When the first crypto-currency, Bitcoin was released back in 2009, the now identified creator, Satoshi Nakomoto could have never predicted the impact that Bitcoin mining was going to eventually have on energy consumption. With researcher and analyst, Sebastiaan Deetman going so far as to claim that by the year 2020, Bitcoin mining operations will consume enough electricity to power the nation of Denmark! With crypto-currency mining now becoming a full-scale industry onto itself and analysts predicting such a staggering energy cost, is it really “worth it” in the end? The answer to this question really depends on whether or not you are one of the lucky early adopters that got into the Bitcoin craze BEFORE it became a craze.
With the energy costs associated with managing a profitable crypto-currency mining operation almost outweighing the final output of the de-hashing systems, it is safe to assume that the Bitcoin craze is going to eventually run aground of its own success and very well could eventually tank outright. Industry insiders have been claiming for nearly 2 years now that the entire Bitcoin eco-system is unsustainable and is eventually going to collapse in a (virtual) mini-meltdown. Whether or not the coins that have been mined will retain their value is really up to consumer confidence at this point. With Bitcoin established as the de facto of crypt-currency, the “gold” to competitor “lite coin”‘s silver and a huge number of established outlets now accepting the currency in the same manner it would hard currency, the future of crypto-currency in financial systems is almost assured IF advanced technologies can reduce the costs associated with large-scale mining.
As it stands right now, Bitcoin is expected to halve the rewards garnered for the completion of cryptographic functions. This in turn will have a greater impact on the costs of energy associated with mining the elusive currency. Unless the value increases to a point to off-set the additional expenditure of energy, we might end up seeing the first stages of collapse in the next 5 years. In addition to the perceived energy-derived volatility of Bitcoin (and crypto-currency in general), it remains up to the market itself to decided whether or not the value is going to remain steady, increase dramatically, or just tank outright.
Could more efficient technologies ensure the longevity of Bitcoin and other crypto-currencies?
When Bitcoin was first released, anyone with a moderately powerful desktop system and high-level graphics processing unit was capable of earning enough of the wily buggers to pay for much large, more dedicated mining units comprised of old, off-the-shelf rack servers coupled to half-a-dozen or more high-end GPU’s. Eventually, even these super-machines began to cost more to operate than they were generating profits and as such, the need for a new decryption paradigm was born. Enter the ASIC miner. These systems were built with the sole purpose of dehashing the particular algorithms of whatever crypto-currency they were designed for. At first, early-adopters were cashing in on the relatively low block-chain difficulty, thanks mainly to the advanced ability of ASIC miners to solve the long logic puzzles that make up the “meat” of crypto-currency. As more and more people began to hear about Bitcoin and decided they wanted a piece of the action as well, eventually the difficulty of mining grew to a degree that even the formerly efficient ASIC systems were now perilously close to being obsolete. With the need to constantly pay out massive energy bills and repeatedly update the hardware needed to make a successful run at mining, many would-be millionaires would have been better off investing the money they had spent on setting up their Bitcoin mining operations in other industries. For example, at the time Bitcoin mining was beginning to first take a nose-dive with regards to product, Facebook had just released their ad platform. If a person had chosen to invest the money they had spent buying ASIC miners into marketingASIC miners via Facebook, they could have easily retired by now!
Currently, there are several notable companies out there that are developing advanced mining systems with the hopes of bringing the energy costs down to manageable levels but even with these advanced systems in place, the more people that decide they want to “get rich quick” with Bitcoin mining, the more complicated the blockchain’s algorithms will become, which will just require more advanced hardware, more power, and so on. We get caught up in a loop at this point where early adopters are able to earn a tidy profit from their mining operations, these people begin to brag to friends about how much money they made mining, and this causes other people to invest in buying the same equipment and get into mining themselves! Obviously, this system is unsustainable in the long run and it is simply mind-blowing that more people have yet to realize that they are basically chasing after a pipe dream.
One interesting side-note of the race for more power while using less energy is the fact that it is offering a massive incentive to anyone that can figure out how to get a working quantum computer into play. The first person (or company) that can come out with a working quantum device stands to make billions of dollars in the crypto-currency market as the sheer processing power possessed by one of these now theoretical systems makes moot the entire Bitcoin arms race.