Each Bitcoin Transaction Uses As Much Energy As Your House In A Week

Tyler Durden's picture

While Bitcoin bulls will probably never have it so good as they have in 2017, we wonder whether many of them have stopped to think about the environmental downside of this roaring bull market. After all, back in the dot.com boom, people had ideas about potential internet businesses, issued pieces of paper representing ownership and watched their prices go parabolic parabolic. All it took was a Powerpoint presentation, some computer programming expertise and a “research” report, courtesy of Mary Meeker, Henry Blodgett et al.

The environmental downside we’re referring to in Bitcoin is, of course, is energy.

We alluded to this in a constructive way here when we noted that a new Bitcoin mining hub is developing in Iceland, where the natural temperature dramatically reduces the cost of cooling computing hardware.

The primary energy requirement, however, goes into the computing power to “mine” the Bitcoins. The Bitcoin mining industry can consume 24 terawatt hours of electricity and still be profitable – the Motherboard website provides some context...  

Bitcoin's incredible price run to break over $7,000 this year has sent its overall electricity consumption soaring, as people worldwide bring more energy-hungry computers online to mine the digital currency. An index from cryptocurrency analyst Alex de Vries, aka Digiconomist, estimates that with prices the way they are now, it would be profitable for Bitcoin miners to burn through over 24 terawatt-hours of electricity annually as they compete to solve increasingly difficult cryptographic puzzles to "mine" more Bitcoins. That's about as much as Nigeria, a country of 186 million people, uses in a year… De Vries also estimates that the worldwide Bitcoin mining industry is now using enough electricity to power 2.26 million American homes.

A rapid “Google” later and we discovered that there are 125.8 million American households, so almost 2%.

Another way of looking at Bitcoin’s energy consumption is divide the electricity use in Bitcoin mining each day by the number of daily Bitcoin transactions. As the Motherboard notes, each Bitcoin transaction now requires the same amount of electricity needed to power the average American household for one week.

Expressing Bitcoin's energy use on a per-transaction basis is a useful abstraction. Bitcoin uses x energy in total, and this energy verifies/secures roughly 300k transactions per day. So this measure shows the value we get for all that electricity, since the verified transaction (and our confidence in it) is ultimately the end product…This averages out to a shocking 215 kilowatt-hours (KWh) of juice used by miners for each Bitcoin transaction (there are currently about 300,000 transactions per day). Since the average American household consumes 901 KWh per month, each Bitcoin transfer represents enough energy to run a comfortable house, and everything in it, for nearly a week. Since 2015, Bitcoin's electricity consumption has been very high compared to conventional digital payment methods. This is because the dollar price of Bitcoin is directly proportional to the amount of electricity that can profitably be used to mine it.

Unfortunately for the environmentalists, the Bitcoin price – as every bull knows – entered the parabolic phase in 2017. This Bloomberg chart calculates the number of days for each $1,000 rise in price.

While Motherboard states that De Vries model isn’t perfect and “makes assumptions about the economic incentives available to miners at a given price level”, the website makes the point that there is clearly a “problem”. According to Motherboard...

That problem is carbon emissions. De Vries has come up with some estimates by diving into data made available on a coal-powered Bitcoin mine in Mongolia. He concluded that this single mine is responsible for 8,000 to 13,000 kg CO2 emissions per Bitcoin it mines, and 24,000 - 40,000 kg of CO2 per hour. As Twitter user Matthias Bartosik noted in some similar estimates, the average European car emits 0.1181 kg of CO2 per kilometer driven.

 

So for every hour the Mongolian Bitcoin mine operates, it's responsible for (at least) the CO2 equivalent of over 203,000 car kilometers travelled.

However, you’ve probably been thinking what we’ve been thinking. While the price is going parabolic now, Bitcoin usage might go parabolic in the future, problem solved. While it might help, De Vries pointed out the structural flaw...

As goes the Bitcoin price, so goes its electricity consumption, and therefore its overall carbon emissions. I asked de Vries whether it was possible for Bitcoin to scale its way out of this problem.

 

"Blockchain is inefficient tech by design, as we create trust by building a system based on distrust. If you only trust yourself and a set of rules (the software), then you have to validate everything that happens against these rules yourself. That is the life of a blockchain node," he said via direct message.

Motherboard reflects on the cost of Bitcoin’s environmental footprint versus the benefits of a decentralized payment system which avoids the “Too Big To Fails” and their smaller brethren.

This gets to the heart of Bitcoin's core innovation, and also its core compromise. In order to achieve a functional, trustworthy decentralized payment system, Bitcoin imposes some very costly inefficiencies on participants, for example voracious electricity consumption and low transaction capacity. Proposed improvements, like SegWit2x, do promise to increase the number of transactions Bitcoin can handle by at least double, and decrease network congestion. But since Bitcoin is thousands of times less efficient per transaction than a credit card network, it will need to get thousands of times better. In the context of climate change, raging wildfires, and record-breaking hurricanes, it's worth asking ourselves hard questions about Bitcoin's environmental footprint, and what we want to use it for. Do most transactions actually need to bypass trusted third parties like banks and credit card companies, which can operate much more efficiently than Bitcoin's decentralized network? Imperfect as these financial institutions are, for most of us, the answer is very likely no.

It’s certainly food for thought, even for die-hard libertarians, like ourselves. Then again, perhaps less so for libertarians who’ve been loaded up with Bitcoins in the past few weeks. They would likely be more interested in the bull, bear and neutral cases for Bitcoin in the Bloomberg article linked above. Here is the summary.

With the rhetoric for and against heating up this week amid bitcoin’s barrelling gains, here’s a look at where some big names in finance stand -- from those who see it as the natural evolution of money, to the naysayers waiting for the asset to crash and burn.

Bitcoin’s Backers

  • The digital currency’s evangelists are led by Roger Ver, known in the industry as “Bitcoin Jesus.” Ver remains optimistic about bitcoin’s sustainability amid attempts from governments like China to curb some of the more speculative elements of trading. “The only way to stop (bitcoin) is to turn off the entire Internet in the entire world and keep it turned off,” he said in a September interview with Bloomberg News.
  • Some countries are jumping on the bitcoin bandwagon, with Argentina’s most important futures market considering offering services to investors in digital currencies, while Turkish Central Bank Governor Murat Cetinkaya said digital currencies may contribute to financial stability if designed well.
  • Ronnie Moas, who for the past 13 years has made more than 900 stock recommendations via his one-man show at Standpoint Research, upped his 2018 price forecast to $11,000 from $7,500 on Friday. He maintained his $50,000 target for 2027, though he said it was conservative.

Bitcoin’s Detractors

  • Severin Cabannes, deputy chief executive officer at Societe Generale SA, was the latest big bank official to weigh in, saying that “Bitcoin today is in my view very clearly in a bubble,” in a Bloomberg Television interview Friday.
  • Speculation around bitcoin is the “very definition of a bubble,” Credit Suisse Group AG CEO Tidjane Thiam told reporters in Zurich on Thursday. “The only reason today to buy or sell bitcoin is to make money,” and such speculation “has rarely led to a happy end,” Thiam said.
  • Themis Trading LLC raised a red flag this week after CME Group Inc. announced plans to introduce bitcoin futures, saying the world’s largest exchange owner appeared to have “caved in” to pressure from clients. “A bitcoin future would be placing a seal of approval around a very risky, unregulated instrument that has a history of fraud and manipulation,” the firm said in a blog post.
  • JPMorgan Chase & Co. CEO Jamie Dimon remains one of Wall Street’s most strident bitcoin opponents, saying in October that people who buy the currency are “stupid” and that governments will eventually crush it.

On the Fence

  • While CME’s decision to offer bitcoin futures by the end of the year appears to be an endorsement of the currency’s viability, CEO Terry Duffy demurred when asked whether he’s concerned about a potential bubble. “I’ve seen a lot of different bubbles over the last 37 years,” he said on Bloomberg TV. “It’s not up to me to predict if it’s a bubble or not -- what I’m here to do is to help people manage risk.”
  • Goldman Sachs Group Inc. CEO Lloyd Blankfein isn’t sure what to make of bitcoin and is unwilling to reject the digital currency just yet. “I know that once upon a time, a coin was worth $5 if it had $5 worth of gold in it,” Blankfein said in another Bloomberg TV interview. “Now we have paper that is just backed by fiat ... maybe in the new world, something gets backed by consensus.”
  • While Thomas J. Lee of Fundstrat Global Advisors has turned cautious on bitcoin in the short term because of its big gains, he remains a long-term bull on the digital currency -- maintaining a 2022 price target of $25,000.

Unfortunately for the environmentalists, we suspect the Bitcoin horse has bolted and only the dreaded hand of government can rein it back.

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VWAndy's picture

 Wow they will need lots of guns to sell that shit on main street.

eforce's picture

So for every Bitcoin mined I'm saying fuck you to the Greenies?

Lumberjack's picture

I know someone who just started. Got 3 top of the line cards and the computer puts out so much heat a window needs to be opened in a fairly large room. His wife will kill him when they get the electric bill next month...

espirit's picture

We're gonna need moar Coal-fired Electrical Generation Plants to sustain this run...

Or it's lights out for miners.

Bunga Bunga's picture

When most of the bank towers in Manhattan, London, Singapore, Hong Kong, Frankfurt shut down, we will consume less energy in the end.

Escrava Isaura's picture

What do Bitcoin, electric cars, and religion have in common?

An unsustainable lie.

 

City_Of_Champyinz's picture

Doesn't matter, Tmosley is long electricity, fucker is a brilliant asshole. 

tmosley's picture

Confusing me with Mogambo there.

espirit's picture

I prefer air conditioned cooling to heat.

tmosley's picture

Move to iceland, you might think differently.

NoDebt's picture

"Another way of looking at Bitcoin’s energy consumption is divide the electricity use in Bitcoin mining each day by the number of daily Bitcoin transactions."

So, let's divide the energy used in mining gold by the amount of gold transactions????

This is fucking stupid.  Mining is different than transacting. 

 

Billy the Poet's picture

Mining is different than transacting.

Gold money is created by digging it out of the earth. Fiat money is created by borrowing. Bitocin is created by processing transactions.

City_Of_Champyinz's picture

How was bitcoin created if there were no transactions beforehand?

Billy the Poet's picture

A quick search turned this:

The first block is known as the "genesis block" or "block 0". It was mined using the same hashing algorithm as any other block, but at difficulty 1. It contains only one transaction, the coinbase, which gives 50 BTC to address 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa.

 

https://bitcoin.stackexchange.com/questions/2994/how-did-the-first-50-bi...

The Forecast Calls for Pain's picture

There was a genesis block, a first block.  After that, it processed transactions (if any) into each block.  If there were no transactions, the block was empty.

 

The Forecast Calls for Pain's picture

There was a genesis block, a first block.  After that, it processed transactions (if any) into each block.  If there were no transactions, the block was empty.

 

ThanksChump's picture

"Mining is different than transacting."

 

Forget it. He's on a roll.

 


City_Of_Champyinz's picture

sigh, not an argument cashew.

IH8OBAMA's picture

It's not CO2 that needs to be reduced.  It's bitcons.

 

tmosley's picture

Peanutz HAAAAAAAAAAATE competition.

Zero_Ledge's picture

First of all, NOT AN ARGUMENT.

Secondly, taking the math one step further, if we assume 10 cents per kWh, then 215 kWh = $21.50 per transaction.  Care to comment on the "competition" factor of that number ?

 

Bunga Bunga's picture

Civilization is an unsustainable lie. FIFY.

ThanksChump's picture

Yeah, but that's not a popular thing to say.

 

People think magic is real, pray to sky Gandalf, and ignore the billions of people shitting in their drinking water.

 

Post a funny kitten picture as penance.

marysimmons's picture

OMG!! Now they're getting even environmenatlsist to trash BTC.  The whole argument of this article is specious.  In reality, it takes as as much energy for me to send one BTC as it does for me to send one e-mail.  Sure, it takes a lot of energy to mine BTC, but once a BTC is mined, it takes almost no energy to send/receive it.  Shame of ZH for putting out this disinfo.

garypaul's picture

Umm, excuse me. You don't just "send/receive" a bitcoin, you have to do the hash each time.

Snout the First's picture

To quote Meat Loaf, "two out of three ain't bad".

NCIzzy's picture

not to mention all the wars they finance.

Bunga Bunga's picture

Not only the wars, without government fiat wouldn't even exist. Their energy consumption has to be included in a comparison.

BlindMonkey's picture

Or...she will strip like a pole dancer when he cashes in his mining take. 

NCIzzy's picture

lol

people need to realize that the current 'green movement' has nothing to do with true environmentalism, and all to do with lies and control.

for anyone new to the science, and scratching their head as to how seemingly intelligent and rational people can voice such dissent over 'accepted climate science', i i offer a little dity i penned a few months ago. hopefully by the end it will be clear that the ONLY intelligent and rational conclusion to reach is that the climate-change-movement is based on misrepresentation and obfuscation. the only thing left to decide is whether it's an 'innocent mistake' or by design.

https://ncizzy.blogspot.com.au/2017/07/those-crazy-climate-change-denier...

of course, this article is just another attempt to (ridiculously) shoot at bitcoin. 

my free piece on BTC below.. note, that i'm not trying to spam anyone here with the piece. i'm asking for no compensation, advertisement or promostion, only constructive feedback as appropriate. the fact that the response i've gotten so far has been almost uniformly constructive encourages me in my belief that it communicates some important perspectives.

https://www.scribd.com/document/360363481/The-Power-of-Money-A-Case-for-...

 

Justin Case's picture

No matter how high bitcoin prices go or what records they break, banks will still have “no appetite” for the digital currency because of money laundering risks, said Credit Suisse Chief Executive Tidjane Thiam.

“Most banks in the current state of regulation have little or no appetite to get involved in a currency which has such anti-money laundering challenges,” Thiam said at a news conference in Zurich Thursday.

He clarified that anonymity associated with bitcoin is a significant problem for banks that will not go away.

On top of that, bitcoin is in a definite bubble, Thiam added, as all trades are based on “speculation.”

“From what we can identify, the only reason today to buy or sell bitcoin is to make money, which is the very definition of speculation and the very definition of a bubble,” he explained.

And such speculation has “rarely led to a happy end,” Thiam pointed out.

Bitcoin surged to a new all-time high on Thursday, breaching $7,000 for the very first time. According to Kitco’s aggregated charts, bitcoin was last seen at $7,038.50, after briefly touching a high of $7,350.

In another negative comment about digital currencies, ING’s chief financial officer Koos Timmermans advised his clients not to invest in cryptos.

“Are we advising our clients to invest in this? The answer is no,” Timmermans told CNBC. “We see the superiority of cryptocurrencies in terms of a means of exchange, so that part is fine. But if you then say, 'Can you easily attach future value to it?' — and that's one of the main functions of currency — that is rather difficult because you still don't know how much the supply of this currency is connected to the demand, we don't know what the interest rates are.”

Yet, there are companies who are embracing bitcoin. In the latest example, Chicago Mercantile Exchange (CME) said earlier this week that it will be launching a bitcoin futures contract by the end of the year.

“We’ve seen pent-up demand by clients. [Bitcoin] is a story that hasn’t gone away [and] CME Group is looking to bring new products,” the company’s CEO Terrence Duffy told Bloomberg when explaining the decision to introduce the new product.

But, Duffy pointed out that CME’s model will be based on “a regulated platform that will have risk controls, margin rules, etc.,” which is different from how cryptos are traded today.

Bitcoin’s aggregate value now stands at more than $122 billion, according to Coinmarketcap, bringing the total value of all cryptocurrencies to an all-time high of more than $194 billion.
By Anna Golubova

NCIzzy's picture

"Pay no attention to the man behind the curtain." - your friendly neighborhood bankster.

VD's picture

& it's not just the k.y.c. strictures.

Bunga Bunga's picture

The irony, banks themselves are biggest money launderers. Before Bitcoin 100 billion Dollars were moved per year in the US for illegal drug sales alone. Without banks this wouldn't be possible. There are also studies that conclude the risk of illicit use of Bitcoin  is very low. It would also be stupid to launder money on a public ledger where one day a transaction will be tracked back to a real person. Banks use secret, disposable ledgers, they do fit the purpose way better.

Blue Dog's picture

Nobody actually explains how you could possibly launder money with Bitcoin. There are records of every deposit, payment, and withdrawal. Even if you have an illegal business where you accept Bitcoin for payment eventually you will have to sell some for cash. Anything over $10,000 will draw the attention of the IRS.

tmosley's picture

Coinjoin and/or lightning swap for some anonymous crypto.

From there you can just spend it. No need to convert back to fiat.

espirit's picture

Sorry, it's the anonymous crowd I don't trust...

Other then that, run with it.

kochevnik's picture

It is nosy people I do not trust

VWAndy's picture

 Risk controls and margin rules would of course demand the use of force. ie goons with guns taking orders from banksters.

  Buy then the new the trap will have been set. Perhaps putting state pensions all in on bitcoin would be enough motivation for some to apply the force needed?

Supafly's picture

Banks will have no appetite because they can't get a piece of the money laundering action with Bitcoin, and it cuts into their biz.

Billy the Poet's picture

I don't have the energy to keep up with all this stuff.

Slomotrainwreck's picture

And people wonder why it costs so much to purchase just one Bitcoin.

VD's picture

2weeks ago i wrote here that to mine a single btc takes the same energy to run an average american home FOR A YEAR. and itz only going up. a really stupid inneficient scam. it you must speculate, at least do it w/ bch (bitcoin cash, which is the real "Satoshi" fork "coin").

tmosley's picture

Hahaha, VD LOOOOOOOOOOVES Satoshi!

I can't stop laughing! Somebody help me, I'm going to die!

VD's picture

i luv NSAcoinz. i'm just telling ppl to consider the least evil shitcoin, that also happens to be more "energy efficient" and averages less per transaction while upholding "Satoshi"/NSA whitepaper terms. make sense?

since tylerz are just riding this btc idiocy and milking it for all they can, w/ crypt0-muppetz like yourself literally living here day and night shilling it and trolling.

 

i was right about silver and skum like Keiser, and i may just be right about this too.... we shall see.

espirit's picture

I just heard that Satoshi was a hundred billionaire.

... and you can too.

/s

Slomotrainwreck's picture

SATOSHI must be an acronyn for something. 50,000 satoshi's (USD $3.6924500000 approximately) for the best answer. 

JibjeResearch's picture

ahaha...

Yeah... that shit is funny ehehehehe

kochevnik's picture

Sorry you have no power how you surf ZH?

avid reader's picture

Gridcoin has succesfully bound the energy consumption into advantaging mankind.

As one contributor puts it; "I am stoked to see compute being spent wisely instead of hashing into the empty void"

https://steemit.com/gridcoin/@dutch/why-i-only-mine-gridcoin-and-my-mini...

http://www.gridcoin.us/