Today’s top cryptocurrencies are worth a lot of money. Bitcoin hit $17,000 per coin in December 2017 – it has since dropped significantly – but it is proof of the soaring popularity of the world’s first mineable digital fund. But while the media mostly focuses on the aspect of the cryptocurrency’s prices, there’s a factor of cryptocurrency mining that is just as important as the coins’ value. That is, the amount of energy being used to mine the cryptocurrencies. After all, the formula for breaking even in cryptocurrency mining is the digital fund’s market value minus the electricity costs of mining it.
How much energy is needed in mining cryptocurrencies?
Mining cryptocurrencies isn’t as easy as downloading files from the internet. It takes an entire server farm to mine them, as well as massive amounts of energy to generate 1 coin or digital fund. The difficulty in mining them, as well as their increasing popularity among merchants and private investors, is why the top cryptocurrencies are valuable and expensive.
As mining this cryptocurrency can provide a steady stream of income, people are willing to run energy-consuming machines. This has caused the total consumption of energy to grow to grand proportions over the years. If Bitcoin were a country, it would rank above Serbia and below Denmark in terms of the amount of energy it consumes annually. According to Digiconomist’s data on cryptocurrency mining, Bitcoins now consume over 30 Terrawatt hours (TWh) per year. Both Serbia and Denmark generate about the same amount of energy annually.
In the same data presented by Digiconomist, it shows that Bitcoin’s annual energy consumption worldwide could provide almost 50% of Czech Republic’s energy needs and 25% of the Netherlands’ demand. Bitcoin can also feed 15% of Australia’s energy consumption. To put Bitcoin’s energy consumption in a narrower perspective, the annual electricity consumption of the cryptocurrency’s miners can power over 3 million U.S. households.
Compared to Bitcoin, Ethereum hasn’t used as much energy. Records show that the cryptocurrency’s annual consumption is merely a third of Bitcoin’s total or 11.14 TWh. If Ethereum were a country, it would rank above Zambia and below Lithuania, both of which also consume around 11 TWh of energy annually.
When combined together, Bitcoin and Ethereum mining consumes more power than countries like Jordan, Syria, and Iceland.
The developers of Ethereum have plans to change the cryptocurrency’s algorithm to an energy efficient proof-of-stake algorithm called Casper. This would allow miners to minimize their energy consumption, and it will be implemented gradually based on the cryptocurrency’s development pipeline.
There isn’t a lot of data when it comes to Litecoin’s annual energy consumption, but it’s important to note that the cryptocurrency’s popularity is quickly rising. Litecoin, whose prices move relative with Bitcoin, enjoyed some significant gains this year between March and September. The cryptocurrency’s prices climbed from $4.30 to $92 – an increase of over 2,000%.
Litecoin’s popularity is soaring because its blockchain technology is almost similar to Bitcoin. The only difference is that Litecoin’s transactions finish faster, and mining its coins are lighter on the energy (hence, the name).
Based on Litecoin’s mining calculator, it takes one miner around 1,370 days to generate one Litecoin, while it takes 3,000 days to generate Bitcoin when it is mined solo. Based on this data, Litecoin miners should be generating about half of Bitcoin’s energy consumption. Of course, this is currently not the case because Litecoin doesn’t have the equal amount of miners that Bitcoin does. Since Litecoins have fewer miners, it most likely generates less than half of Bitcoin’s energy needs.
Solar energy as a solution to minimizing cryptocurrency’s energy consumption
While the massive energy usage of cryptocurrency miners will continue for some time, some people who are concerned about the environment are presenting viable solutions to the current issues. Coinwire suggests that solar energy is a valid alternative for powering mining rigs since solar plants can provide constant, renewable energy that is cheaper than grid power. For example, an A 1-megawatt solar project could potentially provide energy to mining operations in California. Green Tech Media looked at the numbers behind a solar Bitcoin mine that is powered by a 1-megawatt PV system.
Given the current technology in creating solar panels, it won’t be impossible to create cheap, sustainable electricity for mining operations. San Diego-based company Clean Spark is one of the first companies in the world who want to show that designing a microgrid to power large-scale cryptocurrency mining operations is possible. The company’s proprietary modular and containerized microgrid will begin construction in two months time.