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You probably already have heard about Bitcoin, the most popular cryptocurrency. You might even be a Bitcoin user. But do you know anything about Bitcoin mining? Have you ever wondered about Bitcoin’s origin? Well, Bitcoin mining is the process that leads to developing new Bitcoins. Are you interested in Bitcoin trading? Then visit BitIQ and start your Bitcoin trading journey.
Bitcoin mining is vital to ensure that there are more Bitcoins. It also serves the fundamental purpose of confirming Bitcoin transactions. Bitcoin mining occurs in extensive mining facilities with up to 50,000 mining rigs. And this is partly why Bitcoin mining consumes so much energy.
In 2021, Elon Musk, one of the wealthiest people in the world, announced that his company, Tesla, would no longer take Bitcoin as payment. Musk, who had hitherto been a great supporter of Bitcoin, was concerned about the quantity of energy for Bitcoin mining. Specifically, he felt that the large amount of fossil fuel-generated energy used was not justifiable.
So How Much Energy Goes into Bitcoin Mining?
According to estimates, completing a single Bitcoin transaction takes about 1449 kWh. In terms of cost, that translates to about $173 for every Bitcoin transaction. To understand that even better, it takes about 50 days of power consumption in the average household in the US.
Also, it’s important to emphasize that the amount of energy going into Bitcoin mining is never constant. As more mining facilities come up, so does the total quantity of energy needed. Between the end of 2021 and early 2022, Bitcoin mining consumed over 200 terawatt-hours of energy.
Why That Much Energy?
Bitcoin mining requires significant energy amounts because of some factors. Bitcoin mining rigs often work non-stop. And this means that a lot of energy is needed to keep the mining rigs running. And since mining rigs often have more than one graphics card, they consume more energy to keep the GPUs running.
Moreover, most Bitcoin mining facilities have thousands of mining rigs in one place. And this further adds to the energy required to keep the rigs running. For example, before China banned crypto mining, a mining facility produced 750 Bitcoins monthly, whose electricity bill often surpassed $1 million.
Another critical consideration is the energy that goes into cooling the mining rigs. Mining rigs generate heat; with more mining rigs in one place, the heat generated is even more. You require external cooling to prevent the rights from melting and keep the places cooler.
If a mining facility has hundreds or even thousands of mining rigs, the heat generated will be so much that it requires more electricity to cool them. So, while the mining rigs consume energy, they also produce heat that, in turn, requires more energy for cooling.
Today, many Bitcoin miners are competing for rewards. To get rewarded, a miner must solve very complex cryptographic puzzles. While hundreds of thousands may try to solve a single puzzle, only one will succeed and get the Bitcoin reward. And this means that over 99.9% of the computers working on the crypto puzzle but failed consumed energy.
Finally, solving cryptic puzzles is time-consuming. On average, every Bitcoin transaction will take about 10 minutes. And it does not end there. After solving one crypto puzzle, the miners continue to the next. Overall, it takes more time to mine Bitcoins and contributes to the high energy consumption.
Take Away
So much energy goes into Bitcoin mining. While most of this energy is fossil-fuel generated, it may require more investment in renewable and clean energy in the future. Luckily, there’s a limited amount of Bitcoin that miners can generate. So, Bitcoin mining may end when they reach the limit.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.
Cryptocurrency trading involves high risk, and is not suitable for all investors. Before deciding to trade cryptocurrencies, tokens or any other digital asset you should carefully consider your investment objectives, level of experience, and risk appetite. TaxGuru does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions. By the use of the above information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.
