Technology

Can massive energy consumption pierce the Bitcoin bubble?


04/03/2021 05:42 GMT + 7

Mining requires a lot of energy, and more and more people are becoming aware of the scale of Bitcoin’s environmental impact.

Elon Musk’s backing has contributed to pushing Bitcoin’s price to more than $ 58,000 at a time. However, more and more people are becoming aware of the scale of Bitcoin’s environmental impact, which in turn negatively impacts the Tesla CEO.

Musk made over $ 900 million in profit on paper after investing in Bitcoin.

Recently, the energy consumption of Bitcoin mining has led to harsh criticism from a number of people, including US Treasury Secretary Janet Yellen. President Biden’s senior economic advisor described Bitcoin as “an extremely inefficient way of trading” and said that “the energy consumed to process these transactions is staggering”.

It is not yet clear how much energy Bitcoin consumes as cryptocurrencies are difficult to track by design. But for sure, the “mines” that mine Bitcoin consume a lot of electricity. The calculation results of the University of Cambridge’s Center for Alternative Finance Research (CCAF) show that Bitcoin’s total annual energy consumption ranges from 40 to 445 terawatt hours (TWh, 1 terawatt hour is 100 million. kWh), estimated at around 130 TWh on average. In the UK the annual electricity consumption is more than 300 TWh, while in Argentina is roughly equivalent to the CCAF average estimate of Bitcoin.

Most of the electricity used in Bitcoin mining comes from pollution sources. The CCAF team investigated the energy use of Bitcoin “mines” around the world and found that about two-thirds of them came from fossil fuels. Blockchain technology that supports cryptocurrencies requires strong computation in design, which means huge energy consumption.

Most of the energy to mine Bitcoin comes from fossil fuels.

“Mining” is based on a giant and decentralized network of computers. This is a way to acquire Bitcoin cryptocurrency and is named for the same principle as mineral mining. The computing equipment used to “mine” is called the “mining machine” and the participants are called the “miners” of bitcoin. Not only can they create new bitcoins, they can also independently verify and record every bitcoin transaction.

In fact, Bitcoin is the reward miners keep accurate records of every transaction. Gina Pieters, a professor of economics at the University of Chicago and a researcher for the CCAF team, explains that it’s like a 10-minute lottery game. Data processing centers around the world compete to systematically compile and send transaction records, they also have to guess a random number. The first person to submit the transaction records and the correct numbers wins the prize, which will become the next block of the blockchain. At the end of this “lottery”, a new number is created and the whole process will start over.

Professor Pieters claims that the higher the Bitcoin price, the more miners want to participate. “They want to make money,” she said. “This encourages them to put in more and more powerful machines to guess this random number, thereby increasing their energy consumption.” Also, there is another factor driving the continued increase in Bitcoin’s energy consumption. Since the program is designed to ensure that it always takes 10 minutes to understand the puzzle, if the number of miners increases, the puzzle becomes more difficult and requires more computation.

Hence, Bitcoin is really designed to encourage more computational work. Bitcoin’s philosophy is that the more computers compete to maintain the blockchain, the more secure the blockchain will become. Because anyone trying to destroy this virtual currency must have at least the same computing power as the sum of the computational power of other miners. This means that as Bitcoin’s value gets higher and higher, the computational work used to verify and maintain, as well as the energy it consumes, will inevitably increase.

Can massive energy consumption pierce the Bitcoin bubble?

Bitcoin’s energy consumption exceeds half of the world’s data centers

It is estimated that they can perform 16 billion calculations per second. Bitcoin expert Alex de Vries, founder of Digiconomist, said that such a large amount of computational work is the “Achilles heel” of this cryptocurrency. De Vries believes that Bitcoin mining requires a large investment, which also makes it difficult to scale.

He speculated: “If Bitcoin is accepted as the global reserve currency, the price of Bitcoin could reach millions of dollars and the amount owned by these mines would exceed the entire federal budget. electronic money “. As for Bitcoin, “we will have to double global energy production,” added Alex de Vries.

“In fact, Bitcoin is not used much in the legal economy today,” said Kenneth Rogoff, a professor of economics at Harvard University and former chief economist at the International Monetary Fund (IMF). Yes, a rich person sells it to another rich person, but this is not the end use. Without these uses, Bitcoin has no long-term future. In other words, Bitcoin exists almost exclusively as a tool of speculation.

So, is the Bitcoin bubble about to burst? “This is my prediction,” said Professor Rogoff, “but I can’t really tell when it will happen.”

Diep Save

The US government can

The US government can “force” Bitcoin to protect the dollar

In fact, this is a completely valid statement, because the US authorities are making many moves that suggest they may interfere with Bitcoin.

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