Bitcoin Mining Will Be Consuming Power like Small Country

May 03, 2016 | by VienS
Bitcoin Mining Will Be Consuming Power like Small Country

The issue of energy consumption is especially critical for Bitcoin miners. Hashing demands more and more capacity so the bitcoin miners have to continuously increase the number of pieces of equipment, thus consuming more and more electricity.

The findings of research of Leiden University ecologists are striking: the scientists came to a conclusion that, within ten years from now, cryptocurrencies production will be devouring as much electricity as a small country is able to produce, like Denmark for instance. The article about future of mining energy consumption was posted in a reputable online news portal Motherboard.

What is Mining and How Crypticurrency is Produced?

Bitcoin is a product of solution of multiple mathematical problems. The mathematical problems are handled by computers located in various parts of the Earth. Such location mode guarantees safety and security. A single data centre controls the result but it doesn’t control the process.

Miners are specialists with a task to find a single hash among millions of combinations. A miner who was the first to find a correct hash will be rewarded with 25 bitcoins, easily exchangeable into actual currency. The reward is quite significant – one bitcoin costs over 400 US dollars.

The problem is that miners need more and more capacities to leave their competitors in the dust and to get the prize. At the beginning one personal laptop was sufficient for successful mining, but eventually miners started to use powerful video cards in order to increase the chances of success, and later on turned to specialized reprogrammed chips and integrated circuits.

After purchase of all the required equipment, the only miner’s expenditure will be his/her bills for electricity consumption. However, the complexity of calculations is constantly increasing, slowing down miner’s return on investment in equipment– if in 2011 a miner was able to return the money spent on a powerful video card within 2 weeks, in 2016 it will cost you about 300 US dollars to produce one bitcoin. Besides, miners’ reward is constantly decreasing too – it is expected that soon miners will be getting only 12.5 bitcoins per each new block.

Bitcoins Mining Trends

Ever growing bills for electricity caused by the use of powerful equipment lead to the situation that individual miners working from their homes are gradually coming to extinction. Instead, biotin mining pools and bitcoin farms came to life to replace them. Pools consist of thousands miners, each one get the profit proportional to his/her personal contribution into a common success. Such mining method will you income more often, but in smaller bits. The world’s largest pool is located in Hong Kong and it produces only 26 bitcoins per day, which is a bit more than ten thousand US dollars, as per the current exchange rate.

Based on the fact that the number of individual miners is falling, a researcher Sebastiaan Deetman presented two possible scenarios of bitcoin mining for 2020 with regard to energy consumption, one of them is a pessimistic forecast and another one is optimistic.

According to scientists, a pessimistic scenario is more probable: hashrate growth, together with reward shrinking, will lead to the situation when total electricity demand of bitcoin network will actually be comparable with electricity consumption of entire Denmark. The fears of Leiden University researcher were shared by Gay Lane, a chairman of Australian Long Future Foundation. He thinks that if a bitcoin cost will rise to one million US dollars the cryptocurrency production will demand 60% of total world electricity demand. Lane believes that majority of the people will be just sitting in darkness.

According to the optimistic scenario electronic giants will be able to develop energy efficient devices and technical progress will be proportional to the growth of resources spent on mining. Even now multi corporations are busy seeking for solutions. At the end of 2015 BitFury and Bitmain companies informed about thier project aimed to develop a unique mining chip which would require three times less energy than a standard one.

Even if the energy consumption of bitcoin production is very high, bitcoin still has numerous advantages. Bitcoin is the first alternative to existing financial environment and anybody can get it. It would be a mistake to think that only bitcoin production demands more and more energy: manufacturers of all modern gadgets take part in this arms race and bring to the market more and more powerful devices. So slowdown of Bitcoin production growth will not be a solution. To resolve the problem we need to create smart energy systems. Currently a number of start-ups are already experimenting with intellectual energy metering devices.