Cryptocurrencies have been around for a while now, and the effect they’re having on global resource costs and availability is now very clear. The currencies in themselves do not affect resource cost much, they only have value relative to their availability and what people are willing to pay for them. The main resource cost with CCs is the process of adding more coins to the global ‘pool’; mining.
Though all cryptocurrencies are extremely complex in how they work, they do follow the same rules as any other limited-availability commodity. If you think of CCs like beanie-babies, it’s easy to see how they work. There is a very limited supply, and the value is only given when people want to collect them. As the supply diminishes, the value of each one increases, leading to a cycle of increasing value over time. Of course, this trend cannot last forever, and the recent crashes in value show this easily.
The difference between beanie-babies and crypto is that anyone can create more crypto, using a technique known as mining. Crypto mining is basically using the algorithm to produce your own CCs from nothing, which seems like an incredible way to earn money. Unfortunately, the set up costs and return on this investment is very, very low for the average user.
To mine any cryptocurrency, a high end graphics card (or 30) is needed to run the complex simulations. This has led to a massive hike in GPU cost worldwide, with the market now being dominated by miners instead of editors, gamers, and designers. It’s simple supply and demand; the demand has shot up, and the supply is now relatively low. Many of the more recent GPUs being released are geared towards miners, with an average cost increase of up to 30% over the last few years. Miners now dominate the GPU market, and even older, slower GPUs are being snatched up all over.
Of course, in order to power all of these home based and industrial mining operations, a massive amount of electricity is needed. It’s been estimated that the current crypto mining going on worldwide needs as much power as the average G20 country; the power usage of the UK or Australia. This is a huge amount of extra power that needs to be produced in each country, and in many places needs extra infrastructure to accommodate this. With a very simple mining rig of 1 GPU running the algorithm constantly for a year, this would use around 15,000Kwh; about as much as a small home.
Of course, most mining rigs are much more complex and expensive than this, with machines running not only 24/7, but also with up to dozens of graphics cards. For comparison, a tonne of coal produces around 2500Kwh, so a single GPU rig needs around 5 or 6 tonnes of coal per year. The ‘average’ rig of 6-8 GPUs would need around 45 tonnes of coal per year; this is a huge environmental impact even when not using coal.
As a result of this massive power requirement, many power-users are choosing to relocate their mining rigs to places with cheaper power. This is causing an influx of people to move where power is cheaper or more abundant, such as near solar generating areas.
Power cost is going up, GPU and computing costs are going up, even cold-ready storage and office space is becoming more expensive. Cryptocurrencies may be great for users in the short to medium term, but the long term ramifications are still being studied. Bitcoin, Litecoin, Etherium and virtually all other currencies are free to create, but the cost for the environment and society is huge.