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You’ve probably heard that bitcoin is on an insane roll. But you know what’s also crazy? The bitcoin network already consumes an estimated 32. That’s more energy than you’d need to power all of Houston. It’s more than you’d need to power all of Ireland, and roughly as much as Denmark. That raises the question: Is all this energy use worth it? It’s frankly hard to see how.
Bitcoin was supposed to be a kind of anarchist project: A peer-to-peer currency outside of the control of any government. There are certainly upsides to that premise. But that means bitcoin also has to get by on do-it-yourself projects by a decentralized network of enthusiasts. The digital process by which new bitcoins are created and added to the currency supply — called “mining” — involves a ton of computational power, and thus a ton of energy. All of that complexity requires much, much more energy than established systems for payments and transactions. The Guardian reported that one of Visa’s two American data centers uses about 2 percent of bitcoin’s power consumption.
Meanwhile, the two centers handle over 570 times as many transactions as the bitcoin network each day. But it’s also important to consider what people actually use bitcoins for. There are certainly good and defensible ways to use a currency designed to evade government and law enforcement oversight. There are lots of bad and indefensible ways, too.
But because bitcoin doesn’t play nice with established governments and legal systems, and because of its extreme volatility and transaction fees, it’s simply not a reliable way to actually purchase goods and services. What people mainly do with bitcoins is stockpile them and wait for their value to skyrocket. 17,000 in less than a year? So we’re basically burning those 32. 5 terawatt-hours per year to power a particularly weird form of gambling.
Which is doubly silly once you consider most of us in the developed world can already gamble with the money in our regular government-sanctioned checking accounts — either at a casino or on Wall Street. In raw economic terms, this pretty clearly doesn’t qualify as productive activity or an efficient use of resources. Bitcoin investing will inevitably remain a hobby for wealthy people in the developed world. Which undercuts the case that bitcoin-style cryptocurrencies help the developing world much. Now, are there ways bitcoin could solve its energy problem? Bitcoin is designed to make the computations easier as the supply of bitcoins grows. That should slow down its energy consumption per computation over time.
Given the digital currency’s meteoric rise, most analysts understandably expect it to plummet. That was a random event, so who knows if another precipitous fall is imminent. Interestingly, it’s designed to have a hard supply limit: Once miners create 21 million bitcoins, they can’t make anymore. Finally, if bitcoin’s network and culture adapted to become more society and government-friendly, that ought to also open up opportunities to change its digital architecture and improve its energy use. Of course, those two options would require bitcoin to abandon the spirit of bitcoin. After looking at bitcoin’s current trend, Wired concluded that “by February 2020, it will use as much electricity as the entire world. And things that can’t continue generally don’t.