Bitcoin consumes more electricity than 159 countries – really?
The inner Mongolia. In this Chinese province there is somewhere the largest Bitcoin mine in the world. Image by Neil Young via Flickr.com. License: Creative Commons
A website estimates the electricity consumption of the Bitcoin network-and promptly it says that Bitcoin burns more electricity than 159 countries in the world. What’s on it?
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The headline is of course a sure -fire success: Bitcoin “eats” more electricity than 159 countries. With almost 30 terawatts, the energy requirement of the decentralized currency is about as high as that of Slovakia and only a bit deeper than from Denmark. Of course, this is not entirely optimal and makes Bitcoin the number one climate killer among the payment systems.
What about these messages? You rely on a “study” of the British electricity comparison portal Power Compare. However, this has only taken over an estimate by the Digiconomist Crypto news portal and illustrated by infographics. Digiconomist leads a “Bitcoin Energy Consumption Index”, which reproduces Bitcoin’s hunger for electricity in a chart. The index is currently around 30 terawatt, which is about as much as the state of Oman uses and Bitcoin would rank 65 in the states of electricity consumption ranking.
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Unfortunately, there is no critical look at the methodology of the digiconomist in any article. So how does the portal get this value?
“Even if you can easily calculate the absolute hashrine of the network, it is impossible to say what this means for energy consumption,” explains Digiconomist. The problem is that different mining machines have a different high electricity consumption. In order to determine the entire electricity consumption of Bitcoin, it has therefore been estimated in the past which machines are distributed in which ratio in the network. Due to a report on the largest Bitcoin mine in the world, which was set up by Bitmain in the inner Mongolia, Digiconomist comes to the conclusion that such estimates neglect important factors, such as cooling, which is why the previous results were inaccurate.
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“The Bitcoin Energy Consumption Index therefore suggests that the problem upside down and to determine the energy consumption from an economic perspective.“And digiconomist assumes that there is a relationship between income and costs of the miners. “Since electricity costs are an essential part of the expenditure of the miners, it is logical that the absolute power consumption of the Bitcoin network is related to the income of the miners.“So the index takes the miners’ income at the current market price, estimates how much they spend on electricity (60 percent) and how much they pay for the electricity (5 cents), and determines how much electricity can consume Bitcoin.
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The bill is somehow like this: you take the reward per block (12.5 bitcoin + fees), multiplies it 144 (so many blocks are found a day), and again with the current market price (9.500 dollars). This is then calculated for one year to find out what the miners earn a year, takes 60 percent of what the annual power expenditure can be, and offset this with a current price of 5 cents per kilowatt hour.
The result is known: 30 Terawatt hours a year, or something like Oman or Slovakia. This value should not be roughly estimated. But there are some reasons to at least relativize him.
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- First, the starting value seems too high. Digiconomist assumes electricity costs of 0.284 watts per gigahash. The current Antminer, S9, on the other hand, only needs just under a third, namely about 0.088 watts per gigahash. Even the previous predecessor, the S7, had less consumption than 0.284 watts per gigahash. One can assume that the “secondary energy costs” are set a little too high.
- Second, a value of 60 percent for power spending also seems to be a little too high. Let’s take a look at the Antminer S9. It costs 1.$ 415 and consumes about 1.2 kilowatts. If, like the digiconomist, you now run out of a current price of 5 cents per kilowatt hour, the operation of the S9 7 cents per hour or $ 613 a year. The device must therefore run for more than 2 years so that the electricity costs make up the targeted 60 percent of the total costs.
- Thirdly, the digiconomist assumes the current price and assumes that it is immediately implemented in Hashrates at the current state of the art. In fact, the retrofitting of the miners lags behind the price of the price almost permanently this wild year. And even if it comes behind, the structure of the Hashrate usually goes hand in hand with a technical upgrade to more efficient miners. In other words: if the miners have invested the current income of the network in hardware, the GigaHash rate will have improved each watt.
An interesting case study is the mine from Bitmain described by the digiconomist himself in the inner Mongolia. It consists of 21.000 miners, which are housed in eight buildings. At the beginning of August, when the mine was visited by several media representatives, it allegedly generated almost 4 percent of the total Bitcoin hashrates and used 40 megawatts per hour. If you calculate this, the network had an overall consumption of 1 at that time.000 megawatts per hour, which would result in an annual consumption of around 8.7 terawatt. According to the index, the electricity consumption has more than tripled since the beginning of August (while the Hashrate itself has not even completely doubled).
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The Bitcoin Energy Consumption Index is unable to maintain consistency for its own case study. This shows that you have to enjoy the results with caution. The network could have a consumption of 10 terawatts as well as 30 terahash – but also of 40 terawatt. But one thing is clear – we have an order of magnitude. In the best case, Bitcoin “only” consumes as much energy as a country as Uruguay (90th place), in the worst the cryptocurrency comes to electricity costs from the format of a state such as New Zealand (55th place).
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That sounds dramatic, and it is also a certain degree. However, this is relativized if you make it clear that it will probably be more of the great industrialized nations that invest excess energy in the mining. One could say, for example, that China only has to put 0.5 percent of annual electricity consumption into mining to supply the entire Bitcoin network with electricity, or 0.7 percent of US consumption.
In addition, the statistics of the digiconomist stimulate a much more interesting train of thought than pure outrage: if the average electricity costs of Bitcoin mining are about 5 cents, and if the miners heat 30 Terawatts a year-then that means that there is 30 terawatts of excess electricity in the world that does not manage to generate more than 5 cents per kilowatt hour. The Hashrate of Bitcoin, in this way, becomes an indicator of how lucrative electricity is otherwise used.
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