PerspectiveBitcoin mining: A global review of energy and power demand
Introduction
Cryptocurrencies and their energy consumption have become a popular subject of discussion over the last couple of years. Bitcoin, the most well-known and most expensive cryptocurrency, was first introduced by Satoshi Nakamoto, a pseudonym of an author or group of authors, in 2008. There is growing concern about the power and energy demand of Bitcoin mining. This is indeed an energy intensive phenomenon. Some views might address this energy consumption as one of the contributing factors to the climate change. There are significant differences in Bitcoin's energy consumption estimations since there are too many unknowns in the process, such as which type of hardware is used in the mining and for how long. This ambiguity necessitates an extensive analysis that will cover all Bitcoin transactions from 2009 until today. This paper aims to present a detailed analysis and estimation of the energy consumption of Bitcoin mining by focusing on the use of computational power during the proof-of-work process, and hence the mining process only. In our study, we analyzed 160GB of blockchain Bitcoin data. We deliberately excluded the estimation for energy intensity of Bitcoin mining more generally since it will cover all processes including the use of external cooling systems and their energy consumption. Even though CO2 and Green House Gas emissions due to Bitcoin mining is another crucial topic, we omitted this to focus solely on the power and energy demand of the mining process.
Bitcoin mining is a decentralized computational process, where transactions are verified and added to the public ledger, known as the blockchain. Nakamoto explains the working principles of Bitcoin mining in detail in his paper [1]. Bitcoin networking started in 2009 with its unique currency Bitcoin or BTC. The Bitcoin network is a peer-to-peer, distributed network. In this network, all nodes are treated as equal peers. The process of making Bitcoins is called mining, and the participants are called miners. All transactions are carried out and stored in a distributed ledger: the blockchain. The historic transaction data are contained in the blockchain. A signature between the new block and the previous block is needed for adding a new block to the blockchain. This is done via finding a nonce value that will satisfy the cryptographic hash function, Secure Hash Algorithm 256-bit (SHA-256). The nonce starts with 0 and is incremented by 1 by the miner until the hash of the block is less than or equal to the target value. Once a node finds a hash that satisfies the required number of zero bits, it transmits the block it was working on to the rest of the network. The other nodes in the network then express their acceptance by starting to create the next block for the blockchain using the hash of the accepted block. The finder of the block is rewarded for their efforts with a special transaction. Creators of a block are currently allowed to send 12.5 newly created coins to an address of their choosing. This is a fixed reward that halves every four years (210,000 blocks). On top of the fixed reward, a variable amount of transaction fees is received as well. The reward provides an incentive to participate in this type of network. To keep the flow of rewards stable, the network self-adjusts the difficulty of hash calculations, so new blocks are only created once every 10 min on average. Cryptography takes an important place in Bitcoin transactions with private and public keys. Private keys in the Bitcoin network are 256-bit long numbers that are created randomly in wallet creation. These randomly generated numbers provide security for Bitcoin transactions as they are infeasible to crack. Private keys are used to sign transaction messages and provide authenticity for the messages as only the owner of the Bitcoin address knows the private key. Public keys are complementary to Private keys and allow checking of the authenticity of messages. Public keys are 512-bit long numbers that are derived from Private keys. Unlike Private keys, Public keys are shared in the Bitcoin network and are available to every node. Fig. 1 shows a simple diagram how Bitcoin mining is completed.
During the mining process, the miner computes the hash of a block of transactions and the summary information of the previous block. The block has a ‘nonce’ value and the miner randomly chooses a nonce value so that the hash of the block is smaller than a target, which is periodically recalculated by the network. Random attempts for nonce values to find a valid hash is called as proof-of-work. This process needs computational effort, which is measured in Gigahashes per second. The more computational power a miner has, the bigger the share of all distributed rewards that go to that miner. This is the part where the energy consumption of Bitcoin mining takes place.
Section snippets
Studies covering energy consumption of Bitcoin mining
O'Dwyer and Malone used two hardware efficiencies; an efficient commodity hardware and a high efficiency ASIC machine [2]. Then they calculated the total power demand to be between 0.1 and 10 GW depending on what hardware was used in the mining. McCook calculated the energy consumption with a scenario where all mining was done with ASIC machines with the following models and ratios of the mining models: Bitfury BF3500, 35%, KnC Neptune, 25%, Cointerra TerraMiner IV, 20%, Antminer S2, 15%,
Materials and methods
This research was based on four different sources of data: Bitcoin's Blockchain, the performance data of the devices that solves hash problems, historical Bitcoin prices, and power cost data. Bitcoin data are publicly available via the Bitcoin history stored on the blockchain. Most of the data used in this research were extracted from this publicly available blockchain data created by transactions. The size of the Bitcoin Blockchain at the time this research was conducted was around 160GB [12].
Results
There are questions about for how long BTC will be profitable for the miners. When we calculated the term Maximum, we stressed that the cost of BTC should not be higher than the price of BTC. Nonetheless, due to the complexity of the analysis, we limited ourselves with the BTC mining locations from 1 June to 4 June 2018. To see if this sample was representative of the whole historical data, we plotted Fig. 2 to see the comparison between Maximum Cost of BTC (the cost of Bitcoin mining under
Discussion and conclusions
Energy consumption of Bitcoin mining is a very controversial topic. There are various estimations. However, these estimations vary considerably from study to study. This paper makes use of 160GB of blockchain data and data from 269 different hardware models (CPU, GPU, FPGA, and ASIC) that are used for the mining process. We defined two metrics to measure the energy consumption. First is the minimum energy consumption. This metric simply picks the most efficient hardware in use during the
Declaration of Competing Interest
The authors declare no conflict of interest.
Funding
This research received no external funding.
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