To use crypto-assets such as Bitcoin, a large amount of electricity is required.

It has been pointed out that the power consumption for operating Bitcoin is comparable to the power consumption of a single country. Since crypto-assets do not use banknotes or coins, which are physical substances, there are many people who have an ecological image.

Cryptocurrency “eats electricity” is ironic because it doesn’t use banknotes and coins. Instead of using money, it uses a lot of computers and requires a lot of electricity.

Has the public secret been revealed?

The power problem of crypto assets became apparent shortly after the birth of crypto assets. Computer processing called “mining” is required to operate cryptographic assets, and those computers are used in countries such as China, where electricity charges are low（※1).

If mining is done in a developed country where the electricity bill is high, the operating cost will increase and the “cryptographic asset business” will become unprofitable and will go bankrupt.

So why has the power problem, which was an open fact, come into the limelight?

That’s because American electric car maker Tesla CEO Elon Musk criticized Bitcoin in May 2021 as “energy consumption (power consumption) is out of the ordinary”（※2). After that, the price of Bitcoin plummeted.

A world-renowned business owner dared to expose the major drawbacks of crypto assets, and more and more people thought that having Bitcoin was a risk and they were tossed.

But if the power problem of crypto assets is a well-known fact, it makes no sense to expose it and plunge. Why did Bitcoin plunge after Mr. Musk’s remarks? That’s because Tesla’s electric cars are treated as synonymous with eco.

The Ministry of the Environment of Japan states that “electric vehicles are expected to become widespread as they have the potential to bring about major changes in global energy problems such as global warming countermeasures”（※3).

Tesla is the world’s largest electric car maker, and its CEO said crypto assets weren’t eco-friendly, so many investors questioned the potential of Bitcoin and gave it up.

※1：https://toyokeizai.net/articles/-/423872
※2：https://jp.reuters.com/article/tesla-bitcoin-musk-idJPKBN2CU232
※3：https://www.enecho.meti.go.jp/about/special/tokushu/ondankashoene/ev.html

Bitcoin power consumption is on par with one country

It is pointed out that the annual power consumption of Bitcoin is said to be 150 terawatt-hours, which is comparable to the annual power consumption of Sweden. It is also pointed out that it is for two years in Portugal. In addition, some say it accounts for 0.6{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} of the world’s electricity consumption.
By the way, Japan’s annual electricity consumption was 350 terawatt-hours in FY2018 （※4、5、6、7).

※4：https://www.nikkei.com/article/DGXZQOUB00009_X10C21A5000000/
※5：https://www.nikkei.com/article/DGXZQOUB143980U1A510C2000000/?unlock=1
※6：https://jp.techcrunch.com/2021/04/03/2021-03-21-the-debate-about-cryptocurrency-and-energy-consumption/
※7：https://www.enecho.meti.go.jp/about/whitepaper/2020html/2-1-4.html

Is it Expensive When You Think of it as an Internet Service?

A unique comparison was made by AFP, which estimated Bitcoin’s annual power consumption of 200 terawatt-hours, and reported that Google was using 12 terawatt-hours of electricity per year（※8). Bitcoin consumes 17 times more electricity than Google.

I think many people use Google much more often than Bitcoin. Both Google and Bitcoin are Internet services and computer services. And yet, if Bitcoin consumes far more electricity, the impression that Bitcoin is using too much electricity is even stronger.

※8：https://www.afpbb.com/articles/-/3338700

Non-eco Sin is Heavy

Bitcoin, which has the largest market capitalization among crypto-assets, has the highest power consumption, and the power consumption per transaction is more than 20 times that of Ethereum, which has the second-largest market capitalization（※6).

In other words, Bitcoin is guilty of double non-eco, which consumes a lot of electricity per transaction and also has a lot of transactions. The criticism of being “out of the ordinary” is not an exaggeration.

What is Mining that Requires a Large Amount of Electricity?

Mining is the act of giving a new Bitcoin to someone who has helped with the computer processing required to operate Bitcoin.

The feature of the Bitcoin system is that it is operated by everyone. In other words, it is not a money system operated by the Bank of Japan or the Fed. Therefore, someone has to do the computer processing required to operate Bitcoin. You need a reward to get someone to do the computer processing, so you give them a new Bitcoin.

Bitcoin is given by computer processing because it is similar to getting gold by digging a gold vein, so it is named mining.

Is Mining Creating Bitcoin Value?

When crypto assets were first launched, they were completely worthless. We just set rules for treating data on a computer as currency and exchanging it for goods and services. Only those who approve the rule will recognize the value of the crypto asset.

Cryptocurrency assets such as Bitcoin have become enormous in value because the number of people who approve the rules has exploded. This is a strange form of currency.

Currencies such as the yen and the dollar are valued by government-approved central banks such as the Bank of Japan and the Fed. No one is reluctant to exchange 100-yen coins for 100-yen coins because the Government of Japan and the Bank of Japan give 100-yen coins a value of 100 yen.

So why has the number of people who recognize Bitcoin as valuable increased explosively? Thinking that way, I have to admit that “Bitcoin is valuable in the first place.”

The value of Bitcoin is created in many ways, one of which is mining. The job of “computer processing that is indispensable for the operation of Bitcoin” is valuable. If that value becomes a new Bitcoin, Bitcoin will be worth it.

What is the computer processing that is indispensable for the operation of Bitcoin?

Next, I will explain the computer processing that is indispensable for the operation of Bitcoin.

Bitcoin has data on a computer called a “transaction ledger”. This transaction ledger records who moved 1 BTC from whom. BTC is a unit of Bitcoin and is read as “Bitcoin”.

Since all Bitcoin transactions are recorded in the transaction ledger, the amount of data is enormous. When a new Bitcoin is traded, it will be “added” to the transaction ledger. Addendums are also processed by the computer.

If the addition is incorrect, the entire transaction ledger will be adversely affected, so the addition must be accurate. This causes the following problems.

●　Which computer should store the transaction ledger, which is a huge amount of data?

●　How can I make additional notes accurately?

If you are a huge company when the data you have becomes large, you can build a huge data center, install a large number of computers called servers in it, and store it there, but with Bitcoin, it is There are no companies or people to do.

Also, since Bitcoin can be participated by anyone, there is a possibility that a malicious person will appear who will add something that is convenient for him.

To solve these two, Bitcoin has recruited volunteers who can do computer processing. A person who gives his / her name as a volunteer keeps a part of the data in the transaction ledger on his / her own computer and helps to add it on his / her own computer. Bitcoin will be given to volunteers who have done this work.

If Dust Accumulates, It Will Go Crazy

Even if you add to the transaction ledger using a computer, if there is only one, the power consumption is small. However, when it is traded all over the world like Bitcoin, it will have a huge amount of electricity such as 150 terawatt-hours and 200 terawatt-hours.

Small crypto assets are fine, but when they grow globally, they go crazy.

Summary – Renewable Energy is the Key

Volunteers who perform mining are called miners. Miners want to do a lot of computer processing (additional) and earn as much Bitcoin as possible, so they want to mine cheaply.

Since the cost of mining is the computer used for additional writing and the electricity cost to run it, miners aim for a country where the electricity cost is low with a computer. That would be China, Russia, etc.（※9、10).

These countries can produce electricity cheaply because they use cheap fuels such as coal. However, burning coal silently to produce electricity is now globally recognized as “bad for the environment.”

Even if you try to do eco-friendly things using crypto assets if the operation method of crypto assets is non-eco, “good for the environment” will be canceled. Therefore, the issue is whether crypto-assets can be operated with renewable energy（※11).

※9：https://jp.techcrunch.com/2021/04/03/2021-03-21-the-debate-about-cryptocurrency-and-energy-consumption/
※10：https://www.coindeskjapan.com/19095/
※11：https://www.nikkei.com/article/DGXZQOUB00009_X10C21A5000000/