Bitcoin Tops 159 Individual Countries in Energy Consumption at $2 Billion Per Year

According to data consultant Alex de Vries and his Bitcoin Energy Consumption Index, the process of transacting with and mining the digital currency translates to huge real-world energy consumption. So much so that verifying Bitcoin transactions tops 159 individual countries in energy consumption. In total, the whole Bitcoin network spends almost $2 billion per year mining.

As a refresher: Every Bitcoin transaction must be verified by a key group of users called miners. Using specialized computers paired with high-performance graphics cards, miners “assemble” the transaction records into groups known as blocks. They then compete to get their block added to the chain of record. About every ten minutes, one block is randomly selected, winning that miner (or group of miners) a prize of new Bitcoin.

As for the numbers: The creation of a single bitcoin requires about 50,000 kilowatt-hours. In the U.S., the average residential rate is about 10 to 12 cents per kilowatt-hour. In China, electric costs are slightly less expensive, being about 4 to 5 cents per kilowatt-hour. It’s something that many users are removed from: The electric bills end up with the miners, so users never see how much energy the system consumes.

That said, on one hand, the high carbon cost is partly intentional. “The energy costs are part of the reason why Bitcoin is so secure,” de Vries explains, “because if [someone] wants to attack the system, they would need the machines and would have to spend a huge amount of money to pay for all the electricity to simply take control of the network.” So, in essence, it’s really part of what makes Bitcoin secure.

It’s worth noting, too, that this huge energy consumption will cease to be a problem when all Bitcoin have been mined. The coin started with a block reward of 50 bitcoins — so everyone who participated in the creation a new block for the blockchain received 50 Bitcoin (split between them). But now, that reward is just 12.5 Bitcoin per block, already halving twice — as it does and will continue to do every four years. Down the line, then, in a few decades, all Bitcoin will be mined and there will be no more block reward.

This might lower overall energy costs, simply because as the reward goes down, so will the amount miners spend on electricity. But unfortunately, that’s not only a long time away, it’s only part of the picture. Transaction fees also contribute to consumption. “The whole idea is that those transaction fees, which are also claimed by the miners, will end up supporting the Bitcoin infrastructure,” de Vries explains.

As for the future of cryptocurrencies, de Vries doesn’t see them replacing government-issued currencies. But he does think there will “always be a niche for Bitcoin.” Just a niche? Perhaps de Vries feels this way because he is content the way things are: “I have no problem with my bank. I trust my bank. I’m fine with them doing my financial transactions, so I don’t really need Bitcoin.”

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Last summer, 24-year-old Kingsley Advani set his sights on becoming a cryptocurrency king after seeing the once-in-a-lifetime returns the coins were bringing in. Inspired, Advani invested everything he had, $34,000, in cryptocurrencies like Bitcoin and startups working on related technologies. In six months, he watched his net worth balloon to seven figures.

At a time when many people his age are trying to climb the ranks at their given employers, Advani has carved out his own prospects: Now working as an advisor to cryptocurrency startups. He travels between London, New York, and San Francisco, meeting with industry leaders and scouting startups working on what may be the next big application of blockchain technology.

“I think at no point in human history have people in their twenties had such an opportunity to invest in such high-growth assets,” Advani told Business Insider in an interview.

Created in 2008, Bitcoin is a payment system that allows people to make purchases and send money with anonymity. There are no banks or middlemen, and transactions are recorded on a digital ledger called a blockchain, which stores the information with full transparency. It was the blockchain that first drew Advani to cryptocurrencies. In 2012, after a friend had introduced him to Bitcoin, he began to see the potential of the technology.

“It’s like a rebellion to traditional finance,” Advani said. He believes its creation in 2008 — at the height of the worst financial crisis since the Great Depression — was no coincidence. “You don’t need centralized banks to send money, you have these great pieces of tech send money for you through cryptography. So unlike banks, it’s faster, cheaper, and more secure,” he said.

Advani started reading white papers on cryptocurrencies and watching the market more closely last summer. He decided he would not miss a second chance to take part. He invested all of his savings and part of his income from his job as a data scientist at a small software company. “Every month I was waiting for that paycheck and I put it straight in,” he said.

So far, his gamble has paid off. When Advani invested in Bitcoin, it was worth about $4,000 per coin: As of this February, the cryptocurrency has more than doubled in value. At its peak, Advani’s investment had grown to low seven figures, though it fluctuates with the swing of the market. Advani invests mostly in startups spun out of top universities, like Stanford, Cornell, and Massachusetts Institute of Technology, that are working on high-speed blockchain technology.

Right after the bitcoin network has cleared up its massive backlog of transactions, we’ve been hit by a huge price correction. However, there is still much to be hopeful about; the development and testing of the Lightning Network is coming along quite nicely.

What is the Lightning Network?

The LN, put simply, will allow for instantaneous, near fee-less transactions of Bitcoin utilizing an off-chain network. If you’re familiar with the cryptocurrency’s transaction times and fees, you can see why the cryptosphere is excited. Through the innovation, many users and companies hope that Bitcoin will become a safe and accepted currency for merchants worldwide. 

Going into more detail, the LN it is a decentralized network of payment channels that are based on the Bitcoin blockchain. Users who install the Lightning software and establish a connection with the network have the option of opening up payment channels with other users. The network is considered an in-development solution to the Bitcoin scalability issue, allowing users to make micro-payments between two parties without the necessity to broadcast directly to the blockchain. This reduces transaction fees, increases the speed of the transaction, and also enhances privacy.

Implementation Underway

An Austrian cryptocurrency startup Coinfinity has completed the first Bitcoin ATMtransaction using the Lightning Network (LN). Coinfinity is already known for having made a number of innovative moves like deploying the first Bitcoin ATM, allowing a person to exchange Bitcoin and cash, as well as introducing a web-based cryptocurrency trading platform in Austria. The implementation of the Lightning Network on Bitcoin ATMs would allow users to easily purchase bitcoins at light

In late-January, the first transaction of the Lightning Network took place in the form of a Reddit user (btc_throwaway1337) who purchased a router from TorGuard through a Lightening Network payment. The post was entitled “The future just arrived at my doorstep!” The user, who brands himself as “your average Bitcoin investor,” goes on to provide further details about the purchase: “I saw TorGuard’s tweet, so I decided to contact them. I enquired as to purchasing more than just a monthly subscription, their staff gave me LN peering information, I opened a channel, received an invoice, and here we are!”

Although the Lightning Protocol 1.0 was just released in December, 2017, it has already garnered a lot of attention on the side of developers. And although it is still in alpha-stage testing the network is gaining momentum, already having 417 nodes and over 1,000 open payment channels. By comparison, the Bitcoin Cash network operates with 1,187 nodes.

It’s important to remember that the development and implementation of the Lightning Network is still in progress, with many companies testing the technology. However, one should remain aware of the fact that the using such software before a production release may mean it contains bugs or errors that could potentially result in LN funds losses. Aforementioned Reddit user btc_throwaway1337 had the following to say: “Mainnet is still caveat emptor! I went down the rabbit hole fully willing to lose my BTC. I got lucky, others may not!”

Banco Santander has set a Q1 2018 launch date for the introduction of same-day, mobile, international payments for customers, which will operate using blockchain technology on Ripple’s distributed ledger. For banks, the benefit of using Ripple is that it can enable the transfer of data and value in a more accurate and much faster way — as little as four seconds, compared to three days with the current model SWIFT.

Santander plans to introduce the service in four countries simultaneously and promises full transparency on fees and FX upfront. “We expect to be one of the first global banks to roll out a distributed ledger, technology-based payments for individuals,” the bank told analysts. In November, the UK arm of the bank also announced plans to work with American Express to use Ripple’s technology for cross-border, business-to-business payments.

The process began 18 months ago when the company began an assessment, running a proof of concept with Ripple which it rolled out to staff in app form as a way of emulating the customer experience. The app was tested with Apple Pay for payments of between £10 and £10,000 using Touch ID for secure sign-in. According to the company, security and regulatory compliance are central to all activity, therefore the app has undergone the same rigorous testing that all new technology goes through ahead of the roll out.

The choice to go with Ripple, according to an interview (here) with Ed Metzger, Head of Technology Innovation at Santander UK, revolved around the uncertainty and transparency associated with SWIFT. According to Metzger: “We chose Ripple because of its speed, transparency, and certainty. [Because] these three characteristics provide relief to the pain points of international payments.”

Chris Larsen, Chief Executive Officer at Ripple had the following to say: “Ripple is redefining the way that value moves around the world, and today we’re already enabling real-time, affordable, international settlement between banks who have adopted our solutions. He continued: “As an early adopter and pioneer in the banking industry, Santander is the first bank in the world to transfer real funds externally. In doing so, they are creating a new, exemplary standard of service.”

Two more providers file plans with regulators to join the blockchain sector, while Harvest Portfolios gets the go-ahead to launch Canada’s first blockchain ETF.

Last month, Harvest Portfolios filed with regulators to introduce an ETF that tracks blockchain technologies. Yesterday, February 1st, the firm received approval by the Ontario Securities Commission to launch the country’s first blockchain fund: Blockchain Technologies ETF. The fund has a management fee of 0.65% and seeks to replicate the performance of the Harvest Blockchain Technologies Index — an in-house index used to track the performance of issuers. It will begin trading next week on the Toronto Stock Exchange under the ticker HBLK.

Meanwhile, two other notable providers are also looking to access blockchain technology: This week both First Trust Portfolios Canada and Evolve Funds Group Inc. have filed with regulators for blockchain funds.

First Trust is looking to launch the First Trust Indxx Innovative Transaction & Process ETF, which will aim to replicate the performance of an index called the Indxx blockchain Index. With the ticker BLCK, it is the second fund provider to file an index fund with regulators in Canada. If approved, it will have a management fee of 0.80%. In the U.S, First Trust already has a Blockchain ETF trading under the ticker LEGR, which the Canadian fund will closely imitate, says Karl Cheong, head of ETFs for the company.

“Every conversation we are having with clients — regardless if we are talking about a Canadian equities product or a U.S. equity product — inevitability leads to [a discussion about] blockchain or Bitcoin,” says Cheong.

Already known for its niche lineup of ETFs, Evolve Funds also filed its plans to launch the Evolve blockchain ETF February 1st. If approved, it could become the country’s first actively-managed blockchain fund. With the ticker LINK, the fund will aim to actively invest in equity securities of issuers that are involved in the research, development, or utilization of blockchain technologies. It will have a management fee of 0.75%.

The concept of blockchain is very attractive to investors right now, and while the idea is still relatively new, research shows that this is a technology that could potentially save billions of dollars in cost. “Blockchain technology is poised to disrupt virtually every business and industry, including financial services, real estate, healthcare, and government,” said Raj Lala, president and chief executive officer of Evolve in a statement.

UNICEF has launched Game Chaingers in an effort to bring together gamers and crypto-enthusiasts from across the globe to have them unite their computing power for a good cause.

In an effort to raise funds for victims in war-torn Syria, UNICEF is putting solidarity in the blockchain, asking gamers and crypto-enthusiasts to lend their powerful graphics processors to help the humanitarian fund mine cryptocurrency — specifically, Ethereum. This is the new project named Game Chaingers, and joining it is as easy as going to its website and providing a few details about your system so it can configure and install the mining software.

UNICEF says it created the project out of the need to find new donors, since most of its benefactors are already over 50 years old. By their thinking, asking to borrow computers’ processing power — instead of directly asking for cash — is a novel way to allow those who aren’t normally in the position to give to charities an opportunity to contribute.

This isn’t the first time the humanitarian organization has expressed interest in utilizing blockchain technology. In October of last year, UNICEF Ventures co-founder Chris Fabian said the company will not shy away from experimenting with the technology: “If we are in a place to look at designing our own token, look at others to help design theirs in a way that we can be a part of, and potentially also have a crypto-denominated investment fund, those would all be things that would be on our roadmap for the near future.”

“To participate in this operation, all you need to do is to install Claymore, a mining software,” the Game Chaingers website reads. “You will be able to start or stop mining when you want, and generate Ethereum right in UNICEF’s electronic wallet.” According to a spokesperson for the organization, running the mining program won’t cause users’ computers to consume more electricity. UNICEF will only borrow part of your processing power and only asks “for a punctual and brief participation.”

For those who want to contribute but lack the computing resources to do so, it’s easy to chip in with direct donations. UNICEF has posted the address of its Ethereum donation wallet on the official Game Chaingers website, which can be found here. Game Chaingers’ mining efforts will continue through March 31st.

Advertisements, videos, infographics, articles, and more are part of Hong Kong’s push to educate the public on cryptocurrencies and initial coin offerings (ICOs).

Earlier this week, Hong Kong’s Financial Services and Treasury Bureau (FSTB) and Investor Education Center (IEC) launched a public campaign to educate cryptocurrency enthusiasts in Hong Kong about the potential risks associated with this new and booming industry. According to Under Secretary for the FSTB, Joseph Chan, the aim of the program is to provide a “correct and comprehensive understanding of ICOs and cryptocurrencies” to help give the public the tools to make informed decisions on their investments.

The campaign has many facets, including television and radio ads, ads that will be displayed in Hong Kong’s public transit system, and government-sponsored educational videos which will be posted on social media. Also included in the campaign will be articles and infographics on ICOs and cryptocurrencies provided by the public financial education arm of the IEC, the Chin Family. Information is already live on their website, which has educational tools in a variety of arenas, including protection from scams and wallet security.

Hong Kong has generally been more open toward cryptocurrencies, contrary to the opposition faced in mainland China. One of the larger cryptocurrency exchanges, Gatecoin, operates in Hong Kong, and regulators have generally held a cautious but open approach. As illustrated by this new campaign, their concern is focused primarily on protecting and informing investors, rather than shutting the door on this emerging asset class.

One of the main drivers behind the educational push is due to the volatility of the cryptocurrency markets, which some traditional investors are not prepared for. “ICOs and cryptocurrencies are high-risk products that are not suitable for everyone,” said Dr. Kelvin Wong, Chairman of the IEC. “Cryptocurrencies are highly speculative and are associated with various kinds of risks. Their prices may be susceptible to significant fluctuations due to speculative activities.”

This isn’t the first time that a government has pushed for state-sponsored educational programs on cryptocurrencies and related technology. Last year, the Russian government announced it hoped to include cryptocurrency in its financial literacy improvement strategy in order to help better educate the Russian people.

The Indian government isn’t looking too kindly on cryptocurrencies, but the country has certainly caught on to the potential applications for blockchain and associated technology.

Blockchain technology is becoming a favourite in India, Asia’s third-largest economy, for solidifying information, sharing records, and preventing tampering. In his budget speech on February 1st, the country’s Finance Minister Arun Jaitley said the following: “The government will explore the use of blockchain technology proactively for ushering in the digital economy.”

Stripping away the financial application, blockchain is essentially a bookkeeping platform that can be accessed by anybody on the internet but at the same time is owned by nobody. “Once you have a blockchain, the big spreadsheet in the cloud serves as a recordkeeping system that can’t be forged and can’t be reversed,” said Nicolas Cary, the Co-founder and President of Blockchain (the company).

In some cases, such as in the southern Indian state of Andhra Pradesh, the technology is already being applied. The government there is working with Swedish startup ChromaWay to set up a blockchain based land registry system that allows people to collateralize property, receive loans, and invest in that asset. Tracking property ownership using blockchain allows people to avoid disputes, frauds, and errors, while also lessening the administrative hassle of registrations and title transfers. Andhra Pradesh’s neighbour, Telangana, is also digitizing its property documentation system.

Registries around the world are currently laid-out in one of three ways: on paper, in a database, or as digital files in machine-readable form. The latter of these three is where most land registries ultimately hope to end up. According to August Botsford, Chromaway’s chief security analyst: “It’s more efficient, and you can do more with your data, including analytics and automation,” (this according to Quartz).

Beyond land registries, blockchain can also help put a stop to other fraud, such as identity theft. To reduce the chances of getting hacked, a growing concern in India, the platform can manage digital IDs. Currently, if you pay for something online, you turn over unencrypted personal information that gets stored all over the web. With blockchain, only encrypted, relevant information will be released — and only when necessary.

A step ahead of other states in implementing the technology for land registries, Andhra Pradesh also entered into a partnership with Swiss cybersecurity firm WISekey, making it a frontrunner in securing citizen’s data as well.

The EU throws its weight behind blockchain technology – the European Commission launches the Blockchain Observatory.

The European Commission announced in a press release today the launch of the EU Blockchain Observatory and Forum, taking a great step forward aimed at “uniting” the economy around Blockchain. The project will bring together various sectors, including regulators, industry experts, and politicians, to develop new use cases. European Commissioner for Digital Economy and Society Mariya Ivanova Gabriel was quoted in the official press release saying that the project would become “one of the world’s most comprehensive repositories of blockchain experience and expertise.”

The Commission sees blockchain technologies as a major breakthrough due to high levels of traceability and security in economic transactions online. According to the press release, the Commission anticipates blockchain to impact a wide array of digital services, and transform business models in areas such as healthcare, insurance, finance, energy, logistics, intellectual property rights management, and government services. It forecasts that by 2020, it will fund up to €340 million (over $420 million) for projects that draw on blockchain technologies.

Many European innovators and entrepreneurs are already offering blockchain-based solutions. Major players from traditional sectors, like banks, insurance companies, stock exchanges are engaged in pilot projects. Also, many EU Member States have announced initiatives, as they seek to reinforce their use of blockchain technology. For example, The Dutch Central Bank, has been working on four projects based on blockchain since 2015 (their aim not being to launch a cryptocurrency, but to better understand the technology).

Moving forward, the European Commission wants to build on the existing initiatives and ensure that they can work across borders. To help with this, ConsenSys, a global blockchain player well established in Europe, has been selected as a partner to support the Observatory’s outreach, following a call for tenders launched last year. A contract was signed on January 29th.

In the meantime, the European enforcement agencies remain vigilant. As cryptocurrencies are sometimes used to finance criminal activities including terrorism, Europol has reiterated its commitment to coordinate across EU Member States, and beyond, in an effort to effectively respond to this rising threat.

Venezuela’s economy is in deep trouble, and the government is planning to create a token, the Petro, in attempts to dig itself out. This Tuesday, President Nicolás Maduro signed the Petro white paper, revealing its plans to create an oil-backed cryptocurrency for Venezuela.

Controversy has surrounded the Petro, the price of which will be pegged to the value of Venezuela’s oil per barrel — roughly $60 in early January — since day one. Opposition legislators in Venezuelan Parliament see the currency as an illegal attempt by President Maduro to basically get advance payment for the eventual sale of its oil reserves (the country is currently amid quadruple-digit inflation).

Cryptocurrency enthusiasts, meanwhile, have argued that a centralized government creating a decentralized currency defeats the purpose of the technology entirely. And the United States is apprehensive, too, earlier this month it warned investors curious about the Petro, saying dealing in it may be troublesome because “the Petro digital currency would appear to be an extension of credit to the Venezuelan government.”

The country will create the token on the Ethereum blockchain, the white paper reveals, and mining centers are being set up at educational institutions to produce it. This, apparently, has been revised from an initial draft proposal that stated the Petro was going to be pre-mined before its launch. The country will issue 100 million tokens, each valued at and backed by the equivalent of one barrel of Venezuelan crude. That would put the value of the entire Petro issuance at just over $6 billion. The President, on state TV, said the following: “The Petro will have a great impact in how we access foreign currencies for the country, and in how we obtain goods and services that we need from around the world.”

One thing to consider is that tokens are not cryptocurrencies, they are digital assets and their value is only whatever people are willing to pay for them. Most token sales on Ethereum are used to raise money to fund development, but the real fundraiser for Venezuela will be the public offering of Petro itself. Instead, according to the white paper, the token pre-sale “will promote and guarantee demand for the Petro Initial Offer, which will be made later.”