Electricity Used To Mine Bitcoin Falls As Crypto Crisis Deepens | Cryptocurrencies – Tech Tribune France

The amount of electricity consumed by the largest cryptocurrency networks has fallen by up to 50% as the “crypto winter” continues to eat away at the income of “miners” and financial contagion spreads further throughout the world. sector.

The bitcoin network’s electricity consumption has fallen by a third from its peak on June 11, to an annualized 131 terawatt-hours per year, according to estimates by crypto analyst Digiconomist. This still equals Argentina’s annual consumption, with a single conventional bitcoin transaction using the same amount of electricity that a typical US household would use for 50 days.

The decline in electricity used for Ethereum, the “programmable currency” that underpins much of the recent explosion in crypto projects, has been even sharper, from a peak of 94 TWh per year to 46 TWh per year – the annualized consumption of Qatar.


However, the underlying reason for the fall is the same for both currencies. A cryptocurrency network’s electricity consumption comes from “mining,” which involves people using specially designed computers to generate digital lottery tickets that can reward cryptocurrency payments. The process underpins network security, but causes the network as a whole to waste extraordinary amounts of energy.

As the price of cryptocurrencies has fallen – bitcoin peaked at $69,000 (£56,000) earlier this year, and is now hovering around $20,000 – the value of rewards for miners has fallen in the same proportion, leaving them in areas where electricity is expensive or using older, inefficient mining ‘rigs’ unable to generate profits.

“It literally puts them out of business, starting with those operating with suboptimal equipment or under suboptimal circumstances (eg inefficient cooling),” said Alex de Vries, the Dutch economist behind Digiconomist.

“For bitcoin mining equipment, this is a big problem, because these machines cannot be reused to do other things. When they are not profitable, they are useless machines. You can keep them hoping the price will recover or sell them for scrap.

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Ethereum, on the other hand, can be mined using a normal computer. But it’s more cost-effective to do so using a very powerful graphics card, which has led to widespread card supply shortages and turned many gamers against the industry. The collapse in mining revenues has led to a flood of graphics cards on the second-hand market, as insolvent miners try to recover their investments, but De Vries warns it’s a lottery to buy one.

“These machines usually run 24/7 and the components get hot. Heat [especially for prolonged periods of time] is known to wear down electronics, reducing longevity and reliability.

“At the moment it will be mostly older GPUs [graphics processing unit] become unprofitable, which means that it is not unlikely that these devices have been used for mining for a long time. Luckily for gamers, the drop in demand has also resulted in significant price drops for new components.

Although bitcoin’s price slide has leveled off over the past week, the broader cryptocurrency sector continues to stumble due to the massive price crash. The latest jolt was caused by the bankruptcy of ersatz cryptobank Celsius, which announced on June 12 that it was halting withdrawals as it faced a liquidity crunch.

Celsius’ failure set off a domino effect across the industry: Three Arrows Capital (3AC), a multi-billion dollar hedge fund, experienced its own cash crunch as a result, and several companies with significant outstanding loans at 3AC have now had to take emergency action in turn.

Two other companies that offered banking-like services reported large exposures to 3AC. Finblox last week said the hedge fund’s shares were having a “liquidity effect” and severely limiting user withdrawals, raising the daily limit from $50,000 to $500 while stopping interest payments on deposits.

On Wednesday, Voyager, which offers 12% on crypto deposits, disclosed that it had a $650 million outstanding loan to 3AC, more than four times its available cash. Voyager added that it would consider 3AC in default if the hedge fund did not repay the loan in full by Monday morning. The company also reportedly froze user withdrawals.

Bancor, a decentralized finance protocol that acts as an exchange, lost out to “the recent insolvency of two large centralized entities,” believed to be Celsius and 3AC, and had to impose withdrawal limits. On Thursday, another crypto exchange, CoinFLEX, announced that it was suspending withdrawals due to “extreme market conditions”.

Amid the meltdowns, a major cryptocurrency firm has emerged as a potential savior to the industry. Alameda Ventures, the investment arm of crypto entrepreneur Sam Bankman-Fried’s empire, centered on its FTX exchange, has bailed out Voyager and embattled exchange BlockFi, offering multimillion-dollar loans to the two companies. The loans have earned him comparisons to JP Morgan, the American banker that stepped in during a 1907 financial crisis and bought up shares of troubled companies in a bid to halt the collapse.

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Electricity Used To Mine Bitcoin Falls As Crypto Crisis Deepens | Cryptocurrencies – Tech Tribune France

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