Cooperative Living August 2023 - 18

CLOSER LOOK
● Cryptic Currency
by Paul Wesslund, Contributing Writer
Why bitcoin uses more electricity than Finland
C
ryptocurrency has been around for about 15 years, but if you're not
familiar with bitcoin and other forms of digital currency, what you're
about to read will likely sound strange but interesting.
Cryptocurrency is a form of money that exists only in the virtual world of the
internet, and the annual amount of electricity required to support cryptocurrency
already compares to the amount of electricity used annually in Finland.
A NEW KIND OF
MINING INDUSTRY
Cryptocurrency has created a new
class of companies known as bitcoin
miners. It's also created controversy.
At least one state has restricted bitcoin
mining as a drain on local resources,
while others are creating incentives
to attract cryptocurrency jobs.
There are several cryptocurrencies,
but bitcoin is the first and largest.
Today, there are some 200,000 bitcoin
transactions a day, and about 420
million users of cryptocurrency
worldwide.
Of course, the people exchanging
all that currency want a guarantee of
security - and that's what creates the
heavy electricity use.
Bitcoin devised a method of ensuring
the safety of its virtual money called
" proof-of-work. " It's a decentralized way
of verifying a transaction by creating a
complicated mathematical puzzle for
people on the internet to solve. The
reward is a valuable bitcoin.
THE IMPACT ON
ELECTRIC UTILITIES
That idea might seem outlandish,
but it's worked well enough that the
proof-of-work market is valued at more
than $10 billion and is expected to grow
to more than $67 billion in the next
three years.
With the popularity of
cryptocurrency, the proof-of-work
technique calls for tons of electrically
VALIDATION PROCESS OF CRYPTOCURRENCY
powered computing capacity.
Bitcoin miners often try to
locate their data centers near a
water supply to use as a coolant
to keep the computers from
overheating. Miners are also flocking
to areas where electricity rates are low,
and regulation is likely to be less
burdensome.
Critics say bitcoin mining could
strain water resources, raise local electric
rates and harm the environment with
massive energy use.
But bitcoin defenders cite the
economic development benefits to a
local economy. They also say data miners
try to locate data centers where green
energy is available - near hydroelectric
dams or solar and wind power sites.
MORE EFFICIENT DATA
MINING SOLUTIONS
Bitcoin mining could potentially
benefit electric utilities by making more
efficient use of electricity. Data centers
use power 24/7, including at night
when excess electricity is available. And
since the data centers aren't supplying
a life-or-death service, bitcoin miners
might be willing to accept a lower
electric rate in return for having their
power interrupted during times of peak
electricity use.
The controversy over data mining's
use of electricity could be resolved
another way. Bitcoin's biggest
competitor, ethereum, has changed its
verification system from proof-of-work
to something called " proof-of-stake. "
It's a similar technique that doesn't
require solving a puzzle, which reduces
energy use by more than 90%.
Whether cryptocurrency continues
to use enormous electricity use or finds
less energy-intensive techniques will
determine the future of a very young and
very strange data mining industry. 
Paul Wesslund writes on consumer
and cooperative affairs for the National
Rural Electric Cooperative Association.
16 ● Cooperative Living ●
August 2023
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Cooperative Living August 2023

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