The High Energy Cost Of Bitcoin’s Rise
Whatever your take on investing in cryptocurrencies, the boom for bitcoin is also a boom for cheap coal power in China, where much of the energy-intensive computational ‘mining’ process takes place. Recent estimates indicate that the power consumption from bitcoin transactions is roughly on par with the nation of Denmark—and it could go up if the currency’s value and popularity continues to explode.
Why so dirty? Amy Nordrum, associate editor at IEEE Spectrum, explains. Plus, the prospects for a more sustainable kind of blockchain.
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Amy Nordrum is an executive editor at MIT Technology Review. Previously, she was News Editor at IEEE Spectrum in New York City.
IRA FLATOW: This is Science Friday. I’m Ira Flatow. We were just talking about the sustainable future of driving and now for something a bit different. What about the sustainable future of money? Bitcoin, the cryptocurrency that made it big this year certainly has– may have some people seeing dollar signs in a better way to exchange value between people.
But others, they’re seeing smokestacks and coal pollution. One estimate says mining bitcoins today is consuming as much energy as the whole country of Denmark, and that could go up with the price and popularity of Bitcoin. So is the future of money dirty? My guest is Amy Nordrum, Associate Editor at IEEE Specturm. Welcome back, Amy.
AMY NORDRUM: Thanks Ira.
IRA FLATOW: Give us the numbers. How much energy does it take to mine a bitcoin?
AMY NORDRUM: To mine one bitcoin, so per transaction it’s 237 kilowatt hours, which is more than the average US home consumes in an entire week, and that’s the current status.
IRA FLATOW: Wow! Why does it take so much energy?
AMY NORDRUM: The inefficiency of Bitcoin is actually– it’s a feature, not a bug. I mean, it really has to do with the security of the cryptocurrency itself. So Bitcoin is built on this data architecture called the “blockchain” and that’s really what keeps it secure and protected from hackers. So the way that the blockchain works is, it’s basically a list of transactions organized into these groups called “blocks,” and they make it very difficult to add new blocks to the chain. And that’s what makes it hard for people to go back and edit previous transactions on the list and steal money.
So in order to add these new blocks to the chain, you actually have to do some very complicated math that takes a lot of computing power. There’s a particular function called a “hash function” that these Bitcoin miners have to perform over and over. They have to do it again and again to get the right number and they’re all trying to get the right number at the same time. Because if I get it before you, I’m rewarded in Bitcoins and you lose out. So there’s actually a financial incentive to put tons of computing power into mining these bitcoins, adding more blocks of the chain, and getting the rewards.
IRA FLATOW: And all these thousands of computers running together, they’re eating up electricity made by coal power?
AMY NORDRUM: Yeah for the most part, yeah. These Bitcoin mining operations are largely concentrated in China and other countries that are still heavily reliant on fossil fuels, and also have more lax carbon emissions restrictions than countries like in Europe or in the US, for example.
IRA FLATOW: How much more– how much more power or– yeah, compared to conventional currency like a credit card transaction. How does that compare?
AMY NORDRUM: It’s thousands of times more power. There was one estimate that compared it to a Visa credit card transaction and found that a Bitcoin transaction takes about 5,000 times more energy.
IRA FLATOW: So how come we are just talking about this now? What brings this into the news?
AMY NORDRUM: Bitcoin is hotter than ever. So the price of bitcoin– one bitcoin in US dollars was less than 1,000 at the start of this year. It reached $5,000 in October, and now it’s over $17,000 per bitcoin. So it’s become hugely popular. There’s more and more transactions happening every day. And the computing hardware that these miners are using is certainly getting more efficient. But the pace of transactions and the demands in computing power are perhaps going to outpace that if Bitcoin continues to take off.
IRA FLATOW: Oh, so if it keeps skyrocketing, we’re going to see more mining.
AMY NORDRUM: Yes.
IRA FLATOW: More use of this dirty energy.
AMY NORDRUM: Absolutely, yes.
IRA FLATOW: Is there any green energy? I mean, does anybody talk about that?
AMY NORDRUM: Yeah there’s definitely other kinds of cryptocurrency that are trying to address this problem. And there are other blockchains that are using a different scheme to add large blocks to the chain that would not require as much computing power. So the one that Bitcoin uses is called “proof of work,” that’s the guessing over and over of this number to get the right algorithm to add a block to the chain.
But there’s other blockchains that are built on something called “proof of stake”. So that just grants permission for somebody to add a block to the chain depending on how many coins they have invested. So it’s sort of like, you know you’re not going to cheat the system because then you’re actually cheating yourself. And that is supposed to make it more sustainable and efficient blockchain.
IRA FLATOW: So you’re thinking there is a sustainable Bitcoin possible?
AMY NORDRUM: You know it’s tough with Bitcoin because it’s already built on this inefficient scheme that has these scalability issues. And these new blockchains are kind of coming up and hoping to rival Bitcoin for people who want a more sustainable solution. And of course you could run Bitcoin off of renewable energy, but that’s not currently happening. So we’ll have to see how this plays out. It really is a big problem for the cryptocurrency.
IRA FLATOW: Well we’re glad you know about this. It’s such a difficult thing for all of us to wrap our heads around.
AMY NORDRUM: It’s difficult, but it’s not going to go away anytime soon. So it’s worth trying to figure it out.
IRA FLATOW: All right. Keep us on your scheduling.
AMY NORDRUM: Thanks Ira.
IRA FLATOW: Amy Nordrum, Associate Editor at the IEEE Spectrum here in New York.