Bitcoin’s usefulness as a payment system has been deteriorating fast over the past year. Bitcoin transaction fees and price volatility skyrocketed, prompting big companies such as Steam and Microsoft to stop accepting Bitcoin payments. This development has resulted in the community now being increasingly focused on defining Bitcoin as an alternative to physical gold; making it a long-term way to store wealth.
Whether this makes sense is an interesting discussion by itself. Any owner of a gold bar can be fairly certain that he or she won’t suddenly receive a similar gold bar created out of thin air, but things have proven to be more complicated in Bitcoin. Anyone that held one Bitcoin at the start of 2017, and held onto it for the entire year, would have ended the year with at least one Bitcoin Core, one Bitcoin Cash and one Bitcoin Gold. But let’s assume for now that this won’t stand in the way of Bitcoin becoming “digital gold”. Unfortunately, not even becoming digital gold will be enough to make Bitcoin’s sustainability problems go away.
By now, we know that Bitcoin has a serious problem when compared to traditional payments systems in terms of energy consumption and environmental impact. One Bitcoin transaction requires the same amount of electricity as an average household uses in a month or more (in most developed countries). That’s several thousands of times more than what’s required by traditional payment systems. Comparisons of Bitcoin to gold are, however, still scarce, and certainly not available in any live data feeds.
Bitcoin versus Gold
To get started with the previous we can first compare the total amount of energy consumed by gold mining versus the total amount consumed by Bitcoin mining. While looking at these numbers, it’s important to keep in mind that in Bitcoin, mining is essential for the creation of new blocks, and thus for keeping the system running. The high costs involved in this process are an important part of what keeps the system secure. Mining for gold doesn’t serve a similar purpose.
Energy Consumption
The data for Bitcoin’s energy consumption is available from the Bitcoin Energy Consumption Index, although an adjustment is made to exclude Bitcoin Cash (making it easier to measure the total energy consumed per mined coin later on). For completeness, we also include a minimum limit for Bitcoin’s energy consumption based on the current network computational power. For gold, we assume an energy consumption of 175 Gigajoules per kilogram of gold mined. Around 3100 metric tons of gold are mined every year, putting the total energy requirement of gold mining close to 150 terawatt-hours per year.
Based on this chart it can be established that gold mining requires a lot more energy than Bitcoin mining, but this only tells half the story. After all, the total value of all the gold mined (well over $100 billion) also significantly exceeds the total value of all the Bitcoin being mined.
A more appropriate way to compare the two would therefore be to consider the energy requirement per equal amount of value produced. The next chart shows how it looks like when the average electricity consumed to generate one Bitcoin is plotted against the average energy consumed to mine one Bitcoin worth of gold.
Interestingly, the chart reveals that even in the most optimistic case, Bitcoin mining is actually more energy-intensive than gold mining. Given a more realistic number, the difference increases fast.
Carbon Footprint
On top of this, we can find that the process of mining Bitcoin isn’t just more energy-intensive, but also has a bigger environmental impact. To reach that conclusion, we first need to estimate the carbon footprint for both. For Bitcoin we can, again, get this number from the Bitcoin Energy Consumption Index. For gold, we assume a carbon footprint of 20 tons of CO2e per every kilogram of gold mined.
Again, the result doesn’t look good for Bitcoin even in the most optimistic case. The carbon footprint is huge for both, considering that the average global carbon footprint per household is approximately 10 tons of CO2e per year, but Bitcoin is the clear “winner”. This means that when you’re deciding whether to hold physical gold or Bitcoin, gold might just be the greener option, and it has the added benefit that it will continue to function even if mining stops completely.
Mr de Vries, looking for a brief commentary from you on the development of bitcoin. Please indicate where media requests could be sent. Thank you very much!
We have extreme high Electricity Prices in Germany/Europe, I hope it stops Mining in many cases or make it slower and more expensive and less profitable, at ~0.285€/kWh (= even at current crap rates we have than 33.17 US-Cent per kWh… the US Average is 12 Cent, any Questions left?! You can run 3 Cards and only pay a little bit more than running a single card…
except France and some others, France simply uses massive nuclear reactors… would Germany act this way, you could add at least 6 to 8 power stations with 2 to 5 reactors per power station… because the EU gave Lithuania a lot of time to close the 2 remaining nuclear power plants, old soviet ones, the same type like in Tschernobyl (but that doesn’t matter…), first one went offline in the late 2000’s… and the other one 2011?! or 2012/13?! However now after over 5 or maybe even 7 Years without… they are ok, much/most as usual “we” (Germany as a state) pay, alternatives had the aim to get less dependent on Russian Oil and Natural Gas, Germany had extreme large reserves of all 3 types of coal, all the high value coal with a high energy density compared to lignite or a mix of lignite in old poor not maintained mining sites, some people go there and collect it, at least once in their life, maybe they are fans of Mining (history)? However, German price makes it no longer affordable to now invest into the i7- oder i9- Generation with “X” (For eXtreme I think, it is up to 16 Cores with 32 Threads in the 1st Gen of this type, I think in the next “version” if you want so there are 32 cores, while AMD “only” has 28 cores and 56 Threads against 32/64 Threads. I use AMD Ryzen 7 2700X… why? I do not pay special additional energy demand,
I have a state financed ~30 (or maybe another ~72€ or 6€ per month hidden to us…..), however only so I can operate the Dark Pro 4 cooler (250W non-water cooler with the Performance of a not soooooooo good air coolers, Pro 4 got 2 of the Pure Wings 2, which are used in the same companies (all “Be Quiet!” main energy adapter. I had to pay very much but for this money usually I would get REAL nice thing, its even with current rates more close to 2,000 US-$ than to 1,900 US-$.
5 Years ago (I bought a FX-8320, 8GB DDR3-1666 RAM + ASUS GTX 760 OC (2 instead of 1 coolers, it was the earlier stage of this OC/Gaming-cards… until than you had your card and you overclocked it or not^^ if you did you had to secure it will not get too hot, but well like Windows developed so often (I started with Win 3.1, later Win 3.11, which I think was even the first Windows version?^^ but until Win 98 a DOS was needed or?! It was especially in Win 95, 98 and 98 SE included and being auto doing “cd C:” and if success, win or windows like I used to have to enter every time I started the computer, the 2-digit showing of 25MHz/16MHz (ofc I always used 25MHz on that IBM 386 gen…….. the good old 286,386,486… well it was the crap shit which Intel took much money for these so “limited” and ultra revolutionary i7-8700K äh I mean i7-8086….
only 2 or 3 Boards in the Test Video I saw accepted the Limited Edition Pack, others simply showed i7-8700K, but all boards/Bios/UEFI-Bios etc. was updated to the testing days morning, many have no release since some months……………… (very small, easy to ship everywhere in the world… as you have NOTHING else than the Processor and a small paper which has to be in 100 languages xD nah I guess for Europe they did European stuff, for the Middle East and Japan… etc… even in Sub-Saharan Africa with Lagos and South Africa as a state are markets worth to be present there, Angola was (?) with its capital Lagos was the most expensive City in the world. Also an over 50 (!) GINI-Index… I think even close 53… means some ahve 100 million and others live in the streets of the large cities, beg, if needed they steal… and the country made its own oil in limited amounts via the also in WW2 from German size used Fischer-Tropsch-Synthese from Coal. Only that South African coal is better, very high quality, so they can produce around ~450,000 – ~475,000 where “we” (western powers) watched the fastest rate of holocaust… only in 3 days ten thousands were murdered, (= most American, North, Central, South are done with that too or?!?! Maybe dialect a bit speech addons here and there?! Same as an US-American talks a different “British based” US-American letter.
so I can operate the Dark Pro 4 cooler (250W non-water cooler with the Performance of a not soooooooo good air coolers, Pro 4 got 2 of the Pure Wings 2
of course not sooo good liquid/water coolers, as they get especially now in summer anyway to room temp beyond 30°C… my GTX doesn’t start cooling at all (nice energy saving mode, Nvidia is just rocking. Copper is used much, a bit nickel too I think. Norilsk Nickel, a whole City named after the main source of income in the area, and yes “damn”, in the most months a pipeline goes west-east to meet some places without own gas production directly close by or not yet invested the 3-digit millions for a smaller field or 1 or 2 digit billion amount to build the Energy Station right from the start, many companies avoid Russia, but its interesting how “heat” energy (even much thermal nuclear energy for hot water in some areas, and absolutely no energy-consuming boilers with 1.8 – 2.5 kW or 1800 – 2500 Watt… usual is ~2000W. We have it too here, the water starts it route to us at a temp of 90°C, we live in the penthouse the other “lady” and her friend and their dog are often here too…and washingt by hand, means much cold and for 2 2-person housing unit in this project we have a overkill use of Gas for example, and the fridge runs for the most time at maximum Level 7 (a quite new one from Q4 2017 I think? Only A+ energy class are allowed to sell on freezing of all kind, only for non freezing but only a large cooling tower with a cooling radius between 3 and 8°C… they can have B or C as they are for me a joke, you cant buy ice-cream packed, I do not get my ice cubes… but ofc the consumption even at 100% of the cooler is like 15W or so….. for US prices this means you can have it for over 75 hours or so and than it creates costs of ~12 US-Cent or ~10 €-Cent… or ~28.5€-Cent by real German Prices in North-East “Berlin” Area, we got very much wind from our surrounding state and only 1.4% nuclear energy in average rates coming out for private users^^
I am still trying to understand this whole “mining” operation. From what I have read- The “miners” are the only thing that provides authenticity and anti-redundancy to this “digital currency”. They are “paid” with Bitcoin, which is finite and rapidly increasingly scarce. What is going to happen when the source of the “pay” runs dry? Do they then try to mine/hack already “owned” coin code? Seems pyramid and Ponzi like to me. I’ll stick to stacking my physical. The damage is already done. It is a store of energy now, not a constant consumer.
You’re absolutely right; Bitcoin has a finite supply – but miners also get paid part of the transactions they process as a fee. During the Bitcoin bubble of 2017 fees made up 30% of total miner earnings. This leaves two scenarios for the future: 1) rewards as a result of new coins will “run dry” but fees will compensate miners by then (allowing the damage to continue) or 2) Bitcoin will collapse along with its miners, but the damage will be done by then.
This analysis is wrong and give incorrect information about Bitcoin mining.
You can’t compare energy consumption of 1 Bitcoin. Bitcoin mining don’t scale. You can’t extract more btc increasing energy consumption. This don’t give a sense. The energy consumption is not for bitcoin production but mainly for secure the network.
Also your analysis of carbon footprint is too simple. You don’t provide a clear explanation. The mainly source of bitcoin mining is hidraulic energy residue. Aproximately 75% of bitcoin energy is green. Also the network has a natural tendency to make the mining the most cost eficcient possible.
I believe that there is more research to be done with respect to power consumption.
There are three significant areas to address and all equally complex.
1. Power grid (national or regional) understanding and the relative percentage of power production sources (Natural Gas, Oil, Coal, Hydro, Solar, Wind, etc.). Each country should have available data for review.
2. Economic/Market conditions relative to crypto currency. There is a very good chance that the small investor is unaware of the risks associated with this new asset class. A simulation should be researched and developed to evaluate the long term worst case scenario, and published accordingly.
3. Regulation and system security for trading platforms.
All of this will take time and investment of resources; which will require coherent planning. Most important, is maintaining some level of civility in discussing these topics.