While today’s pace of growth for the cryptocurrency industry feels unsustainable, even a stubborn-as-a-mule skeptic would have a hard time arguing any correction would lead to a fundamental infrastructure collapse.
The current climate around cryptocurrencies is akin to a “coming of age moment”, a line has been crossed.
Let’s imagine a worst-case scenario and a bubble pops. While it will cause short-term pain, a price collapse would be like the Dot-com bubble of 2001. Sure, it would result in some re-building and soul searching but the 2001 collapse didn’t signal the end of the internet.
In hindsight, that moment was the growing pains of what would become possibly the world’s most powerful industry. If a correction happens within the crypto space, the long-term view should be similar — a growing pain of a technology that will grow into a fundamental part of the way the world works.
This also means it’s time to start criticising cryptocurrency and point out legitimate problems of the industry. Think politics; everyone is quick to attack, critique and express anger towards politicians, but only a fringe few actively argue for a dismantling of government.
For the crypto-currency community, there is a major problem beyond the world of finance:
It is staring down the barrel of an energy consumption crisis.
Bitcoin mining consumes more energy than Nigeria
Bitcoin Miners are consuming a huge amount of energy and as other coins (Ethereum, Litecoin etc.) grow in popularity they too become energy sucks.
A new research paper from Power Compares, a UK-based energy tax company, highlights some disturbing realities about Bitcoin mining operations.
The headline grabber is the industry is consuming more energy than 159 countries. Furthermore, Ireland, a developed nation, and Nigeria, Africa’s largest economy, use less electricity. According to the report, if Bitcoin miners were a nation, they would rank 61st on the global consumption index.
For e27 readers, here is some perspective: If the entire Bitcoin mining industry was moved to Singapore, it would consume a number that equates to 62 per cent of the city’s current yearly consumption number.
Furthermore, as the general public begins to grow increasingly interested in cryptocurrencies, the computational power required to sustain the industry will only increase.
This has created a truly terrifying statistic: Bitcoin mining consumption has increased by just under 30 per cent over the past month — and that if this rate continues, it will consume the world’s electricity by February 2020.
Remember, February 2020 will be here in two years and few months, so even if growth is not that extreme, Bitcoin energy consumption will become a major problem in the next five years.
The report puts a macro-perspective on micro-realities the crypto currency community has long understood. Here are three examples:
- Miners in China move to rural areas to take advantage of low prices (and sometimes still pay over $15,000 a day in energy costs).
- Centres get so hot from servers they require immense energy to cool down the room.
- Mining one Bitcoin requires enough energy to run a comfortable house, with all the trappings, for a week.
In August, Futurism argued the blockchain can be an important tool to solving climate change issues. It highlighted an example of a blockchain-based experiment in New York City whereby residents used the system to share energy from a micro-grid.
The reason it is so interesting is it exemplified bottom-up energy policy that can be more efficient than top-down. This micro-grid in New York was able to quickly and easy share energy and could circumvent an inefficient and slow bureaucratic process.
But in the current situation, these benefits are a drop in the ocean compared to the energy being used to sustain the industry.
Mining Bitcoin is not a net-neutral industry in regards to climate change, rather, it is actively contributing to global warming in the same way the automobile industry, deforestation and beef production are making this world hotter.
While there are a lot of potential life-altering benefits to crypto-currency proliferation, it all is meaningless if the industry can not become more energy efficient.
Moving beyond doom-and-gloom
While there is no answer to solving the energy consumption problem — if that silver bullet was discovered it would be the most important story of the decade — the short-term solution is creating a debate that recognises the problem without approaching it as a death knell to the industry (or our planet).
The problem right now is “experts” on one side call cryptocurrencies a scam or tulip fever. Justifiably, it results in a defensive reaction from other “experts” who describe the technology as more substantial than the invention of money.
While I’m being hyperbolic, it illustrates the point that often the public debate does not accomplish much.
This is fine when it comes to predicting the future price of Bitcoin. While a huge story this year, frankly, it’s really not that important. If the Bitcoin bubble pops tomorrow, it will suck for the people who invested in the coin, but it’s not about to destabilise the global financial system.
The debate about energy consumption cannot follow the same pattern. The numbers are so extraordinary that the community needs to recognise the problem as a core bug in the business model.
Then, the argument needs to be about how to fix the problem, not whether or not the problem merits the effort.
The reason is because if the energy consumption continues to grow it will gain more attention from governments, the media and the public. If the numbers of today continue, it’s hard to imagine that it won’t become the core avenue for government regulation and public backlash against the technology.
To achieve their lofty goals of transforming human society, cryptocurrencies need to find a system that doesn’t simultaneously destroy the planet.
The first step is to correctly frame the argument.
Copyright: bakhtiarzein / 123RF Stock Photo