scorecardAn Indian home can live for a year with the energy it needs to mine a single Bitcoin
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An Indian home can live for a year with the energy it needs to mine a single Bitcoin

An Indian home can live for a year with the energy it needs to mine a single Bitcoin
CryptocurrencyCryptocurrency3 min read
Represnetaional image.    Unsplash
  • Bitcoin mining has been known to be environmentally unfriendly and inefficient.
  • Now, a new study claims that miners spend $3 out of $4 of their Bitcoin income on paying for electricity costs.
  • Another study estimates that mining a single Bitcoin consumes the same amount of electricity that an Indian household consumes in 380 days.
Bitcoin mining has long been criticised for being inefficient and a power guzzler. Now, a new report says that electricity charges are actually the single biggest contributor to the costs of mining Bitcoin.

According to a report by CryptoMonday, the electricity costs for Bitcoin mining can be prohibitively high for some. The report adds that $3 out of every $4 earned by Bitcoin miners go towards paying for electricity.

Mining a single Bitcoin can consume as much as 2,165 kilowatt-hours of electricity. According to a study, an Indian household on average consumes 5.7kWh per day – it would take 380 days for an Indian household to consume the same amount of electricity that is needed to mine a single Bitcoin.

Cryptocurrencies – for all the money that people have made off of them – have long been a cause of concern for being environmentally unfriendly. Although solutions are being worked on to reduce the environmental impact of mining these cryptocurrencies, there’s still a lot of room for progress in this regard.

Bitcoin’s proof-of-work (PoW) problem

Bitcoin uses a ‘proof of work’ (PoW) mechanism to regulate the creation of new blocks and the overall state of the cryptocurrency. ‘Proof of stake’ (PoS), on the other hand, uses a simple mechanism to lock coins in a smart contract and owners make their stakes via a lottery system.

For a long time now, PoW has been criticised for consuming more energy than PoS. The PoS evangelists also claim that it is more secure than PoW – essentially, there is little reason to not use PoS.

According to an estimate, Bitcoin mining emits 114 megatonnes of carbon dioxide annually. To put this in context, this is equivalent to Czech Republic’s annual CO2 emission, which has a population of nearly 11 million.

For comparison, Bitcoin mining’s global CO2 emissions are over 4% of India’s total CO2 emissions – and it has a population of nearly 1.38 billion.

Other estimates suggest that Bitcoin mining uses 127 terawatt-hours of electricity – equivalent to Norway’s annual consumption.

Why is Bitcoin mining getting progressively expensive?

Bitcoin derives its value from scarcity. To ensure its value remains stable or that it grows, the rate of Bitcoin mining is managed in such a way that it doesn’t result in excess supply.

Bitcoin mining is dependent on solving complex mathematical equations. The more computational power that is available, the more difficult it becomes to mine a Bitcoin. Likewise, the lesser the availability of computing power, the easier it becomes to mine.

This inherent logic behind the value of Bitcoin and therefore its mining is one of the main reasons behind the increase in power to mine the same Bitcoin today when compared to a year, or a decade ago.