As Bitcoin becomes more mainstream,the environmental cost of mining new coins is becoming a concern.Credit:Bloomberg
The benefit of being this far north,according to Bitcluster,is energy is cheap,around 0.03 cents per kilowatt hour since the city has its own power supply. It is also deathly cold,which cuts the cost of ventilating and cooling its mining kit as it heats up. “We delved into the study of electricity tariffs in this Arctic region and decided to do it,” says Sergey Arestov,co-founder of Bitcluster. “We devoted the entire year 2020 to the active construction of the data centre,and despite the pandemic,we managed.”
While it may seem like an extreme way to ensure cost-efficient cryptocurrency,it also exposes the vast energy demands needed to mint new Bitcoin - and the growing environmental cost.
Bitcoin miners use increasingly powerful,specially designed computer equipment,or rigs,to verify Bitcoin transactions in a process that produces newly minted Bitcoins.
“If you are using Bitcoin you do not see the environmental cost,” says Alex de Vires,founder of Digiconomist,which tracks Bitcoin emissions. “There are 319 kilograms of carbon emissions per transaction,equivalent to watching over 50,000 hours of YouTube. It is an insane amount.” Cryptocurrency mining is the hidden process that powers the transactions that keep accounts on cryptocurrency apps such as Coinbase ticking along. The process is built into the very fabric of digital currencies.
In its simplest terms,Bitcoin transactions are verified by a huge network of independent computers. They perform complex calculations in a process called Bitcoin mining. Once the calculation is complete,the network is rewarded by new Bitcoin.
“You can compare it to a lottery. Every 10 minutes a ticket is drawn,and lucky miners will have the winning ticket,” says Michel Rauchs,of the Cambridge Centre for Alternative Finance.
At first,mining was easy. It could be done in a bedroom with a graphics-processing computer. There were almost no Bitcoin miners out there,so early miners were able to mint thousands of coins. Now,there are thousands of miners and very few Bitcoins left. This makes the calculations vastly more difficult. The more difficult the transaction,the more computing power is needed,with factories filled with graphics processors and “Antminer” rigs crunching numbers and burning power.