New research suggests the digital mining of virtual coins has a very tangible cost.

Financial economist and blockchain specialist Alex de Vries has used a new methodology to track Bitcoin's electric energy consumption.

His estimates put the minimum current usage of the Bitcoin network at 2.55 gigawatts annually, almost as much electricity as the entire country of Ireland.

A single transaction uses as much electricity as an average household in the Netherlands uses in a month.

By the end of this year, he predicts the network could be using as much as 7.7 gigawatts - as much as Austria and half of a percent of the world's total consumption.

“To me, half a percent is already quite shocking. It's an extreme difference compared to the regular financial system, and this increasing electricity demand is definitely not going to help us reach our climate goals,” he says.

If the price of Bitcoin continues to increase the way some experts have predicted, de Vries believes the network could someday consume 5 per cent of the world's electricity.

Bitcoin is dependent on computers that time-stamp transactions into an ongoing chain to prevent duplicate spending of coins. Computers in the network perform calculations continuously, competing for the chance, once every ten minutes, to be appointed to create the next block of transactions in the chain.

The user of the computer that wins is awarded new coins - a process known as “mining” Bitcoin.

But all the time, even the users that do not win are expending computing power.

“You are generating numbers the whole time and the machines you're using for that use electricity,” he said.

“But if you want to get a bigger slice of the pie, you need to increase your computing power. So there's a big incentive for people to increase how much they're spending on electricity and on machines.”

Other researchers have made this kind of estimate before, but de Vries goes farther.

He used production information about Bitmain, the biggest manufacturer of Bitcoin mining machines, to estimate both how much of a miner's costs are associated with hardware rather than electricity and when this equilibrium might be reached.

While he has confidence in his estimates, the problem with this method is that these manufacturers are extremely secretive.

“Sometimes the best information we've got is really shaky eyewitness accounts. That's the stuff we have to work with,” he says.

Still, he believes that getting a good estimate is important in determining the sustainability of cryptocurrencies in the future and in helping shape policy for the technology.

He also points out that there is plenty of room for discussion of his method.

“I think everyone agrees on the minimum energy consumption. But the future estimate? That's actually quite debatable. We don't really have a common approach to getting to a future estimate of electricity consumption right now, which is why I am hoping to get this conversation started. I'm doing this research, but a lot of people should be doing it.”

The study is accessible here.