Cryptocurrencies: Are They Worth It?

Cryptocurrencies: Are They Worth It?

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Cryptocurrencies: Are They Worth It?

Cryptocurrency mining started an arms race for computational power and consumes huge amounts of power. Is the impact worth it?

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Up until recently, I’ve been something of a laggard and have not paid much attention to cryptocurrencies. They’ve simply not been something of interest to me. But, an article caught my eye the other day about the amount of power that cryptocurrency mining consumes. As I’m a fully paid up hippy environmentalist, this sparked my interest. I dug into the subject a bit further and disappeared down an information rabbit hole that led me from the energy expended in Bitcoin mining to its impact on volunteer computing projects and gaming.

“…bitcoin mining consumes at least 22 terawatt hours of electricity a year, and probably as much as 73TWh, roughly the same amount as Austria does. Ethereum, the second-most-popular cryptocurrency, eats up a further 21TWh.”

Cryptocurrency mining was initially the domain of individuals or small groups of people who used their computers at home. It has now grown into an industry of competing companies that run enormous data centers packed with the graphics processing units (GPUs) needed to carry out the calculations necessary. The biggest of these datacenters can be found in China, which is worryingly where most electricity generated comes from coal-fired power stations, rather than renewable sources, suggesting that the Bitcoin network has potential to contribute to global warming.

As The Economist explains, cryptocurrency mining is founded on the concept of an immutable ledger, the blockchain, which records transfers of value from one party to another. Miners compete against one another to solve an algorithmic challenge (“proof-of-work”) that takes ten minutes on average, and the miner that gets there first is the winner who receives a reward in the form of newly created, free currency, and some transaction fees. The winner then adds their block to the chain.

There’s a kind of arms race to prevent solutions being reached more rapidly than ever ten minutes. If miners upgrade their hardware to mine blocks faster, automatically recalibrating the system makes it increasingly hard to solve the challenge. So, to remain competitive, miners upgrade again, and with each increase in computing power comes the requirement for more electricity, despite the general efficiency improvements made by silicon vendors to improve electricity consumption relative to computational power.

Those miners based in areas offering cheap electricity stand to make the best profits. I found an interesting map showing the estimated electricity cost of mining one Bitcoin per country. The five cheapest countries to mine are Kuwait ($1,415 per bitcoin), Venezuela ($1,630), Myanmar ($3,087), Bahrain ($3,628), and China ($3,645). The data comes from Digiconomist, a platform that provides in-depth analyses on cryptocurrencies, which estimates that one Bitcoin transaction uses 1,000 kilowatt-hours of electricity.

A secondary side-effect of the popularity of cryptocurrency mining is that it is causing a global shortage in GPUs, which are in high demand for other purposes too, such as games consoles and in areas of computing with heavy processing loads, such as AI and some specific areas of scientific research. Silicon vendors, like AMD and NVidia, cannot keep up with demand. Back in February this year, researchers at the Search for Extraterrestrial Intelligence Institute (SETI) said they had been unable to source the latest GPUs needed because they are being snapped up by those mining Ethereum and some other cryptocurrencies (Bitcoin miners are now favoring specialized ASICs). Other areas of astronomy are similarly affected, while the price of graphics cards has been fluctuating and impacting the computer gaming industry.

While cryptocurrencies are not making much headway in the mainstream for a number of reasons, they are performing a function on the fringes of society, where buyers and sellers are happy to put up with their drawbacks in order to cover their tracks. Whether society should be enabling cryptocurrency to impact scientific research and the environment for this end, it is something that many are calling into question. What do you think? As usual, hit me up in the comments!

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