As Mining Expands, Will Electricity Consumption Constrain Bitcoin?

By July 24, 2016Bitcoin Business

Since the modern economy has gone digital, it has come to require more electricity. Peter Kelly-Detwiler, co-founder of NorthBridge Energy Partners, LLC, a consulting firm that helps companies connect assets to power grids, examined the impact that expanding cryptocurrency is having on energy consumption in a recent Forbes article. He raises the possibility power supply could constrain bitcoin’s growth.

Detwiler noted that while cryptocurrencies are ethereal, they depend on a very real support in electricity. He noted hundreds of megawatts of electricity are used to produce bitcoin, although there are few estimates available on the exact amount. Miners Are Elusive

One reason the exact amount of electricity used to power bitcoin is uncertain is that the miners that produce bitcoin maintain a low profile. Bitcoin mining centers are big datacenters that are dispersed globally. The datacenters are clustered in places with cheap electricity.

China has the largest number of datacenter mines. The largest share of Chinese mines are close to Tibet in an area with abundant, cheap hydropower. Datacenter mines also exist in Iceland, Malaysia, Venezuela , the Republic of Georgia and other countries.

Electricity can comprise 90% to 95% of mining costs, Detwiler noted. He compared energy and computers to fuel and bulldozers that claw away at hillsides for gold. The computers have specialized chips designed to solve math problems using open source software. How Mining Consumes Power

Cryptocurrency mining is complex, Detwiler observed. A miner can create currency by solving math problems that seal off transaction blocks in the publicly visible bitcoin blockchain ledger. If a miner solves a problem, they are awarded bitcoins.

Every 10 minutes, bitcoin transactions (of which 150,000 to 250,000 occur daily) become locked and filed into a single block in the blockchain. Computers compete to gain credit for sealing off the latest block in […]

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