The cryptocurrency sector is currently facing a crisis as the electricity consumed by the networks has decreased by 50%. The sudden plummet in consumption has affected the incomes of crypto miners.
Electricity Used in Crypto Mining Has Decreased
According to The Guardian, the electricity consumption of the largest crypto networks in the sector has decreased since June 11.
Bitcoin transactions require 131 terawatt-hours a year for it to go smoothly, which is what a typical household in the United States uses in just 50 days.
Digiconomist reported that the decrease in electricity that is used for Ethereum has been sharper, as it went down from 94 terawatt per hour to 46 terawatt per hour.
This is a massive blow to Ethereum, which has been hailed as the programmable money responsible for several crypto projects' recent success.
Also Read; Riot Blockchain to Close Bitcoin-Mining Operation in Texas to Save Electricity For Winter Storm
Reason for the Decrease in Electricity
The reason for the fall is the same for both Bitcoin and Ethereum. The electricity consumption of a cryptocurrency network comes from mining, which requires people to generate digital lottery tickets via purpose-built computers.
These digital lottery tickets are then rewarded as cryptocurrency payouts. The entire process underpins the security of the cryptocurrency networks, but it helps generate incentives for the network as a whole, even if it wastes energy.
As the price of cryptocurrencies plummets, the value of the rewards to miners has also dropped. This has left them with expensive electricity and inefficient mining rigs that do not give them a chance to earn a profit.
According to CNBC, Bitcoin peaked at $69,000 in early 2022, and it is now around $20,000 only.
Alex de Vries, the economist from Digiconomist, said that the crypto crisis is putting a lot of miners out of business, especially those that "operate with suboptimal equipment or those under suboptimal circumstances."
Vries added that the decrease in electricity is a massive issue, especially for Bitcoin mining equipment, because the machines can't be repurposed to do something else.
If they can't turn in profits, the machines are useless. Miners who wish to profit from it will have to sell them for scrap or wait until the crypto crisis is over.
As for Ethereum, it can be mined via a normal computer, but it is better to do so using a powerful graphics card.
However, it has led to the widespread supply shortages of the cards, making many gamers dislike the crypto industry.
Even though the fall in Bitcoin's price has stabilized in the past few days, the wider crypto sector is still struggling due to the price collapse.
The latest problem was due to the failure of the cryptobank Celsius. The cryptobank announced on June 12 that it was seizing withdrawals as it faced a liquidity crisis.
The failure of Celsius has affected the sector. Three Arrows Capital (3AC) has stated that it is experiencing its own liquidity crisis, and several companies with loans to 3AC have now had to take extra measures to settle them.
Related Article: Cryptocurrency Mining is Banned in Iran to Conserve Power and Prevent Blackouts in Major Cities
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Written by Sophie Webster
