{"id":74025,"date":"2021-11-17T12:34:02","date_gmt":"2021-11-17T12:34:02","guid":{"rendered":"https:\/\/chinadialogue.net\/?p=74025"},"modified":"2021-12-13T11:26:43","modified_gmt":"2021-12-13T11:26:43","slug":"great-mining-migration-power-hungry-bitcoin-leaves-china","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/energy\/great-mining-migration-power-hungry-bitcoin-leaves-china\/","title":{"rendered":"\u2018Great mining migration\u2019: Power-hungry Bitcoin leaves China"},"content":{"rendered":"\n

On 14 April this year, the price of a single Bitcoin reached a then all-time-high<\/a> of around US$64,870. Just over a month later, it had tumbled to $34,259.<\/p>\n\n\n\n

A significant driver behind this sudden drop was news that China had begun a sweeping crackdown on the cryptocurrency industry, due to concerns about financial risk and excessive energy consumption. The extreme energy intensity of Bitcoin \u201cmining\u201d \u2013 by which transactions are verified and new coins are created \u2013 has led to criticism of the currency\u2019s oversized carbon footprint.<\/p>\n\n\n\n

Before the clampdown, China accounted for two-thirds of Bitcoin mining worldwide. In the months since, mining companies have been quick to move their operations overseas. Recent data<\/a> suggests that energy consumed by Bitcoin has increased in the US, Canada and Kazakhstan, and with it, pressure to address the currency\u2019s soaring electricity appetite.<\/p>\n\n\n\n

Power-hungry Bitcoin<\/h2>\n\n\n\n

Bitcoin is a decentralised digital currency, meaning that each time money is sent or received, the transaction is kept on a public record, rather than with a bank. But in the absence of a trusted authority to verify each transaction, the responsibility falls to participants known as \u201cminers\u201d in the Bitcoin network.<\/p>\n\n\n\n

To verify transactions, miners connect computers to the network and use them to solve incredibly complex, randomly generated mathematical puzzles. Not just any computer will do the job: Bitcoin mining requires multiple specialised computers running almost 24\/7 to achieve the processing power needed to find the solution.<\/p>\n\n\n\n

Whoever solves the puzzle first is allowed to add a \u201cblock\u201d of transactions to the global ledger<\/a>, and is rewarded with a small amount of newly minted Bitcoin.<\/p>\n\n\n\n

32nd<\/sup><\/p>

The Bitcoin network would rank 32nd<\/sup> in the world by annual electricity consumption if it were a country<\/p><\/div><\/div>\n\n\n\n

Herein lies Bitcoin\u2019s energy problem. The more processing power you can muster, the more often you will be first to solve the puzzle and earn the Bitcoin. And the machines used to mine Bitcoin \u2013 application-specific integrated units (ASICs) \u2013 consume a lot of energy, to say the least.<\/p>\n\n\n\n

In one year, the entire Bitcoin network consumes around 120 terawatt hours (TWh) of energy, or more than the whole of the Netherlands, according to estimates by Cambridge University\u2019s Bitcoin Electricity Consumption Index<\/a> (CBECI). If Bitcoin were a country, it would rank 32nd<\/sup> in the world by annual electricity consumption.<\/p>\n\n\n\n

\u201cThat\u2019s the price we pay to secure transactions,\u201d says Anton Dek, cryptoasset and blockchain lead at the Cambridge Centre for Alternative Finance, and one of the creators of the index. Bitcoin\u2019s energy usage isn\u2019t an accidental by-product, he explains. Mining Bitcoin is purposefully designed to be costly \u2013 both in terms of electricity and money \u2013 to prevent would-be hackers from taking over the network.<\/p>\n\n\n\n

So far, it seems to have worked. \u201cWe haven\u2019t seen any double spending or any attacks on the network, partially because this attack would be too expensive. So it kind of makes sense, though that doesn\u2019t mean it shouldn\u2019t be of concern,\u201d says Dek.<\/p>\n\n\n\n

A climate disaster?<\/h2>\n\n\n\n

Bitcoin\u2019s energy footprint has skyrocketed in recent years. In 2017, economics blog Digiconomist estimated<\/a> that the network of specialised mining computers used 29 TWh annually, equal to 0.13% of total global electricity consumption. This had grown to around 0.65% by May this year, according to CBECI data.<\/p>\n\n\n\n