A Bitcoin Rig Is Not A Green Data Centre

There’s a 10MW data centre being built in Sweden that will be using all the tricks of the industry to carry out its business as efficiently as possible. But is it really green? I wouldn’t say so.

The data centre uses renewable energy, and makes use of Sweden’s cold climate to provide free cooling. But I have issues with what it does –  namely Bitcoin mining.

Burning energy to make money?

Bitcoin is supposed to be virtual money. It’s a decentralised crypto-currency. New Bitcoins are assigned to people carrying out a series of complex mathematical calculations – the process of so-called “Bitcoin mining”. As the price of Bitcoins is rising, there’s been increased interest in mining more, with people using special “rigs” built around high-powered Application-Specific Integrated Circuits (ASICs).

Now some of the companies making these rigs have decided to set up centralised cloud-based mining facilities. One such data centre is being built by KnC miner, a rig-maker from Stockholm (whose “Neptune” appliance is shown below). The idea is that, instead of buying one of KnC’s machines (they cost $5000 and sell out as fast as the firm can make them), you can buy time on the data centre, and have KnC do your mining for you.

Why is this wasteful? Because Bitcoin is a system which is deliberately set up so the amount of energy required to mine new Bitcoins increases according to the number of people trying to do it. Even ASIC machines don’t usually mine Bitcoins fast enough to pay for their own electricity requirements.

Bitcoin mining – everyone is a loser

As Christian Wagner says in a highly skeptical Bitcoin FAQ: “The combination of a scaling difficulty level and a competitive reward system has led to a Bitcoin mining arms race where everybody is a loser.” Mining rigs, he says, “do nothing but convert electricity into waste heat and Bitcoins” – and the more there are, the more wasteful the process is.

All Bitcoin transactions are stored in an enormous file called a “blockchain”. For each transaction, the entire blockchain – the list of everybody’s transactions – must be downloaded. Each block in the blockchain handles a limited number of transactions, and the difficulty of the cryptography is variable.

Bitcoin was set up as an experiment, and part of its design ensures that a block takes about ten minutes to process. As more power is added to the Bitcoin network, the cryptography is made more complex, to slow it down.

No matter how efficiently you try to do it, and no matter if some people make some money doing it at some stage, on average Bitcoin mining is wasting energy. The mathematics of Bitcoin is worked out so that the more people that get involved, the more costly it is to make Bitcoins. The whole enterprise is set up to burn more and more energy for less and less return.

As Wagner puts it: “The Bitcoin network now must use vast amounts of power just to maintain itself, power typically generated by fossil fuel plants and in amounts far out of proportion to its actual usefulness.”

Centralising it into specialised mining data centres is a huge irony, given that Bitcoin was supposed to be decentralised in the first place. All the data centre will do is efficiently collect people who want to pay to have some electricity used on their behalf – and by gathering more and more, it will ensure they make less and less.

It actually looks as if mining Bitcoin is a more wasteful use of power than watching viral clips on Youtube.

A version of this article appeared on Green Data Center News.

Do you know Green IT and energy consumption? Try our quiz!