Alex de Vries, Dutch researcher, recently published a study that concluded: Bitcoin mining currently uses as much electricity as Ireland. Is this something we should trust or not?
Every single person that tried to mine Bitcoin at home knows that the process is energy-intensive. However, experts might actually exaggerate this consumption. According to Standford lecturer Jonathan Koomey, de Vries is not getting it right. In an interview with NBC News, he said:
For two decades, people have been eager to overestimate electricity use by computing. My concern is that we simply don’t have adequate data to come to the strong conclusion that he’s coming to.
The estimate is that the current Bitcoin mining operations consume over 2.55 gigawatts, with the potential consumption of 7.67 gigawatts appearing in the future. In addition, the claim is that economic models say Bitcoin mining electricity consumption is going to move towards the latter number.
Experts like Koomey say that this is not the case since the underlying assumptions made by most analysts are problematic. This is especially the case when referring to how energy value and price are calculated. Koomey explained:
The worry is that those are two numbers that are picked out of the air. There may be some basis for them, but it’s a very unreliable way to do these kinds of calculations, and nobody who does this for a living would do it like that. It’s odd that someone would.
The big problem is that Bitcoin mining is private. Most of the mining operations are operating in areas that are remote. This makes it incredibly complicated to know exactly how much is paid for energy during the mining process. That is especially the case since most of these operations have specific set ups that reduce electricity consumption, like mining in areas that are energy-rich, in caves or in countries that are really low-cost.
The research published by De Vries has another big flaw in that it neglects the fact that Bitcoin miners are now using mining equipment that is especially created with the purpose of maximizing efficiency. Sloan School of Management assistant professor Christian Catalini, who is actively involved in blockchain technology and cryptocurrency research, said:
The only people with good data on this are the miners, so you do need that data to understand the electricity consumption. The main challenge is that this gear is scattered across the globe and faces different prices.
Bitcoin mining is constantly optimized and modified with the purpose of increasing efficiency. What are the correct consumption numbers? We have to see what miners say.
Braiins Systems co-founder and CEO, Jan Capek, stated that the company utilizes a lot less than what critics imply. According to him, at the current difficulty, total cost to mine 1 BTC is under $1937, according to the HW of 5c/kWh. This is so much less than what others say and what would be beneficial for those interested to get rid of Bitcoin mining.
What is interesting is that de Vries actually admits that the research design he uses is flawed. He did say more scientific discussion is necessary. With this in mind, why is such information released when no real data is used for it? We constantly see large Bitcoin miners say that they do not consume that much energy and that their profit is quite high. At the same time, various analysts try to make these amounts seem much higher than what they really are.
Conspiracy theory enthusiasts, go wild!