Cambridge Bitcoin Electricity Consumption Index Updates Every 30 Seconds: BTC Uses Less Energy than the Czech Republic but More than Switzerland Each Year.
Last week during the Cambridge Centre for Alternative Finance annual conference, the prominent research group unveiled a unique tracking platform that monitors energy consumption of Bitcoin – the worlds most popular cryptocurrency.
The new index was announced by Michel Rauchs, the Cryptocurrency and Blockchain Lead at CCAF. Rauchs, an expert in all things crypto, has published several well regarded empirical studies on blockchain (DLT) and cryptocurrencies.
Bitcoin uses a “Proof of Work” (PoW) methodology to mint or mine new Bitcoins. This cryptomining process entails the use of computers attempting to solve an equation and thus “earn” a Bitcoin. As Bitcoin is currently worth about USD $11,000.00 – if you get the answer right you get to keep that bounty. China, a place where cryptocurrency is officially banned, is perhaps the biggest crypto mining jurisdiction in the world.
Over time, the mining process has migrated away from hobbyists operating their own mining nodes to highly professional mining farms scattered around the world competing to earn free money; except the virtual currency is not really free as it costs considerable sums to operate these farms – most of it in electricity bills.
Bitcoin, and those individuals and corporations that mine the crypto, have come under scrutiny and criticism for the amount of energy used in creating the crypto. The Cambridge Bitcoin Electricity Consumption Index (CBECI) provides a “real-time estimate of the total electricity load and consumption of the Bitcoin network.” While acknowledging that the exact amount of energy utilized cannot be determined, the CBECI is probably the best real-time estimate of Bitcoin mining energy usage in existence.
So what does the Index tell us?
According to their numbers, annualized consumption stands at a whopping 60.45 TWh. That’s a big number, but to most of us, this measurement means little until you draw some comparisons which Cambridge provides.
- Bitcoin mining uses more energy than the entire country of Switzerland in a single year (and just under the Czech Republic). Bitcoin energy consumption also tops Greece and Israel.
- The amount of electricity utilized by BTC in a single year could power all of the Tea Kettles in Europe for two years (currently this includes the UK).
- The electricity used by Bitcoin mining could satisfy all of the energy needs of the University of Cambridge for 343 years.
- Bitcoin uses 0.24% of all electricity production globally and 0.28% of all electricity consumption
Cambridge adds that it is important for Bitcoin to be “inefficient.” It is this inefficiency that prevents a “single entity or colluding group of actors to easily gain control and dominate the network.”
Other Bitcoin defenders will ask the question as to how much energy does the traditional financial system consume? And what about gold mining?
The exploration and uncovering of gold takes massive investment and plenty of energy consumption. Bitcoin proponents frequently compare the favored crypto to being a gold like digital asset.
Additionally, at some point in the future, the mining of Bitcoin will end – because it is capped at a certain amount. The “Halving” (as it is called) is an event that takes place every four years when mining rewards are cut in half. This event has already happened three times with the fourth expected to take place next year.
As the supply of Bitcoin is limited, some people expect the value to rise. But markets can act in interesting ways – the price of Bitcoin could go down making it too expensive to mine. Or perhaps, Bitcoin will simply end, replaced by something else or taken down by an exogenous event. Anything is possible in the land of crypto.