Electricity used to mine Bitcoin falls as crypto crisis widens

With the crypto winter continuing to consume the crypto miner's income, andthe financial epidemic spreading throughout the sector, electricity consumption by the most prominent cryptocurrency networks has decreased by up to 50 per cent, reported the Guardian.

According to estimates made by the crypto analyst Digiconomist, the bitcoin network's electricity consumption has decreased by a third from its high on 11 June and down to an annualised figure of 131 terawatt-hours a year.

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Ethereum, the "programmable money" that is experiencing much of the recent explosion in crypto projects, has seen a downfall in electricity usage from a peak of 94TWh a year to 46TWh a year which is the annualised consumption of Qatar.

For both the companies, the reason for the fall remains the same.

The electricity usage for a cryptocurrency is determined by "mining." In crypto mining, people essentially use purpose-built computers to generate digital lottery tickets that can reward cryptocurrency payouts.

This process is vital because it holds up the security of the networks. However, it also incentivises the network as a whole to waste significant amounts of energy.

The prices of most cryptocurrencies have fallen by a large proportion, with Bitcoin at nearly $20,000 from its peak at $69,000 (£56,000) earlier this year. The value of rewards to miners has also fallen, which has left them in areas with expensive electricity or older, inefficient practices of mining "rigs," resulting in an inability to turn a profit.

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The Dutch economist behind Digiconomist, Alex de Vries, told The Guardian, "This is literally putting them out of business, starting with the ones that operate with suboptimal equipment or under suboptimal circumstances (e.g., inefficient cooling)."

"For bitcoin mining equipment, that's a big issue because those machines cannot be repurposed to do something else. When they're unprofitable, they're useless machines. You can keep them around hoping the price will recover or sell them for scrap," he added.

In comparison to others, Ethereum can be mined using a typical computer. However, it is most profitable to do so using a very powerful graphics card, resulting in widespread supply shortages of the cards, which have turned many gamers against the industry.

The fall in mining revenue has resulted in a flood of graphics cards on the second-hand market, with insolvent miners trying to recoup their investments.

The cryptocurrency sector continues to stumble due to the massive price collapse even after the Bitcoin prices are much more stable presently.

(With inputs from agencies)

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