What’s the cost of a bitcoin?
In one way, that’s a relatively easy question. As the crypto-currency has gained increasing acceptance this year, its value has soared from right around $1,000 to more than $18,000. A futures market opened this month.
In another way, it’s devilishly hard. Even though a bitcoin exists only in cyberspace, there are a lot of costs that go into it, the biggest of which is electricity to power the computer systems needed to process its equations.
It’s easy for those of us who don’t use bitcoin to come unglued if we try to come to grips with it. Even some of those heavily involved acknowledge that many users might not really understand it. And it’s true that since the essence of the currency is its decentralized nature, there is no certain answer to the question of cost.
But there is a lively debate among experts – some of whom have produced eye-popping estimates of the energy required, and what that really costs us. A futuristic network used by a very small percentage of humanity, they say, creates large environmental problems for everyone else.
Here is one way to think about the problem, courtesy Bloomberg news service: Processing bitcoin transactions, which earns the processors new currency, gets progressively harder, requiring more computer power, which requires more and more electricity. As the price rises, the risk increases. Bitcoin “miners” will try to protect themselves from volatility by keeping costs down. That means seeking out the cheapest sources of energy.
Not surprisingly, much of the action is in China – about 58 percent, according to Bloomberg. The U.S. is second with 16 percent. Bitcoin might be a 21st-century product, but we know what China uses to produce most of its electricity: coal.