It was one of those weekends when a friend pinged on the ‘close friends’ WhatsApp group and suggested we have a FIFA night (football video game). Little did I know that the real intent behind planning the whole evening was to brag about his newly purchased PlayStation 5; which, I might add, has been tough to get my hands on in India.
About 20 minutes into the first game, the power went out and we were on backup. We had to shut all the appliances in the house (including the mosquito machine) to ensure we wouldn’t overload the circuit board because the PlayStation was eating up all the generator juice. The price we had to pay for entertainment.
Similar to any device running a powerful graphics processor that needs a lot of electricity to function, a Bitcoin mining rig works the same way.
A Bitcoin mining rig runs multiple processors at a time and consumes copious amounts of Watts. But instead of providing entertainment, it creates digital money. Ironically, we are living in a world where gaming commands respect for being a multi-billion dollar industry and provides employment to millions of people globally, and crypto, with almost $1 trillion market value, is ostracised as a “Ponzi scheme” and subjected to criticism due to its energy consumption by many.
THE 24×7 CURRENCY
Bitcoin mining operations have drawn immense criticism from environmentalists and even politicians on account of increasing energy demands by this sector. Bitcoin mining rigs are said to run all day, 24×7. Estimates say that the Bitcoin network alone consumes the same amount of energy in a year as Argentina and has a carbon footprint equivalent to that of the nation of Greece! A crypto-mining business can have thousands of rigs in one location. For example, a mining centre in Kazakhstan houses 50,000 mining rigs, while a mining farm in China gets a $1 million electricity bill for mining 750 Bitcoins!
In comparison to the energy consumption of countries like China (8310 TWh per year) and the US (3930 TWh per year), Bitcoin consumes much less energy (127 TWh per year).
Ever since the drop in Bitcoin’s value, it has been misery galore with mining becoming more energy-intensive and expensive due to rising electricity costs. While Bitcoin is the benevolent leader of the entire crypto ecosystem, non-believers often question the existence of such technology and whether it even serves a purpose. As I remember, that’s what some people said about the Internet in the 90s.
Yes, Bitcoin is energy-intensive, and its core foundation requires it to be. This energy is utilised to solve complex mathematical equations that keep the network impregnable and give the whole process value in the form of BTC (Bitcoin tokens). Each BTC token today is worth $19,000 (was $69,000 in November 2021) which is why people in droves are investing in hardware and electricity to mine Bitcoin. More miners mean more electricity, which has become a pressing issue among Bitcoin antagonists.
In November last year, Bitcoin mining was banned in China as the government claimed it had concerns regarding the country’s power supplies for the year’s winter season. In August 2021, Bitcoin mining had to be shut down in the State of Texas to balance the demand of households and other industries.
Undoubtedly, households and essential industries need to be prioritised over Bitcoin mining (obviously). However, one can’t help but think why Bitcoin was singled out as the root of the problem, while industries like gaming, traditional banking and even mining gold have been consuming more energy and resources.
‘WATT’ ABOUT THE OTHERS?
Ever since blockchain technology burst into the scene, there have been numerous debates about whether it will be able to replace the traditional banking infrastructure. I am not even going to open that can of worms. However, interestingly, the current banking system is no exception when you talk about energy consumption. A 2022 Valuechain report stated that the current banking system of today consumes 56-times more energy than the Bitcoin blockchain. In hindsight, one must also consider that traditional banking also takes care of a lot more transactions on a daily basis than Bitcoin, but that doesn’t mean that you start lobbing eco-bombs on Bitcoin.
Gaming is another industry that consumes massive energy and has been thriving for the past couple of years. As more high-end hardware joins the illustrious lineup of gaming consoles and PCs globally, the graphics-intensive devices have been demanding more energy which has led to an increase in the electricity consumption from these devices. Estimates suggest that the global gaming industry consumed around 104.7 TWh of power in 2020; that’s still more than what Bitcoin has been consuming. That estimate could be higher now considering that more power-consuming hardware and consoles are being launched for gaming.
There are those who refer to Bitcoin as digital gold due to its limited supply and a common association with the word “mining”.
Gold has considerable clout in today’s financial world and is used as a store of value by many countries globally. This physical asset has provided economic stability to the global financial system as countries have been printing currency based on the amount of gold they hold in their reserves. But gold doesn’t grow on trees, it has to be mined (physically).
ALSO READ | A world where coding is a crime
Estimates suggest that mining gold consumes 132 TWh per year and at its current rate, it’s much more valuable to mine gold than Bitcoin. However, mining gold leaves a lot of waste and tons of debris and rocks get misplaced.
One should also remember that gold’s value has risen over hundreds of years to be this valuable today and I believe crypto (especially Bitcoin) needs to be given that opportunity and not be branded as a power-consuming peril. I know it’s difficult to put your money into something that doesn’t possess any physical value but the future of money is digital and crypto is going to find a way to merge itself into the banking system one way or another (it’s already happening).
A MORE SUSTAINABLE APPROACH
As the Bitcoin hash rate keeps rising, miners are turning to more sustainable ways of running their rigs. Just recently, the Bitcoin hash rate reached its all-time high after a 55 per cent increase which means that mining Bitcoin is at its toughest difficult level right now. This means that miners will have to resort to sustainable energy sources such as hydroelectricity and geothermal energy among others to run their operations, or else fossil fuels are going to run their businesses to the ground.
Also, many other cryptocurrencies are shifting to more energy-efficient proof-of-stake mechanisms that reduce energy consumption by 99 per cent (like Ethereum). This will help crypto build a more long-lasting and sustainable ecosystem.
Since Bitcoin is not shifting to a proof-of-stake mechanism anytime soon, Bitcoin miners and maximalists will be at the receiving end of a lot of brickbats since its energy demands are not going to drop. However, it is possible that Bitcoin will gain more utility and the adoption of this digital currency will increase in the future. Only then will it be able to shield itself from the constant criticism it has been drawing.
Mining needs to happen 24×7 in order for the network to be secure and efficient. While Ecuadorians have been thinking of using volcanos to power their mining operation, other Bitcoin mining operations need to move to sustainable sources sooner if they want to be accepted and survive in the long run.
These days, Bitcoin has a target painted on its back and policymakers and governments are looking for ways to pull the plug on Bitcoin mining operations. I understand that Bitcoin is not perfect and has its cons. Yes, it consumes considerable power and leaves a massive carbon footprint. But to cast it aside for the above reasons, when there are other industries with similar energy demands and dealing with almost the equal amount of damage to the environment, I feel is a bit too harsh.