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A recently released peer-reviewed article by blockchain evangelist and financial economist Alex de Vries deployed a novel methodology to determine Bitcoin’s energy usage a few years from now, and the estimated results are certainly astonishing.
Pay with Bitcoin or Power a Home?
Published on May 16 onJoule, de Vries made use of complex economic models, coupled with publically available electricity costs and mining statistics, with the intentions of producing a scientific paper that companies and individuals can base their research on.
According to de Vries, the worldwide minimum current requirement of Bitcoin is 2.55 gigawatts, equivalent to the electricity usage of Ireland, the world’s 118th largest country by landmass. The researcher also states that this amount equals to half a percent of the world’s total electricity usage.
The report suggests that bitcoin mining power consumption this year could equal the usage of Austria.
Furthermore, every transaction via the Bitcoin network uses up enough electricity to power an average home in the Netherlands.
De Vries, who currently works with PwC Netherlands, believes that the world’s pioneer cryptocurrency may end up using 7.7 gigawatts to power its network by the end of this year, a figure equal to the electricity usage of Austria!
Bad for Bitcoin, Bad For Climate
The huge costs associated with Bitcoin mining – a process that “timestamps” transactions and performs extensive calculations – has been a subject of criticism since years. And with the increase in the network’s size, the costs are further poised to grow, possibly consuming 5 percent of the world’s total electricity in the future.
De Vries notes:
You are generating numbers the whole time and the machines you’re using for that use electricity. But if you want to get a bigger slice of the pie, you need to increase your computing power. So there’s a big incentive for people to increase how much they’re spending on electricity and on machines.
Applying economic principles to the Bitcoin protocol highly suggests the network reaching a point of equilibrium, which would see the miner’s bitcoin incentives become equal to the computing, hardware, and electricity costs involved.
With that in mind, de Vries extrapolated present data to that of the equilibrium point, to determine electricity costs and economic implications in running the Bitcoin network during that period
Sources May Have Skewed Results
A telling point remains that of utilizing public data, which de Vries feels could be misleading. Mining companies like Bitmain are highly secretive operations, and official documents pertaining to their operations are largely unavailable.
However, de Vries is confident of his prediction, and says:
Sometimes the best information we’ve got is really shaky eyewitness accounts. That’s the stuff we have to work with.
The researcher believes that his paper can be referred to by governments and regulatory bodies prior to placing restrictions or introducing laws, as its peer-reviewed, scientific nature supersedes that of anecdotal evidence and weakly researched publications.
Featured image from Shutterstock.