Bitcoin’s Unsustainable Energy Use Cannot Go On Forever
In a world where Covid-19 and the war in Ukraine have paralyzed our system, why are we ignoring the most fearful crisis of all? Our earth is being pushed to its limits with the use of fossil fuels and it needs to change. The IPCC recently published its second report warning that climate change will soon be irreversible. It issued a wake-up call for action, but was widely ignored by the media. The climate crisis is as urgent as ever but isn’t being tackled head-on by nations and corporations. In fact, the world keeps acting as if nothing is wrong, regardless of the fact that the situation is deteriorating day by day. The economic sector, in particular the financial industry, isn’t making sufficient improvements regarding its environmental impact even though new developments in this area are causing harm in ways we haven’t seen before. Namely, the cryptocurrency industry has considerably grown over the last decade and its carbon emissions pose a substantial risk that can no longer be ignored.
Cryptocurrencies like Bitcoin involve mining, which is extremely energy intensive. Mining is the process of creating new Bitcoin by solving computational puzzles or complex mathematical problems. Miners create new bitcoins, verify transactions, prevent fraud and are rewarded in Bitcoin for their work. Because the quantity of Bitcoin was originally capped at 21 million units, mining has become a complicated process. In 2009, you could mine 200 bitcoins in a few days using your personal computer at home. By 2014, mining one bitcoin using the same method required 98 years. For this reason, more advanced methods relying on specialized computers (known as ASIC miners) have now been developed. Yet these new methods demonstrate that Bitcoin’s energy appetite is constantly growing. Today, a single Bitcoin block consumes more than 2000 kilowatt-hours of electricity to be mined. To put this in perspective, that is equivalent to the amount of power consumed by the average American household over 78 days. This is set to increase as mining gets more and more difficult and efficiency decreases over time. The Cambridge Bitcoin Electricity Consumption Index estimates that the entire bitcoin system uses 122.87 terawatt-hours of electricity every year, which is more than what entire countries such as the Netherlands consume.
These astonishing numbers translate to a large carbon footprint. Emissions produced by Bitcoin mining are between 53 and 127 million megatons of CO2. However, Bitcoin is a decentralized currency that uses anonymous miners, hence it is difficult to identify exactly what percentages of electricity used come from renewable or non-renewable resources. However, we do know that the USA is home to 35% of mining operations, and the US generates 60% of its electricity from fossil fuels. It has also been recently found that the share of renewables that power the network decreased from 41.6% to 25.1% this year. This has been attributed to China’s latest restrictions on miners, which have forced them to relocate to coal or gas-based electricity locations like Kazakhstan or the US.
At the same time, Bitcoin mining produces more than just emissions: the process implies that hardware piles up as well. Miners seek the best, newest machinery, which causes high turnover and a new e-waste problem. This e-waste represents a growing threat to our environment, from toxic chemicals and heavy metals leaching into soils, to air and water pollution caused by improper recycling. On average, the time for a mining device to become unprofitable sums up to less than 1.29 years, after which it is thrown out.
So how can this industry become greener? It’s simple, and would solve a whole lot of other problems at the same time: divest. Fossil fuels are the main reason for climate change and we rely on them too much. Divesting from non-renewable energies would lead to a cleaner cryptocurrency system. Miners relocating to green energy locations is also a solution. For instance, Paraguay uses 100% renewable energy generated by its hydroelectric dams. For this reason, the country believes it can become the crypto hub of South America where mining will produce a lower carbon footprint. The Crypto Climate Accord has a stated goal of running all blockchains on entirely renewable energy by 2025, but there is still a lot of work to be done if they wish to meet this goal.
Either way, it is safe to say that Bitcoin's constantly growing appetite for energy is a pertinent issue that needs to be addressed seriously. The switch to renewables will help, but a solution needs to be found with regards to e-waste. This unsustainable practice can no longer be ignored in today’s world.
The views presented in this article are those of the author and do not necessarily reflect the perspective of the MJE or the ESA.
Edited by Nadira Anzum
Featured Imagine "Mining bitcoins" by Gastev is marked with CC BY 2.0.