Bitcoin today: about $50,000.
By Jon Huang, Claire O’Neill and Hiroko Tabuchi
Illustrations by Eliana Rodgers
Sept. 3, 2021
Cryptocurrencies have emerged as one of the most captivating, yet head-scratching, investments in the world. They soar in value. They crash. They’ll change the world, their fans claim, by displacing traditional currencies like the dollar, rupee or ruble. They’re named after dog memes.
And in the process of simply existing, cryptocurrencies like Bitcoin, one of the most popular, use astonishing amounts of electricity.
We’ll explain how that works in a minute. But first, consider this: The process of creating Bitcoin to spend or trade consumes around 91 terawatt-hours of electricity annually, more than is used by Finland, a nation of about 5.5 million.
Bitcoin’s electricity usage compared with countries
Estimated electricity consumption (terawatt-hours, annualized). Shaded region represents the range of possible values.
Denmark
Finland
Netherlands
Sweden
Spain (2019)
Chile
2017
2021
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Source: EIA, Cambridge Bitcoin Electricity Consumption Index·Country usage numbers are from 2019. Electricity cost for miners is assumed to average $0.05 per kilowatt-hour. Upper, lower and best guess trends are estimated using the research methodology behind the Cambridge Bitcoin Electricity Consumption Index.
That usage, which is close to half-a-percent of all the electricity consumed in the world, has increased about tenfold in just the past five years.
The Bitcoin network uses about the same amount of electricity as Washington State does yearly …
more than a third of what residential cooling in the United States uses up …
and more than seven times as much electricity as all of Google’s global operations.
So why is it so energy intensive?
For a long time, money has been thought of as something you can hold in your hand — say, a dollar bill.
Currencies like these seem like such a simple, brilliant idea. A government prints some paper and guarantees its value. Then we swap it amongst ourselves for cars, candy bars and tube socks. We can give it to whomever we want, or even destroy it.
On the internet, things can get more complicated.
Traditional kinds of money, such as those created by the United States or other governments, aren’t entirely free to be used any way you wish. Banks, credit-card networks and other middlemen can exercise control over who can use their financial networks and what they can be used for — often for good reason, to prevent money laundering and other nefarious activities. But that could also mean that if you transfer a big amount of money to someone, your bank will report it to the government even if the transfer is completely on the up-and-up.
So a group of free thinkers — or anarchists, depending on whom you ask — started to wonder: What if there was a way to remove controls like these?
In 2008, an unknown person or persons using the name Satoshi Nakamoto published a proposal to create a cash-like electronic payment system that would do exactly that: Cut out the middlemen. That’s the origin of Bitcoin.