Bitcoin uses more power than Sweden
Bitcoin 'miners' have an incentive to do their computing: they get a reward for creating the next block, a certain amount of Bitcoin. And as the price of Bitcoin goes up, there's more and more incentive to do this mining. Faster technology doesn't make it easier, because the underlying code is set up such that the puzzle becomes harder the faster the technology gets. Today, mining operations are relatively centralised in vast banks of dedicated electronic chips that are drawing enormous amounts of electricity. Michel Rauchs from the Cambridge Centre for Alternative Finance told Phil Sansom and Eva Higginbotham that he's done the maths...
Michel - Bitcoin currently uses about 15 gigawatts of electric power. That's about as much as Ukraine and Sweden consume in an entire year.
Phil - Ukraine and Sweden? Full countries?
Michel - That makes it look very large. Now you can also make it look a bit smaller. The yearly consumption of just stand-by home appliances in the US alone could power the Bitcoin network for nearly two years on their own.
Phil - Who exactly are these miners?
Michel - It used to be, really, hobbyists. Nowadays, since a few years now we would be talking about industrial scale operations all over the world; so we need big data centres that host tens of thousands of machines. Since 2012, you have specialised hardware called application specific integrated circuits; machines that have been specifically designed with custom chips to be good at one single thing, which is Bitcoin mining.
Phil - Is that how you figured out how they're taking up that much power? You could actually go to the places and ask them what they're using?
Michel - So that would of course be the ideal way, but unfortunately we do not live in a perfect ideal world. So we have to come up with a model that is based on certain assumptions. We essentially use a bottom up approach that starts from the energy efficiency of those different types of mining equipment, essentially calculates for each type of equipment whether it's still profitable based on a range of current factors, such as the Bitcoin price, mining revenues, and also the average electricity price.
Phil - Michel, all this energy is probably going to come with a pretty big environmental impact, no?
Michel - So that really depends on the energy sources that went into producing the electricity that miners use. We've essentially compiled the data sets, the estimates where most of those miners are being based. So currently we cover about one third of the entire network. China is clearly dominating with about 60 to 70% of all Bitcoin mining. But within China you see seasonal migration, where during the wet season miners are actually located or moving towards the Southern regions of Sichuan and Yunnan, where there is huge excess supply of hydropower that cannot really be stored or transported to demand centres. However, during the dry season, those miners then move north, where actually the majority of the power is being generated using brown coal.
Phil - Do you have an idea so far of what the carbon footprint of this stuff is? Or maybe how much of it is renewable energy, and how much is definitely not renewable?
Michel - So through surveys, we found out that miners used on average about 39% renewables, but that was based in 2019. So that might have changed quite a lot.
Eva - That is absolutely nuts. As much electricity as Sweden in a whole year. That is a lot. How much do you get for mining? How big is the reward?
Phil - The reward actually halves automatically every four years. Right now you get just over six Bitcoins for mining a block, but at today's prices, that's still more than $300,000.