How Much Is Bitcoin Projected To Be Worth

The Bitcoin Energy Consumption Index provides the latest estimate of the full energy consumption of the Bitcoin network.

NEW Inquiry:
“Cryptocurrencies on the route to sustainability: Ethereum paving the way for Bitcoin” (December 2022); Bitcoin’south biggest competitor, Ethereum, has reduced its electrical energy requirement past at least 99.84% by irresolute its method of production.

Annualized Total Bitcoin Footprints

Single Bitcoin Transaction Footprints

*The assumptions underlying this energy consumption gauge can be establish here. Criticism and potential validation of the judge is discussed here.
**The minimum is calculated from the total network hashrate, assuming the simply car used in the network is Bitmain’s Antminer S9 (drawing 1,500 watts each). On February 13, 2019, the minimum benchmark was changed to Bitmain’due south Antminer S15 (with a rolling average of 180 days), followed by Bitmain’s Antminer S17e per November vii, 2019 and Bitmain’s Antminer S19 Pro per  October 31, 2020.
***Note that the Index contained the aggregate of Bitcoin and Bitcoin Cash (other forks of the Bitcoin network have not been included). The latter has been removed per October ane, 2019.

Did you know Bitcoin runs on an energy-intensive network?

Ever since its inception Bitcoin’s trust-minimizing consensus has been enabled by its proof-of-piece of work algorithm. The machines performing the “piece of work” are consuming huge amounts of energy while doing so. Moreover, the energy used is primarily sourced from fossil fuels. The Bitcoin Energy Consumption Index was created to provide insight into these amounts, and heighten awareness on the unsustainability of the proof-of-piece of work algorithm.

A dissever index was created for Ethereum, which can be plant here.

What kind of work are miners performing?

New sets of transactions (blocks) are added to Bitcoin’s blockchain roughly every x minutes by so-chosen miners. While working on the blockchain these miners aren’t required to trust each other. The only affair miners have to trust is the code that runs Bitcoin. The code includes several rules to validate new transactions. For example, a transaction can merely be valid if the sender actually owns the sent corporeality. Every miner individually confirms whether transactions adhere to these rules, eliminating the demand to trust other miners.

The trick is to get all miners to concord on the aforementioned history of transactions. Every miner in the network is constantly tasked with preparing the next batch of transactions for the blockchain. Simply one of these blocks will be randomly selected to become the latest block on the concatenation. Random pick in a distributed network isn’t easy, and so this is where proof-of-work comes in. In proof-of-work, the adjacent block comes from the first miner that produces a valid one. This is easier said than done, every bit the Bitcoin protocol makes information technology very difficult for miners to practice and so. In fact, the difficulty is regularly adjusted by the protocol to ensure that all miners in the network will only produce ane valid block every ten minutes on average. Once one of the miners finally manages to produce a valid block, information technology volition inform the rest of the network. Other miners volition accept this block once they confirm information technology adheres to all rules, then discard whatever cake they had been working on themselves. The lucky miner gets rewarded with a fixed amount of coins, along with the transaction fees belonging to the processed transactions in the new block. The bicycle then starts once more.

The process of producing a valid block is largely based on trial and fault, where miners are making numerous attempts every second trying to find the correct value for a cake component chosen the “nonce“, and hoping the resulting completed cake will match the requirements (as there is no fashion to predict the outcome). For this reason, mining is sometimes compared to a lottery where you can choice your own numbers. The number of attempts (hashes) per second is given by your mining equipment’s hashrate. This volition typically exist expressed in Gigahash per second (1 billion hashes per second).

Sustainability

The continuous block mining cycle incentivizes people all over the globe to mine Bitcoin. As mining can provide a solid stream of revenue, people are very willing to run power-hungry machines to get a piece of it. Over the years this has caused the full energy consumption of the Bitcoin network to grow to epic proportions, as the price of the currency reached new highs. The entire Bitcoin network at present consumes more than free energy than a number of countries. If Bitcoin was a country, it would rank equally shown below.

Autonomously from the previous comparing, it also possible to compare Bitcoin’s free energy consumption to some of the earth’s biggest energy consuming nations. The result is shown hereafter.

Carbon footprint

Bitcoin’s biggest problem is perhaps not even its massive energy consumption, but the fact most mining facilties in Bitcoin’due south network are powered by fossil fuels.

Thinking near how to reduce CO2 emissions from a widespread Bitcoin implementation

— halfin (@halfin) 27 januari 2009

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Locating miners

Determining the exact carbon impact of the Bitcoin network has been a challenge for years. Non only does i need to know the power requirement of the Bitcoin network, but ane likewise need to know where this ability is coming from. The location of miners is a key ingredient to know how muddied or how clean the power is that they are using.

Since 2020 Cambridge provides detailed insights into the localization of Bitcoin miners over time. The article “Revisiting Bitcoin’due south carbon footprint” released in the scientific journal Joule on February 25, 2022, subsequently explains how this information on miner locations can exist used to estimate the electricity mix and carbon footprint of the network.

The commodity specifically finds that that the share of renewables that power the network decreased from 41.half dozen% to 25.one% following the mining crackdown in China during the Spring of 2021. Miners previously had admission to a substantial amount of renewables (during a limited office of the twelvemonth) when they were notwithstanding in Prc (i.e. hydropower during the wet season in the summertime months), but this was lost when they were forced to move to countries such as the U.S. and Republic of kazakhstan. These locations now mainly supply Bitcoin miners with either coal- or gas-based electricity, which has likewise additional the carbon intensity of the electricity used for Bitcoin mining. The commodity highlights that the boilerplate carbon intensity of electricity consumed by the Bitcoin network may have increased from 478.27 gCO2/kWh on average in 2020 to 557.76 gCO2/kWh in August 2021. The carbon footprint provided by the Bitcoin Free energy Consumption Index is based on this carbon intensity.

Primal challenges for using renewables

It is important to realize that, while renewables are an intermittent source of energy, Bitcoin miners accept a constant free energy requirement. A Bitcoin ASIC miner volition, once turned on, non be switched off until it either breaks down or becomes unable to mine Bitcoin at a profit. Because of this, Bitcoin miners increase the baseload demand on a grid. They don’t just consume energy when there is an excess of renewables, but still crave ability during production shortages. In the latter case Bitcoin miners have historically ended up using fossil fuel based power (which is more often than not a more steady source of energy).

Further substantiation on why Bitcoin and renewable free energy make for the worst match tin be found in the peer-reviewed academic article “Renewable Free energy Will Non Solve Bitcoin’s Sustainability Problem” featured on Joule. With climate change pushing the volatility of hydropower production in places similar Sichuan, this is unlikely to get any better in the future.

Comparing Bitcoin’s energy consumption to other payment systems

To put the energy consumed by the Bitcoin network into perspective we tin can compare it to another payment system like VISA for example. According to VISA, the company consumed a full amount of 740,000 Gigajoules of energy (from diverse sources) globally for all its operations. This ways that VISA has an free energy need equal to that of effectually 19,304 U.S. households. We also know VISA candy 138.three billion transactions in 2019. With the help of these numbers, information technology is possible to compare both networks and show that Bitcoin is extremely more energy intensive per transaction than VISA. The difference in carbon intensity per transaction is even greater (run into footprints), as the energy used by VISA is relatively “greener” than the energy used by the Bitcoin mining network. The carbon footprint per VISA transaction is only 0.45 grams CO2eq.

Of course, VISA isn’t perfectly representative for the global financial organization. Only even a comparison with the boilerplate non-cash transaction in the regular financial system notwithstanding reveals that an boilerplate Bitcoin transaction requires several thousands of times more free energy.

Limited scalability causes farthermost transaction footprints

I central reason why the CO2 emissions per Bitcoin transaction tin be so extreme is that the underlying blockchain isn’t just built on an energy-enervating algorithm, simply information technology’s too extremely limited in terms of transaction processing capacity. A block for Bitcoin’south blockchain can incorporate 1 megabyte of data. Every bit a new block volition be generated simply in one case every 10 minutes on average, this data limit prevents the network from handling more 7 transactions per second. In the virtually optimistic scenario Bitcoin could therefore theoretically handle around 220 one thousand thousand transactions annually. Meanwhile, the global financial organization is handling more than 700 billion digital payments per twelvemonth (and a payment provider similar VISA can handle over 65,000 per 2d if needed). Bitcoin’s maximum transaction capacity represents only 0.03% of this (rapidly growing) number. This is less than the total number of electronic payments processed in a country like Republic of hungary (more 300 one thousand thousand per year), not even considering that cash still makes upwardly for ii thirds of all payment transactions here. With such an incredibly low limit, Bitcoin is simply incapable of achieving whatsoever form of mainstream adoption as a global currency and/or payment organisation. Different the network’s transaction limit, the energy consumption of the network isn’t capped. The cost of Bitcoin is the main driver of the network’s environmental impact, and there’s no limit to how loftier this can go. Because of this, the Bitcoin network tin eat several times as much electrical energy every bit the entire country of Hungary (which consumes 43 TWh annually).

Unfortunately for Bitcoin, at that place’due south no existent solution for this scalability problem either. Proponents of the digital currency debate that so-called 2nd layer solutions like the Lightning Network will aid scaling Bitcoin, while dismissing that information technology is practically impossible to make such a solution piece of work on a substantial scale. In order to move any amount of funds into the Lightning Network in the kickoff place, a funding transaction on the main network is still required. Information technology would take the Bitcoin network 35 years to process a single funding transaction for all vii.7 billion people (2021) on this planet, ignoring any other possible utilize of the main network and further population growth in the meanwhile. The merely applied solution to Bitcoin’s scalability trouble has, so far, been to make use of trusted third parties, as these can process transactions internally without the need to really use the Bitcoin blockchain. The obvious problem with this is that it merely reinvents the system we already have in place.

Another perspective

Because of the same scalability issues, it’south often argued that Bitcoin is more than like “digital golden” than a payment arrangement. Hence nosotros can as well compare Bitcoin mining to gold mining instead. Every year, effectually 3,531 tonnes of gold are mined, with a full related emissions amounting to 81 million metric tonnes of CO2. When comparing this to the carbon intensity of mining Bitcoins, nosotros can discover that the latter exceeds that of mining existent gold (see below). Note that this includes mined fees, which has no comparison in mining for real gold (as we’d have to put previously mined gilded back into the ground). Likewise, the comparison is also flawed considering we can terminate mining for real gilt, whereas Bitcoin would simply stop existing without active mining.

One could argue that this is simply the cost of a transaction that doesn’t require a trusted third political party, but this price doesn’t have to be so high as will be discussed hereafter.

Alternatives

Proof-of-work was the first consensus algorithm that managed to prove itself, but it isn’t the just consensus algorithm. More than energy efficient algorithms, similar proof-of-stake, accept been in development over recent years. In proof-of-stake coin owners create blocks rather than miners, thus not requiring ability hungry machines that produce equally many hashes per 2d as possible. Considering of this, the energy consumption of proof-of-stake is negligible compared to proof-of-work. Bitcoin could potentially switch to such an consensus algorithm, which would significantly amend environmental sustainability. It is estimated that a switch to proof-of-stake could save 99.95% of the energy currently required to run a proof-of-work based system.

Energy consumption model and key assumptions

Even though the total network hashrate tin can easily exist calculated, it is impossible to tell what this ways in terms of energy consumption as there is no central annals with all active machines (and their exact power consumption). In the past, energy consumption estimates typically included an supposition on what machines were still agile and how they were distributed, in social club to arrive at a certain number of Watts consumed per Gigahash/sec (GH/s). A detailed examination of a real-earth Bitcoin mine shows why such an approach volition certainly lead to underestimating the network’due south energy consumption, because information technology disregards relevant factors like automobile-reliability, climate and cooling costs. This capricious approach has therefore led to a wide set up of energy consumption estimates that strongly deviate from one another, sometimes with a condone to the economic consequences of the chosen parameters. The Bitcoin Energy Consumption Index therefore proposes to turn the trouble effectually, and approach energy consumption from an economic perspective.

The index is built on the premise that miner income and costs are related. Since electricity costs are a major component of the ongoing costs, it follows that the total electricity consumption of the Bitcoin network must be related to miner income every bit well. To put information technology simply, the college mining revenues, the more energy-hungry machines can be supported. How the Bitcoin Energy Consumption Alphabetize uses miner income to make it at an energy consumption estimate is explained in detail here (also in peer-reviewed academic literature here), and summarized in the following infographic:

Bitcoin miner earnings and (estimated) expenses are currenly as follows:

Note that one may reach unlike conclusions on applying different assumptions (a reckoner that allows for testing different assumptions has been made available here). The chosen assumptions have been chosen in such a way that they can be considered to be both intuitive and bourgeois, based on information of actual mining operations. In the end, the goal of the Index is non to produce a perfect estimate, but to produce an economically credible twenty-four hour period-to-day estimate that is more than authentic and robust than an estimate based on the efficiency of a pick of mining machines.