and other equipment that the mining operation no longer requires. Electronic trash from bitcoin mining amounts to 34 kilotons, about the same as what the Netherlands produces.






What other cryptos have energy efficiency levels higher than bitcoin?

The proof-of-stake protocol that ethereum 2.0 will switch to is used by an increasing number of coins—more than 19,000 of them—resulting in a reduction in power consumption.

Cardano, for instance, spent 6 gigawatt-hours in 2021 and has its own proof-of-stake system. The proof-of-space protocol is used by another cryptocurrency, named Chia. Instead of requiring costly calculation, Chia asks farmers to set aside space on a computer's hard drive, referred as as "plots," which will be used by the blockchain depending on specific criteria.

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