Kriptovalute. Vir: Adobe Stock
Kriptovalute. Vir: Adobe Stock

How much does it cost to “create money from scratch?”

Even in cryptocurrency mining and transactions, it has long been said that the more you have, the more you earn. Cryptocurrency still clings to a certain “Robin Hood” or pioneering reputation, but that has long since ceased to be true.

Cryptocurrency mining costs money, and it costs a lot. Bitcoin mining requires more electricity than some entire countries consume – and we’re not talking about small countries like Slovenia.

The mining of cryptocurrencies, such as bitcoin and Ethereum, or ether, is a long, complex, and energy-intensive process in which a new unit of cryptocurrency is “created” by a computer that successfully solves a complex series of algorithms.

By far the largest and most well-known currency is bitcoin, but not only has its exchange value risen over the past year, but the amount of energy required for its extraction has also grown significantly.

Bitcoin mining involves solving complex mathematical problems in order to create new units of the currency. Successful “miners” are rewarded in bitcoins. In its relatively short history (the currency was created in 2008), its acquisition has changed significantly. In the beginning, mining was possible just on a regular PC, but now mining a single bitcoin requires a lot of processing power and time, and thus a lot of energy.

The reason for this lies in the way Bitcoin was conceived and how its mining was set up. This is a kind of pyramid scheme – those who are present in the scheme at the beginning get the most wealth.

The reason is that there is a finite number of bitcoins that can be mined – 21 million. The more bitcoins we mine, the harder the algorithms are to obtain new units. More than 18.5 million units have now been “mined,” and the average computer has long been unable to mine bitcoins.

Bitcoin mining advocates say that mining has increasingly turned to renewable electricity, but environmentalists have found this mining to be highly problematic; mainly because the “miners” use the cheapest electricity, which means they divert mining to places where coal is used.

An energy consumption survey carried out by the University of Cambridge shows that most of the mining currently takes place in China, which is slowly moving towards renewable energy sources, but still about two-thirds of its electricity comes from coal.

Another study from Great Britain, published a year ago, found that the computing power required to mine bitcoins quadrupled in 2019 compared to 2018. They found that in some places this mining also affected prices of electricity and utility services.

With all this, Bitcoin is also problematic with its impact on the global economy. Experts predict that the Bitcoin bubble could burst in the near future.

What can we do right now?

We probably can’t have much influence on the global events related to the Bitcoin fever, but we can be aware of what is happening and become better acquainted with the world in which we live.


The original version of this article was published on 20th March, 2021.

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Vreča dela na Arnesu in sodeluje v projektu Safe.si. Želi si, da bi čim več ljudi razumelo ozadja novih tehnologij - da bi bili več kot le uporabniki, da bi bili pametni uporabniki interneta.


Svetina is an English translator, EFL educator, and graphic designer. She is an American who has lived in Slovenia since 2008. She loves hiking and traveling with her family.

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