Coin Metrics, a crypto intelligence firm, has recently released a report that proposes a new method for measuring Bitcoin’s energy usage by analyzing the blockchain. The energy consumption of Bitcoin has long been a contentious topic, with critics highlighting the energy-intensive nature of the proof-of-work validation process. This process involves thousands of machines continuously performing complex calculations in the hopes of solving the next block and being rewarded for their efforts.
As governments, including the White House, increase pressure on digital asset mining firms through proposed regulations such as a 30% excise tax, the report aims to provide a more accurate approach to estimating Bitcoin miners’ overall power consumption. It builds upon methodologies used in previous studies conducted by various institutions. By examining the data contained in miners’ constant stream of guesses, researchers at Coin Metrics claim they can better estimate Bitcoin’s total electricity consumption by matching the “fingerprints” of each guess with the unique profiles produced by specific machines.
The report focuses on a type of machine called ASICs (Application-Specific Integrated Circuits), which are designed to maximize the number of guesses made to solve Bitcoin’s blocks as quickly as possible. The study analyzed 11 different ASIC models from four manufacturers, ranging from models released in 2016 to those from last year. By associating network activity with specific machines, there is less room for overestimating Bitcoin’s energy usage because the efficiency of each ASIC can be taken into account.
Bitcoin power draw is lower than the estimates
The report emphasizes the importance of hardware efficiency, a critical element that previous attempts to assess Bitcoin’s power draw have often overlooked. It highlights how ASICs have become increasingly efficient over time, generating more hashes per second and per unit of power drawn.
According to Coin Metrics’ findings, Bitcoin’s power draw is historically lower than estimates from studies that did not include ASIC-level data, such as those conducted by the University of Cambridge and the Digiconomist. For example, Coin Metrics’ estimate for miners’ power consumption in May is 16% lower than the University of Cambridge’s Bitcoin Energy Consumption Index, which is considered the industry’s current “gold standard.”
While Coin Metrics argues that its model provides a more accurate representation, it also commends the University of Cambridge researchers for their groundbreaking work and acknowledges that its report is a refinement of their methodology.
In addition to providing accurate energy statistics, the report aims to offer data for miners to compare the efficiency of their rigs with those of their competitors. This information is crucial for miners in forecasting their future profitability and understanding where their fleet stands relative to other miners.
Using the data collected, the report also reveals trends in the popularity of different ASIC models over time, as well as those that have become less prominent. This information is valuable from a security standpoint as it helps identify potential points of centralization by tracking the dominance of hardware manufacturers.
Coin Metrics’ report also addresses environmental concerns related to crypto mining, including e-waste. By estimating how often each ASIC needs to be replaced, the report provides insights into the amount of electronic waste generated by mining activities. The environmental impact of cryptocurrencies has faced increased scrutiny, with concerns raised by institutions like the White House and through art installations like Benjamin Von Wong’s “Skull of Satoshi.” Breakthroughs such as Coin Metrics’ new methodology could contribute to more nuanced discussions surrounding Bitcoin’s energy use, enabling data-driven conversations based on information extracted from the blockchain.
Coin Metrics’ report offers a fresh perspective on measuring Bitcoin’s energy consumption by leveraging blockchain data. By analyzing the activity and profiles of specific machines involved in the mining process, the report provides a more accurate estimation of Bitcoin’s energy usage. This approach not only contributes to more informed discussions about the environmental impact of cryptocurrencies but also provides miners with valuable insights into the efficiency of their operations.
