An 800-page study released on May 16, 2018, has revealed more concerns about the viability of using Bitcoin as an alternative to the current monetary system. The study was published in the Joule journal by Alex de Vries. Bitcoin is mined by computers that take vast amounts of electricity to run as well as financial expenditure in the form of ASIC hardware. Current estimates are that total Bitcoin mining expenditure is 2.55 gigawatts of power, making it comparable to the expenditure of the country of Ireland at 3.1 gigawatts.
As of mid-March, the Bitcoin network is processing 2-3 transactions per second and is performing about 26 quintillion hashing operations per second. The ratio is around 8.7 quintillion to one. While an analysis of the exact figures and energy consumption can be complicated, there is little doubt that Bitcoin mining is an environmental hazard and it is simply not an efficient technology. Cryptocurrencies such as Ripple boast proven speeds of 1500 transactions per second. Visa can handle 24,000, PayPal can handle 200, and Ethereum can handle 15 transactions per second. These are the actual speeds, though Visa’s real-time testing was done in conjunction with IBM in secret.
The Bitcoin network is said to have 10,000 connected nodes. However, each node can represent one or many machines. Additionally, different machines are more or less energy efficient, which can make the process very difficult. The study used a lower bound estimate and arrived at 2.55 gigawatts. This figure does not take into account the electricity consumption used for the cooling of the mining rigs, which has prompted people to initiate mining operations in colder climates such as Canada. The cost of cooling these rigs is even more difficult than an analysis of the mining process itself, due to the different types of cooling mechanisms in operation. Furthermore, large mining facilities such as Bitmain often operate in secret facilities, and they do not disclose much information.
The study estimates that the price of Bitcoin mining is going to reach 7.67 Gigawatts, and it says that this figure may already be reached. The study concludes by saying that Bitcoin has a big problem, though its Lightning Network may alleviate the issue to an extent.
The analogy that Bitcoin is the financial equivalent to gold might have merit regarding its role in a new financial infrastructure. While Bitcoin may not be able to replace fiat money due to its inefficiency, it definitely has a place as a store of value, and coins such as DASH, Ether, Litecoin, and IOTA might be more appropriate as an everyday medium of exchange.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.