Not long ago, Willy Woo, an important bitcoin researcher made a statement where he revealed that the number of bitcoin users throughout the world doubles approximately every year. Additionally, Dutch Bank ING released a paper where they state that bitcoin transactions use so much energy that potentially, the amount of electricity needed to verify a single transaction would be enough to power a house for an entire month.
To put things better into perspective, bitcoin transactions need to use so much energy in order to make verifying trades expensive for those who do it. Because of this aspect, fraudulent transactions that would be confirmed on the blockchain network are much harder to attain, as those who wish to do so, would need to make a large investment in both computing equipment and electricity to be capable of misusing the currency.
In a recent press statement, an ING senior economist mentioned that: "By making sure that verifying transactions is a costly business, the integrity of the network can be preserved as long as benevolent nodes control a majority of computing power (…) Together, they will dominate the verification process. To make the verification costly, the verification algorithm requires a lot of processing power and thus electricity."
At the current costs in the Netherlands where the study was carried out, 200kWh is enough power to run around 200 washing cycles, or better said, power a medium-sized home for around four weeks. This is roughly the same amount of power that would be needed to power a bitcoin transaction.
When, for instance, compared to other payment providers, bitcoin is roughly 20,000 times more expensive from this regards when compared to Visa.
Because of the doubling amount of users and the powering costs, some people have become alarmed. However, before alarming that bitcoin technology is wasting too much energy, it is important to put all of these numbers into some context. While the cost to power a single transaction may be that high, it is not the users who pay the costs. In fact, it is the miners who actively process thousands of transactions, and then get access to the transactions costs, and of course, the mining rewards. In theory, the same amount of electricity will be used to power the entire system, capable of carrying out multiple transactions. With hundreds of thousands of transactions taking place on a daily basis, the world’s entire supply of energy would completely run out if there wasn’t a catch to the numbers.
Based on everything that has been outlined so far, do you think that there is truly reason for concern on bitcoin’s electricity costs? Let us know your thoughts in the comment section below.