For many people, the ever-increasing numbers of media reports on digital currencies are still as unfathomable as the book with seven seals. What Bitcoin, Ethereum and various other originally-named currencies all have in common is that they are generated by computers. Current estimates put the number of such computers at over 2 million around the globe. The myriad interlinked supercomputers used for the purpose of ‘crypto-mining’ consume colossal amounts of energy. The current global power consumption estimate for this task is 145 TWh, slightly more power than the country of Norway consumes in a year. To ensure maximum profitability for this process, the vast majority of Bitcoin servers are currently located in countries offering cheap electricity. Initially, coal-power was the dominant source of energy, the share of which has fallen significantly as the industry strives for a greener image. However, even if more power is now generated by hydroelectric plants, there is still strong criticism of the excessive consumption of energy in general.

Cryptocurrencies are based on the basic principles of blockchain technologies. People began working on manipulation-proof digital entries via cryptographical encoding as early as the 1970s. The unique quality of this cryptological and technological endeavour was the generation of an entity in the digital realm which could not be copied or duplicated. The central concept of this building block system is the blockchain, to ensure the cryptocurrency is secure. A blockchain is a complete chronological list of all transactions conducted using a cryptocurrency such as Bitcoin. Every transfer in the currency adds new blocks to the list. Each transaction block also contains a record of all the previous blocks and becomes part of the chain of blocks – or ‘blockchain’. The built-in records of previous earlier blocks make a chain almost impossible to fake. The basic precondition for participation in general crypto-mining activity is a powerful computer equipped with the requisite Bitcoin Client software. Bitcoin transactions then take place without an intermediary, such as a bank. Hence, the technology is innovative, decentralised and transparent. But there is a drawback; the immense power consumption.

STUCK IN AN UPWARDLY-MOVING VORTEX
Crypto-mining requires immense computing capacities with correspondingly enormous demand for energy. When Bitcoin first saw the light of day in 2009 it could be done on any average-quality home computer. However, as the popularity of the cryptocurrency grew and, correspondingly, the number of computers hooked up to the system, the demand for computing power rocketed. The larger the network of computers and users, the more complex and complicated the computing tasks required to mint new digital coins – and the greater the need for energy. This ever-accelerating vicious circle has led to the need for special breeds of computer, like the Antminer S9, still capable of computing for such complex encoding calculations. The CBECI (Bitcoin Electricity Consumption Index) was developed at Cambridge University in the UK in order to analyse the entire demand for energy generated by this technology. As a consequence, the global Bitcoin network, the entire crypto-miner community, consumes 145 TWh every year. If Bitcoin were a country, it would be globally ranked 29th in terms of power consumption. Put another way, crypto-mining accounts for approximately 0.65% of all the electricity now consumed on the planet. Seen in context, the electricity consumed by all the data centres in the whole world serves a storage capacity of 2 billion gigabytes of data, and Bitcoin mining accounts for 40% of this energy. The staggering rate at which the demand for energy is growing is revealed by figures recently published on the ‘Digiconomist’ website: In 2018, a single Bitcoin transaction generated a carbon footprint it would take 80,000 credit card transactions to fill. Not even four years later that trans­action Bitcoin-to-credit-card ratio has now grown to 1 to 453,000.

CHINA SWITCHES OFF
It was logical that miners raced to base themselves in regions competing to provide ever-cheaper power and accommodation. Until recently 65% of the world’s Bitcoin miners were situated in China, where they benefitted from cheap hydroelectric power in the summer and cheap coal-powered electricity in the winter. China’s considerable surplus of energy from state-subsidised coal power infrastructure enabled crypto-miners to be offered ex­tremely cheap power for a long time. However, the whole scene had a ‘dirty’ image that needed to be shed. There were stories of ingenious Chinese local authorities tempting crypto-miners to the outskirts of former coal mining towns with electricity price discounts of up to 30%. For a period, these newcomers were a welcome beacon of hope for areas aware the sun was setting on the coal industry. Nevertheless, China has now decided to put a stop to the trend and is successively forcing these energy-intensive modern operations out of the country. Now crypto-miners are having to seek new operational bases in countries offering affordable and preferably clean energy. Countries like Canada, Russia, Iceland, the USA and Norway are currently the most popular choices for crypto-miners. All of these countries produce immense volumes of hydroelectric power; some very cheaply, too. Hydropower has now become the most important source of energy for the work of crypto miners. Indeed, according to researchers at Cambridge University, hydropower now makes up the lion’s share at 60% of the energy consumed.

EXCESSIVE USE OF HYDROELECTRICS
Frequently, as shown by many cases recently published by Wirtschaftswoche in Germany, even the immense volumes of electricity produced by hydropower plants are still not sufficient to cover demand. One example comes from the northern US town of Plattsburgh. Thanks to the abundant supply of hydroelectric power generated every year in the broad area surrounding the Niagara Falls the town is allocated a certain volume of this energy at a discount. However, since two crypto-mining operations alone were responsible for the consumption of 11.2 MW – or approximately 10% of the total available capacity – the town’s allocated quota was soon exhausted. Another case revealed by Wirtschaftswoche took place in Washington State where a moratorium was announced for crypto-miners after Bitcoins had been illegally mined at prices of 1.9$C/kWh. Even Hydro-Québec, Canada’s largest hydroelectric power producer, seem to have been pushed to their limits by the digital mining activity. According to Bloomberg’s news service, the above-named electricity producer had received inquiries about its capacity to provide 9 GW of power – a quarter of the Hydro-Québec hydropower park output, or around one tenth of Canada’s total hydroelectric power capacity. Notwithstanding, there are still countries like Russia prepared to welcome crypto-miners with open arms. The aim is to attract the miners forced out of China with offers of cheap hydroelectric power. It is believed several such crypto industry parks have been planned for the far north of Russia.

ECOLOGICAL FOOTPRINT TO BE ENHANCED
Researchers at the Technical University of Munich claim the total CO2 footprint created by crypto-mining can be calculated at around 22 megatons of carbon dioxide – comparable with the CO2 footprint of cities like Vienna or Hamburg. The entire global internet only produces another half of emissions again at 33 ­megatons of CO2. No wonder the industry is trying to improve its emissions record. In the meantime, the tendency in the crypto-mining sector has moved toward renewable energies. Efforts are being made to make optimum use of excess electricity generated by wind and photovoltaic plants and it has been argued such initiatives make a contribution to their economic viability and development. It remains to be seen whether hydroelectrically-generated power maintains its status as an attractive proposition for crypto-mining in the future.

ALTERNATIVES ON THE WAY
In general, experts agree that blockchain technology is here to stay, although it is very doubtful that the delicate topic of the exorbitant amounts of power it consumes will be a sacrosanct issue beyond debate – especially since alternative cryptocurrencies have already been developed that consume significantly less electricity. The majority of new technologies are no longer dependent upon computing pow­er for the generation of blockchains, and simply represent a given value. Alongside Bitcoin there are something like 6,000 alternative cryptocurrencies, the newest of which are already distancing themselves from the immense energy consumption of the best-known representatives of this breed. One of the newest advocates of such an alternative approach is the Swiss cryptocurrency, Signa. To run the new currency, according to Signa’s own figures, the company requires just 0.002% of the energy consumed by Bitcoin. Although still in the minority, these currencies are pioneering new routes for the years to come.