A study has found that by the end of this year, bitcoin mining could be using as much as half a per cent of the world's global energy usage, making it a significant threat to renewable energy efforts and potentially making it an inefficient investment.
Bitcoin mining, which has received increased interest from both the public and investors over the past few years, is currently estimated to use at least 2.55 gigawatts of electricity which is already almost as high as the energy consumption of Ireland.
However, the study found that this figure could potentially triple to 7.67 gigawatts as early as the end of 2018, which puts the consumption to roughly the same amount of energy the entire country of Austria consumes.
Alex de Vries, the author of the study and blockchain specialist at PwC , concluded: “The bitcoin development community is experimenting with solutions such as the Lightning Network to improve the throughput of the network, which may alleviate the situation. For now, however, Bitcoin has a big problem and it is growing fast.”
This could potentially have a harsh impact on environmental policy as the UK, for example, is currently not investing enough in clean energy methods and has hit a 10-year low.
However, several experts have criticised de Vries findings, claiming that there is not enough data collected to make a firm conclusion, but although the number can be disputed, it is still a process that requires a lot of energy.
The so-called mining process of bitcoin involves computers with the necessary software to solve complex mathematical problems. When each problem is solved, a new block is added to the blockchain and the miner receives bitcoins as a reward.
The reason why the process requires so much energy is because computers need to time stamp transactions in the blockchain, making a ledger of transactions, so that it can be made sure that the same coins are not spent twice.
Based on de Vries research, if the price of bitcoin goes down and the amount of electricity needed to mine goes up, bitcoin could become an inefficient investment, causing miners to shut down.
Warren Buffett, the chief executive of Berkshire Hathaway, has received a lot of criticism lately from crypto miners for his comments on bitcoin being a non-productive investment, and the crypto mining company Genesis Mining put up a billboard outside Buffett's office.
Buffett called bitcoin “rat poison squared” and he is one of several prominent business figures who has expressed their lack of faith in the digital currency, among them billionaire and investor Bill Gates.