Do Bitcoins consume more electricity than our country?

Bitcoin has been the buzz for quite a few days throughout the world. Its ever-increasing price is becoming the major point of interest. This triggered me to look into what a cryptocurrency is and how it works.

Bitcoin is a currency that uses something called cryptography. In simple words, cryptography secures its networks from third parties accessing it. So such a currency, based on cryptography does not have its transactions recorded. So the network here is peer to peer and the transactions happen between users directly. Unlike notes or coins, bitcoins are not printed by traditional banks or governments and these largely exist
online.
Around 3600 Bitcoins are created every day through a complex process called “mining”, where computers are rewarded with a Bitcoin for executing mathematical equations through specialized software. Since a lot of computers are involved in the processing of bitcoins, wouldn‘t it be interesting to know how much power these consume?

When we looked into detail, there was no recognized authoritative source that says how much energy does a digital currency like bitcoin consume. But we were pretty sure that people might have worked out details on it or at least tried calculating it. Going through popular Bitcoin blogs like Coindesk, Crypto coins News, Digiconomist, we found a widely-used formula to calculate the energy consumption of bitcoins.

This formula takes total mining revenues as the starting point. Then, it estimates the total operational costs for miners which are taken as a percentage of the miner revenue. The total operating costs which is calculated is converted into energy consumption using average electricity prices.

A carbon footprint is the total greenhouse gas emissions caused by an individual, event or organization which is expressed as a carbon-di-oxide equivalent (More about Carbon footprint here). And Bitcoin biggest problem here is not its internal energy consumption, but the network through which it operates is mostly fueled by coal-fired power plants in China. One of the reasons coal power in China might have been selected is because of its very low rates i.e. Rs. 0.19/unit. We do know that coal power plants are major contributors to the carbon footprint. A coal power plant produces 3.5 million tons of CO2 per year. So, using such a resource is also a warning.

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