Sunday November 12, 2017

The Bitcoin power drain

A single bitcoin transaction uses the same amount of energy as running a washing machine 200 times, says Teunis Brosens.

A single bitcoin transaction uses the same amount of energy as running a washing machine 200 times, says Teunis Brosens.

Listen 9:29

As the cryptocurrency Bitcoin becomes more mainstream, more people are considering using it, and it's become less a symbol of the dark web and more like a possible future of money.

But there is one negative side to Bitcoin, as well as Blockchain, the software that underlies it: the incredible amounts of energy used to "mine" it and verify transactions.

Teunis Brosens, an economist at ING bank in Holland, points out that it takes about 200 kilowatt hours of electricity to authenticate a single Bitcoin transaction.

Teunis

Teunis Brosens (ING)

That's enough energy to run a washing machine 200 times, he says.

In comparison, a credit-card transaction requires 0.01kw/h, about 20,000 times less energy.

Teunis says that because there is no central element of trust in the Bitcoin, it takes massive amounts of computing power to run the distributed ledger to ensure it can't be defrauded.

That's the cost of running a system in which nobody is trusted, Teunis points out.  He calls it the "Mad Max" problem, referring to the post-apocalyptic film series where everybody regards each other with suspicion.

There are other cryptocurrencies, such as Etherium, which use significantly less energy. But none are as widespread or well-known as Bitcoin.

One solution he proposes is to include "trusted" nodes on the system, such as banks, which would reduce the energy required to verify transactions. But he acknowledges this runs counter to the anarchistic philosophy of the currency.

Another way of reducing energy costs, he says, would be to have Bitcoin miners put a certain amount of money in escrow, thereby guaranteeing the validity of their work. But that would require considerable wealth on the part of miners, and only a few would be able to do this.

"You would create a plutocracy," he says.

Teunis concedes that there are no easy solutions to this, but that Bitcoin is going to have to solve the energy use problem if it is going to become a truly mainstream currency.