There has been a lot of talk about the carbon footprint of Bitcoin. In this article, we will examine where Bitcoin’s power consumption comes from, and potential ways to mitigate the power hunger of Bitcoin.
More than a literal footprint, Bitcoin’s carbon impact is every bit as real as it sounds. As the height of the altcoin bubble subsides, the question remains whether or not cryptocurrencies are sustainable in their current form.
The value of a cryptocurrency is directly related to its energy consumption. Miners use computers to solve increasingly complex mathematical equations to verify cryptocurrency transactions.
The greater the number of bitcoins, the longer it takes to mine new coins and the more electricity is consumed in the process. The miner who is the first to find the next elusive “hash” number in cryptocurrency mining is currently rewarded with 6.25 Bitcoins.
To put this in context, one Bitcoin transaction has the “carbon footprint of 735,121 Visa transactions or 55,280 hours of YouTube watching,” according to Digiconomist, which created a Bitcoin Energy Consumption Index.
According to the Cambridge Bitcoin Electricity Consumption Index, although there are only around 1 million bitcoin miners in the world, the amount of electricity consumed by mining in one year is equivalent to that used to power Malaysia, Sweden, or Ukraine.
If more businesses and investors pledge their commitment to the environment and sustainability, the cryptocurrency’s vast carbon footprint could become a red flag.
Energy-guzzling crypto miners have been blamed for power outages in Iran, while China — a hotbed of crypto mining — is cracking down on the activity as it clamps down on polluting industries.
According to analysis, the rise in bitcoin’s price since the beginning of 2021 could result in the cryptocurrency having the same carbon footprint as London. However, depending on which study you read, the annual carbon emissions from the electricity required to mine Bitcoin and process its transactions are equal to the total amount emitted by the entire country of New Zealand.
Hydro Québec told Global News that it is unconcerned about the amount of energy consumed by cryptocurrency mining, but that it has protections in place to protect its grid from overload. Bitfarms, a Canadian Bitcoin mining firm, revealed in February that its five warehouses of mining computers had reached the milestone of performing one quintillion Bitcoin verification calculations per second.
According to Bitfarms president Geoffrey Morphy, Quebec is a sustainable alternative for miners due to its abundance of renewable resources, mainly from hydroelectric dams.
“We know the world is evolving very quickly to having to deal with carbon credits and carbon offsets, and really heading for a net-zero type of approach. So we’re very mindful of that.”
Others believe blockchain technology (a form of distributed ledger technology, or DLT) may aid in the fight against climate change rather than contribute to it.
Alex de Vries, a Dutch economist, developed the Bitcoin Energy Consumption Index, one of the first systematic attempts to estimate the bitcoin network’s energy consumption.
“As the resource intensity of running Bitcoin has increased over recent years, it has become a serious concern for its potential impact on health and climate,” Alex de Vries, the index’s founder, wrote in the journal Energy Research & Social Science.
Bitcoin proponents, on the other hand, contend that estimates of its carbon footprint are inflated. And, if computers used to mine and transact in bitcoins are connected to an electric grid powered by wind and solar energy, mining and using it will become cleaner over time.
Depending on which study you read, the annual carbon emissions from mining Bitcoin and processing its transactions are equal to the amount released by the entire country of New Zealand or Argentina, to put an example.
To put this in context, one Bitcoin transaction has the “equivalent to the carbon footprint of 735,121 Visa transactions or 55,280 hours of watching YouTube,” according to Digiconomist, which created a Bitcoin Energy Consumption Index. (Critics of this contrast point out that the average Bitcoin transaction is around $16,000, while the average Visa transaction is $46.37.)
“We agree that cryptocurrency will ultimately be driven entirely by clean energy, eliminating its carbon footprint and accelerating global adoption of renewables,” Square CEO Jack Dorsey said in a statement as part of his company’s pledge to be carbon-neutral by 2030. The company has pledged $10 million to invest in new “green energy technology within Bitcoin mining, with the intention of accelerating its transition to clean power.”
Mr. Gates, who considers himself a Bitcoin skeptic unrelated to climate problems, says that the obstacles may be solved, but he isn’t persuaded just yet.
“If it’s green energy and it’s not crowding out other applications, you know, maybe that’s OK,” he says.
Several companies are working on some counterintuitive ideas to turn Bitcoin green.
Seetee, a cryptocurrency investment firm, announced on Monday that it will invest in Bitcoin “mining operations that transfer stranded or intermittent electricity without stable demand locally — wind, solar, hydro power — to economic assets that can be used anywhere.”
In other terms, the company aims to create wind and solar in areas that may not be suitable for the technologies, then use the excess electricity to mine Bitcoin and benefit. “Bitcoin is, in our view, a load-balancing economic battery, and batteries are essential to the energy transition required to fulfill the targets of the Paris agreement,” the firm said in a statement.
The digital currency’s carbon footprint is alarming even to some of its hardcore fans, raising questions about whether enough renewable energy is being harnessed by governments and companies.
If Bitcoin is supposed to reduce our dependence on centralized financial institutions, then why is it so resource-hungry? In a world where every watt of power counts and where climate change needs all hands on deck, doesn’t the association between digital currencies and energy consumption goes against the popular narrative of sustainability Bitcoin sometimes promotes?