#020: Tech Talk // The Bitcoin Energy Index
“When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions” — Elon Musk
We have all heard of Bitcoin, right? Well, if you haven’t, here’s a quick primer to get you off the ground — it’s actually a very cool and informative video everyone will understand, so highly recommend giving it a watch!
What the general population will tend to know is that Bitcoin:
- Is a cryptocurrency
- Is a decentralized network — there is no centralized server (like a bank). The network is everywhere.
- Sits on top of the Bitcoin blockchain.
- Was started by some chap(s) called Satoshi Nakamoto — no ones knows who this is!
- Was accepted by Tesla at one point, but then Elon Musk redacted the offering
- Is now hovering between $USD 48,000–50,000 (hot damn!)
This is all well and good, and we get it — it’s hot sh*t.
However, what most people don’t really know is that the Bitcoin network consumes A LOT of energy! A lot more than you think. Running a Bitcoin network is becoming increasingly expensive in terms of both money and power consumption and it’s not slowing down (yet).
Consumption
To provide some context, here are some numbers for y’all;
Based on the Cambridge Bitcoin Electricity Consumption Index ( CBECI), the Bitcoin network is estimated to consume around 11.69 Gigawatts (GW) per day. Over one year, this accumulates to around 90.85 Terrawatt-hours (TWh)!
Side note: A Gigawatt equates to 1 billion watts. For perspective, our light bulbs consume around 60–100 watts. So 1 GW would power more than 10 million light bulbs. So 1 Terrawatt equates to 1 trillion watts — that’s a lot!
Here’s another way to put things into perspective — take the country rankings in relation to Bitcoin with a grain of salt.
Here’s one more for kicks:
But Why?
The Bitcoin network relies on something called proof-of-work (watch this other awesome video), to perform and validate transactions on the network. What this means is that in order to make sure the transactions are legitimate (since it’s decentralized), it needs to execute some ‘work’ in the form of utilizing computer resources.
In short; this validation process requires a bunch of computers (called miners) that exist on the network to perform a series of calculations that puts a lot of stress on these machines; consuming CPU and memory. This stress, therefore, increases the demand for electricity on the network.
At any given moment, there will be several miners around the world competing with each other to do this work, so whoever is first to complete the calculations is minted with a brand new ‘Bitcoin’. The more coins that are mined, the harder the calculations become, which ultimately means the more energy that is consumed.
The heat map above shows the countries which participate in the network. The darker the color, the more activity (mining), and computers that exist on the network. Guess which country does the most mining…?
What’s Next?
It’s hard to say. But improvements are on the way. While proof-of-work has become the defacto standard for a lot of cryptocurrencies, there’s now a push towards ‘ proof-of-stake ‘ as a method to validate transactions.
In summary; this method gives a more equal opportunity to participants in the network to forge (not mine) new coins based on their stake in the currency as well as through randomization.
This alternative will provide more security and optimal energy consumption. Both Ethereum and Bitcoin have plans to implement this, but there currently is no timeline for when this will be complete.
So there you have it.
I hope this provides you with some context on what it takes to run a Bitcoin network and why crypto, in general, is becoming more widely accepted.
Until next time.
B.
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Originally published at https://theinfinite.substack.com on September 6, 2021.
