Bitcoin, Ethereum, and other cryptocurrencies have had more than their share of press over the last few years. Many articles have concentrated on their chaotic price history, but recently journalists have turned their attention to the large amount of power consumed by cryptocurrency operations.
Bitcoin analyst Alex de Vries maintains a website, Digiconomist.net that tracks cryptocurrency metrics. Currently, the site shows the Bitcoin network consuming an estimated 47 TWh or electricity annually: 0.2 percent of the world’s energy consumption, about the same as Singapore.
Why does bit mining consume so much power? The Bitcoin network of nodes stores information on every transaction that has ever taken place in a distributed ledger called the blockchain. Every time a new Bitcoin transaction occurs, it’s added to the blockchain using cryptography, so it can’t be altered or reversed.
New bitcoins are created as a result of activity by miners; the system rewards the first miner to successfully complete the required calculation for a block.
A miner assembles a block from a list of unprocessed transactions plus other information, including a 4-byte (32-bit) variable field called a “nonce,” then runs the result through an SHA-256 hashing algorithm. If the 256-digit result begins with a specified minimum number of zeros and is validated by other nodes in the network, the miner can append the block to the Bitcoin blockchain, and the miner’s Bitcoin address is credited with a reward. If the result does not meet the criteria, then the computer generates another nonce and tries again. Once a new block has been “discovered,” competing miners discard their work and assemble a new block to work on.
Sounds simple enough. But there are couple of wrinkles. First, the Bitcoin code can change the number of leading zeros required from the hash to vary the difficulty of finding a correct solution. This adjustment takes place every 2,016 blocks with a goal of allowing a new block once every 10 minutes on average, no matter how many miners are competing worldwide. Second, the reward for success halves every 210,000 blocks—it’s expected to go to 6.25 bitcoins in May, 2020.
The first Bitcoin block, mined March 1, 2009, required a string of 9 zeros: the average daily number of hashes produced by all bitcoin miners was around 6,000,000 and the reward was 50 bitcoins. Today, the daily output is around 50 x 1018 hashes, and the difficulty has increased to 17 or 18 leading zeros. At the same time, the reward has decreased to 12.5 bitcoins.
In the pursuit of ever-faster hashing performance, bit-mining hardware has quickly progressed from high-end CPUs such as Intel’s Core i5, through GPUs, FPGAs, to ASICs designed for efficient SHA-256 operation.
Bitcoin processing takes considerable power: about 435 kWh per transaction. The blue graph in Figure 1 shows the daily Bitcoin revenue (US$) per GH/s: the horizontal lines show the daily energy cost of different technologies based on US$0.20 per kWh.
As hardware has converged around the last few generations of ASICs, profit depends primarily on the price of electricity; rates vary widely around the world, so miners flock to low-cost areas. Only around 60 percent of the cost of electricity, though, comes from its generation; the other 40 percent is due to the transmission and distribution infrastructure. Sensing an opportunity, entrepreneurs in the U.S. are helping cut energy costs with standalone power plants for bit-mining applications.
Bunker Mining, for example, is moving forward with a project in Portsmouth, Va., to convert a 110-MW coal-fired power plant to burn biomass: wood pellets and reclaimed construction lumber. The company is also installing a bit-mining facility adjacent to the power plant to take advantage of the low-cost electricity.
According to Bunker Mining Executive Brian Snyder, the company intends to sell the fuel ash from the boiler as a fertilizer, lowering costs of production while increasing sustainability. They’re even considering augmenting the bio-fuel with swine manure, which has a calorific value of up to 9,000 Btu/lb after drying.
Pig poop and bit mining: a match made in power-hog heaven? I can’t believe I just wrote that.