Cryptocurrencies, still very energy-intensive, in search of a greener future

Officially invested in bitcoin with cash from his company Tesla, Elon Musk cast opprobrium on cryptocurrency last may by announcing that it would no longer accept this means of payment for its automobiles as long as its production was “dependent on carbon-rich fuels […], especially coal”.

Diary of a bitcoin apprentice: Article reserved for our subscribers “All it took was one tweet from Elon Musk to bring it all down”

On May 20, the NGO Greenpeace explained to FinancialTimes renounce to receive these donations for ecological reasons. Equally lapidary, Bill Gates did not say anything else to the New York Times last March : “Bitcoin is bad for the climate” – which did not prevent Microsoft from launching at the same time a decentralized digital identity system anchored on the bitcoin blockchain, ION.

  • What is mining?

The initial function of bitcoin is to propagate and secure the transactions of its users, and to permanently anchor them in a public digital ledger, the famous “blockchain”. A “block chain”, where the blocks would be as many pages of a virtual accounting book, public and identifiable by all, which makes it possible to facilitate between 500 million and 14 billion dollars of transactions per day, according to Blockchain.com.

In the case of protocol “proof-of-work”, or proof of work, implanted by the creator of bitcoin (a developer known under the pseudonym Satoshi Nakomoto), the creation of a new page of this digital ledger is conditional on the resolution of a cryptographic equation. This work of mathematical resolution is operated by a computer, it is the “minor”. When the latter solves the equation necessary for the continuation of the writing of the register, he is rewarded with 6.25 bitcoins and fees levied on the transactions of the users (themselves conditioned on the speed with which the user wants to confirm payment and network congestion).

  • Why does mining consume energy?

If, at the beginning, a simple computer was enough to mine bitcoin, its increasing value quickly aroused vocations: however, the difficulty of the calculations necessary for mining adjusts automatically according to the number of candidate machines for these operations. Thus, the more miners there are, the more complex the calculations. With a price that today exceeds several tens of thousands of euros, it is useless to try to mine bitcoin with a simple desktop computer: the sector is so competitive that chips dedicated to these calculations are marketed: the Asics .

Newer models, like the Antminer Pro S19 from the Chinese firm Bitmain, are sold between 7,000 and 9,000 euros. Given the power of 3,250 watts indicated by the manufacturer (and moreover, often underestimated), the electricity consumption of such a device is 28,470 kWh/year if it operates continuously. By way of comparison, the annual consumption of a freezer is estimated between 200 and 500 kWh/year, by the energy supplier Engie.

However, a single copy is hardly useful to achieve its ends: the largest bitcoin miners have fleets of hundreds of machines, carefully maintained and constantly ventilated, to prevent them from overheating: these are mining farms. Some of the larger ones, like that of Northern Data in Texasevoke a consumption of 1 GWh/year, i.e. the production of 3.1 million photovoltaic panels, according to an estimate from Energy.gov in 2019.

A burst of energy justified by the financial windfall represented by bitcoin: “electricity consumption is correlated to the price of bitcoin”, confirms Marc Bevand, business angel and ex-engineer for Google. A report easily verifiable by observing the logarithmic curves of the price of bitcoin and the total power allocated to the mining of it.

Logarithmic curves of bitcoin price.
Total power allocated to bitcoin mining.
  • What is the annual consumption of bitcoin?

It’s a fact: the bitcoin network consumes electricity, like, each on their own scale, all cryptocurrencies. According to the University of Cambridge, which offers on its website an index to assess this impact, the annual consumption of bitcoin is currently estimated at nearly 115 TWh. According to data from the statistics aggregator IndexMundico-founded by a former MIT researcher, the United Arab Emirates (113 TWh) or the Netherlands (109 TWh) consumed less in 2020.

“We may prefer to compare this consumption to that of a large city, such as Los Angeles”nuance, from his Californian garden, Marc Bevand, with the World. The latter advised Cambridge, who had noticed his work relating to annual bitcoin consumptionmade in response to another site estimate Digiconomisttaken up at the time by many media, such as The Guardian, The weather Where Release.

If he recognizes the pioneering nature of such work, they overestimate, according to him, the real consumption of bitcoin by a factor of two. A skepticism shared in particular with CNBC by other observers, such as Christian Catalini, professor at MIT, or Jonathan Koomey, researcher for energy policy at Stanford University.

Note that there are several thousand cryptocurrencies, and hundreds are based on a protocol similar to that of bitcoin. This is, for example, the case of Ethereum, Monero or even ZCash, for the best known. Here again, the biggest slice of the cake is reserved for owners of the best electronic chips, generally those of graphics cards normally devoted to video games, which partly explains their shortage. According to an estimate from researchers at the University of Munich and MIT published in December 2020, the blockchain Ethereum would consume approximately the equivalent of 16% of the consumption of bitcoin. The website Digiconomist evokes about 40%.

  • Are there less energy-consuming solutions?

Some cryptocurrency creators have opted for supposedly greener protocols. Ether, the currency of the blockchain Ethereum, is still produced by mining, but its developers are working on a transition to the protocol “proof-of-stake”, i.e. “proof of stake”, as opposed to “proof-of-work” used by bitcoin. A system already inaugurated by cryptocurrencies like Peercoin or Nxt, which have now almost disappeared.

Here, to create additional blocks, a “validator” must prove possession of a certain amount of coins and lock them. In exchange for this participation, he receives as a reward an interest proportional to the capital placed in sequestration, like a bank book. For the future version of Ethereum, this fee is estimated at around 6% per year.

In theory, this protocol does not require more than a simple computer, even if certain implementations penalize a validator who would remain offline too long. While it sounds great on paper, its critics believe that no implementation has proven itself when it comes to security. For Pierre Rochard, economist of the American cryptocurrency trading platform Kraken, this protocol, which he describes as “plutocracy”, does not even present any improvement compared to the traditional financial system, since it favors the largest wallets. For example, it will be necessary to hold 32 ethers (i.e. nearly 65,000 euros on June 11, 2021) to become a validator in the next iteration of Ethereum. “Proof of stake consumes much less energy than proof of work, but the flip side is that it creates much more centralization”insists the economist to the World.

Others, such as Tezos or EOS, have turned to “proof of stake delegation” where users delegate their currencies to validators, sorted according to different criteria, and sometimes in such an opaque way that these blockchains are suspected of being governed by “cartels”: validators who conspire and undermine the principle of decentralization. One point raised in particular by Binance cryptocurrency exchange research team.

In fact, until today, no alternative protocol has proven to be able to assume the same promises of a decentralized, public and secure cryptocurrency with a negligible carbon footprint. The green conversion of Ethereum has also been in the works for more than four years due to technical difficulties. “If we ever discover a proof-of-stake mechanism without negative trade-offs, bitcoin users will embrace it”assures Pierre Rochard, emphasizing that the “bitcoin source code is open to everyone”.

  • Possible carbon neutrality?

Faced with the legitimate questions implied by the climate emergency, the players in this ecosystem are responding in unison. For Sébastien Gouspillou, co-founder of the mining company BigBlock Data Centerthis technology would even encourage people to abandon fossil fuels: “In Kazakhstan, I represent a godsend for the operator of the hydropower plant. He produces surplus, I consume it. For him, its cost is zero.he tells the World. Like him, many miners aspire to move away from Chinese coal and achieve carbon neutrality: according to a 2019 Coinshares studythis would concern 70% of bitcoins mined, an estimate nevertheless lowered to 40% by Cambridge in 2020.

The Square company, founded by Twitter creator Jack Dorsey, believes in an article published on April 21 that this cryptocurrency could even become a source of financing for renewable energy infrastructure, including solar energy. “We are very much in demand by electricity producers and wind turbine manufacturers, who realize that we are a godsend for their profitability”abounds Sébastien Gouspillou.

A week after criticizing bitcoin for its carbon footprint, Elon Musk praised himself for initiating a coalition of North American miners to make this energy transition. More surprisingly, the authoritarian president of El Salvador has just announced the construction of a mining plant powered by water vapor from the country’s volcanoes.

“I have asked the president of the state-owned geothermal energy company to come up with a plan to create a low-cost, 100% clean, 100% renewable, zero-emission energy-powered bitcoin mining center, our volcanoes. »

Open to the energy debate, the Frenchman Marc Bevand points out that what bitcoin brings is “a financial system, available twenty-four hours a day, seven days a week, unlike banks”. And to dare one last comparison: “115 TWh per year is only the annual production of the largest hydropower plant in the world, the Three Gorges Dam in China.”

Last Maythe firm Galaxy Digital evaluated the energy consumption inherent in the banking system and the gold mining industry, two ecosystems that bitcoin aspires to compete with, to be twice that of the digital currency.



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Cryptocurrencies, still very energy-intensive, in search of a greener future


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