Crypto Opinion

Estimating Bitcoin Annual Carbon Footprint – Updated Research

Earlier this year Digiconomist published his findings on the Bitcoin Energy Consumption Index claiming that the network’s power consumption currently equals that of the entire island of Ireland, and is set to overtake that of Austria before the start of next year. In fact, he estimated that the Bitcoin network uses about 0.01% of all the electricity on the planet.

Here at CryptoIsComing we even weighed in on the matter, taking a frank and open look at whether the massive cost of the Bitcoin network to the environment justified the project itself.

It’s true that the energy required is enormous – however, it’s also true that the production, storage and distribution of fiat currencies is far more costly to the planet than that of the Bitcoin network. Were Bitcoin to suddenly replace fiat, it would be a more efficient system – however the cost of having both systems operating at the same time simply can’t be ignored by any responsible Bitcoin maximalists trying to secure a real long-term future for Bitcoin as a global currency.

Having said that, Digiconomist isn’t the independent researcher to take a crack at measuring the energy consumption of Bitcoin. Johnathan Bertrand of Quebec is the founder of DCentral Tech, a Bitcoin mining consultation firm that specializes in installing and advising new mining operations, recently posted findings from a 2014 report on Bitcoin emissions on Twitter, rekindling the conversarion on the subject.

The paper published in 2014 by Hass McCook, an Australian civil engineer and a contributing writer to CoinDesk.

The paper was entitled “An Order-of-Magnitude Estimate of the Relative Sustainability of the Bitcoin Network” and sought to critically assess the Bitcoin mining industry, gold production industry, the legacy banking system, and the production of physical currency.

McCook found that in 2014, Bitcoin was a sustainable system despite popularly held opinions to the contrary, listing a comparison of the costs below.

Comparison of Annual Economic Costs

  • Gold Mining USD$105 billion
  • Gold Recycling USD$40 billion
  • Paper Currency & Minting USD$28 billion
  • Banking System Electricity Use USD$63.8 billion
  • Banking System (All Expenses) USD$1870 billion
  • Bitcoin Mining USD$0.79 billion

Meanwhile, the annual environmental costs are shown in the table below.

[table id=9 /]

Finally, the socioeconomic costs showed that money laundering and black market costs through the Bitcoin network had a negligible cost whereas that of fiat was in the trillions.

Clearly, in 2014 Bitcoin was far more sustainable than fiat systems. However, inspired by McCooks research, Bertrand still contends today that Bitcoin is the most sustainable monetary system ever invented, despite the doomsday report from Digiconomist.

He posted more current findings on Twitter, pictured below.

McCook followed up on his 2014 research in earlier this month in a report detailed in a Youtube series entitled the Economic and Environmental Cost of Bitcoin.

The data is from the end of July 2018, making it the most current research on the topic available at the moment.

The report estimates the cost of mining one Bitcoin at $6,450.

“All data used in this paper is as Block 534,240 mined on 29 July 2018. Network difficulty was roughly 5.95 trillion. Hash rate was roughly 42.6 EH/s. Price on the Bitfinex exchange was roughly $8,200.”

In a section entitled Major Assumption Updates, McCook acknowledged that the previous research failed to account for the cost of air conditioning, meaning the  tonnage of C02 was underestimated by over a third. It further didn’t account for the impact of the manufacturing and transport of ASIC rigs, resource extraction and recycling.

The report now indicates that Bitcoin exhales 63 million tonnes of C02 every year, accounting for about 0.12% of all greenhouse gas emmissions. Of the 160,000 TW of electricity produced gloablly every year, Bitcoin uses 105 TW or about 0.06% – the generation of ASIC miners accounts for half of that. This figure is actually over six times higher than the estimate provided by Digiconomist! It’s possible that his estimate was correct but that by July the emmissions had increased to 0.06%.

Comparison to Gold Revisited

The new report didn’t just reevaluate the environmental cost of Bitcoin, but took another look at gold as well.
Since 2014, world gold production has increased 18% from 2,770 ot 3,270 tonnes. There was a sharp drop in the tonnage of recycled gold produced, with the 37% of gold produced in 2011 being recycled reduced to 26% in 2017.

McCook found that his 2014 estimate that gold production emits 20 tonnes of C02 for every kg of gold was accurate, and that his research plus a recent report from Dell illustrates just how toxic and harmful gold production is to the environment with each kg also requiring over 460 liters of water, 27, 696 kWh of electricity, 1,762 pounds of hydrochloric acid, 564 pounds of nitric acid, over 3,000 pounds of caustic soda, and more.

It also found that the gold mining and recycling process produced photochemical smog, contributed to global warming, fossil fuel depletion, ecotoxicity and the production of carcinogens all at an alarming rate.

165,000 tonnes of C02 were created for the production of the gold mining vehicles which will last approximately ten years before needing to be replaced.
McCook wrapped up his report by comparing the two systems once again, and found that Bitcoin is comparatively sustainable.
Gold mining and equipment: 160 million kWh of energy, 65 million tonnes of C02 produced.
Gold recycling: 36 million kWh of energy, 42 million tonnes of C02.

Bitcoin mining: 105 million kWh energy, 63 million tonnes of C02.

While the numbers are similar, there’s one difference – the C02 of Bitcoin are decreasing, whereas those of gold are still increasing.

Bitcoin relies on the energy grid. As energy production becomes more sustainable through green energy initiatives like wind farms and solar panel networks, the carbon footprint of the Bitcoin network will drop over time whereas the carbon emissions produced by the gold industry will steadily increase.

However, there’s a flip side – as Bitcoin produces more energy, the energy consumed by the network will eventually overtake that of gold production.

McCook confirms at the end of the report that it’s true that the Bitcoin network consumes more electricity than all of Ireland, directly referencing Digiconomist’s work.
“However – this energy is necessarily required to turn electricity or power into ‘money’. While emissions are high, this is due to the composition of the world’s energy grid, and over time, emissions will begin to reduce proportionately to the amount of energy that is being used. Some people have labelled  Bitcoin an environmental disaster – however, it has been demonstrated that Bitcoin is dramatically less harmful to the environment than the gold mining industry. Others have made the very fair criticism that transaction costs are unruly […] This criticism is only temporarily fair, as the Lightning Network which has been live and growing since March 2018 will significantly increase transaction capacity without increasing energy consumption.”

Remember folks, Crypto is comin!

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Interested in other cool crypto posts….check out Uncorrelated assets, the “holy grail” of portfolio allocation.and The Price of Bitcoin vs Cost of Mining.

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Mining Wars – Bitmain vs Halong

Cryptocurrency mining is a huge global industry, with Bitcoin mining alone generating over $2 billion in revenue last year.

Such a field is obviously highly competitive, and while there is one giant monopolizing the lions share of the industry, a number of other companies are stepping up to the plate as well leading to a global power struggle for one of the fastest growing industries in the world.


Bitmain caters to the majority of Bitcoin miners with their innovative ASIC miners, specialized hardware engineered specifically to solve the computational puzzles on the Bitcoin network in a process required to verify transactions and generate new Bitcoins.

The company is based in China and headed up by Jihan Wu, a controversial figure in the Bitcoin space accused by BTC advocates of supporting the BTC/BCH fork in order to try and centralize the currency in order to consolidate power for his own personal gain. His detractors often feel that he is far too powerful a figure in what is supposed to be a decentralized movement, with his mining pool Antpool controlling 16.4% of the BTC hashrate and transaction-verification power.

However, many BCH supporters view him as a champion of their cause in supporting what they consider to be the version of Bitcoin originally envisioned by Bitcoin creator Satoshi Nakomoto.

Wu’s Antminers are very powerful hardware, with an ever-expanding range of models designed to deal with the increasing difficulty of crypto-mining. In May of 2016, Antminer S9, the world’s first consumer-grade bitcoin and most power-efficient miner based on a 16nm process ASIC chip was released by Bitmain.

Antminer S9 is estimated to have the capacity to significantly reduce the cost of mining Bitcoin and make it profitable, something which may prove crucial to the network now that many Bitcoin miners are beginning to mine at a loss due to falling prices and rising electricity costs due to competition and increased difficulty.

Halong Mining

Halong is a far more secretive organization, in ways that are only really accepted in the cryptocurrency world. The identity of the CEO and team as well as the location of the company headquarters is unknown, leading to prominent Bitcoin figure Cobra Bitcoin calling the project a scam in a Medium post in March 2018. The project was however endorsed by Blockstream CEO on Twitter:

The interests of Blockstream and Bitmain are at odds due to Wu’s support of BCH which arguably contributed to Back’s endorsement.

So which company has the better hardware?

Antminer S9 (Bitmain)

DragonMint 16T (Halong)

So the Antminer S9 comes in at just under $2,900 with a capacity of 1.5 TH/s with a power draw of 1375 watts with an annual return of 2%  while the Dragonmint T1 costs $2,700 with 16 TH/s capacity and a 1480 watt power draw and an annual return of 6%, making the T1 faster and more profitable.

According to cryptocompare the S9 will return the original investment after 4804 days while the T1 only takes 3,138 to pay back the $2,700. These numbers are subject to change as hash power on the network adjusts. The T1s are currently sold out with no info as to when the next batch is due in. The announcement on the site reads:

The DragonMint 16T miner is the world’s most efficient Bitcoin miner, running faster and cooler than any competing miners. It’s the culmination of over 12 months research and development which has resulted in major advancements in mining technology including a brand new generation of ASIC mining chips. The DM8575 ASIC runs at a staggering 85GH per chip with power efficiency of around 0.075J/GH.

Other miners

As you might expect, it’s not all down to Halong and Bitmain.

Crypto Compare lists a number of mining setups with price tags ranging as high as $30,000 (although those models have longer ROI periods of around 17,000 days with current prices).

BitFury is another company worth keeping an eye on – a US-based company aiming to compete with the giant that is Bitmain along with the newcomer Halong.

Crypto mining is currently in a bit of a rut due to the inverse relationship between the bear market prices and the competitive industry creating higher mining costs and lower ROIs, a far cry from the early days when even a basic setup could net $5 a day.

Cloud mining projects have started to pop up offering people unrealistically high ROIs of 2% a day or even higher, the vast majority if not all of which are scams.

It seems likely that the days of the individual miner are drawing to a close as industrial mining becomes the only viable way to make a profit. Circle CEO Jeremy Allaire said:

“We’re at the institutional scale today. We’ll see investments grow to billions of dollars in coming years. We’ll see the mining pools move from being run by hobbyists to being run by large companies.”

OddoCash, Terraminer, and Miner One are all companies offering investors a stake in crypto mining without having to front the cash for mining equipment individually, but the current consensus is that industrial mining will take over small-scale operations as the only viable way to profitably mine cryptocurrencies and continue to validate transactions on PoW currencies, arguably enhancing the use case for PoS currencies that don’t require high-powered mining operations at all.

What is Proof of Work? Crypto 101

What you need to know:

  • Proof of Work is a solution to the so-called Byzantine General’s Problem.
  • The Byzantine General’s Problems describes the difficulty that distributed computing systems have in reaching a consensus when communications channels are unreliable.
  • Proof of works solves the problem by requiring a significant amount of computing power to find a valid hash for each message through a process called mining.
  • An attacker would have to have more computing power than the rest of the mining network to produce a succesful attack.

Have you ever wondered what makes Bitcoin so special?

Or perhaps you have heard the term Proof of Work and wondered what it means?

Proof of Work Meme

Proof of work is one of the key measures underpinning Bitcoin and most other cryptocurrencies. This post will explain what it all means.

Byzantine Solutions

Bitcoin was designed by the mysterious Satoshi Nakamoto as a proof-of-concept for a solution to a previously unsolved problem in distributed computing called the “Byzantine General’s” problem.

The problem describes a group of Byzantine Generals who have encircled an enemy city, each commanding a portion of the Byzantine army, and each trying to decide whether to attack or retreat. Only a coordinated, simultaneous action (either Attacking or Retreating) would be successful, an uncoordinated action would be disastrous as anything less than the army’s full strength would be insufficient to storm the city and a retreating army at less than full strength could also be effectively routed.

Each general must cast a vote on the correct course of action and send it to each of the other generals. As the armies are spread out, communication is difficult, and the decision must be relayed via messengers. However, the messengers could get captured by the enemy city, which may replace them with new messengers with different messages to disrupt the coordinated attack.

The Generals must send some messengers across enemy territory, where the chances of getting caught are very high.

Can’t we just hash this out?

How can this problem be solved? Imagine that the Byzantine Generals own modern computer which allows them to use hash functions. A hash function is simply a function that receives a string of words and generates a seemingly random 64 alphanumeric number (called a “hash”).

For example, if I input a string such as “LET’S ATTACK ON WEDNESDAY” the function will generate the hash bee215a407b438cc74511780049e8013fa1b5d0136840bd71e912b20363f585e. The key to hash functions is that the same string will always generate the same Hash.

You can actually check this by using an online hash function calculator and checking that “LET’S ATTACK ON WEDNESDAY” will always generate the hash

So the Generals agree that for a message to be valid, the hash of the message must start with a fixed number of zeros (let’s say eighteen). To do this, they append a random number to their string (called a number only used once or nonce) so that “LET’S ATTACK ON WEDNESDAY 7dfh6r7f7w” generates the hash 000000000000000000fbf4c8996fb92427ae41e4649b934ca495991b7852b855 (this hash is completely made up, and you’ll soon understand why).

There are two characteristics about hash functions that make them great for this sort of task. The first is that there is no easy way to know which string will generate which hash. The only way to find which string will generate a hash that starts with a fixed number is to guess over and over again.

If you want to know how hard it is to generate such a hash, may I suggest you try coming up with a string that generates a hash starting with eighteen zeroes? Go on, I’ll wait…

Did you give up? I can’t blame you. It is estimated that the Bitcoin network currently has to make almost one octillion computations or guesses to find the appropriate nonce for a Block. That’s one followed by 30 zeroes! If it took you 10 seconds to make a guess, that’s still 31 million trillion years to find the nonce!

Modern computers excel at this type of repetitive task, and they would take only a couple of hours to guess the appropriate string.  Custom-made mining rigs are even more efficient, and they can find nonces in minutes. In fact, the combined computational power of the Bitcoin network allows them to make 10,000 quadrillion guesses every second! Of course, modern Bitcoin facilities are massive computer warehouses like the one below:

The other great thing about hash functions is that they only work one way, meaning that given any Hash, it is impossible to know which string generated it.

What is proof of work?

So the generals start appending the nonce to their messages (such as “LET’S ATTACK ON WEDNESDAY 7dfh6rhas86as97as097f7w). Although it was very difficult to come up with the correct nonce, it is very simple to check if the string and nonce generates the correct hash.

The generals now have a way to send messages which can’t be easily tampered with, as even if the enemy city intercepts the messengers, and even if they also have the same computers, it would take them a couple of hours to modify the message. If the generals send a couple of messengers each carrying the same message, the time it takes to modify the message ensures that at least one messenger with an untampered message will get to the other messengers before the enemy city is able to send a tampered message.

Let’s take things a step further. Let’s give the enemy city a supercomputer which can outperform the General’s puny computers. Let’s also assume that there are thousands of generals trying to lay siege to thousands of cities, all at the same time. The generals could then group their messages (we will call groups of messages “Blocks” from now on) and pool their computer’s hashing power to find the appropriate nonce.

Although it is very difficult for a single computer to guess the correct nonce, once one computer in the network has found it is very easy to share it with the rest of the generals, and everyone can validate that the correct nonce has been found in seconds.

As long as the combined computing power of the generals exceed that of the cities under siege, the odds will be strongly stacked in their favor. This is what proof of work is all about.

So what does this have to do with Bitcoin?

Its time to go back to Bitcoin. Have you ever wondered why somebody just can’t Copy Paste Bitcoins and make themselves rich?

The answer is the Blockchain. The Blockchain is essentially a public ledger where anyone can see who owns Bitcoins at any moment in time. The key to the Blockchain’s security is that Blocks containing new transactions will only be added if they contain the nonce that generates a satisfactory hash, proving that a significant amount of processing power was spent in figuring the nonce. That is Proof of work in action!

How does this all work in practice?

Let’s say I have one Bitcoin and I want to duplicate it by sending it to different people at the same time. I send two transactions, one where I send my Bitcoin to Bryan to purchase an online good and another where I send the same Bitcoin to Gregg to purchase another online good. For simplicity’s sake, assume I’m trying to buy very expensive digital books. This is what is known as a “double spending attack”. Let’s assume I also have a state-of-the-art mining rig to help me with my fraud.

What happens next?

Both transactions enter the mempool, which is a midway house of sorts. There they sit until they are picked by a Bitcoin miner, grouped into a Block, and mined. Mining is simply the act of finding the nonce for the Block which generates a satisfactory hash. After a Block is mined, it is added to the Blockchain.

Now, my two transactions aren’t the only two transactions waiting to be confirmed. The mempool contains at any one-time thousands of transactions. You can check the size of the mempool here, which is the aggregate of all transactions. A transaction is on average 495 Bytes and a single Block can contain 1,000,000 Bytes (1MB) worth of transactions.

So back to my attack. I first wait for someone else to validate one of my transactions. After a couple of minutes, the first transaction is confirmed, Bryan receives his Bitcoin and sends me my online book, I then furiously set my mining rig to mine the second transaction. Since it’s a powerful standalone rig, it takes it about an hour to mine the transaction. What happens next?

Well, a couple of things. Since the Blockchain’s ledger recorded an hour ago that I already sent the same Bitcoin to Bryan, I have to go back and insert my fraudulent Block before that Block and all Blocks validated by honest miners after that. I would then propose an alternate Blockchain to the rest of the network.

Here is where my con fails. The network will only recognize the longest Blockchain as the valid one. So I would have to generate a longer Blockchain than the existing one. That means that my puny individual mining rig would have to out-speed the entire Mining network, finding the proper nonce for the Block containing my fraudulent Block and all Blocks after that! And so, the second transaction is never recognized as valid and my plan is thwarted.
Therein lies the power behind proof of work. Any would-be attacked has to have at his disposal greater computing power than the rest of the combined miners.

Of course, it is not inconceivable that someone with malicious intent could acquire that amount of computing power. This is what is known as a 51% attack. However, that would require a significant investment in the Bitcoin network. And who in their right mind would try to undermine a system in which they have made a significant investment?

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