Bitcoin, you’ve probably heard of it. Blockchain? Maybe not. And energy? It’s what keeps it all running. But what are the implications on the energy industry, and is it worth it?
Digital currencies might sound like an imagination, but they need a very real place to exist. Like any data, they require advanced data centres and IT infrastructure to host the 1s and 0s that they emerge from. Equally crucial is that the more powerful your computer(s), the more chance you’ll have to become a winner of the mining process that underscores discovery of ‘new’ bitcoins.
Computers compete in this network in a process called ‘mining’, essentially running complex calculations to see who ultimately delivers a mathematical solution which can unearth or ‘win’ them some coins. The more popular bitcoin becomes, the more computers contribute to the needs and demands of this network.
According to some analysis, bitcoin’s annual energy consumption sits at over 52TWh. That’s more than a third of the total energy consumption of Malaysia in 2016! This energy thirst covers everything from mining to conducting bitcoin transactions.
One country feeling the bitcoin squeeze is European nation Iceland. The combined energy used in bitcoin ‘mining’ now outstrips the total residential electricity use in the country.
However, ‘mining’ a blockchain is not a waste of energy, according to Ruben Tan, Chief Technology Officer of Neuroware. “Blockchain networks are distributed networks, and like all distributed systems they need a mechanism to ensure that each individual participant in the network play nice with one another. In computer science we call this “achieving consensus”.
“The thing about consensus algorithms is that there’s no perfect solution. Every algorithm MUST make a conscious decision on what they are willing to sacrifice. Some algorithms choose to sacrifice the response time of each request (the MEPS network getting shut down every night so banks can perform reconciliation on batch transactions is a good real-world example of what a trade-off means), and in most blockchain’s case, the trade-off is the computing power needed to “mine” and secure the network. In conclusion, mining operations on the blockchains may seem wasteful, but they serve an important purpose.”
Bitcoin needs more than a bit of energy
Iceland offers a uniquely enticing proposition for big data centres and bitcoin miners. Not only does the cold climate lend itself happily to one of the biggest challenges – keeping processors cool, but a domestic focus on renewable geothermal energy also plays a big part.
Iceland’s huge geothermal reserves provide an energy ecosystem that is both affordable and sustainable, a convincing argument when your biggest operational expenditure is energy. With the reduced cost of cooling and cheap energy, Iceland is truly a bitcoin paradise. Unless of course you’re the energy companies or tax authorities struggling to keep up with this currency revolution.
The world is energised by energy hungry data
What’s at the heart of this energy hungry revolution? It’s data. And our growing thirst for data could see data centres consuming as much as 20% of total global electricity by 2025.
You don’t have to look far to see some of the emerging challenges of this data-hungry world. A recent study estimates that the electricity needs from data growth in Japan could outstrip the national electricity supply by 2030 on the current trajectory. That Harajuku selfie uploaded to Facebook has a lot bigger impact than just the likes on your page.
While some nations are feeling the energy pinch, others are quick to embrace the opportunity of this emerging revolution. European nation Sweden has moved to cut electricity tariffs for data centres, seeking to position the country as a global hub for this new world. Like Iceland, Sweden benefits greatly from its climate and renewable energy policies when it comes to attracting the pioneers of this data revolution. The predicted result is an economic boost to the tune of US$3 billion and creation of a projected 25,000 new jobs.
There’s no doubt that a more sustainable and renewable energy environment will play a crucial part in balancing our demand for data with the ability to reliably support it. Bitcoin, blockchain and energy? They’re all part of an exciting evolution. Where it ends up will be up to us.