Bitcoin’s energy arms race is a sign of things to come, Greenpeace warns Bitcoin’s enormous power demands are an early symptom of major problems to come, campaigners have warned, as renewable energy sources […]

Bitcoin’s enormous power demands are an early symptom of major problems to come, campaigners have warned, as renewable energy sources fail to keep pace with the needs of 21st century technology.

Greenpeace UK has added its voice to a growing chorus of concern about the cryptocurrency, which could surpass the energy usage of the United Kingdom within the next year.

Bitcoin has had a 1000% increase in value over the course of 2017, leading to an arms race among the so-called “miners” that generate the currency. Increasingly powerful computer rigs, many based in China where coal-powered plants still dominate, are using more and more electricity as they compete to solve the cryptographic puzzles that form the currency’s transaction history.

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“As online services grow and become more complex, the demand for computing power is bound to go up over the next few years, and that will require more energy,” said Greenpeace UK’s head of IT Andrew Hatton.

“The problem is that only about a fifth of the electricity used in the world’s data centres comes from renewable sources, and that’s not good enough.”

Explained: How Bitcoin uses so much energy Bitcoins are created by “mining”, a process by which computers work through extremely complex calculations and puzzles to create “blocks”. These blocks form part of the “blockchain”, the system by which records of Bitcoin ownership are digitally stored in a secure and difficult-to-alter way. Whoever mines a block, which is then added to the blockchain, receives a bitcoin as a reward. As the value of the cryptocurrency has increased, more and more computing power has been devoted to mining blocks. The biggest mining rigs exist in countries where electricity is relatively cheap, such as China, or where cooling costs are lowered by the climate, such as Iceland. However, powerful mining hardware runs into a problem: Bitcoin is designed to ensure that blocks are created at a constant rate – once every 10 minutes. The result is an arms race between ever-more-powerful computers to create the same amount of blocks. An ordinary computer, which could have mined bitcoin only a few years ago, now has a negligible chance of beating the superpowered rigs to the punch.

Outstripping Ireland

The situation as it stands is startling. According to an estimate by Alex de Vries, an analyst at accountant PwC who blogs about cryptocurrency at Digiconomist, the amount of energy being used has already outstripped countries like Ireland and Serbia.

It’s now gaining on Hong Kong and is likely to keep growing as long as there is cheap electricity to run the mining rigs – or the price of Bitcoin is high enough to cover the costs.

Bitcoin currently uses only a fraction of the world’s energy – around 0.13% according to one estimate – but if its power demands kept rising at their current rate, they would use as much as the UK by 2018, the United States by 2019 and the world as a whole by 2020.

That’s not physically possible without literally doubling the world’s electricity generation capacity in the next two years, which seems unlikely, but it’s a stark illustration of Bitcoin’s voracious appetite.

Doomsday scenario

For now, the major Bitcoin miners are in China, where they take advantage of energy overcapacity in certain areas to set up shop. But in the doomsday scenario, the price of Bitcoin would rise so much that it would become profitable everywhere, including in the United States, where significant capital might be sunk into processing power.

“The analogue here is fracking,” says Garrick Hileman, a research analyst at the University of Cambridge who co-authored a report about the state of cryptocurrency earlier this year. “In the US, all of a sudden, the $100 barrel of oil prompted a technical revolution to be able to frack.”

“With gold, when the price goes up, the supply increases, because it becomes more profitable to reach deeper into the earth to mine the deposits that were previously unprofitable to extract.”

That doesn’t necessarily hold for Bitcoin, because there is an absolute maximum number that can ever be created (21 million, of which almost 17 million have already been mined). But in the coming years, a high price could be a strong incentive for those who are yet to dabble.

Inefficient and energy-intensive

Oliver Rees, the founder of tech consultancy OR/innovation, created an online tool called Crypto Offset to highlight how much energy Bitcoin buyers and sellers are using – each, rather than on the whole – when they make trades. It even recommends a number of trees to plant to make up for those blithe clicks on the exchange app.

“Bitcoin and currencies like it are largely very inefficient and energy-intensive,” Rees says. “These issues are easy to ignore on a macro level but I wanted to make the implications more personal.”

Making 10 Bitcoin transactions – say, buying £10 worth of Bitcoin five times, then selling pieces off for profit five times as the price rises – is worth half a flight from London to New York in terms of carbon footprint, and carries penance of 1.5 trees.

The doomsday scenario isn’t by any means guaranteed to come to pass, however.

There are several potential obstacles to indefinite growth, however.

Chip shortages

“One constraint is just available electricity,” says Hileman. “If low-cost sources of electricity are exhausted, that’s going to have an effect on the price curve. Another factor that’s important here is just hardware availability – there are already chip shortages because there is already so much demand.”

Another is something crypto’s backers hoped the new technology would help them avoid: government interference.

The European Union has already agreed to clamp down on Bitcoin’s hypothetical anonymity with strict new rules to prevent money laundering and terrorism. Their fears aren’t unfounded: last week, a woman in New York was charged with bank fraud after allegedly collecting as many loans as she could, converting the cash to Bitcoin and sending more than $85,000 worth to Isis.

“Historically cryptocurrencies come from groups who wanted to design technology to facilitate the circumvention of government,” says Rees. “This means that baked into cryptocurrencies is the fact that they’re impossible to regulate, stop or monitor.”

In the UK, the Treasury has signalled that post-Brexit Britain won’t be a crypto haven either, with MP John Mann of the Commons Treasury Select Committee saying “we’ve got to make sure we don’t get left behind”.

There are other risks too. Campaigners for fossil fuel divestment have had some success with pulling pension fund money out of coal and oil – and they might turn their attention to Bitcoin at a moment when institutions are just starting to examine its viability as an investment.

The bubble could burst

And then there’s the risk always underlying the spectacular rise of the cryptocurrency: it could just crash to zero, or close, at which point it would presumably revert to being an amateur sport as the big miners bail out due to lack of profitability.

Conventional wisdom says the bubble will pop at some point – but the longer it takes, the worse the ecological footprint.

It doesn’t help that for many politicians, they will have heard the term “cryptocurrency” for the first time in recent months – and it might not seem like a priority.

“The lack of government engagement comes mainly from a lack of knowledge,” says Rees. “I worry that this lack of knowledge will lead us to a place where either we’re powerless to change things because they’ve evolved too quickly.”

Finding new ways to power it

Of course, it’s not impossible to power Bitcoin or other hi-tech innovations from renewable sources. Some of the Chinese mining rigs reportedly use hydroelectric power from dams, while artist Julian Oliver recently used wind turbines to mine the cryptocurrency zcash, which he promptly donated to a climate charity.

“We’re largely powering 21st-century technology with 19th-century energy sources,” Greenpeace UK’s Hatton told i.

“If we want the internet to grow without fuelling more climate change, we need to massively increase the clean, renewable energy that powers it. Some IT giants have realised the challenge and are acting on it, but we need more to follow.”