In what is increasingly becoming a banner year for Bitcoin, including smashing through eight all-time high records and commanding 53% of the crypto market’s $250 billion market capitalization, the pioneering cryptocurrency has been predicted to consume the world’s electricity by February 2020. The prediction comes from Digiconomist’s Bitcoin Energy Consumption Index, which uses the relationship between miners’ income and mining operation cost to arrive at an economically credible day-to-day estimate.
The report estimates that miners of the venerated cryptocurrency have consumed about 29.86TWh as of Monday, November 20th, 2017. Unlike traditional mining, which involves heavy machinery and copious amount of explosives, Bitcoin mining involves solving complex, interlinked mathematical puzzles known as blocks (hence the blockchain) in order to process and verify transactions on the peer-to-peer network. The solutions to these blocks are known as Hashes. In truth, hashes are 64-digit hexadecimal number that is more or less equal to the target hash inside the block. For guesstimating the target hash successfully, miners are rewarded with Bitcoins.
Mining is integral to the network. It not only helps secure the network and process transactions, but it is also the only way of releasing new Bitcoins into circulation. However, with miners solving blocks every ten minutes, sometimes, two or more miners from different locations may solve the same block at the same time, creating two or more competing chains of events on the network.
The only way to resolve this conflict is by selecting the longest valid chain on the network as the official record of the event and invalidating the other blocks. To avoid this problem, miners have to ensure that they solve their block before anybody else on the network. This has resulted in a “hardware” race among miners, resulting in a shortage of GPU hardware on the market.
With increased firepower comes increased power consumption to keep the engines firing and to maintain the required cooling to prevent them from backfiring. Add Bitcoin’s meteoric rise in price, and the cause of this unprecedented growth in power consumption becomes obvious; money – or in this case, bitcoins.
At approximately $8,000 per coin and a reward of 12.5 Bitcoin per block solved, more miners are joining the network for some of that reward. On average, a single transaction on the network can power 9.92 U.S. households for a day. And though the report estimates that $1.5 billion has been spent on mining Bitcoin this year alone, the $7.2 billion generated from these operations has made it a very profitable venture.