Crypto mining farms are super intense computer centers
>> Condensed from an Article by Nathan Reiff, Investopedia, December 21, 2021
SUMMARY — Bitcoin and other proof-of-work cryptocurrencies require large amounts of energy — more than is used by entire countries — to perform the computations associated with crypto mining. The majority of Bitcoin mining occurs in the United States, which accounts for 35% of Bitcoin mining activities.
Worldwide, energy sources such as hydropower supply close to 39% of the energy used in Bitcoin mining. About 30 kilotons of electronic waste are annually produced as a byproduct of Bitcoin mining.
Many people are bullish about cryptocurrencies like Bitcoin, but detractors point to a major flaw—cryptocurrency mining is highly energy intensive. While mining is just one method available to validate cryptocurrency transactions and mint new crypto coins, it’s the method used by Bitcoin and other leading cryptocurrencies.
Energy Consumption of Cryptocurrency Mining
The Cambridge Bitcoin Electricity Consumption Index indicates that Bitcoin, the most widely-mined cryptocurrency network, uses 122.87 Terawatt-hours of electricity every year — more than the Netherlands, Argentina, or the United Arab Emirates. (Enough electricity for 24 million homes). According to Digiconomist, a cryptocurrency analytics site, a single Bitcoin transaction uses 2,106.37 kilowatt-hours of electricity, which equals the amount of power consumed by the average American household over 72.2 days.
Digiconomist estimates that the Ethereum network annually uses 99.6 Terawatt-hours of electricity — more power than is required by the Philippines or Belgium. A single Ethereum transaction requires 220.05 kilowatt-hours of electricity, which is the same amount of power that an average U.S. household consumes in 7.44 days.
The amount of energy consumed by cryptocurrency mining is likely to increase over time, as user adoption of crypto increases and mining efficiency decreases. Cryptocurrency mining is a competitive process, and as crypto blockchains grow longer and the competition to win crypto rewards continues to increase, the required computational power continues to rise in tandem. An increased requirement for computational power results in more energy being consumed by crypto networks.
Why Cryptocurrency Mining Requires Energy
The energy intensity of crypto mining is a feature, not a bug. Just like mining for physical gold, mining for Bitcoin or another proof-of-work (PoW) cryptocurrency is designed to use large amounts of energy. The requirements for both expensive hardware and plenty of electricity to power that hardware create barriers to entry, which in turn make it extremely difficult (although not impossible) for a small group of miners to take control of an entire crypto network.
Cryptocurrency advocates believe that this decentralized structure has many advantages over centralized currency systems, because cryptocurrency networks can operate without relying on any trusted intermediary such as a central bank. In place of any centralized authority, miners use large amounts of computational power to operate and maintain the security of a cryptocurrency network.
Environmental Impacts of Cryptocurrency Mining
According to Digiconomist, Bitcoin mining generates about 96 million tons of carbon dioxide emissions each year — equal to the amounts generated by some smaller countries. Mining for Ethereum produces more than 47 million tons of carbon dioxide emissions annually.
Researchers at the University of Cambridge report that most Bitcoin mining — around 35% in 2021 — takes place in the U.S. The U.S. gets most of its electricity by burning fossil fuels. Kazakhstan, another country that gets most of its energy from fossil fuels, follows the U.S. in accounting for 18% of the world’s Bitcoin mining. As a result, two countries heavily dependent on fossil fuels are responsible for the majority of the world’s Bitcoin mining.
A study by the University of Cambridge shows that 39% of proof-of-work mining was powered by renewable energy sources.
Cryptocurrency mining also generates a significant amount of electronic waste, as mining hardware quickly becomes obsolete. This is especially true for Application-Specific Integrated Circuit (ASIC) miners, which are specialized machines designed for mining the most popular cryptocurrencies. According to Digiconomist, the Bitcoin network generates approximately 30 thousand tons of electronic waste every year.
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Bitcoin Energy Consumption Index
The Bitcoin Energy Consumption Index provides the latest estimate of the total energy consumption of the Bitcoin network.
NEW RESEARCH: “Preying on the poor?” (February 2022); how Bitcoin exacerbates social and environmental challenges for communities already experiencing multiple dimensions of deprivation.
Annualized Total Bitcoin Footprints
97.14 Mt CO2 — Comparable to the carbon footprint of Kuwait.
204.50 TWh — Comparable to the power consumption of Thailand.
32.44 kt — Comparable to the small IT equipment waste of the Netherlands.
Single Bitcoin Transaction Footprints ~~~
1036.05 kgCO2 — Equivalent to the carbon footprint of 2,296,241 VISA transactions or 172,675 hours of watching Youtube.
2181.15 kWh — Equivalent to the power consumption of an average U.S. household over 74.76 days.
346.00 grams — Equivalent to the weight of 2.11 iPhones 12 or 0.71 iPads. (Find more info on e-waste.)
Ever since its inception Bitcoin’s trust-minimizing consensus has been enabled by its proof-of-work algorithm. The machines performing the “work” are consuming huge amounts of energy while doing so. Moreover, the energy used is primarily sourced from fossil fuels. The Bitcoin Energy Consumption Index was created to provide insight into these amounts, and raise awareness on the unsustainability of the proof-of-work algorithm.
A separate index was created for Ethereum.
What kind of work are miners performing?
New sets of transactions (blocks) are added to Bitcoin’s blockchain roughly every 10 minutes by so-called miners. While working on the blockchain these miners aren’t required to trust each other. The only thing miners have to trust is the code that runs Bitcoin. The code includes several rules to validate new transactions.
For example, a transaction can only be valid if the sender actually owns the sent amount. Every miner individually confirms whether transactions adhere to these rules, eliminating the need to trust other miners.
The trick is to get all miners to agree on the same history of transactions. Every miner in the network is constantly tasked with preparing the next batch of transactions for the blockchain. Only one of these blocks will be randomly selected to become the latest block on the chain. Random selection in a distributed network isn’t easy, so this is where proof-of-work comes in. In proof-of-work, the next block comes from the first miner that produces a valid one.
This is easier said than done, as the Bitcoin protocol makes it very difficult for miners to do so. In fact, the difficulty is regularly adjusted by the protocol to ensure that all miners in the network will only produce one valid block every 10 minutes on average. Once one of the miners finally manages to produce a valid block, it will inform the rest of the network. Other miners will accept this block once they confirm it adheres to all rules, and then discard whatever block they had been working on themselves. The lucky miner gets rewarded with a fixed amount of coins, along with the transaction fees belonging to the processed transactions in the new block. The cycle then starts again.
The process of producing a valid block is largely based on trial and error, where miners are making numerous attempts every second trying to find the right value for a block component called the “nonce“, and hoping the resulting completed block will match the requirements (as there is no way to predict the outcome). For this reason, mining is sometimes compared to a lottery where you can pick your own numbers. The number of attempts (hashes) per second is given by your mining equipment’s hashrate. This will typically be expressed in Gigahash per second (1 billion hashes per second).
Sustainability
The continuous block mining cycle incentivizes people all over the world to mine Bitcoin. As mining can provide a solid stream of revenue, people are very willing to run power-hungry machines to get a piece of it. Over the years this has caused the total energy consumption of the Bitcoin network to grow to epic proportions, as the price of the currency reached new highs. The entire Bitcoin network now consumes more energy than a number of countries. If Bitcoin was a country, it would rank as shown below.
Apart from the previous comparison, it also possible to compare Bitcoin’s energy consumption to some of the world’s biggest energy consuming nations. The result is shown hereafter.
Carbon footprint
Bitcoin’s biggest problem is perhaps not even its massive energy consumption, but the fact most mining facilties in Bitcoin’s network are located in regions (primarily in China) that rely heavily on coal-based power (either directly or for the purpose of load balancing). To put it simply: “coal is fueling Bitcoin” (Stoll, 2019).
Locating miners
Determining the exact carbon impact of the Bitcoin network has been a challenge for years. Not only does one need to know the power requirement of the Bitcoin network, but one also need to know where this power is coming from. The location of miners is a key ingredient to know how dirty or how clean the power is that they are using.
Just like it’s not easy to find out what machines are active in the Bitcoin network, determining location isn’t an easy feat either. Initially the only information available to this end was the common belief that the majority of miners were located in China. Since we know the average emission factor of the Chinese grid (around 700 grams of carbon dioxide equivalent per kilowatt-hour), this can be used for a very rough approximation of the carbon intensity of the power used for Bitcoin mining. Assuming that 70% of Bitcoin mining is taking place in China, and that 30% of mining is completely clean, this yields a weighted average carbon intensity of 490 gCO2eq/kWh. This number can subsequently be applied to a power consumption estimate of the Bitcoin network to determine its carbon footprint.
A more detailed estimate
Later on, more granular information became available in the Global Cryptocurrency Benchmarking Study by Garrick Hileman and Michel Rauchs from 2017. In this study, they identified facilities representing roughly half of the entire Bitcoin hash rate, with a total (lower bound) consumption of 232 megawatts. Chinese mining facilities were responsible for about half of this, with a lower bound consumption of 111 megawatts. This information can be used to get a more accurate idea of the carbon emission factor in grams of carbon dioxide equivalent per kilowatt-hour (gCO2eq/kWh) that applies to the electricity used for mining.
The table features a breakdown of the energy consumption of the mining facilities surveyed by Hileman and Rauchs. By applying the emission factors of the respective country’s grid, we find that the Bitcoin network had a weighted average carbon intensity of 475 gCO2eq per kWh consumed. (This number is currently applied to determine the carbon footprint of the Bitcoin network based on the Bitcoin Energy Consumption Index.)
Source ~ https://digiconomist.net/bitcoin-energy-consumption/