Bitcoin: The Power Grid’s Greatest Enemy
Bitcoin mining consumes more energy than Finland, and with its current Proof-of-Work model, analysts predict that electricity consumption will only rise. However, the proper regulations can save us from inevitable crises like power outages and omnipresent grid pressure.
91 terawatt-hours of electricity. That is how much energy Bitcoin is burning on an annual basis. To put that into perspective, that is three times the total energy usage of Sri Lanka! This number will increase, as America is now the number one destination for Bitcoin miners, eclipsing China for the first time. Mining requires so much electricity because you can earn more money using a faster, energy-intensive computer. The effect of this is that it leads to detrimental power outages.
The Iranian government has already expressed its distress toward unlicensed crypto miners using such absurd amounts of electricity. They quantify that mining will cause 10% of power outages in the winter of 2021. Thus, they went as far as issuing a four-month ban due to unplanned blackouts. However, I strongly believe in the ample benefits that crypto can provide, so regulation is a more promising alternative instead of complete removal.
In the U.S., most grids are incredibly vulnerable, specifically Texas’, as studies find that the grid is already lethally unreliable. Alarmingly, the Texas grid has come under strain and is about to be hit by a surge in demand for electricity as Crypto mining will demand five times more electricity by 2023. Furthermore, increases in Bitcoin prices contribute to a rise in energy consumption. Analysts predict that Bitcoin will hit a record high of $100,000 next year. This dramatic price will undoubtedly increase the interest in the cryptocurrency, thus putting even higher pressure on the power grids.
However, federal regulations can solve this. As Bitcoin moves away from being mined on a Macbook Air and toward giant mining farms, abundant cheap energy supplies are required. This significant energy can only be provided by the government, as independent corporations do not have the resources to fund such insurmountable energy needs. If America limits the amount of power supplied for mining, crypto can mitigate the pressure on its grids. As an avid supporter of DLT myself, advocating for ending mining is not my objective. However, if the FERC regulates the electricity supply, we can solve ubiquitous power outages just as it does for other utilities.
The only other solution is if Bitcoin adopts a Proof-of-Stake model. However, Proof-of-Work is fundamental to Bitcoin’s primary use case of acting as an immutable and secure decentralized ledger of value ownership, enabling censorship-resistant interactions between network participants and driving value through scarcity. Furthermore, a switch would take away from its unique nature, causing it to decline in usage. Thus, Bitcoin will not be making the switch soon. Such stubbornness leaves U.S. regulation as the only option to save the grid.
Legislation must be adopted now, as the impact on the environment and the risk of power outages are tremendous. Mismatched priorities and the Texas outage left millions of people in the dark, with more than $20 billion in damages. With crypto becoming popular, such economic disasters will become more dominant, with the danger of affecting millions of lives and livelihoods. A study from Yale concludes that non-accidental deaths increased 25% during power outages, and accidental deaths spiked 122%. In conclusion, to save lives, money and preserve the security of the U.S. power grid, regulation is necessary.
What Does This Mean for the Future: Cryptocurrency, despite its benefits, consumes an excessive amount of energy. Thus, it should move to renewable energy, regulate its energy supply, or switch to Proof-of-Stake.
Picture Credits: Lisa Barnard
