Cryptocurrencies require significantly more energy to generate one US Dollar in value according to a new paper published in the journal Nature Sustainability last week.
The research paper published by the Oak Ridge Institute in Cincinnati, Ohio last Monday found that between January 2016 and June 2018 the amount of energy required to produce $1 USD worth of Bitcoin as nearly four times as much as $1 of gold.
The figures show a variety of metals and their relative energy costs. Copper needs 4 million joules of energy, Gold 5 million, and Platinum/Palladium 6 million. In comparison, Ethereum uses 9 million, the secretive Monero requires 11 million, Litecoin takes 15 million joules, and Bitcoin is the worst energy user with 19 million joules per Dollar generated.
Energy consumption for cryptocurrency mining has been in the news repeatedly within the past 18 months. As of the start of July the estimation for Bitcoin mining alone was that it had used 30.1 billion kilowatt hours of electricity since the year began. In context, that puts it around the same usage figures as the entirety of Ireland or Denmark in a calendar year, with the same carbon emissions as over a million transatlantic flights.
The survey only tackled energy usage, rather than emissions, but it did highlight differences in expected CO2 generation between the likes of China and Canada, as examples, with China known for using a large amount of coal-powered power stations at present.
Using less energy is a big advantage to be gained by crypto firms, however. The global market value of the top 100 currencies is around the $200 billion mark, but prices often struggle under the ceiling that is energy costs, due to their basis in physical fiat currency. By reducing their expenditure during production, they can increase gains post-production.
One solution, currently being pursued by the Ethereum project, is a switch from Proof of Work to Proof of Stake. Proof of Work is energy-intensive crypto mining which sees many users (miners) compete to solve algorithms. This is mostly trial and error, performed by high spec computers. The winner gets a financial reward in the form of the transaction fees for a set block of trades within that currency.
The alternative being proposed is Proof of Stake. This would result in one performance of the process, not hundreds, thus reducing the energy (and subsequently pollution) costs of cryptos. The idea behind it is that a forger (what was a miner) is part of a validator pool. Anyone can join and anyone can be selected, but the system will weigh up candidates based on reliability and also their stake; the validator will place a deposit of their Ethereum wealth as part of a guarantee that they intend to be faithful – effectively pay to play. Cheaters or scammers will lose their deposit, thus countering any potential foul play or theft.
For more information you can visit https://blockgeeks.com/guides/proof-of-work-vs-proof-of-stake/
The Aluminium Anomaly:
The worst efficiency on the research paper’s list was aluminium, with a staggering 122 million joules of energy required per Dollar. This makes the likes of Bitcoin and Ethereum’s energy costs seem relatively cheap, but this is an odd metal. It is the most abundant on Earth, but it’s found within Bauxite – a mish-mash of other metals all in one ore. To break it out requires electrolysis, rather than chemically breaking the components out, which is where the high energy cost comes into it.
Figures from 2010 show that the global output of aluminium was approximately 41 million tonnes. The energy consumption on this amount of metal would be around 621 billion kilowatt hours of electricity. Electricity production for 2010 was 20,261 billion kilowatt hours, which puts aluminium’s extraction process at 3% or more of the world’s electrical supply.
Using the figures mentioned earlier, we can estimate Bitcoin’s usage alone at approximately 60 billion kilowatt hours per year, meaning just Bitcoin uses 0.3% of the world’s electricity. If we were to factor in just the top 10 then the figure would be close to aluminium, and to extend the energy usage to the top 100 cryptocurrencies would likely be even higher – a worrying prospect for some areas of the world (Iceland, for example) who are already running near capacity on their energy grids.
To read the full academic paper on this story please visit https://www.nature.com/articles/s41893-018-0152-7