Digital currency ethereum's massive price spike has sparked an online gold rush. The price per token has topped $300 lately, soaring from around $10 at the outset of 2017. Amateur miners worldwide are jumping into the action from home, using computer graphics cards to generate new ether (units of ethereum) and secure the blockchain, the public ledger of transactions.

This mining frenzy has a side effect: Ethereum is now consuming a small country's worth of electricity.

A new real-time index from Alex de Vries, founder of cryptocurrency analysis site Digiconomist, shows that each ethereum transaction could now represent as much as 45 Kilowatt-hours (kWh) of electricity spent mining. That's about as much juice as the average American household uses in a day and a half. For comparison's sake, De Vries has estimated that a Visa transaction requires 0.00651 kWh. The entire network could be using as much as 4.2 Terawatt-hours (tWh), or slightly more than the country of Cyprus.

Just like bitcoin, ethereum mining doesn't come for free. As the price of the cryptocurrency goes up, it becomes more profitable to throw more computing power at mining, which generates new ether. Graphics cards are relatively energy-hungry components, and with scores of them now in the mining game, the currency's electricity bills are starting to add up.

Before we go further, it's worthwhile to note two things. First, ethereum doesn't only process transactions—you can program smart contracts with it that could add extra value-for-electricity. Second, ethereum has a plan to change its mining that could drastically reduce its power needs, if it works.

De Vries, who has previously estimated bitcoin's electricity consumption based on miners' economic incentives, arrived at his conclusions by first calculating the total mining revenue in USD available to ethereum miners. This is the amount of new ether created by mining each day, multiplied by the USD-ethereum exchange rate. To leave room for profit and the cost of buying mining equipment, he assumes a (reasonable) 60 percent of this revenue would go towards miners' electricity bills. From there, the index calculates the amount of electricity miners could be using at an average residential rate of 12 cents per kWh.

He found that the ethereum network in total could be using as much as 4.2 Terawatt-hours (TWh) of electricity each year. It's then possible to calculate the "embedded" energy in each transaction performed, since we know the exact number of transactions ethereum processes as each day goes by (as of June 25, ethereum's record for daily transactions was 308,488).

Source: Digiconomist

Given the decentralized nature of mining, it's impossible to know ethereum's electricity consumption exactly. The index, currently in beta, attempts to make a reasonable guess. But what if it's guessing too high?

In an email, de Vries provided me with an estimate of the least amount of electricity ethereum could be sucking up worldwide, if everyone was mining with the very popular AMD Radeon RX 480. "It produces ~29 MH/s at 135W, so that's a little over 2 TWh per year [for the whole Ethereum network] at the current hashrate," he wrote.

Of course, not everybody's using this card, and indeed it's profitable to mine with less efficient equipment, so the real consumption is likely higher.

Unlike bitcoin, ethereum has a plan to transition away from its current energy-intensive mining algorithm

There are a number of factors that could throw the index off in either direction. People mining with dirt-cheap power prices could afford to use more electricity and older equipment. Or, the current shortage of graphics cards could delay people from using more power with new equipment. Finally, ethereum supports programmable contracts, meaning there's the potential for any given unit of electricity to produce more value than a simple transaction. But on the whole, the index is a level-headed analysis of ethereum mining's economic incentives and their consequences for its electricity consumption.

Unlike bitcoin, ethereum has a plan to transition away from its current energy-intensive mining algorithm, Proof of Work, towards a new hybrid model incorporating Proof of Stake. This would certainly decrease electricity demands: Put very simply, under the new protocol, ether holders would mine just by having their computers connected, said de Vries. If ethereum switched to a full Proof of Stake algorithm, "energy consumption would become negligible," he offered, consuming little more power than the thousands of desktop computers that would already be switched on.

Until the transition plan is up-and-running, ethereum's appetite for electricity will continue to be tied to its price (18 million new ether are created each year, and miners will mine for them using as much electricity as the price supports).

Cryptocurrencies are inefficient by design. Their decentralized nature demands a way to establish trust between strangers on the internet, and for technical reasons the best answer we seem to have developed so far is to back blockchains up with enormous amounts of electricity and computing power.

Is the juice is worth the squeeze? That depends on our opinions on a wide range of issues: economic freedom, the value of authority, and the immediacy of climate change, to name a few. It's also a question for ethereum's developers and community as they take their platform forward. If ethereum is the economic revolution they say it will be, let's hope they choose wisely.