Why Bitcoin mining uses so much energy

Finally, a good basic article on why Bitcoin mining uses so much energy.

You often read about how the worldwide creation of bitcoins uses as much energy as a country like Argentina, and how, if it were a country, it would be in the top 30 of energy users. But bitcoin "mining", despite its name, is essentially just a computer transation, so I have never fully understood how it can be so energy-intensive. Well, here's how.

When someone buys a bitcoin, multiple computer systems then swing into action in a race to create a new 64-digit hexadecimal number, or hash, which can then be entered into an online ledger or blockchain. The impetus for this competition is that the creator of this new hash number receives a "reward" of 6.2 Bitcoins, worth about $225,000 at the ridiculous current prices.

The problem is that generating a new hash of this size is an onerous task, even for a bank of computers. The computers involved are not just standard PCs like we know, but stripped-down machines with multiple graphics cards (GPUs) which require high wattage power supplies, and which are run 24 hours a day. As an example, a rig with three graphics cards uses over 1,000 watts of power, about the equivalent of running a domestic air conditioning unit, and rigs may have many more than three cards. 

In addition to the energy used for the processing power of these crypto mining rigs, they also generate a lot of heat, and so each rig will typically need multiple cooling fans to ensure the components do not melt down. Where there are many such rigs gathered together in a factory, external cooling is also required, all if which requires more and more energy. Crypto mining businesses can have hundreds or even thousands of these rigs in operation 24 hours a day (one in Kazakhstan reportedly boasts 50,000 units).

So, taking all this into account, it is estimated that creating one Bitcoin used 1,544 kWh of electricity, about the equivalent of 53 days' worth of power for a typical American household, creating an energy bill of about $200 (depending on local energy costs) and a pretty ugly carbon profile (again depending on the energy production in particular jurisdictions). And remember, we are not talking about just Bitcoin here: there are many other cryptocurrencies these days - Etherium, Dogecoin, Litecoin, Monero, and many, many others - all of which use a similar production process. So you can see how it all adds up.

One-time cryptocurrency fanboy Elon Musk has recently made a point of refusing to accept Bitcoins for Tesla purchases, after his earlier high profile espousal of the cryptocurrency, and he did so because he has belatedly realized the true carbon footprint of the technology. And bear in mind that some US states with struggling coal sectors are going out of their way to attract bitcoin mining operations. It's a messy old business. And for what? Yet another avenue for speculative investments for the already-rich? Do we really need that?