Bitcoin mining is super important. It keeps our favorite cryptocurrency going. Mining is the process of verifying the bitcoin transactions and adding them to the public ledger, and being rewarded for doing the same. It involves solving complex cryptographic puzzles which are highly computation intensive. Anyone can become a miner, provided that you have access to the Internet and the hardware required to do the difficult calculations.
Bitcoins are mined in groups called “blocks”. The reward for mining gets halved for every 210,000 blocks mined. When bitcoin came out in 2009, the reward for mining a block was around 50 BTC. Today, the reward for mining a block is 12.5 BTC. Currently, there are about 16,791,100 bitcoins in circulation, and the maximum number of bitcoins that can ever be produced has been capped at 21 million. On an average, around 1,800 bitcoins are mined per day. (For real-time figures, checkout bitcoinblockhalf.) More the number of active mining nodes (higher hashrate), greater the difficulty level of mining additional ones. As a result, computations get complex, and a lot of hardware is required for doing the same.
Now, this hardware would understandably consume a lot of energy to run. This consumption would be pretty significant, you’d think. Let’s do the math and find out.
Doing the Math
To calculate the electrical energy used to power the bitcoin network, one needs to look at the number of sums that are conducted every second for solving the cryptographic puzzles. Then, one needs to find out the amount of electrical energy needed to solve each sum. The “sums” being talked about here are nothing but “hashes”.
A miner has to come up with a 64-digit hexadecimal number (A hash) that is less than or equal to the target hash. Not only that, he/she has to be the first one to do it. To mine successfully, you need to have a high hashrate and need a lot of computing power. Your best bet would be to use either a graphics processing unit miner (GPU) or an application-specific integrated circuit miner (ASIC).
- According to a recently released estimate by Digiconomist, Bitcoin mining consumes about 30.14 TeraWatt Hours of energy annually.
- This level of consumption is actually higher than more than 159 countries.
- About 381,000 bitcoin transactions are processed in a day. In a year, therefore, a bitcoin transaction would consume an average of 200–210 KiloWatt Hours of energy.
- An Indian household consumes an average of 75 KiloWatt Hours of energy in a month. A single bitcoin transaction, therefore, consumes as much energy as a household does in 3 whole months!
The Power of Bitcoin
One has to agree that running the bitcoin network requires a lot of power. In fact, with the numbers we’re crunching, bitcoin transactions are consuming more energy than half the planet!
With bitcoin gaining immense popularity, the number of miners that join the race keeps increasing. As it gets harder and harder to mine bitcoins, the graph of power needed to do so continues to shoot up. In some places, this power drain has been putting a strain on the local power grids. For example in Venezuela, mining operations have adverse effects on the country’s existing electricity shortage problem.
On the other hand, one needs to remember that the bitcoin is a volatile currency. Different numerical figures associated with it constantly fluctuate every day. This leads us along a path which has an unforeseeable future.