Last year, Bitcoin reached its highest value, just under US $ 17,000, and currently values are declining but still high enough. Anyway, the increase has generated several articles in the media and comments from experts in finance. But before seeing the reasons behind this increase, let's consider the infrastructure.
The society separates its waste for recycling and tries to save energy in several ways: some speculators in cryptocurrency could be surprised by the energy consumption statistics of the Bitcoin network. To understand the problem of energy consumption, it is important to have a conceptual overview of how Bitcoin works. The system comprises a chain of blocks, a record that contains all transactions and timestamps. A new block is created every 10 minutes, approximately, by the so-called 'miners'. These are a distributed network that calculates complex algorithms to create blocks and extend the chain. Each miner tries to calculate the next block, and the first to calculate a valid block distributes it to the other miners.
The miners receive a payment for their services to the network in additionally created Bitcoins, diluting the value of existing ones. However, today this does not represent a problem, given the continuous increase in its value, which means that the dilution does not have negative effects. For example, the current rents paid to the miners are $ 9.9bn (Bitcoins) and the estimated cost of mining is $ 1.58 bn, making it a lucrative business and a reason why people are enthusiastic about creating miners. The enthusiasm of the people in turn spawned many new developments of cryptocurrency technology; the most famous one is the cryptocurrency calculator.
The estimated annual energy consumption of Bitcoins is 31.6 TW⋅h (Terawatt hours per hour), which represents more energy than Ireland consumes in a year. The electricity consumed by just one transaction is 251 kW⋅h (kilowatts per hour), enough to power 8.49 typical homes in the United States per day.
If someone has lunch at one of the many restaurants that accept Bitcoin, and the cost of that meal is less than $ 15, it would be more the value of the payment process than the lunch. Using the average cost of one kWh in California, according to Electric Choice, is $ 0.1816, so the cost of a single Bitcoin transaction would be around $ 45.
Energy costs are not the only ones present in a transaction: the Bitcoin network alone has a tax that has increased from $ 0.20 in 2016 to approximately $ 20 for each transaction today. Based on this and the current volatility in the value, some company decided to discontinue the acceptance of payments using Bitcoins. Logic indicates that there is a serious flaw in this business model when you look at energy costs and transaction fees. However, as long as the price of Bitcoin continues to rise, those who spend with their newly found wealth could accept this failure.
With the great interest generated around the Bitcoin, I have been asking the people I knew if they have some kind of cryptocurrency. Far from surprising me, I have found few ... none that use it for daily transactions, but rather investors and speculators in the search for economic gain. And here lies the problem: the value of the currency seems to be inflated by the demand of organisations and individuals seeking to make a quick profit.
Sir John Cunliffe, the deputy director of the Bank of England, was quoted in a BBC article with the following sentence: "Investors should do their homework and think carefully." It also points to the absence of a government or central bank behind Bitcoin, which is not an official currency, and which should actually be seen as a commodity. But day-to-day trends show that Bitcoin is a super-commodity that reflects the revolution of how people will transact in the future.