Financial economist Alex de Vries, whose article was published on Wednesday in Joule magazine, hypothesizes that Bitcoin mining will require more electricity. According to his calculations, by the end of 2018 Bitcoin network will use about 0.5% of the world's electric power, about as much as Austria - the average European country.
Energy demands are one of the key problems of the cryptocurrency industry, which is solved in different ways. The miners in China are trying to gain access to cheap hydropower in the west of the country, while Japanese companies are developing more energy-intensive equipment. Now, Bitcoin transactions involve 2.55 gigawatts of energy (roughly consumes Ireland). By the end of the year, consumption could potentially rise to 7.67 gigawatts - comparable to the energy needs of Austria. If Bitcoin price increases sharply, the demands of the industry may increase up to 5% of the world's electricity.
For each block created, a given miner receives 12.5 Bitcoins, with the new blocks appearing about every 10 minutes. The complexity of the tasks automatically adjusts to a 10 minute cycle. As a result, this requires more computing power for future tasks. This signifies that the cost of electricity to create Bitcoin units are growing, while profits are decreasing. According to the de Vries hypothesis, a turning point may come when mining starts consuming 7.7 gigawatts of electricity. At this point, the process will simply became unprofitable for some miners and they will start leaving the industry.
De Vries has been investigating bitcoin-transactions for several years already. According to his study, one Bitcoin transaction takes as much energy as the average Dutch family consumes in a month. He also revealed that 60% of the income from mining bitcoins goes for energy payments,and if consumption increases, mining will cease to be profitable. In another study, de Vries concluded that cryptocurrency mining is consuming three times more energy than gold mining. The study received critical reviews in the scientific community. Some experts doubt that you can make inferences and predictions based on fragmentary data. De Vries believes that “we cannot observe this hashrate directly, but it is possible to derive this number from the observable difficulty and the actual time required to mine new blocks for the blockchain”.
At the same time, the scientist notes that theamount of data available for analysis is extremely limited, which makespredictions unreliable and notes that the introduction of state regulation ofmining can give more access to scientists.
By Nadya Astam