The latest estimates suggest that the Bitcoin network may end up sucking down half a percent of the world's total energy output by the end of 2018, which some say could end up making it too cost-prohibitive to even use the cryptocurrency.
This peer-reviewed paper is among the first to take a comprehensive look at Bitcoin's impact on the energy grid, which researchers hope will provide a greater understanding as to how the cryptocurrency will likely evolve over time.
Utilizing a new methodology designed to pinpoint precisely where Bitcoin's energy consumption rates are headed, financial economist and blockchain specialist Alex de Vries, the author of the study, believes that his discovery will lay a groundwork for understanding the future of Bitcoin.
"We've seen a lot of back-of-the-envelope calculations, but we need more scientific discussion on where this network is headed," de Vries, founder of the Digiconomist blog and employee at the Experience Center of PwC in the Netherlands, is quoted as saying. "Right now, the information available is pretty poor quality overall, so I'm hoping that people will use this paper as a foundation for more research."
In his estimate, de Vries says Bitcoin's right-now total energy usage clocks in at around 2.55 gigawatts, which is almost as much electricity as the entire country of Ireland. And a single Bitcoin transaction, he says, sucks up the same amount of energy used by the average Dutch household in a month.
But Bitcoin's energy consumption levels could more than triple over the next six months, he says, to as much as 7.7 gigawatts. This is roughly the amount of electricity used by the entire nation of Austria, or about one-half of one percent of the world's total consumption.
"To me, half a percent is already quite shocking," de Vries says. "It's an extreme difference compared to the regular financial system, and this increasing electricity demand is definitely not going to help us reach our climate goals."
Should current trends continue, Bitcoin's energy consumption requirements could someday reach five percent of total global use. In de Vries' view, this "would be quite bad," and is something that crypto experts need to address – especially since much of the energy that Bitcoin consumes comes from the burning of coal and other fossil fuels.
Because there's no central governing body that keeps track of Bitcoin transactions, the Bitcoin community at large has to maintain it using a peer-to-peer model that's updated every 10 minutes or so. This requires thousands of computers all around the world to be transacting and updating the blockchain on a near-continuous basis.
In order to perform quintillions of calculations per second, this collective of computers requires plenty of energy – more so than other financial instruments that are centrally maintained. Bitcoin's mining incentives are also driving up energy use, as miners are filling literal warehouses full of computers that process math problems all day in the hopes of being rewarded with new Bitcoins.
"I think everyone agrees on the minimum energy consumption. But the future estimate? That's actually quite debatable," says de Vries. "We don't really have a common approach to getting to a future estimate of electricity consumption right now, which is why I am hoping to get this conversation started. I'm doing this research, but a lot of people should be doing it."
To keep up with the latest Bitcoin news, check out BitRaped.com.
Sources for this article include: