Will Bitcoin mining leave us without electricity in three years?

Bitcoin mining uses about 0.2% of the world's electricity each year, but that's about the same amount of electricity that electronic devices use when they're "off" or "on standby." Most economists believe the market will sort that out.

The Bitcoin Energy Consumption Index at the beginning of the year showed that the annual electricity consumption of Bitcoin mining is estimated to be about 48.37 terawatt-hours (TW, trillion watt-hours), equivalent to 0.20% of the global electricity consumption, and it continues to grow steadily over time.

What does 48.37 TWh mean? Iraq, which ranks 54th in the world in electricity consumption, has a population of only 44.4 TWh, which has now been surpassed by Bitcoin mining.

If the current growth rate continues, Bitcoin mining will consume all the world's electricity by February 2020.

This is a staggering number, but is it really worth worrying about?

Alan Shipman, an economics lecturer at the Open University in the UK, said that the answer given by most economists is that the market will solve the problem itself.

1

Most of the electricity consumption comes from coal

Initial concerns about the power consumption of Bitcoin mining mainly came from the fact that most power plants are highly polluting coal-fired power plants. This is indeed true, but in order to reduce pollution, at the beginning of the year, China’s Internet Financial Risk Special Rectification Leading Group, composed of multiple government departments, issued a notice requiring local governments to "guide" enterprises under their jurisdiction to "orderly exit the mining business." The result was that many Bitcoin mining companies relocated.

The places where these Bitcoin mining companies eventually move to have abundant clean energy, such as the Canadian province of Quebec, which has actively invited cryptocurrency companies to use their idle hydropower capacity; the same is true for Iceland (which has geothermal power) and Sweden (which has hydropower like Quebec).

In other words, the world still relies heavily on fossil fuels (oil, coal) for electricity generation, which means that thermal power generation is not the fault of cryptocurrency mining. Just because there is a new and rapidly growing source of electricity consumption is not enough reason for the government to drive out digital cryptocurrency companies.

Of course, ideally, electricity would be carbon-free worldwide. This change will only happen if governments around the world move toward a carbon quota system that incentivizes everyone, including Bitcoin miners, to choose cleaner energy. The good news is that this is already a global trend.

2

Distribution of electricity consumption

Bitcoin mining can be done anywhere in the world. According to Alex de Vries, author of the Joule study, since electricity costs account for 60% of the cost of Bitcoin mining, miners will naturally flock to areas with cheap electricity prices and favorable climates. For example, mining in cold countries does not require cooling of servers. Although China is still the main gathering place for miners, there are now some large mining companies in the United States, Canada, Iceland, Sweden and Georgia.

To put that in perspective, while Bitcoin mining uses 0.2% of the world’s electricity annually, that’s the same amount of energy consumed by electronic devices when they’re “off” or “in standby,” which is worth $6.4 billion in the U.S. alone, according to a 2015 study.

3

Does Bitcoin enhance social value?

Some environmentalists believe that Bitcoin is a speculative asset, a product of late capitalism, which consumes a lot of electricity but adds no real value to society.

But economists obviously do not agree with this statement. "Economists believe that bubbles are inevitable, especially when new and exciting technologies emerge. But the continuation of bubbles will lead to a misallocation of resources, which is regrettable. Since the birth of digital cryptocurrency, many economists have believed that it exists as a bubble," said Shipman.

If we deny the value of digital cryptocurrency itself, the decentralized blockchain technology that Bitcoin relies on still has high social value.