The creation of the famous virtual currency and the trading on it are done through large computer networks, which have ever higher demands on electricity. The subject – due to its environmental impact – is slowly beginning to attract interest similar to the sharp and speculative ups and downs of Bitcoin’s value.
Dutch dean Alex de Vreas, a blockchain technology expert behind Bitcoin, and founder of the Digiconomist blog that informs users of cryptographic data, writes in the journal Joule that in 2017 the minimum global use of electricity due to Bitcoin was calculated to 2.55 gigabatts a year, almost as much as Ireland had consumed last year.
However, by the end of 2018, it is expected that the energy demand will be more than doubling due to Bitcoin’s requirements, at 7.7 gigawatts. As he estimates, a single transaction with Bitcoin uses both electricity and an average household within a month.
“0.5% is already sufficiently shocking and it is something extremely different compared to the traditional financial system. Bitcoin’s ever-growing demand for electricity will certainly not help us catch up with climate change targets, “said Alex de Vreas. It seems likely that if Bitcoin’s price continues to climb up, the computer network that supports the coin will reach 5% of global electricity, “which is too ugly,” he warns.
Bitcoin is a peer-to-peer digital currency, which is not regulated by a central authority, e.g. central bank. Bitcoin users themselves record their transactions and assure each other of who owns what, keeping a common digital record. This depends on computers scattered around the world, who put a “time stamp” in the chain of successive transactions, to prevent double transactions in the same currency. As blockchain demands, computers on Bitcoin’s network make continuous mathematical computations and compete with each other in order to have the opportunity, once every ten minutes, to create the next “block” in the chain of transactions.
The winning computer user, having solved the mathematical problem first, is rewarded with 12.5 new encryption (worth about $ 104,000 today), a process known as Bitcoin’s “Extraction”. Users are constantly adding new computers and expanding their computing power, hence their energy needs, in order to increase their share of the world’s “pie” and thus increase their chances of “mining” new cryptosnotes. In fact, Alex de Vreas warns that Bitcoin will become so costly in the future because of its big energy needs, which may be no longer profitable.