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Cryptos Consume more Energy than Expected
Categories : Cash is efficient
January 12, 2021
Published in : Bitcoin, Cryptocurrency, energy, environmental footprint
As Bitcoin reaches new records, it is also guzzling epic levels of energy and its environmental footprint is on the rise.
Guillaume Lepecq
view more articles
Chair, CashEssentials
IN 2021, THE VALUE OF BITCOIN SOARED BY 300%
On 8 January, the value of Bitcoin, the world’s leading cryptocurrency peaked at over $41,000 for the first time. It has since lost $10,000 in a characteristic swing of volatility. Over 2020, the price of bitcoin soared over 300%, with the price of many other cryptocurrencies also rising sharply. Ethereum, the second largest cryptocurrency grew by over 400% in 2020. The market capitalisation of Bitcoin amounts to over $700 billion.
BTC vs USD Exchange RateSource: Coindesk
The rise has sparked interest from speculators and investors in search of quick profits in times of economic uncertainty. In October, PayPal enabled its customers to hold Bitcoin as well as other virtual currencies in their digital wallets as well as use it to pay merchants who accept Paypal transactions. However, Bank of England Governor Andrew Bailey cautioned over Bitcoin’s use as a payment method. “I have to be honest, it is hard to see that Bitcoin has what we tend to call intrinsic value,” he said. “It may have extrinsic value in the sense that people want it.”
Regardless of how it is used, Bitcoin is consuming more and more energy. Without a centralised authority, the blockchain technology – the underlying technology on which Bitcoin is based – rests on a “consensus mechanism” to ensure trust across the network. In the case of bitcoin, consensus is achieved by a method called “Proof-of-Work” (PoW), where computers (or miners) on the network compete with each other to solve a complex mathematical puzzle. Once the puzzle is solved, the latest “block” of transactions is approved and added to the “chain” of transactions. The first miner to solve the puzzle is rewarded with new bitcoins and network transaction fees. The energy use of the bitcoin network is therefore both a security feature and a side effect of relying on the ever-increasing computing power of competing miners to validate transactions through PoW.
× Cryptos Consume more Energy than Expected Categories : Cash is efficient January 12, 2021 Published in : Bitcoin, Cryptocurrency, energy, environmental footprint As Bitcoin reaches new records, it is also guzzling epic levels of energy and its environmental footprint is on the rise. Guillaume Lepecq view more articles Chair, CashEssentials
IN 2021, THE VALUE OF BITCOIN SOARED BY 300% On 8 January, the value of Bitcoin, the world’s leading cryptocurrency peaked at over $41,000 for the first time. It has since lost $10,000 in a characteristic swing of volatility. Over 2020, the price of bitcoin soared over 300%, with the price of many other cryptocurrencies also rising sharply. Ethereum, the second largest cryptocurrency grew by over 400% in 2020. The market capitalisation of Bitcoin amounts to over $700 billion.
BTC vs USD Exchange RateSource: Coindesk
The rise has sparked interest from speculators and investors in search of quick profits in times of economic uncertainty. In October, PayPal enabled its customers to hold Bitcoin as well as other virtual currencies in their digital wallets as well as use it to pay merchants who accept Paypal transactions. However, Bank of England Governor Andrew Bailey cautioned over Bitcoin’s use as a payment method. “I have to be honest, it is hard to see that Bitcoin has what we tend to call intrinsic value,” he said. “It may have extrinsic value in the sense that people want it.”
Regardless of how it is used, Bitcoin is consuming more and more energy. Without a centralised authority, the blockchain technology – the underlying technology on which Bitcoin is based – rests on a “consensus mechanism” to ensure trust across the network. In the case of bitcoin, consensus is achieved by a method called “Proof-of-Work” (PoW), where computers (or miners) on the network compete with each other to solve a complex mathematical puzzle. Once the puzzle is solved, the latest “block” of transactions is approved and added to the “chain” of transactions. The first miner to solve the puzzle is rewarded with new bitcoins and network transaction fees. The energy use of the bitcoin network is therefore both a security feature and a side effect of relying on the ever-increasing computing power of competing miners to validate transactions through PoW.