4/3/2018 There Is Nothing Virtual About Bitcoin’s Energy Appetite - The New York Times

There Is Nothing Virtual About Bitcoin’s
Energy Appetite

An employee at a Bitmain facility in Inner Mongolia, one of the biggest Bitcoin farms in the
world. Giulia Marchi for The New York Times

By Nathaniel Popper (http://www.nytimes.com/by/nathaniel‑popper) Jan. 21, 2018

Leer en español (https://www.nytimes.com/es/2018/01/24/el‑consumo‑de‑energia‑que‑
requiere‑el‑bitcoin‑no‑es‑nada‑virtual)

SAN FRANCISCO — Creating a new Bitcoin requires electricity. A lot of it.

In the virtual currency world this creation process is called “mining.” There is
no physical digging, since Bitcoins are purely digital. But the computer power
needed to create each digital token consumes at least as much electricity as the
average American household burns through in two years, according to figures
from Morgan Stanley and Alex de Vries, an economist who tracks energy use
in the industry.

The total network of computers plugged into the Bitcoin network consumes as
much energy each day as some medium‑size countries — which country
depends on whose estimates you believe. And the network supporting
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Ethereum, the second‑most valuable virtual currency, gobbles up another

country’s worth of electricity each day.

The energy consumption of these systems has risen as the prices of virtual
currencies have skyrocketed, leading to a vigorous debate among Bitcoin and
Ethereum enthusiasts about burning so much electricity.

The creator of Ethereum, Vitalik Buterin, is leading an experiment with a more

energy‑efficient way to create tokens, in part because of his concern about the
impact that the network’s electricity use could have on global warming.
“I would personally feel very unhappy if my main contribution to the world
was adding Cyprus’s worth of electricity consumption to global warming,” Mr.
Buterin said in an interview.

But many virtual currency aficionados argue that the energy consumption is
worth it for the grander cause of securing the Bitcoin and Ethereum networks
and making a new kind of financial infrastructure, free from the meddling of
banks or governments.

“The electricity usage is really essential,” said Peter Van Valkenburgh, the
director of research at Coin Center, a group that advocates for virtual currency
technology. “Because of the costs, we know the only people participating are
serious, that they are economically invested. That creates the incentives for
cooperation.”

This dispute has its foundations in the complex systems that produce tokens
like Bitcoin; Ether, the currency on the Ethereum network; and many other
new virtual currencies.

All of the computers trying to mine tokens are in a computational race, trying
to find a particular, somewhat random answer to a math algorithm. The
algorithm is so complicated that the only way to find the desired answer is to
make lots of different guesses. The more guesses a computer makes, the better
its chances of winning. But each time the computers try new guesses, they use
computational power and electricity.
The lure of new Bitcoins encourages people to use lots of fast computers, and
lots of electricity, to find the right answer and unlock the new Bitcoins that are
distributed every 10 minutes or so.

This process was defined by the original Bitcoin software, released in 2009. The
goal was to distribute new coins to people on the Bitcoin network without a
central institution handing out the money.

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Early on, it was possible to win the contest with just a laptop computer. But the
rules of the network dictate that as more computers join in the race, the
algorithm automatically adjusts to get harder, requiring anyone who wants to
compete to use more computers and more electricity.

These days, the 12.5 Bitcoins that are handed out every 10 minutes or so are
worth about $145,000, so people have been willing to invest astronomical sums
to participate in this race, which has in turn made the race harder. This
explains why there are now enormous server farms around the world
(https://www.nytimes.com/2017/09/13/business/bitcoin‑mine‑china.html)
dedicated to mining Bitcoin.

This process is central to Bitcoin’s existence because in the process of mining,

all the computers are also serving as accountants for the Bitcoin network. The
algorithm the computers solve requires them to also keep track of all the new
transactions coming onto the network.

A computer server farm in Iceland, dedicated to mining Bitcoin. Richard Perry/The New York Times

The mining race is meant to be hard so that no one can dominate the
accounting and fudge the records. In the 2008 paper that first described Bitcoin
(https://bitcoin.org/bitcoin.pdf), the mysterious creator of the virtual
currency, Satoshi Nakamoto, wrote that the system was designed to thwart a

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4/3/2018 There Is Nothing Virtual About Bitcoin’s Energy Appetite - The New York Times

“greedy attacker” who might want to alter the records and “defraud people by
stealing back his payments.” Because of the mining and accounting rules, the
attacker “ought to find it more profitable to play by the rules.”

The rules have kept attackers at bay in the nine years since the network got
going. Without this process, most computer scientists agree, Bitcoin would not
work.
But there is disagreement over the real value of Bitcoin and the network that
supports it.

For people who consider Bitcoin nothing more than a speculative bubble — or
a speculative bubble that has enabled online drug sales and ransom payments
— any new contribution toward global warming is probably not worth it.

But Bitcoin aficionados counter that it has allowed for the creation of the first
financial network with no government or company in charge. In countries like
Zimbabwe (https://www.bloomberg.com/news/articles/2017‑11‑15/bitcoin‑
surges‑in‑zimbabwe‑after‑military‑moves‑to‑seize‑power) and Argentina
(https://www.nytimes.com/2015/05/03/magazine/how‑bitcoin‑is‑disrupting‑
argentinas‑economy.html), Bitcoin has sometimes provided a more stable
place to park money than the local currency. And in countries with more stable
economies, Bitcoin has led to a flurry of new investments, jobs and start‑up
companies.

“Labeling Bitcoin mining as a ‘waste’ is a failure to look at the big picture,”

Marc Bevand, a miner and analyst, wrote on his blog
(http://blog.zorinaq.com/bitcoin‑mining‑is‑not‑wasteful/). The jobs alone, he
added, “are a direct, measurable and positive impact that Bitcoin already made
on the economy.”

But even some people who are interested in all that innovation have worried
about the enormous electrical use.

Mr. de Vries, who keeps track of the use on the site Digiconomist, estimated
that each Bitcoin transaction currently required 80,000 times more electricity
to process than each Visa credit card transaction, for example.

“Visa is more centralized,” Mr. de Vries said. “If you really distrust the financial
system, maybe that is unattractive. But is that difference really worth the
additional energy cost? I think for most people that is probably not worth the
case.”

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The figures published by Mr. de Vries have been criticized by Mr. Bevand
(http://blog.zorinaq.com/bitcoin‑electricity‑consumption/) and other Bitcoin
fans, who say they overstate the energy costs by a factor of about three. Many
critics add that producing and securing physical money and gold also require
lots of energy (https://www.zerohedge.com/news/2017‑11‑04/bitcoin‑vs‑gold‑
which‑ones‑bubble‑how‑much‑energy‑do‑they‑really‑consume), in some cases
as much as or more than Bitcoin uses.
Mr. Van Valkenburgh, of the Coin Center, has argued that Bitcoin miners, who
can do the work anywhere, have an incentive to situate themselves near cheap,
often green energy sources, especially now that coal‑guzzling China appears to
be exiting the mining business (https://www.reuters.com/article/us‑canada‑
bitcoin‑china/chinese‑bitcoin‑miners‑eye‑sites‑in‑energy‑rich‑canada‑
idUSKBN1F10BU). Several mining companies have opened server farms near
geothermal energy in Iceland (https://dealbook.nytimes.com/2013/12/21/into‑
the‑bitcoin‑mines/) and hydroelectric power in Washington State
(https://www.cnbc.com/2018/01/11/wenatchee‑washington‑and‑the‑bitcoin‑
gold‑rush.html).

But the concerns about electricity use have still hit home with many in the
industry. The virtual currencies known as Ripple and Stellar, which were
created after Bitcoin, were designed not to require electrically demanding
mining.

Perhaps the biggest change could come from the new mining process proposed
by Mr. Buterin for Ethereum, a process that some smaller currencies are
already using. Known as “proof of stake,” it distributes new coins to people who
are able to prove their ownership of existing coins — their stake in the system.
The current method, which relies so heavily on computational power, is called
“proof of work.” Under that method, the accounts and people who get new
coins don’t need existing tokens. They just need lots of computers to take part
in the computational race.

Energy concerns are not the only factor encouraging the move. Mr. Buterin
also believes that the new method, which is likely to be rolled out over the next
year, will allow for a less centralized network of computers overseeing the
system.

But it is far from clear that the method will be as secure as the one used by
Bitcoin. Mr. Buterin has been fiercely attacked by Bitcoin advocates
(https://medium.com/@tuurdemeester/critique‑of‑buterins‑a‑proof‑of‑stake‑
design‑philosophy‑49fc9ebb36c6), who say his proposal will lose the qualities
that make virtual currencies valuable.
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4/3/2018 There Is Nothing Virtual About Bitcoin’s Energy Appetite - The New York Times

Mr. Van Valkenburgh said that for now, throwing lots of computing power into
the mix — and the electricity that it burns — was the only proven solution to
the problems Bitcoin solves.

“At the moment, if you want robust security, you need proof of work,” he said.

A version of this article appears in print on January 22, 2018, on Page B1 of the New York edition with the headline: Powering
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