Tesla CEO Elon Musk shook the crypto market in 2021 when he announced that his company would no longer accept bitcoins for car purchases. His reasoning was tied to the large amount of energy, generated from fossil fuels, which is required for mining cryptocurrency. Since then, Musk has chosen a new approach, in May delivering Tesla Megapack batteries to a Bitcoin mining facility in Texas.
Bitcoin, Dogecoin, and other popular cryptocurrencies reached record highs in 2021, as did crypto-dependent NFTs, raising concerns about the increasing amount of energy needed to mine coins. When the crypto markets crashed in 2022, crypto mining continued to consume about as much energy as Argentina, and have a carbon footprint equivalent to Greece, according to a research report titled "Revisiting the Carbon Footprint of Bitcoin", published in February. As electricity costs for crypto mining increase, so does the amount of carbon and waste, exacerbating the growing climate crisis.
Here's what you need to know about crypto mining and its energy use.
What is crypto mining?
When bitcoins are traded, computers around the world race to perform calculations that create a 64-digit hexadecimal number, or hash, for that bitcoin. This hash is entered into a public ledger so that anyone who wishes can confirm that a transaction for that particular bitcoin has occurred. The computer that first completes the calculation receives a reward of 6.25 bitcoins, or about $183,293 at current prices.
Other cryptocurrencies and NFTs use similar mining technologies, contributing to overall energy consumption.
What is a crypto mining rig?
It is a simple computer with multiple graphics cards, or GPUs, instead of the standard single card, and it does all the work to complete the calculations. Powerful Nvidia and AMD GPUs are typically used for calculations in rigs, and they require high-power power supplies. The popularity of mining has led to a shortage of graphics cards, which, in turn, has led to an increase in their cost. Now, so-called ASIC miners, which have captured the mining market, are popular.
How much energy does an ASIC consume
Let's start with the fact that mining rigs operate 24 hours a day. This takes much more energy, than browsing web pages. A rig with three GPUs can consume 1000W of power or more, when it is operating, which is equivalent to turning on a medium-sized window AC unit. One ASIC miner on average consumes 3000-3500W, which turns out to be even more than a GPU rig, but this is justified by the power of the ASIC miner.
Cryptocurrency mining enterprises can have hundreds or even thousands of drilling rigs in one place. A mining center in Kazakhstan is equipped to operate 50,000 mining rigs, and another mining farm in China pays over $1 million in electricity bills per month, as it mines 750 bitcoins per month.
Mining rigs not only consume electricity but also generate heat. The more rigs you have, the hotter it gets. If you don't want your drilling rigs to melt, you need to cool them down a bit. Many mining rigs have several built-in computer fans. But if you have multiple rigs, the room quickly gets hot, requiring external cooling. Small enterprises, for example, those managed by individuals, can get by with a regular stationary fan. However, mining centers need much more cooling, which, in turn, requires even more electricity.
Reducing Energy Consumption
ASIC miners with the highest energy consumption also require a huge amount of cooling to maintain the optimal temperature for operation. This leads to additional electricity costs, as powerful air conditioning systems must be used.
What steps are being taken to reduce the energy consumption of crypto mining?
In response to criticism about high energy consumption, many companies and individual miners are looking for ways to make the process more environmentally friendly. Some of these include:
- Using renewable energy: Many mining farms are transitioning to using solar, wind, or hydroelectric power instead of fossil fuel-generated energy. This helps to reduce the carbon footprint of mining.
- Switching to more efficient equipment: New models of ASIC miners and GPUs are becoming more energy-efficient, which allows reducing energy consumption without compromising performance.
- Switching to other consensus algorithms: Some cryptocurrencies, such as Ethereum, plan to transition from the energy-intensive Proof-of-Work (PoW) algorithm to the more energy-efficient Proof-of-Stake (PoS) or other alternative algorithms.
- Locating mining farms in regions with a cold climate: This reduces the need for active cooling of equipment, which also lowers energy consumption.
- Using the heat generated by mining for other purposes: Some miners use the heat generated by their equipment to heat buildings, which allows for more efficient use of consumed energy.
Conclusion
Crypto mining is an energy-intensive process that raises significant concerns about its impact on the environment. Given the growing interest in cryptocurrencies and their integration into the global economy, the issue of energy consumption is becoming increasingly relevant. However, the cryptocurrency industry is actively seeking ways to solve this problem, including the use of renewable energy sources, transitioning to more efficient consensus algorithms, and optimizing mining equipment.
Business leaders, such as Elon Musk and his company Tesla, play a significant role in shaping this dialogue, demonstrating how large corporations can influence the sustainability of the industry. Their active participation in this field may serve as a catalyst for further innovations and changes aimed at reducing the carbon footprint of the crypto industry.