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Some dispute this figure. Oscar Lafarga, co-founder from cryptocurrency consultant and developer SetOcean , reckons the real answer is likely half as much. There are other figures, if those don't appeal. In a pair of Irish researchers published one of the first papers on this topic. Karl O'Dwyer and David Malone estimated the total power use of bitcoin would be somewhere between MW and 10GW, but decided it was somewhere in the middle, choosing 3GW — comparable to their home country's consumption.
Malone now pegs it at around 0. That's a lot of numbers sorry, but it gets worse. There are plenty of other estimates, but the key point is they're all very different. The real range is probably somewhere between MW to 3.
That's like guessing someone's age as between 15 and 65, while admitting there's a margin of error of ten years. That wide gap is partially down to timing and methodology, but a fair chunk of the difference is quite likely individual bias. Let's start with timing. When you make your guess skews the figures, because the bitcoin network changes so quickly — there's always more activity and more processing power, but it's somewhat balanced by more efficient hardware.
Harald Vranken , associate professor at Netherlands' Open University, studied the energy draw of bitcoin earlier this year, positing that it was in the MW to MW range, versus Digiconomist's 3. As he explained to WIRED, his numbers are for January of this year and since then the network hash rate — a measure of the bitcoin network's processing power, looking at how quickly it solves the equations that run the network — has leapt by a factor of 4.
That's more than Digiconomist's figure, but that methodology has other inputs. So while those two figures look different, they're roughly the same. What a difference a year makes. Another factor influencing these figures is methodology. There are a few pieces of information we know: how hard it is to solve the proof of work, how much energy various hardware uses, how much revenue miners stand to make, and how much energy is used by the entire world as a useful top-line figure.
Using those pieces of the puzzle, we can attempt to fill in the rest. Bitcoin is popular, but it hasn't actually taken over the world, yet. That first Irish paper used a similar methodology that examined the types of hardware used, explains David Malone, one of the authors from Maynooth University. You can also try to get estimates by balancing the cost of electricity for mining against the value of mining, but the idea is very similar.
Malone has actually reduced his estimate, saying that while it's hard to know exactly what hardware is being used, it's likely all professional grade at this point, which is much more efficient. Digiconomist, meanwhile, works on the premise that miners spend a certain amount on operational costs, improving their hardware when prices go up, shifting from standard desktop PCs to GPUs then to specially designed ASIC machines.
And that evolution in hardware can have a huge impact on the amount of power used. It can be calculated that the lifetime electricity costs are then about 60 per cent of the total, based on past performance. It takes a few months for machines to be produced and installed. Costs are estimated at less than 20 per cent now by the index. Tweak, correct or otherwise fiddle with any of the factors in the various equations, and the result changes — that's just how maths works, apparently, but it means it's no wonder we have such a wide estimate.
Bitcoin may well have merit above and beyond making miners rich, but compared to traditional payment systems — gold, cash, credit cards — is it an energy hog? The consumption range leaves bitcoin either much more expensive in terms of energy than existing transactional systems or much cheaper.
Once again, it's how you pick your data. To put these figures in some context, Digiconomist suggests Visa's payment systems uses the energy equivalent of 50, US households to run million transactions, while bitcoin uses the energy equivalent of 2. But in his paper, Vranken counters that in the MW to MW range, bitcoin mining requires between 0. He pins the banking system, including not only its data centres but also its branches and ATMs, at KWh.
In other words, there's more to our traditional financial system than one brand of payment card. That said, he notes bitcoin is a much, much smaller system than cash and traditional banking, but as bitcoin scales up, so does the energy required for mining. Using a Visa card may well be less of an energy suck than bitcoin, but in a way that point is moot — we still have both, and will for the foreseeable future, no matter how successful bitcoin is going mainstream.
You're likely using them in tandem, such as selling off bitcoin to earn the dollars to pay off your Visa bill. In recent weeks, the headlines of business journals and finance sections have covered everything from the importance of investing in bitcoin to how the bubble is about to burst within days of bitcoin futures hitting the stock exchange. To anyone on the outside, those words make no sense. Introduced in , bitcoin is an anonymous cryptocurrency, or a form of currency that exists digitally through encryption.
It was invented to be unhackable, untraceable, and safe for investors. Here's a quick rundown on what the hell bitcoin actually is. Bitcoin is a cryptocurrency that is conducted on a public ledger, the "blockchain.
It is also decentralized and not managed by a single entity, but rather a group of people who process transactions, called miners. This means it is not subject to government regulations when traded or spent, and you don't need a bank to use it.
Miners are in charge of making sure bitcoin transactions made by users are recorded and legit. Simply put, they do this by grouping every new bitcoin transaction made during a set time frame into a block. Once a block is made, it is added to the chain, which is linked together with a complex cryptography. This chain of blocks is the public ledger, and its extreme complexity is what currently protects transactions.
No, at the maximum, the system is designed to top out at 21 million bitcoin. At that point, bitcoin will stop being released. Most people think that will be around the year You see, miners don't build blocks just from the kindness in their hearts. When a miner builds a block, they also have to solve a series of complex math puzzles.
If they can do it before any other miner, they unlock a predetermined amount of bitcoin that they can keep—a prize for being both smart and quick. The first time bitcoin was mined, the founder, Satoshi Nakamoto, released 50 bitcoin, which he kept. Moving forward, when a miner completed a puzzle, he or she got 25 bitcoin. In the summer of , that was halved again to That amount will continue to be halved periodically until all 21 million bitcoin have been released.
By the estimation of many bitcoin experts, that public ledger is pretty bulletproof. What one person or computer does affects the entire blockchain, and everyone can police the transactions. Currently, unless you're spending thousands of dollars to buy it in bulk, bitcoin is nothing more than a stock, though the inventors would hate to have it explained that way.
The Mining is a kind of decentralized Bitcoin data center with miners from all countries. No single person has control over the network. Unlike bitchecking, bitcoin mining provides a reward for useful services. The payment of the respective bitcoin shares is based on the available computing capacity. In traditional Fiat currency systems, governments, if needed, simply print more and more money. Around the world, computer calculators calculates bitcoin and compete with each other.
People transfer around the clock Bitcoins over the Bitcoin network, but even if all transactions are recorded, no one would be able to see who paid what. The Bitcoin network does this by collecting all the transactions of a certain period of time and putting them together in a list — the so-called block.
He is paid for this in bitcoin the bitcoin transaction fee. The blockchain is used in Bitcoin Mining to be able to trace all transactions at any time. Whenever a new block is created, it is added to the blockchain , resulting in an endless list of all transactions. The blockchain is visible to everyone, so each user can see which transaction is being performed. However, you do not know who is doing this transaction.
Bitcoin is thus transparent and anonymous at the same time. But a general ledger has to be trustworthy and the entire process is digitized. So how can we ensure that the blockchain remains intact and never manipulated? When a block of transactions has been generated, they let the miners go through a process.
You see the information and apply a mathematical formula that converts the transaction. After that the transaction is something much shorter, actually only a string of letters and numbers, also called hash. This hash is kept in the block at the end of the blockchain. Hashes have some interesting features. Since it is fairly easy to create a hash of a large number of records, each hash is unique. If only one character in the block is changed, the entire hash will change.
To create a hash, the miners use not only the data of the transaction in the block, but also other additional data. Part of the data is the hash in the last block of the blockchain. Since each hash of a block uses the hash of the previous block, a kind of wax seal is created. He confirms that the current block and the before is valid, because if manipulated, it would notice everyone. Would someone try to manipulate a transaction by changing the block already in the blockchain, then the would have to change also the hash.
If someone verifies the authenticity of the block with the hashing function, one would notice directly that the hash does not match the one in the blockchain. The block would immediately be recognized as forgery. Since each hash of a block is used to generate the hash of the next block in the blockchain, manipulation would also manipulate the following hashes.
There are different ways of bitcoins to mines. On the one hand one can with Bitikins from so-called ASIC Minern themselves from at home and can be operated on the other cloud Mining. If you want to mine Bitcoin from your own home, you will need the following hardware and software components:. It's Bitcoin mining via rented equipment, often stored at a database.
The cloud mining providers get paid for their assistance, and you potentially get Bitcoins. Cloud mining comes with pros and cons. The pros -- not having to worry about electricity costs and maintenance -- are solid. But the biggest negative is a real killer: It's very easy to scam people via cloud mining. If you're interested in it, do as much research as is humanly possible to know that you will be working with a reputable cloud mining service, and that you are not being defrauded.
TechRadar listed some of the more popular, respected outlets for cloud mining ; if you can't find something similarly reputable about the cloud mining service you're researching, run. It has become increasingly common for miners to join mining pools, where resources are pooled together and the nodes are combined to try and successfully solve proof-of-work calculations.
Many pools, as they've grown in size and power, require membership fees. When Bitcoins have been successfully mined, the reward is spread out among pool members. That does mean you won't be getting the full You may not be thrilled with that. Any miner would love to just mine by themselves and get that massive reward, but with the massively increased difficulty of successfully mining a block, many don't see it as worth the effort to try this alone.
Mining pools mean smaller rewards, but they also mean a far greater chance of a reward at all. And as electricity costs rise, many miners have sought pools in areas like eastern Washington that have more power at an affordable rate. You'll still need high-quality mining hardware. Many of the ways rewards are divided -- such as pay per share, or PPS -- are gauged by proof that your rig is effectively contributing to the pool's success in mining that block.
And don't forget to attach your Bitcoin wallet, as it's where your reward will go. Like with cloud mining, do your due diligence with research to try to avoid scams. Larger pools may mean you're getting a smaller payout, but it's at least a legitimate operation. Mining isn't what it was in the late 's, when the mysterious Bitcoin founder known as "Satoshi Nakamoto" mined the first 50 Bitcoins.
That block was first mined on January 3rd, , mere months after Bitcoin's whitepaper was published. The first Bitcoin mining software was released to the public not long after. Back then, mining was something a person could do using only their CPU. Now, enough people are mining and the hardware has developed at such a rapid pace that Bitcoin mining as an industry takes up an entire country's worth of electricity.
More on that later. But as more people got involved, the calculations got more difficult to solve and added more competition, and more firepower was required for miners to realistically compete. Quickly this shifted to aforementioned GPUs, and mining was suddenly something that could bring in other businesses; the need for powerful GPUs set large companies like Nvidia to developing them, turning them into intriguing investment options.
It was only a matter of time before hardware built specifically for mining was developed, and thus "application-specific integrated circuit" miners were born. The first successful ASIC miners, designed specifically to perform the calculations necessary for mining cryptocurrency, were released in and continue to be a mainstay.
These advances require more power, more electricity, more space to hold them. Additional expenses and competition made Bitcoins harder to mine than ever, and not everyone has room in their home to run everything.
For these reasons, many miners began combining their resources. These days it's pretty doubtful. In February , EliteFixtures published the findings of a study determining the cost to mine 1 BTC in different countries. Hardware, software, electricity and maintenance add up awfully fast in the mining world. If it isn't already clear, the biggest roadblock many people have with mining is the costs. And that's assuming you're just getting that and not also getting or building a new computer capable of handling such an intense workload.
The attempts to solve the puzzle and mine a block take up an absurd amount of processing power and heat, so in addition to the power running up your electric bill, the air conditioning you'll be running to keep the house temperate is there to rub salt in the wound.
By the time you've finally managed to mine an entire Bitcoin, will you have broken even? It's far from a guarantee. It's also, as more and more people delve into the world of Bitcoin mining, way harder to be the one who successfully mines Bitcoins first. One person in an ever-growing sea of miners and mining pools is fairly limited in how successful they can actually be, especially if they can't afford the unbelievable manpower required.
Besides the financial issues, there's also the general inconvenience of it. Heating your home to such an extent for an investment that might not even work out can wear on you. That's why, despite the potential that comes with mining, it isn't for everyone. Bitcoin's value is nowhere near what it was at the beginning of the year, but people continue to mine it. How is all that mining and the energy output required to do it impacting the environment?
Some fear that the energy consumption required to mine Bitcoin is a deep concern. Information on Bitcoin energy consumption from Digiconomost suggests that Bitcoin is expected to consume That's quite a bit more from the already troubling estimate at the beginning of the year, which had it at under 40 TWh. This consumption is due to the aforementioned proof-of-work system inherent in Bitcoin. Mining nodes guess billions upon billions of numbers to try and successfully mine Bitcoin, and miners have used more and more energy to try and keep pace and succeed.
Not every cryptocurrency uses proof-of-work, many as a response to the environmental concerns. One alternative is proof-of-stake, where there is no reward; creation of the block is determined by how powerful they are in the system. They merely receive a transaction fee from the transaction in the block. Without a need to mine for a reward, there is far, far less power needed. Receive full access to our market insights, commentary, newsletters, breaking news alerts, and more.