Bitcoin Could Stop Being Profitable Due to High Energy Costs

Bitcoin Could Stop Being Profitable Due to High Energy Costs

May 16, 2018

The bitcoin network could use 0.5% of the world's energy consumption by the end of 2018, extremely huge cost will be used to mine the cryptocurrency and it might not be as profitable as we think.

According to a financial economist, Alex de Vries, based on the data about ongoing bitcoin mining production, the energy consumption of the bitcoin network could rise to 7.67 gigawatts (GW), amounts to about 0.5% of the world's energy consumption. This is going to be a problem for several reasons, and causes environmental concerns. And more importantly, it could soon be very expensive to mine bitcoin that the process would stops being profitable.

To understand why bitcoin is sucking up so much energy, you first have to know a little about how it works.

Bitcoin is a peer-to-peer digital currency and worldwide payment system. It is the first decentralized digital currency, as the system works without a central bank or single administrator. Transactions take place between users without an intermediary. And maintaining that shared record, adding a "block" to it every 10 minutes or so, is the work of a competitive effort by thousands of computers all over the world. Those computers collectively perform quintillions of calculations per second, each "mining," trying to solve a math problem that will give it the right to form the next block on the chain. And the winner every 10 minutes is rewarded with 12.5 bitcoins, which equals to more than HKD$690,000 at bitcoin's current exchange rate. With this attractive rate, Bitcoin miners have filled up warehouses with computers devoted to mining. Even the most efficient computers need a huge amount of power to run. Study had proven the substantiating trends in Bitcoin's electricity consumption, and Bitcoin mining will continue to become more costly than profitable.