As the price of Bitcoin rises above $ 56,000, it becomes increasingly difficult to ignore the negative impact that cryptocurrency has on the environment. Crypto miners who consume energy have been blamed for power outages in Iran, while China – a hotbed for crypto mining – is cracking down on the practice as it takes a heavier hand with polluting industries.
More such measures may be needed to keep crypto’s carbon emissions under control. Bitcoin’s record prices have left crypto mining behind, according to a study published this week, so emissions from mining the virtual currency are likely to remain high in the near future, even if the price has fallen.
The study was published in Joule magazine by cryptocurrency economist Alex De Vries, who found that Bitcoin’s energy consumption this year rivals that of all cloud computing data centers around the world.
“It’s the insane inefficiency of the system that shakes it up,” said De Vries.
Bitcoin’s niche attractiveness is at odds with its massive energy requirements, De Vries said. Since the use of Bitcoin is limited to a tiny number of simultaneous transactions, “it is not really capable of serving a large group of people,” he said. “Even so, it still consumes so much [power] Like all data centers in the world, we are talking about all data centers that power the internet, large tech clouds, and the majority of the world’s population. It’s extremely disproportionate. “
There are only about 1 million Bitcoin miners worldwide. According to an industry estimate, the amount of electricity mining uses in a year is equivalent to the amount used to power Malaysia, Sweden or Ukraine according to the Cambridge Bitcoin Electricity Consumption Index.
Pollution on a London scale
While it is difficult to say exactly how carbon-intensive cryptocurrency mining is – most miners’ locations and energy sources are a closely guarded secret – scientists are concerned. De Vries estimates that Bitcoin’s annual carbon emissions are on track to match those of the City of London, which is estimated at 98.9 megatons, according to citycarbonfootprints.info.
A group of researchers at the University of New Mexico has set a price for this pollution and estimated in a paper that every dollar of Bitcoin mined in the US causes 49 cents of health and climate damage.
“With any cryptocurrency, the increasing demand for electricity to produce a single coin can lead to an almost inevitable cliff with negative net social benefits,” the paper says.
Other studies have found that the environmental damage caused by crypto mining is on par with mineral mining. In an article published in Nature Climate Change, scientists warned that Bitcoin alone could bring the temperature of the earth 2 degrees above historical levels if it were as widespread as other new technologies.
“Bitcoin is inherently inefficient. That inefficiency is the price we pay for security,” said Anton Dek, director of crypto assets and blockchain at the Cambridge Center for Alternative Finance (and a researcher on Bitcoin Energy Tracker).
The process of mining a bitcoin involves a multitude of computers competing to solve a complex math problem. The first person to find a solution will be rewarded with a bitcoin. For example, the complexity of these transactions makes it difficult to hack the Bitcoin blockchain.
It also means that the amount of Bitcoin you can mine depends on how much processing power you can throw at the problem. This has effectively started an arms race with miners investing in even more computer equipment to run around the clock. And the more expensive Bitcoin gets, the more people want a shot at the action.
“When it’s more profitable, it encourages more people to take part in this competition – it encourages more miners to come,” Dek said.
Less concerned than others about Bitcoin’s potential environmental impact, Dek points out that crypto mining uses as much electricity as Americans waste by plugging in non-working electrical appliances. Most miners use renewable energy, according to research by Cambridge, although more than 60% of crypto mining is powered by fossil fuels.
“We’re trying to point out here that it’s not that bad,” said Dek. “We don’t want to say that it’s not a problem at all.”
As good as gold?
“We see the Bitcoin use case more and more as gold. It’s something to preserve value, not everyday transactions,” Dek said.
However, this type of comparison could drive Bitcoin into a speculative frenzy that could “lock in” high emissions for years to come.
The rise in the price of bitcoin has sparked a run on bitcoin mining computers. Bitmain, a major manufacturer of so-called mining rigs, was sold out by August, while competitor Canaan is processing an order backlog of 100,000 orders. These purchases are non-refundable, De Vries noted, which means that once miners receive their equipment they will likely be using it – even if the price of a digital coin has fallen in the meantime.
“All you care about when you get the machine is how much do I pay for the electricity to run this machine? The sunk costs no longer matter,” he said.
Even if the price of Bitcoin were to drop in half, the planet is likely to be tied to high emissions from crypto mining in the short term – unless more miners find cleaner sources of energy to meet their computing needs, or more regions follow China’s example to restrict or eliminate Bitcoin mining entirely.
“You have all these miners who use electricity – you can take them off the grid if you want. That’s an option you have as a regulator,” De Vries said.
Despite comparing Bitcoin to gold, many continue to wonder whether the virtual currency is worth anything. Commentators have compared it to a bubble and found that currency cannot be exchanged for most goods or services.
“Unlike other economic activities, the Bitcoin system produces absolutely nothing for all of this waste,” said Stephen Diehl, a software engineer who frequently writes on cryptocurrency. “It is a purely speculative activity by people who gamble on random price movements and the only expense is simply mixing numbers in a computer at insane costs.”