Elon Musk, Tesla CEO and cryptocurrency cheerleader shook the crypto market when he said his company would no longer accept Bitcoin for vehicle purchases. In a May 13 tweet, Musk referred to an increase in the use of coal and other fossil fuels to generate the power used for mining as the reason behind his decision. The fallout from the tweet: The price of Bitcoin dropped by 14% and it continued to fall after.
Bitcoin, Ethereum, Dogecoin, and other popular cryptos reached record highs this year, raising concerns about the amount of energy needed to mine the coins. Warehouses of Bitcoin mining rigs run 24 hours a day, consuming more power than the whole of Argentina. As the energy bill for crypto mining rises, so does the amount of carbon and waste, adding to the growing climate crisis.
When Bitcoins are traded, computers across the globe race to complete a computation that creates a 64-digit hexadecimal number, or hash, for that Bitcoin. This hash goes into a public ledger so anyone can confirm the transaction for that particular Bitcoin happened. The computer that solves the computation first gets a reward of 6.2 bitcoins or about $225,000 at current prices. Other cryptocurrencies use similar mining technologies, contributing to the overall energy usage.
Why is crypto mining so energy-intensive?
For starters, graphics cards on mining rigs work 24 hours a day. That takes up a lot more power than browsing the internet. A rig with three GPUs can consume 1,000 watts of power or more when it's running, the equivalent of having a medium-size window AC unit turned on. Crypto mining businesses can have hundreds or even thousands of rigs in one location. A mining center in Kazakhstan is equipped to run 50,000 mining rigs. Not only do rigs take up power, but they also generate heat.
The more rigs you have, the hotter it gets. If you don't want your rigs to melt, you need some cooling. Many mining rigs have multiple built-in computer fans. But if you have multiple rigs, the room quickly gets hot, requiring external cooling. Small operations, like those run by individuals, can get by with a typical standing fan. Mining centers, however, need a lot more cooling, which in turn requires even more electricity.
How much energy does mining take?
The Digiconomist's Bitcoin Energy Consumption Index estimated that one Bitcoin transaction takes 1,544 kWh to complete, or the equivalent of approximately 53 days of power for the average US household. To put that into money terms, the average cost per kWh in the US is 13 cents. That means a Bitcoin transaction would generate more than $200 in energy bills. Bitcoin mining used more energy than Argentina, according to an analysis from Cambridge University in February. At 121.36 terawatt-hours, crypto mining would be in the top 30 countries based on energy consumption.