Bitcoin Mining Uses As Much Power As Ireland. Here’s Why That’s Not A Problem

Published 6 years ago

Just a few years into the cryptocurrency revolution, bitcoin mining is already eating up an estimated 20,000 gigawatt hours of electricity per year. That’s roughly 0.1% of global generation, on par with the power demand of Ireland. The primary culprits are bitcoin mining appliances like the Antminer S9, which is a computer processor that does nothing but endlessly crunch algorithms to lengthen the blockchain. An Antminer draws a load of 1.5 kilowatts — enough to power two refrigerators and a flatscreen TV. If you run an Antminer 24/7 for a year it will produce about 0.85 bitcoins, at a cost of about 15,000 kilowatt hours. Depending on your power prices it will cost anywhere from $600 (at 3 cents per Kwh) to $1,800 (at 9 cents per Kwh) to mine 1 coin. Even with bitcoin having plunged to $11,600 this morning, there’s still money to be made, assuming you can get your machines cheap enough. Walmart sells the Antminer s9 for $8,200.

But what happens if the bitcoin bubble just keeps expanding? Some naysayers worry that bitcoin mining could eat up all the world’s power generation by 2020. Is it a realistic concern? No.

Analysts Michael Weinstein, Khanh Nguyen and their team at Credit Suisse took a look at the issue, and in a research note out today they conclude that fears of cryptocurrencies overwhelming the power grid are overblown. Start by comparing bitcoin’s 20,000 gigawatt hours per year with the 4.3 million Gwh used in the U.S. last year and 6 million by China. The analysts figured that if the price of bitcoin rose to $50,000, miners would find it economic to boost their efforts such that they would consume more than 350,000 gigawatt hours, still less than 2% of world power capacity. The team also calculated the bitcoin price that would be needed to incentivize miners to gobble up all the world’s generation capacity: $1.1 million per coin.


But that’s all assuming existing technology. As cryptocurrencies evolve, they will become more energy efficient. The proof-of-work algorithms run by bitcoin miners are needlessly complex. New coins have simpler algorithms. Ethereum is even shifting from a proof-of-work system to a more easily processed proof-of-stake system.

READ MORE: Bitcoin, Blockchain And Billions

Crypto-mining will enjoy the same economies of scale of web servers. From 2000 to 2010 the power consumed by data centers surged from 20,000 gigawatt hours to about 70,000 Gwh. At that rate it wasn’t going to take long for the growth of the internet to outstrip human ability to keep the lights on. Data centers evolved to meet the need, both growing in size and scale, as well as energy efficiency. Since 2010 server farm power demand has barely grown, despite the number of installed servers growing 6-fold. According to scientists at Lawrence Berkeley Lab, the industry is on track to improve energy efficiency 45% by 2020 with the likes of Google, Amazon and Facebook leading the charge.

Fears of rampant energy usage caused by rampant new marijuana cultivation were similarly half-baked. Utility companies in Colorado, California, Oregon and Washington have seen less than a 2% uptick in power demand linked to pot grows, according to the Credit Suisse team. Pacific Gas & Electric even offers discount power pricing for growers — who have LED bulb technology to thank for keeping their lighting bills low.


There’s also the substitution effect. Crypto-blockchain-based payment systems will eventually replace our hack-prone credit card institutions, which themselves are massive data centers (Visa even has one with a moat). And somewhere out on the margin, cryptocurrencies are likely to reduce demand for other expensive-to-mine assets, like gold, which according to S&P Global has an all-in cash cost of about $900 per ounce.

READ MORE: It’s Actually Okay To Ignore Bitcoin’s 1,400% Rally

In the long run, says Credit Suisse, the breakthrough far more likely to rile world energy markets is the electric vehicle. If, by 2040, EVs grab a third of new-car market share, the world could require more than 280 gigawatts of additional power generation capacity — or somewhere in the vicinity of 2.4 million gigawatt hours. But again, that’s figuring on current technology. After 25 years of improvements, lithium ion batteries are going to keep getting better.

Technology has a way of outwitting the unbelievers. Just a few months ago Jamie Dimon, CEO of JPMorgan, called bitcoin “stupid” and a “fraud.” Last week he said he regretted those comments, saying, “The blockchain is real.” – Written by 

Related Topics: #Bitcoin, #blockchain, #Cryptocurrency, #Mining, #Power.