Bitcoin is an energy hog: New numbers suggest how big a problem it is

Bitcoin miners will guzzle more electricity this year than some countries do, according to new numbers from a leading researcher. And while some critics take issue with these figures, few disagree that the digital currency's energy use is a problem that's only getting bigger.

Economist Alex de Vriesstudies bitcoin and other cryptocurrencies, which were invented in 2008by an anonymous computer programmer.Bitcoinallowspeople to buy and sell things directly from each other without the use of intermediaries, like banksor currencies controlled and manipulated bygovernments.

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Bitcoinsare exchanged along apublic digital ledger, known as ablockchain, where every move is tracked and verifiedby computers doingcomplex mathematical calculations, calledhashes. Those willing to lend a hand in verifying the transactions and building theblockchainare rewardedwithbitcoins.

If it sounds complicated, that's because it is. It's also hardwork.

De Vries estimates that globally, computers on the bitcoin network are currently crunching26 quintillion hashes that's millions of trillions, or 26 followed by 18 zeros every secondof every day.

Ittakes quite a bit of computational power to pull that off, and de Vries is among those taking a stab at figuring out just how much energy is used in conductingall that work, publishing his latest surveythe first peer-reviewed research on the topicin the scientific energy journal Joule.

By his math, computers hashing for bitcoins known as "miners" arecurrently using at least 2.5 gigawatts of power, and are on track to collectively suck up more than three times thatby the end of thisyear. That's more than Ireland, Austria, the Czech Republic, the Netherlandsand most Canadian provinces currently each use.

'It is growing fast'

DeVries also estimates the industry's voracious appetite for juice has doubled in the past six months, possibly due to new interest in bitcoin their price spiked to just under $20,000 each at the end of last yearbut alsobecause energy-consumption growth is baked in:the supply of undiscovered bitcoinsis dwindling so it takes morework to find those left.

In the early days, it was comparatively easyto find a bitcoin, as there were fewer miners competing for the work.Mining could be done by hobbyists using personal computers. But as the digital currency's popularity and value has skyrocketed, the increased complexity of the blockchain requires more energy and computing power to solve equations, and now there arespecialized computing farmsmining forbitcoin.

By de Vries' math, a single bitcoin transaction uses as much electricity as a typical Canadian home would consumein a month and there are200,000 transactions being processedeachday.

"Bitcoin has a big problem," de Vrieswrote."And it is growing fast."

But de Vries' numbers and methodology are not without their critics. The economistcomes up with his estimates by assuming most large-scale miners are using the most energy-efficient devices possible, then factors in how many machines are known to be in useand the cost of electricity where these machines are known to be clustered.

He admits he's taking educated guesses, partly because many bitcoin miners operate inrelative secrecy.

Stanford Universitylecturer JonathanKoomeysays deVries' work makes far too many leaps of logic,whichresults in assumptions that are likely wildly outofstep withreality.

"We know there's a lot of electricityused and we know there's rapid growth,"Koomeysaid in an interview. "But nobody has been in these facilities and we don't have information on the servers themselves."

The 800-poundgorilla of the bitcoin world is a Chinese company called Bitmain, which has huge operations in Mongolia and remote parts of China. Bitmainis a fascinating player asthe companyboth mines for bitcoinitself,but also sells mining equipment to others.

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Their most efficient model, known as anAntminer S9, has the computational power of about a half-million PlayStation 3 gaming consoles, but uses as much wattageas a dishwasher in the process, according to de Vries.

It's not hard to imagine how20,000 of those devices as one of Bitmain'slocations in Mongolia is believed to have wouldnet an eye-watering electricity bill.

It's also not hard to understand why many of the largest mining facilities are set up in cold-weather places witha steady supply of cheap power, such as Manitoba, Quebecand Iceland. "Rational agents would undertake mining while the marginal costs are lower," de Vriessaid.

We still don't know exactly how much powerthey're usingor how much they pay for it.

De Vries admits his work is only meant to bea starting off point for future research. "I think everyone agrees on the minimum energy consumption.But the future estimate? That's actually quite debatable," he said.

"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."

But Koomey argues it's classic scaremongering to worry about the electricity use of new technologies.Twenty years ago, he recalls that the media was full of stories about how internetusage was growing too rapidly,and reportedly destined to consume as much as half of all electricity in the world.

"I've seen this happen over and over," said Koomey."That was bunk,[so]people shouldn't jump to conclusions."

"To be clear, [bitcoin mining]is a big user of electricityand growing rapidly," he said."But we need to be careful to not tooverhypethe problem."

Koomeysaidhe puts more stead in the work ofMarcBevand, another researcher who suggests deVriesis overestimating bitcoin's power consumption,possibly by twice as much. (Bevandhas published adetailed criticism of deVries' work online.)

'Digital versions of Beanie Babies'

Regardless of theelectrical toll, some argue any amount oftime and effort that is going into the mining of bitcoin is a fruitless folly.

Andreas Park, a finance professor at the University of Toronto, likens the digital currency to a major fad of the 1990s.

"Bitcoin, such as it is, has little-to-no use.So we are effectively using our planet'sresources to secure people's digital versions of Beanie Babies," he told CBC News in an email.

"I am a fan of decentralization and blockchains, but I sincerely hope that we find mathematically and economically sound alternative approaches soon that replace this waste of resources."