Bitcoin, Easbit, Energy and the Future of Money
Eco-friendliness is more than just a trend. What started as hype in the business world about a decade ago is now a standard parameter to measure a company’s performance, success and value.
Twenty years ago, most companies didn’t make much effort to jump on the green bandwagon; economic success was too important and needed too much focus to spend extra money on protecting the environment. Much has changed recently, above all consumer’s awareness and mentality, and nowadays a company has to be eco-friendly in order to be taken seriously.
Information technology (IT) is deeply woven into the fabric of modern society, from the way we interact with friends and family to how organizations communicate and collaborate and now, how to create control and monitor our own currency.
As the demand for IT including online services and cloud computing—continues to grow, it is important for decision makers to ensure that their organizations are well positioned to optimize existing IT services and expand them as needed to meet demand while also considering the environmental impact their business has.
The good news is that computer hardware—along with data center power and cooling infrastructure—is becoming more energy efficient and continuing to offer gains in performance and capacity.
Software solutions that improve energy efficiency, including server virtualization and centralized power management, are more widely available. Cloud computing infrastructures, both public and private, are offering significant energy efficiency gains compared to traditional IT infrastructures.
The Hidden Impacts of Underutilization
The cost of powering chronically underutilized IT equipment can be a significant percentage of an organization’s energy bill, and it greatly contributes to data center capacity constraints. These constraints include limits on available utility power, limited power and cooling capacity within the building, and lack of physical space for computers.
In the European Union, for instance, no more than one-third of e-waste is responsibly recycled in a verifiable way. The remaining e-waste often ends up in landfills or is shipped to developing countries, where it is typically dismantled using methods that contaminate the surrounding land, air, and water with toxic metals and chemical compounds, harming the health of unprotected workers and others in the surrounding areas.
Furthermore, given current and projected electric power and resource constraints, failure to significantly improve the utilization of IT equipment will likely limit the ability of IT to help address the world’s pressing economic, societal, and environmental challenges.
Power vs. Energy
When discussing IT energy efficiency, it is important to understand the difference between electrical power and electrical energy. Electrical power is the rate at which electricity is consumed (or generated) at any given instant and is measured in watts or multiples of watts—kilowatts, megawatts, and so on. Electrical energy is the quantity of electricity consumed (or generated) over a given time period—minute, hour, year, and so on—and is typically reported and billed in kilowatt-hours (kWh).
Thus, a server rack that consumes a constant 20 kilowatts will use 175,200 kWh (175.2 MWh) over the course of a year (8,760 hours). The distinction is important because data centers are most often constrained by available electrical power infrastructure. The developed world is generally able to produce more energy than it can consume in a year, but there are often shortages of power during peak times.
If the demand for power at any given instant exceeds supply—whether due to a lack of generating capacity or power transmission capacity between the generator and the consumer—users will experience a “brownout” that causes computers and other electronic devices stop working.
Even a small reduction in power draw—by, for example, decommissioning unneeded servers—can result in significant energy and cost savings over time. Investing in more efficient equipment with a lower average power draw can also save on construction and equipment costs for electrical and cooling systems and reduce overall energy costs. At scale, these efficiency improvements can reduce the amount of power generation and transmission capacity needed on the electrical grid.
Bitcoin mining and Electricity
There are many benchmarks you can use to measure the growth of Bitcoin. All of them—the price listed by online exchanges, the number of new merchants accepting the cryptocurrency for goods and services, the transaction volume across the Bitcoin network—suggest that Bitcoin is steadily gaining in popularity which is why Easbit’s Existence necessary.
But the most impressive metric by far is the astronomical increase in the processing power of the network of computers involved in running the transactions and creating new bitcoins. This month, it exploded, doubling in just a few weeks the amount of power it had previously taken more than four years to accumulate.
Driven by the recent swings in the value of a Bitcoin, more and more people are learning about and becoming interested in the currency. While they could just buy Bitcoins at the current market rate, others are looking to try their luck at mining Bitcoins.
Blockchain.info, which tracks Bitcoin-related data, estimates that miners are using 1,005.59 megawatt hours of electrical consumption each day in their pursuit of new blocks of Bitcoins. That ends up costing about $150,000 in power costs each day to mine the currency.
That may sound like a lot, but miners on average are making money. According to Blockchain, miners are generating $470,000 in Bitcoin-related revenue per day. In fact, due to the recent interest in the virtual currency and its popularity, operating margins for Bitcoin miners are close to record highs.
The actual mining of Bitcoins is purely a mathematical process
A useful analogy is with the search for prime numbers: it used to be fairly easy to find the small ones (Eratothenes in Ancient Greece produced the first algorithm for finding them). But as they were found it got harder to find the larger ones. Nowadays researchers use advanced high-performance computers to find them and their achievements are noted by the mathematical community (for example, the University of Tennessee maintains a list of the highest 5000).
For Bitcoins the search is not actually for prime numbers but to find a sequence of data (called a ‘block’) that produces a particular pattern when the Bitcoin ‘hash’ algorithm is applied to the data. When a match occurs the miner obtains a bounty of Bitcoins (and also a fee if that block was used to certify a transaction). The size of the bounty reduces as Bitcoins around the world are mined.
The difficulty of the search is also increased so that it becomes computationally more difficult to find a match. These two effects combine to reduce over time the rate at which Bitcoins are produced and mimic the production rate of a commodity like gold. At some point new Bitcoins will not be produced and the only incentive for miners will be transaction fees.
The raw performance of a Bitcoin mine is measured in hashes per second (i.e. the number of tries per second to find a block). With the difficulty and bounty settings it becomes possible to calculate the expected rate of Bitcoin production. An ordinary computer can do this work running software and typical high-end PC (using an Intel Core i7) can perform about 6.7MH/s (6.7 million hashes per second). This would have been quite successful at mining a couple of years ago but today it would have an expected rate of 0.0005BTC per day (this is a actuarial measure: a miner finds a block or doesn’t, and in this case it would likely take decades to find one).
At current difficulty and electricity price ($0.15/kWh) it would cost $44 in electricity for each Bitcoin mined. But crucially, the low probability of finding a block means that the economics are likely to have shifted before one is found. The only viable way to mine Bitcoins with a GPU is to have lots of fully-amortised cards in a datacenter running right now.
Bitcoin mining is far more than the equivalent of minting or gold mining: it also secures the network against counterfeiting, provides receipt functionality (a decentralized database that allows people to reliably prove that a transaction occurred) and, at least in Bitcoin’s critical earlier stages, a means for people to get into the community and start using Bitcoins.
WHY CHOOSE ICELAND?
• Sustainable energy sources
• Competitive prices and long term contracts
• Reliable power supply
• Well educated labour force
• Low cost land for industrial sites
• Strategic location between EU/USA
• European business legislation and political stability
• Social cohesion and safety
Iceland in an international context
Ethical consumption has been defined as “the conscious and deliberate decision to make certain consumption choices due to personal moral beliefs and values”
In the past few decades the phenomenon of ethical consumption has become increasingly relevant. Iceland was a high inflation country from the second half of the seventies and until the middle of the eighties. During the middle of the nineties inflation in Iceland, at less than 2% p.a., was among the lowest in the OECD.
We find that high inflation in Iceland was caused by an increased frequency of external shocks, a tight labour market and a stronger devaluation bias. We further find that disinflation took place in two stages. The first was initiated in 1983 by a policy package of statutory incomes policy and a firmer commitment to exchange rate stability as a response to an inflation crisis.
It reduced inflation from the high to the moderate range at negligible cost in terms of output and employment. The second stage took place during the early nineties and reduced inflation from the moderate range to below 3% p.a.. It involved more fundamental changes in policy priorities and public attitudes than the first stage and is more unique in the international context.
It was also more costly in terms of output and employment than the first stage, although the costs seem to have been rather small compared to some other countries. A relatively high degree of real wage flexibility, the use of incomes policy, widespread financial indexation and, above all, a broadly based consensus that the general public was best served by low inflation all contributed to this outcome.
As was mentioned earlier, per capita energy consumption in Iceland is among the highest in the world. In 1998, global primary energy consumption was 68.7 GJ per capita on average, while primary energy consumption in Iceland was 401.5 GJ per capita. That same year, primary energy consumption among that portion of mankind living in industrialized nations was 176.0 GJ per capita, and for people in developing countries 31.8 GJ per capita.
That year, Icelanders consumed 2.3 times as much energy per capita as did the average person in an industrialized nation, 12.6 times more than the average person in a developing country, and 5.9 times that of the average person in the world as a whole. Since 1998, per capita consumption has increased yet more and amounted to some 500 GJ per capita in 2002.
The breakdown of primary energy from energy sources in Iceland also differs considerably from that elsewhere. Only the share of petroleum products consumed is similar to that of the world as a whole. Some energy resources, such as natural gas, nuclear energy and renewable fuels, i.e. firewood and other bio-fuels, are not utilized. Hydropower provides a much larger proportion of the energy used in Iceland than is generally the case.
The energy aspect of Iceland
The most unique aspect, however, is the use of geothermal energy. Its share in Icelandic energy consumption in 1998 was over one hundred times more than in the world as a whole, as it provided almost one-half of the country’s primary energy that year. Nowhere else in the world is the share of geothermal energy anywhere near that which it is in Iceland.
In 1998, the share of renewable energy sources in primary energy supply of the world was 13.8% and that of non-renewable energy resources, primarily fossil fuels, 86.2%. For Iceland, the picture was practically the opposite in 2002. Here, the share of renewable energy resources was 72.1% and that of nonrenewable resources 27.9%.
The fact that the global share of energy from renewable resources was even this high, however, is primarily due to renewable fuels: firewood, other combustible biomass, and animal dung, which together comprise 11% of this 13.8% share. These are the principal energy sources of the majority of humans, who live in developing countries where these sources of energy are overexploited.
Their current utilization is not sustainable in the long term. This is not the case for the utilization of Icelandic energy resources, which can be greatly increased without depletion.
Iceland, with its exceptional economic institutions, sustainable public finances and flexible labour markets, is often viewed as a model of economic virtue. Although miniscule and buffeted by external shocks, its per capita income is among the highest in the world.
Energy Efficiency in Perspective
Although energy efficiency is important, it doesn’t pay if it significantly reduces productivity, performance, and reliability. Some important systems are underutilized by design. For example, no one would seriously suggest sharing fire trucks among airports many miles apart to increase their utilization.
Understandably, IT pros are highly cautious and will advise against operational practices that introduce real or perceived risk. However, the vast majority of applications are not going to cause significant harm if they are oversubscribed or unavailable for short periods of time.
Unfortunately, they are often provisioned as if an outage would be catastrophic. To avoid such wasteful over provisioning, it is important for application developers and business owners to work with IT departments to define appropriate levels of performance, resiliency, and recovery for each of their applications.
Furthermore, if applications are designed with energy and resource efficiencies as key criteria, reliability is likely to be better than it would be when using traditional IT resource provisioning practices, which are prone to uncertainty and error.
IT Industry Leadership and Government Oversight
Nearly all computer and data center equipment manufacturers are developing more energy-efficient hardware, and many manufacturers are aiming to meet increasingly stringent Energy Star standards.
Computer equipment manufacturers, particularly those that make PCs and monitors, are striving to make manufacturing and disposal processes more environmentally friendly through methods validated by programs such as the EPEAT electronics hardware registry.
Meanwhile, a growing number of software solutions are available to help organizations measure and manage computer energy use and improve hardware utilization through centralized power management, virtualization, and other capabilities.
Additionally, Cloud computing also has an important role to play in improving IT energy efficiency. Migrating on-premises commodity services to a public cloud computing platform can free up valuable server and power capacity in an organization’s data center and reduce the need to invest in IT infrastructure that will be likely be underutilized.
Many governments and regulatory bodies are taking action to address the environmental impact of growing IT energy use. For instance, the UK’s Carbon Reduction Commitment initiative requires organizations that consume more than 6,000 megawatt-hours (MWh) of electricity per year—the consumption of a data center with about 2,000 small servers —to report their electricity use and purchase carbon allowances.
An estimated 20,000 organizations that consume between 3,000 and 6,000 MWh per year will be required to track and report their electricity usage and carbon emissions. Many governments are also strengthening regulations governing e-waste.
In addition to existing laws based on European Union directives that are aimed at manufacturers of electronic goods, most municipalities now prohibit the disposal of e-waste through standard waste streams and require it to be recycled.
The risk of being associated with “e-waste criminals” who dump broken electronics in developing countries is leading many large organizations to require assurances from recyclers that discarded equipment will be recycled and disposed of in an environmentally sound manner.
• Environmentally and socially responsible production
• Sustainable growth-oriented business
• High quality, long term jobs
• Diverse industrial base
• Building on our strengths and resources
Bitcoins are a bit like the Internet. Or, rather, the Internet as it was in the mid ‘90s: something strange, coming out of geekdom into mainstream perception, greeted by puzzlement over how it works, why it works and why anyone would think it’s useful.
A common analogy for Bitcoins is gold: like gold, they have value only because people want them, the supply is limited, more Bitcoins are created only by ‘mining’ for them and the difficulty in mining grows as they are mined. But rather than being stored in underground vaults Bitcoins are simply entries in a notional ledger held across many computers around the world.
At Easbit, we believe that prevention is better than cure. We can do our best to repair the damage we have done to the environment, and we can also prevent more damage from occurring by using environmentally friendly hardware to do business.