Despite traditional mainstream skepticism surrounding the use of cryptocurrencies, the sheer inefficiency of conducting a single transaction puts bitcoin at a huge disadvantage.
Energy Output of Recent Transactions
Miners are becoming the principal consumers of energy in the growing bitcoin ecosystem. As each algorithmic problem becomes more and more complicated to solve, more machines are working longer hours in order to birth the next coin. Moreover, these processes are incentivized by rewarding miners whose block is accepted, with even more bitcoin.
This is in part why we are also seeing a rise in national investment in computing power. The more powerful the machines used to mine bitcoin, the more coins can be allocated to the machines owners. Thus the price of bitcoin works in tandem with the interest to mine the cryptocurrency, but not without its caveats.
Analyst Alex de Vries explained on Digiconomist that, “Over the years this has caused the total energy consumption of the Bitcoin network to grow to epic proportions, as the price of the currency reached new highs.”
This means that that recent $7,000 barrier broken by the cryptocurrency is also responsible for soaring energy costs. Data collected from the International Energy Agency compared the energy consumed through the production of one bitcoin as roughly the equivalent of the entire country of Nigeria.
In a similar report conducted by de Vries, he goes into detail as to how all these energy is spent.
In August 2017, a handful of visitors were allowed into the large bitcoin mining center Bitmain Technologies. Although there are only about 50 people who work at this center, their primary task is to fix any faulty machines. In the summer, heat is a major problem.
But no matter the time of year, not only is the center spending energy to keep the 21,000 bitcoin mining machines (only 4% of the global network) from overheating, but also in keeping them cool. Large fans operate to evacuate warm air from the center and reintroduce cool air.
Disadvantages in a Mainstream market
Unfortunately, these levels of consumption will only increase as popularity for the currency also increases. More than anything, this may be the primary reason preventing cryptocurrencies from entering a mainstream market.
The major concern for the currency may not hinge on its volatility, nor its ease of use, but actually the massive amounts of energy it needs in order to function. If we think about bitcoin’s major competitors in the world of finance, it’s difficult work to explain advantages of the cryptocurrency.
From a cost-efficiency standpoint, the cost of making a transaction without a trusted third-party (as it stands currently), is far too high to change the world any time too soon.