Bitcoin’s Environmental Problem

April 19th, 2013 by Joshua S Hill

The world of environmental problems is bad enough without adding digital problems to the mix, but that’s just what Bitcoin has done by virtue of being the most popular digital currency currently available.

Bitcoin, for the uninitiated, is “a digital currency which was first described in a 2008 paper by pseudonymous developer Satoshi Nakamoto, who called it an anonymous, peer-to-peer, electronic payments system.” Nakamoto believed (PDF) that an “electronic payment system based on cryptographic proof instead of trust” was necessary to prevent fraud:

Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.

All very well and good, you might say, but what does this have to do with the environment?

The problem comes in the accumulation of Bitcoins (or is the plural Bitcoin?).

There are two primary methods of acquiring Bitcoins: purchasing on the open market and ‘mining’ for Bitcoins (just like we would mine for gold, say). Business Insider provided a fantastic rundown of just how a digital currency is mined:

A common analogy for Bitcoins is gold: like gold, they have value only because people want them, the supply is limited, more Bitcoins are created only by ‘mining’ for them and the difficulty in mining grows as they are mined. But rather than being stored in underground vaults Bitcoins are simply entries in a notional ledger held across many computers around the world.

Unlike gold, however, mining for Bitcoins is a mathematical process conducted on necessarily increasingly more powerful computers. A successful search will yield a ‘block’ of data, a Bitcoin ‘hash’. As Business Insider describes, “when a match occurs the miner obtains a bounty of Bitcoins.” This is the tricky bit, however. As with any currency there has to be rarity. And as the amount of currency owned grows, so too must the rarity, and therefore the difficulty in acquiring more of said currency.

Returning to the analogy of gold, when gold was first discovered, all you needed was a pan and patience. As time went on, and gold started becoming rarer, the technology needed to extract more and more gold increased. The same goes with Bitcoins, as the computational power required to complete a successful search for a Bitcoin hash continues to increase. More and more powerful computers are required to earn Bitcoin, and those computers are being pushed harder and faster with each Bitcoin that is earned.

Subsequently, so too are the power requirements of those computers. And there we have the environmental problem of the Bitcoin.

Think of it in terms of a distributed computing project, like Folding@home, which uses the idle processes of your computer to simulate protein folding (hence the name). Joining this project connects your computer to thousands of other computers across the globe which have similarly installed the software that simulates the folding. As a result, the researchers have access to one of the world’s largest supercomputers, without the expense of needing to actually buy a supercomputer, by virtue of having thousands of computers around the world doing the job of one expensive supercomputer. The relevant similarities to Bitcoin — and there are several in this particular instance — exist in using your computer’s idle processes.

Normally, when someone is finished with their computer for the day, they might turn it off. However, when folding — or in this case, searching for Bitcoin hashes — the computer is left on in an effort to let the program work longer and have access to more of the computers processes. Additionally, your computer is not ‘at rest’ — using only the barest power necessary to run. Rather, the search pushes the computer to work harder, which in turn increases the amount of power required to sustain the work.

According to Blockchain.info, Bitcoin miners are using 1,046.97 megawatt hours today to search for new Bitcoin hashes, which amounts to approximately $157,000. Blockchain also details the current operating profit of mining, putting the figure in at $204,219.47: that’s an operating margin of only 56.53%.

Without a doubt, that sum probably pales in comparison to the needs of our current financial systems, but given that this is a new and — arguably — unnecessary form of currency with minimal use cases (so far), one wonders at the wisdom currently driving the search for more Bitcoins. Furthermore, when the cost of finding a Bitcoin starts to outweigh the relative cost of a Bitcoin, what then? Will the search continue unhindered, heedless of the environmental damage being caused (not to mention the rising personal costs)? Supporters of Bitcoin are quick to remind critics that the currency was designed in a way that will see the mining of Bitcoins taper off as they become more difficult to find and therefore less economical, but with no evidence of such an occurrence, it will be in the proof that these issues are proven or disproven.

Bloomberg, which originally made this story into headline news, unsurprisingly decided to go for the sensational headline approach: “Virtual Bitcoin Mining Is a Real-World Environmental Disaster” reads its headline, reminding us that it only chooses those headlines because the average reader falls for it every time. And while there may be no real looming international environmental disaster, there is definitely cause for concern.

For example, since Bloomberg published its story — a week ago — the megawatt hours necessary have risen from 982 to 1,046.97, which has subsequently pushed the cost from $147,000 up to $157,000.

That’s in just seven days.

Calculating that into a real-world application, today’s Bitcoin search could have powered 33,901 US homes for one day (based on the US Energy Information Administration’s data for 2011 average annual electricity consumption).

All in all, the Bitcoin is definitely serving a critical function in a society which is undoubtedly moving forward — technologically, at least. However, this critical function is being carried out in the same manner that has so thoroughly hurt our planet’s atmosphere; an almost cataclysmic disregard for anything but personal gain. For centuries, we have striven for technological advancement with little to no regard for the impact that advancement — and the means by which we achieve it — will have on the environment. That disregard is slowly dissipating, but one wonders — if the meteoric popularity of the Bitcoin is any example — whether that disregard is dissipating fast enough.









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