The infamous cryptocurrency, Bitcoin, has been in and out of the news for the past few years. Gaining initial mainstream media coverage through retail investor hype in 2017 and subsequently crashing to less than a third of its peak value, Bitcoin was written off as a pointless, meaningless fad. Recently however, the cryptocurrency again experienced a massive surge in value, all the way to $58,332.36 USD, with only a fraction of retail investor interest. Many institutions are now taking interest in Bitcoin and cryptocurrency as a whole; VISA even partnered with the cryptocurrency start-up Ethereum. Thus, many wonder if Bitcoin is actually an important store of value, that could serve as a replacement to fiat money.
Despite these implications, many lack full understanding of the way Bitcoin is actually produced—or in this case, “mined”. To put it incredibly simply, Bitcoin comes from a lot of people using their computers in unison to solve complex problems that require massive amounts of processing power. If only a single computer worked on a single problem, it would take thousands of years for it to solve. Therefore, the combined processing power of many computers is required, as mining Bitcoin entails solving many problems every day. Cambridge researchers estimate Bitcoin mining to consume 127.89 terawatt-hours a year,1 a number likely to increase as cryptocurrency gains relevance.
What are the Effects of this Energy Use?
With the spread of mining throughout the globe, pinpointing exact environmental toll and energy usage is quite difficult, however, according to the Global Cryptocurrency Benchmarking Study from 2017, we know Chinese miners are responsible for about half (47.6%) of Bitcoin’s total energy expenditure.2 China relies quite heavily on coal, and the same study calculated 711g of CO2 per kWh expended by Bitcoin mining in China. For reference, coal burned in the US releases 1,002g of CO2 per kWh generated.3 Essentially, China’s reliance on coal leads to carbon dioxide emissions close to burning pure coal just from electrical output from citizens. This is an issue with most of the largest countries in the world; multi-billion-dollar coal companies with massive amounts of political influence resist change towards cleaner, revolutionary energy sources such as nuclear power.
Comparison to Gold
These figures have been compared to the output of certain countries such as Argentina, The Netherlands, and the United Arab Emirates—with the electricity required by Bitcoin being more than these entire nations. This is not exactly a fair comparison, however, as Bitcoin mining represents a portion of the outputs of those countries. A better comparison would be to gauge the ecological damage caused by similar commodities, like gold.
The journal Nature Sustainability estimates Bitcoin mining to have used only slightly more energy than gold mining did in 2017.4 The difference is, Bitcoin can be mined using sustainable, renewable energy sources, whereas gold mining effectively only uses fossil-fuel generating methods. In fact, the World Gold Council stated that gold mining emissions need to be reduced by 92% by 2040 to align with the 1.5C threshold outlined in the Paris Agreement.5 This report also excludes China, the world’s largest gold producer, a country also reliant on coal as previously discussed. Additionally, while Bitcoin and gold are both essentially “worthless” items that were simply given value by our society, Bitcoin is arguably more applicable to our lives, as an increasing number of places allow BTC transactions. Gold is certainly more important in our society now (use in electronics, store of value, etc.), however that could change in the near future.
Bitcoin electricity consumption is estimated to take up costs equal to 19.04% of the income earned.2 Financially, the venture is still quite profitable. Environmentally, the numbers speak differently. Ecological damage is not quantified easily, however any activity that contributes to climate change needs to be thoroughly examined for its worth to society. Bitcoin’s status in our world is uncertain; while many believe it to be nothing more than senseless gambling from Gen Z and Millennials, others believe it to be the ultimate replacement to paper money. Regardless of your stance on this topic, Bitcoin currently indisputably produces significant amounts of fossil fuels, and will continue to do so for the near future.
However, despite all these concerns, the underlying issue is clearly the reliance on outdated, polluting energy sources. Where the rest of society has seen technological revolutions over the decades, energy unfortunately has not evolved since the Industrial Revolution. Or, more accurately, it has evolved, but multi-billion-dollar corporations work tirelessly to suppress those changes. Whether it be funding organizations that speak vehemently against nuclear power,6 or spending billions on campaigns that undermine the climate change conversation,7 these corporations find as many ways as possible to ensure the relevance of harmful energy sources in our society. Instead of focusing on how much certain uses of energy pollute, people should point their attention to the reason those uses pollute in the first place: the harmful sources of energy themselves.