Presented as a secure decentralized currency without a central bank and/or intermediary, bitcoin has grown exponentially popular over the past year. The crypto-currency is now worth more than 18,000 dollars. However, behind all the growth lies bitcoin’s dirty secret: its energy comsumption.
A single bitcoin transaction currently consumes around 100 kilowatt hours (KWh), the equivalent of a lightbulb kept lit for three months, according to a study by French energy broker Selectra.
In comparison, the same payment made using a credit card consumes 500 times less electricity.
For its calculations, Selectra claims that it has adopted a more conservative approach than previous estimates. Digiconomist, a site which specializes in Cryptocurrency fraud and risk mitigation, on its side estimates that the energy consumption generated by the cryptocurrency is now equivalent to that of a country like Bulgaria, or nearly 35 terawattshours (TWh) over a year.
“We are on a steep slope, with consumption increasing every day,” worries Julien Maldonato, financial industry consulting partner at Deloitte.
Bitcoin has seen its price soar from $ 1,000 in early January 2017 to more than $ 18,000 today. In December, two major stock exchanges in Chicago introduced financial products for bitcoins.
Bitcoin is based on blocks of coded and authenticated transactions that add to each other. These blocks are produced by powerful computers that have to solve equations whose complexity increases as the value of the currency increases, thus making the production of bitcoin more complicated.
However, whether for the production of bitcoins or for simple transactions, exchanges are made via “minors”, themselves paid in bitcoins and therefore encouraged to produce when bitcoin’s value increases.
For the moment, the economic interest remains strong for the miner, says Mr. Maldonato, because around the world, for an “estimated energy cost of $ 1.6 billion, mining revenues are 10 times greater” .
“Once the value goes up, the miner will be tempted to spend a lot of energy to mine,” confirms Aurian de Maupéou, co-founder of Selectra.
“The more successful Bitcoin is, the more energy it will need,” he says.
The defenders of bitcoin, however, dispute this alarmist observation which to them does not seem objective, highlighting even the “ecological merits” of the cryptocurrency.
“Everyone agrees that there is a problem,” admitted at a conference in in early December Jacques Favier, president of the association Le Cercle du Bitcoin, “but the thesis of the ecological disaster is largely overvalued.”
Mr Favier rejects the figures published by the various studies and recalls that “every year the equivalent of the current value of bitcoins is extracted in gold but for a much higher ecological cost”.
“There are various solutions to reduce consumption but they would lead to concentrating the power of calculation in the hands of the richest or question the very philosophy of bitcoin without completely solving the problem,” said on his side Teunis Brosens, economist senior for ING bank.
However, the concerns created by bitcoin should not call into question the interest for blockchain, the technology on which cryptocurrencies are based and which arouses a lot of interest in the financial world.
For Brosens, “the banks will create private blockchains, which will not face the problems of scale or regulation” and will represent a much lower transaction cost, due to the small number of stakeholders.