Murray LeClair
Bitcoin is a relatively new phenomenon. Ten years ago, nobody had heard of crypto currencies but today, everyone wants to invest in Bitcoin, Ethereum and other virtual currencies.
The amount of power used by Bitcoin miners is growing by the day, which could have far-reaching effects on energy prices if demand exceeds supply. Could South Africans be facing energy shortages and sky-high prices on the back of feverish Bitcoin mining?
Global energy consumption
Bitcoin miners are consuming more energy annually than do 159 countries. As of November 2017, electricity consumption was said to be 29,05 c/TWh, which equates to 0,13% of global electricity usage. Experts predict that, if Bitcoin mining continues at this rate, it will have used up the world’s electricity supply by 2020. Right now, it costs $1,5-billion each year to mine $7,2-billion in Bitcoin revenue. Most African countries use more electricity to mine for Bitcoin than they consume. South Africa’s Bitcoin mining electricity consumption relative to annual use is 13,7% – not bad compared to Rwanda at 5810% and South Sudan at 4185,28%.
Global energy output is unlikely to remain static and Bitcoin energy consumption may not continue along its current trajectory, but interest in crypto currencies such as Bitcoin is unlikely to dissipate anytime soon.
A waste of energy
The fundamental problem is that mining for Bitcoin means wasting huge amounts of energy. The more energy you waste by instructing your computer to complete complex mathematical calculations per second, the more Bitcoin you stand to gain.
Credit Suisse estimates that 80% of Bitcoin mining expenses as a whole are being reinvested into covering the cost of electricity expenditure. The more Bitcoin becomes a mainstream currency, the more electricity will be consumed in the race to mine it. However, Credit Suisse is not too concerned, as it believes Bitcoin prices will never be high enough to spark a dramatic rise in mining activities, which would, in turn, cause a huge increase in energy consumption.
Fortunately, despite the surge in energy usage caused by a spike in demand for Bitcoin, there are signs that the Bitcoin bubble has already burst. The price of Bitcoin shot up in 2017, reaching just under $20 000, but it crashed spectacularly in early 2018, plummeting to below $8000 at one point. It has since climbed back up to $11 000, but prices remain volatile and IG CFD traders predict plenty more highs and lows in the coming months.
Energy consumption is sustainable
Bitcoin energy consumption is sustainable, but it must remain in the energy demand “green zone”, with future growth of less than 19% per year. If energy consumption from Bitcoin mining remains in the energy demand “red zone”, it will have to compete with other economic sectors such as industry and construction. New power plants will have to be constructed to keep up with increased energy demands.
Blockchain technology clearly has value, but if it continues at the expense of the global energy supply, the repercussions could be catastrophic, and not just for South Africa.
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