Bitcoin’s Energy Use Dips After Price Drop – Good News For Environmentalists?
Bitcoin, the world’s most popular cryptocurrency, consumes an astounding amount of electricity. But, its energy use depends on a lot of things.
After suffering a major collapse this entire month, BTC price has remained so low that it is driving the blockchain’s vast electricity consumption to fall as well.
According to estimates of annualized electricity usage published on Digiconomist.net by Alex de Vries, a digital currency economist based in Paris, Bitcoin’s energy demand has decreased by more than a third during the past several weeks.
Still, this is equivalent to the yearly electricity use of Argentina, with a single conventional BTC transaction requiring the same amount of energy that a normal American home would consume in roughly two months.
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Bitcoin: The Power-Hungry Business
Think about this: The process of minting a single unit of Bitcoin – which has upset environmentalists and consumer advocates concerned about pollution – consumes more than 90 terawatt-hours of electricity each year, which is greater than Finland’s average annual electricity consumption.
As digital currencies, and Bitcoin in particular, have increased in popularity, energy use has become the most recent source of contention in the greater discourse regarding what and who crypto currencies are useful for.
Since three weeks ago, the token’s energy consumption has apparently decreased dramatically. According to the Cambridge Bitcoin Electricity Consumption Index, the network now uses more than a quarter less electricity than it did at the beginning of June.
In contrast, the decline in electricity required for Ethereum has been even more dramatic, falling from a peak of 94TWh a year to 46TWh a year – Qatar’s annualized use.
Bitcoin’s current electricity consumption is around 10.65 gigawatts, per the Cambridge BEC Index. This is less than the estimate of 14.34 gigawatts from the first week of June.
Its proof of work (PoW) consensus method is the primary source of the crypto’s energy usage. The process incentivizes crypto “miners” to consume electricity as they compete to create the next Bitcoin block. The winner receives a set amount of Bitcoin.
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BTC total market cap at $404 billion on the weekend chart | Source: TradingView.com
The BTC Price & Mining Incentive Correlation
As the price of cryptocurrencies has declined (BTC reached an all-time high of $69,000 in November 2021, and is currently trading near $21,000 on Friday afternoon), so has the value of the incentives to miners.
Digiconomist believes that the Bitcoin network is responsible for approximately 114 million tons of carbon dioxide per year, based on the geographical distribution of the mining hash rate and using data through May 27, 2022.
Using the same statistics, it is projected that Ethereum mining creates 48.7 million tons of carbon dioxide emissions, the same amount as Bulgaria.
As long as Bitcoin’s price fluctuates, its energy consumption is likely to remain variable in the foreseeable future.
Featured image from Business Today, chart from TradingView.com