With some making millions of dollars through investment (and, inevitably, others losing everything). But something that we in the data center industry seem more acutely aware of than others, is the energy cost that bitcoin and other cryptocurrencies have on our planet.
In the latest podcast episode, we sat down with Alex de Vries, founder of Digiconomist, to talk about how he tracks the energy usage of the sector and the obstacles to doing this. For starters, let's look at what Bitcoin mining actually is.
“Whenever we talk about the energy consumption of Bitcoin, we're typically only talking about the energy consumption of Bitcoin mining,” says de Vries.
“The mining is a process that is part of essentially creating the next block for the blockchain. In Bitcoin, in order to create the next block for the blockchain, you need to participate in what is effectively a massive game of ‘guess the number’.
“You have millions of devices around the world in a Bitcoin network, attempting 200 quintillion guesses every second of the day, hoping that they guess that winning number. Guessing a winning number means you get to create the next block for the blockchain, and the incentive to do this is that there is an award for whoever completes the block. if you complete the block, you get an award of at least 6.25 Bitcoins.”
The current value (as I sit here and type) per Bitcoin is $21,529.60. A significant number, but one that is subject to change. In November 2021, its value approached $65,000, having started its life at only $327.
However, there has since been a steady decline, with it up to debate whether this will bounce back or continue to fall.
Regardless, the process of mining Bitcoins, while a potentially lucrative business, comes at a high computing cost.
“The question is how do you measure the exact energy consumption of that? Well, there are multiple things we can do, we can first of all estimate the total computational power in the network. So you can look at the current difficulty of mining, and you can look at the speed at which blocks are created, and based on that you can derive that there must be this amount of computational power in the network, which is not a perfect estimate because not that many blocks are being created each day which gives it a little statistical uncertainty.
“You can then look into the market at what [equipment] is available currently for mining Bitcoin and you will see that there is a wide array of devices, but there's only one device that stands out in terms of power and efficiency. One thing that a lot of researchers do is pretend like the whole network is running on that most powerful device, and the reason for doing that is because it gives you a minimum number very simply.
“But it gets complicated really fast because we know that not every miner out there is running the latest equipment. People are constantly developing new more powerful mining hardware, which means that you will always have a bunch of older hardware as well as a bunch of new equipment.”
Not only that, but illegal bitcoin mining is a huge issue and one that is hard to track or monitor.
With all these complications, is monitoring the bitcoin and cryptocurrency world’s energy expenditure possible, or, like the mining process, is it little more than guesswork?