The bitcoin cryptocurrency has become notorious for its voracious appetite for electricity and its allegedly massive carbon footprint.
A June article in joule magazine estimated that the bitcoin network’s annual carbon dioxide emissions reach 22.9 million metric tons (as much as the country of jordan). it also accounts for 0.2 percent of global electricity use.
But another recent study by coinshares, a cryptocurrency asset management and analysis company, found that most of the electricity used by bitcoin actually comes from clean sources, such as wind, solar, and hydropower. coinshares says the bitcoin network gets 74.1 percent of its electricity from renewables, making it “more renewables-driven than almost any other large-scale industry in the world.”
This is a surprising finding, and some analysts are skeptical as it contradicts other assessments of where bitcoin miners get their energy. Analysts also warn that the same factors that pushed miners to use clean energy could one day drive them back to dirty fuels.
The coinshares study also points to a broader problem with how renewable energy is currently deployed around the world: many renewable energy generators are so poorly located and underutilized that bitcoin mining has become the only use. viable for that electricity. Still, in a world warming with rising greenhouse gas emissions, is it really worth using zero-emission power for a volatile cryptocurrency, which one critic has described as “a colossal pump-and-dump scheme?” “?
So it’s worth examining why bitcoin uses so much energy to begin with and whether coinshares’ claim that it has turned to clean energy stands up to scrutiny.
why bitcoin needs so much power
Although bitcoin only exists in digital ones and zeros, the computers running the network consume a lot of power.
According to the bitcoin energy consumption tracker at digiconomist, bitcoin currently consumes 66.7 terawatt-hours per year. That’s comparable to the total energy consumption of the Czech Republic, a country of 10.6 million people.
Bitcoin’s energy appetite is fused into its foundations. Since there is no central bank or authority governing the currency, the bitcoin network regulates itself through a distributed accounting system known as blockchain. In blockchain, every bitcoin transaction is tracked in a public ledger spread across thousands of computers. These transactions are grouped into blocks. However, it’s tedious to reconcile and verify every single instance of digital currency changing hands, and verifying a block requires finding a cryptographic key, an increasingly difficult computing problem.
The bitcoin network creates an incentive for people to contribute computing power to verify transactions by awarding bitcoins to a miner who verifies a block (currently 12.5 bitcoins). With the price of a bitcoin right now at roughly $9,000, that’s a prize of over $112,000. this is how bitcoins are “mined”, and with the right hardware and costs, it can be quite lucrative. blocks are added to the blockchain approximately every 10 minutes.
but mining is competitive as only one miner wins the prize per block. Over time, the calculations required to verify a block become more difficult, and the bitcoin prize gets smaller. the price is also unstable. The price of Bitcoin peaked at over $19,500 in December 2017. These factors have created an arms race to develop better computing hardware to more quickly verify transactions and a drive to devote ever-increasing amounts of electricity to the task. .
why is it so hard to track bitcoin’s energy supply
60 to 80 percent of bitcoin mining revenue goes directly to pay for electricity. so miners really want to save as much as possible on their electricity bills.
the search for the cheapest kilowatt has led miners to settle in remote regions of china and mongolia. has sent miners to sulphurous rock in iceland for geothermal energy. bitcoin mining has increased in rural washington state. the search for cheap energy has even led to cases of electricity theft.
However, it’s challenging to figure out just what the energy supply is. Since the network is spread all over the world, bitcoin miners often want to remain anonymous and keep their operations opaque.
another factor is that the computing hardware used by miners, known as application specific integrated circuit (asic), has become more energy efficient over time. but mining operations are continually deploying more of them. The electrical networks that miners draw on also change over time and can change in their fuel sources between seasons. That means a local utility could get cleaner or dirtier over time, and if more fossil fuels are plugged in to meet demand, that would lead to more greenhouse gas emissions.
This is why researchers who want to find out what bitcoin is doing in the global climate are often forced to study proxies such as surveys, interviews, news reports, and calculations based on the performance of the bitcoin network. The recent CoinShares report drew on all of these sources when it concluded that three quarters of Bitcoin’s electricity comes from renewable energy.
“We found that miners are quite reluctant to talk about themselves, but are happy to talk about their competitors,” said christopher bendiksen, head of research at coinshares and a contributor to the recent report.
explained that to assess bitcoin’s energy use, you can’t just look at the energy mix in a country as a whole; you have to zoom in on specific regions, down to provinces, cities, and sometimes individual mining facilities. In doing so, the coinshares team discovered that bitcoin miners were using a disproportionate share of renewable energy.
“This is no accident at all,” said bendiksen. “The reason they’re doing this is because stranded renewables, and particularly stranded, underutilized hydro, is the cheapest large-scale power you can find. that’s why miners flock to regions where high-power renewables are plentiful.”
Regions with high levels of renewable energy and low demand are often areas where local industries have abandoned in recent years and subsequently experienced a population exodus. so bitcoin miners, who care more about electricity costs than location, have happily moved to renewable energy rust belts around the world.
has bitcoin really cleaned up its act?
Governments have had mixed reactions to the rise of cryptocurrencies like bitcoin and their voracious demand for electricity. In Quebec, the government is offering discounted electricity to attract miners to boost the economy. Meanwhile, China is considering an outright ban on cryptocurrency mining because it sees miners as criminals who waste resources and harm the environment.
China’s proposed ban raises a fundamental question about bitcoin: Regardless of where the energy comes from, is bitcoin a good use of energy?
bendiksen said bitcoin mining is using up energy resources that would otherwise go to waste and that renewable energy mitigates its environmental footprint. “If miners don’t use cheap renewable energy, then they will use fossil fuels in less pleasant jurisdictions,” he said.
alex de vries, blockchain specialist at pwc center of expertise and owner of digiconomist, was skeptical of the shared coin report’s conclusions. he noted that his estimate of renewable energy use in bitcoin mining is out of line with other calculations. A 2018 report from the University of Cambridge, for example, found that while most bitcoin mining facilities turned to renewable energy to some extent, the average share was just 28 percent.
In a separate article published in joule in April, de vries explained that even renewable energy used for bitcoin mining has its own consequences. hydropower in particular has huge regional environmental effects and sometimes needs to be backed up by fossil fuels. China’s bitcoin mining industry is a good example:
Hydropower production is high in the wet season during the summer months and low in the dry season during the winter months. As a result, the seasonal variability of hydropower is already over 30% and is expected to increase further due to climate change. In Sichuan, specifically, “the average power generation capacity during the wet season is three times that of the dry season.”
“As such, the carbon intensity of electricity purchased from Sichuan is much higher than would be expected based on pure hydropower,” de Vries said in an email. And since miners care about energy costs above all else, an excess of coal, oil or natural gas could make burning them much more attractive.
another emerging concern around bitcoin is e-waste. ASIC mining devices quickly become obsolete, often in just under two years, and can’t really be reused for anything other than mining.
“There’s a carbon output attached to this as well, but nobody has looked into this to date (I only recently quantified the e-waste),” de Vries wrote. “This is something no amount of ‘green’ energy can fix.”
But mining bitcoins is still profitable, so the amount of hardware you use and the amount of electricity you inhale will continue to increase dramatically for years to come. another price increase could further increase energy use. “Basically, we don’t know how high the price of bitcoin will go,” Bendiksen said. “If the price of bitcoin increases 10 times, the energy consumption of the network would also be expected to increase 10 times.”