Bitcoin has frequently been lambasted for its energy-intensive mining process. Two years ago, Nature Climate Change warned that Bitcoin mining alone could push global warming over the 2ºC catastrophic threshold in just 14 years if adoption rates matched those by other broadly used technologies. Two years down the line, all the blame has shifted to fossil fuels as the shift to renewable energy and the ESG drive continue to gain momentum, while Bitcoin and cryptocurrency mining hardly get a passing mention.
So, how much is Bitcoin mining really contributing to our changing climate?
It is a question worth pondering, considering that scientists have warned that we have a mere 10-year window to act to stop this global phenomenon or risk permanent and irreversible damage to our ecosystems.
Ever-Rising Hash Rates
For some crypto buffs, critics who squawk at the vast amounts of energy supposedly consumed by crypto mining and how it contributes to climate change are little more than churlish, pedantic party poopers.
In one camp are the PoW (Proof-of-Work) maximalists who argue that bitcoin is the “most secure public chain” as measured by hash rate, but denying that bitcoin is an energy hog.
Related: Oil Rig Count Inches Higher Amid Price Plunge
In the other camp are crypto apologists (such as CoinShare) who concede that bitcoin and crypto mining are indeed power-hungry processes, but immediately go on the defensive by claiming that most of the energy is derived from renewable sources.
Bitcoin’s carbon footprint is all about how much electricity miners consume when trying to solve those arcane computational problems.
The bad news: Bitcoin’s hash rate has increased exponentially over the past few years, from 7.5 quintillion hashes per second three years ago to 126.3 quintillion hashes per second currency. That’s a nearly 17-fold increase in the space of just three years.
This suggests that Bitcoin and crypto mining do consume vast amounts of power; however, it is not nearly enough to warrant the wrath of environmentalists as we shall see shortly.
Securing Crypto Networks Is Costly
By necessity, the most secure cryptographic networks such as bitcoin and ethereum are also the most energy-intensive since they rely on heavy resource consumption to defend their networks from malicious attackers. PoW projects, like bitcoin, rely on mining to secure their blockchains and require the hashing power to continue even after every coin has been mined. Less resource-intensive networks do not employ such rigorous processes and are, consequently, almost certainly less secure.
Mineable coins belong to the PoW category, of which CoinMarketCap lists several hundred. These are the main culprits as far as energy-guzzling is concerned. Non-mineable coins such as Ripple, EOS, Stellar, Tezos, NEO, and NEM are more energy efficient as they don’t require tons of energy to validate transactions and secure the network as their PoW brethren.
And now to the million-dollar question: how much energy does bitcoin and crypto mining suck off our power grids every year?
Available data varies quite a bit depending on whom you ask, and is, quite frankly, all over the place.
Figures of sub-10 TWh per year have been thrown about, with this miner placing it at a relatively tame 2.85TWh/year at the lower bound and 6.78TWh/ year at the upper bound, depending on the efficiency of the mining rigs. That was more than three years ago, and since then, more efficient rigs have hit the market while mining activity has also increased quite dramatically. These two trends have opposite effects on overall costs, so we cannot be sure what data this methodology would yield currently.
Energy magazine Joule has estimated it at 45.1TWh/year, or about 0.2% of all global electricity produced, with a carbon footprint at 22.0 to 22.9 MtCO2.
Digiconomist uses the portion of mining revenues spent on electricity costs to estimate power consumption. Using this method, the organization estimates current consumption at 73.1 TWh/year.
Those figures, though, could be quite conservative with the Cambridge Bitcoin Electricity Consumption Index placing the upper bound at 104.3TWh. That is about 0.4% of global electricity production and enough to power Switzerland for two years with some change. The carbon footprint is ginormous, too–34.7 Mt CO2 per year, comparable to the carbon footprint of Denmark.
It is worth noting that Cambridge’s estimated consumption of 65 TWh/year tallies favorably with Digiconomist’s figure, which works out to ~0.4% of global electricity output. These sources were chosen not least because Digiconomist seems to have been validated by Cambridge and possibly won a long-running diatribe against Marc Bevand (publisher of the 2017 estimates) regarding whose methodology is more accurate.
Both Digiconomist and CBECI can also be used for prognostication for future estimates.
Mind you, that is bitcoin only–not counting power consumption and carbon footprint of altcoins such as bitcoin cash, ethereum, litecoin, and monero, among others.
Unfortunately, we do not have much recourse here. Digiconomist only provides bitcoin and ethereum energy consumption estimates while CBECI only does it for bitcoin. According to the firm, ethereum’s energy footprint has declined from an all-time high of 21TWh/year in July 2018 to 7.7 TWh/year currently.
That is only a tenth of what bitcoin guzzles up.
It’s possible to estimate the energy consumption of other altcoins by checking out their hash rates and making assumptions about the type of mining rigs deployed and their respective efficiencies. However, those figures could be wildly off the mark, as we have seen with Bevand’s estimates.
Considering that bitcoin’s dominance has climbed from below 50% of all cryptocurrency (market cap) a few years ago to 61.5% currently, you can bet this is where the vast majority of mining activity is taking place. As very rough back-of-napkin math, it’s logical to estimate that bitcoin and ethereum mining account for ~80% of crypto mining energy, with other cryptos sharing the rest.
That would place total energy by cryptocurrency mining at ~100TWh/year, or about 0.6% of global electricity consumption in 2019. Even with more efficient rigs being constantly pressed into action, electricity costs will probably continue to hover at ~60% of mining revenue over the long-term according to some estimates, meaning energy consumption by crypto mining will only continue to climb in the foreseeable future. Emerging mining technologies like merged mining, however, could possibly mitigate some of that.
Regarding CoinShare’s bold claim that the bitcoin network sources nearly three-quarters of its energy from renewable sources, the actual figure is closer to 30%.
The long and short of it: Bitcoin and crypto mining are definitely playing a part in global warming, but nowhere near the scale of the transport sector, which consumes ~25% of the world’s energy output, mostly in the form of fossil fuels.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.