Understanding the Claims, the Data, and the Real Story
Introduction
The rapid rise of Bitcoin and other cryptocurrencies caught much of the energy sector off guard. As interest surged in late 2017, utilities and policymakers began asking how cryptocurrency mining might affect electricity demand. This article provides a clear guide to understanding the many claims about Bitcoin’s electricity use, focusing strictly on total electricity consumption rather than the merits of cryptocurrency itself.
1. Know Your History (Beware of the Hype)
Information technology evolves rapidly, and history is full of exaggerated claims about its electricity use. Misinterpretations of Internet growth rates in the 1990s led to massive overinvestment in fiber networks, and similar exaggerations resurfaced in the early 2000s and 2010s regarding computing electricity use.
2. Complexities and Pitfalls
Rapid Change
Bitcoin prices can swing dramatically. Mining activity expands and contracts with price, creating volatility that utilities cannot easily plan around.
Computational Loads and Efficiency
Bitcoin mining depends on hardware efficiency, mining difficulty, and data center overhead. As mining difficulty increases, efficiency gains may be offset.
Little to No Tracking of Mining Rigs
Bitcoin mining hardware is custom-built and not tracked by traditional server market analysts, making it difficult to estimate total installed capacity.
Few Measured Data Points
Most available power-use numbers come from manufacturer claims rather than standardized measurements, which can lead to inaccurate estimates.
Secrecy in the Supply Chain
Mining companies rarely disclose operational details, making independent verification difficult.
Brandolini’s Law
“The amount of energy needed to refute nonsense is an order of magnitude bigger than to produce it.” Sensational claims spread quickly; careful analysis takes time.
3. Evaluating Existing Independent Estimates
2014 O’Dwyer and Malone
The first academic estimate of Bitcoin electricity use, producing a wide range (0.01 GW to 10 GW). The range was too broad to be actionable and lacked infrastructure overhead considerations.
2016–2018 Digiconomist
Widely cited but based on economic assumptions (e.g., 60% of revenue spent on electricity). Lacks transparency and produces unrealistic flat periods despite price volatility.
2017–2018 Bevand
A technically detailed critique of Digiconomist. Found real mining rigs spent 6.3%–38.6% of revenue on electricity, not 60%. His estimates were less than half of Digiconomist’s.
2017 Vranken
One of the most rigorous early analyses. Estimated Bitcoin electricity use between 0.1 and 0.5 GW as of January 1, 2017.
2018 Mora et al.
A high-profile but controversial study projecting Bitcoin’s CO₂ emissions. Relied heavily on speculative growth assumptions.
4. Summary of Findings
Across credible studies, Bitcoin electricity use has grown rapidly but remains far below the most sensational claims. Hardware-based analyses are more reliable than economic-assumption models. Lack of transparency from mining operations remains a major barrier.
5. Best Practices for Future Analyses
Researchers should use hardware-based measurements, include data center overhead, model mining economics, provide ranges rather than single-point estimates, and disclose all assumptions.
6. Opportunities for Future Research
Future work should focus on mining hardware inventories, geographic distribution, real-world power measurements, and improved profitability models.
References
- Van Valkenburgh, P. “What is Bitcoin Mining and Why is it Necessary?” Coin Center (2014).
- Hileman, G., & Rauchs, M. “Global Cryptocurrency Benchmarking Study.” Cambridge Centre for Alternative Finance (2017).
- Valfells, S., & Egilsson, J. H. “Minting Money With Megawatts.” IEEE Proceedings (2016).
- Koomey, J. G. “Sorry, Wrong Number.” IEEE Spectrum (2003).
- Coffman, K. G., & Odlyzko, A. M. “Growth of the Internet.” AT&T Labs (2001).
- O’Dwyer, K., & Malone, D. “Bitcoin Mining and its Energy Footprint.” ISSC/CIICT (2014).
- De Vries, A. “Bitcoin’s Growing Energy Problem.” Joule (2018).
- Bevand, M. “Electricity Consumption of Bitcoin: A Market-Based and Technical Analysis.” (2017).
- Vranken, H. “Sustainability of Bitcoin and Blockchains.” COES (2017).
- Mora, C. et al. “Bitcoin Emissions.” Nature Climate Change (2018).