Proof-of-Blackouts? How Proof-of-Work Cryptocurrencies Could Affect Power Grids

Abstract

With respect to power consumption, cryptocurrencies have been discussed in a twofold way: First, the cost-benefit ratio of mining hardware in order to gain revenue from mining that exceeds investment and electricity costs. Second, the overall electric energy consumption of cryptocurrencies to estimate the environmental effects of Proof-of-Work. In this paper, we consider a complementary aspect: The stability of the power grids themselves. Power grids have to continuously maintain an equilibrium between power supply and consumption; extended periods of imbalance cause significant deviation of the utility frequency from its nominal value and destabilize the power grid, eventually leading to large-scale blackouts. Proof-of-Work cryptocurrencies are potential candidates for creating such imbalances as disturbances in mining can cause abrupt changes in power demand. The problem is amplified by the ongoing centralization of mining hardware in large mining pools. Therefore,we investigate power consumption characteristics of miners, consult mining pool data, and analyze the amount of total power consumption as well as its worldwide distribution of two major cryptocurrencies, namely Bitcoin and Ethereum. Thus, answering the question: Are Proof-of-Work based cryptocurrencies a threat to reliable power grid operation?