Bigfoot Bitcoin: Bitcoin’s carbon footprint soon to match that of London’s
March 22, 2021
3 min read
What's going on here?
The cryptocurrency Bitcoin arguably poses a threat to the global climate as its recent surge suggests its carbon footprint could soon match the same of London’s.
What does this mean?
Bitcoin’s value has surged massively already in 2021 – Tesla invested $1.5bn into Bitcoin (see our article on this here) this February.
However, Bitcoin, as a technology, inevitably uses energy. This occurs primarily through bitcoin mining, the process through which bitcoin transactions are verified. Bitcoin mining requires expensive, electricity-exhaustinging equipment. Functioning in a similar vein to a lottery and in order to “receive Bitcoin as a reward for completing ‘blocks’ of verified transactions”, all bitcoin miners must attempt to solve complex calculations, with each miner competing against the other for the single reward (currently about 6 Bitcoin, worth over £245,500). This process encourages the use of extensive electricity, amounting to “about £200,000 worth of electricity every 10 minutes”. According to The Guardian, this is equivalent to 2.5 times the energy usage of Amazon, Apple, Facebook, Microsoft and Google combined and runs up energy costs of £29m every day.
The growing interest in Bitcoin has resulted in estimates that show Bitcoin’s carbon footprint being comparable to the carbon footprint of London, with Bitcoin’s current footprint already matching the carbon footprint of Norway, Las Vegas and Sri Lanka. This is expected to grow, with the energy consumption of cryptocurrencies being equivalent to all data centres globally.
What's the big picture effect?
Given persistent (if often stunted) global conversation about climate change, it is unlikely that the significant energy usage of Bitcoin will remain under the radar for much longer. Indeed, power outages in Iran in January 2021 were attributed to bitcoin miners.
Dutch economist Alex de Vries, the creator of The Bitcoin Energy Consumption Index, states that pressure must be put on bitcoin miners by governments, such as policymakers in Québec, Canada, who have enforced a moratorium on new mining operations, or actions in Iran which has seen bitcoin mining equipment seized.
Many supporters of Bitcoin strike back against these criticisms with three key arguments. Firstly, it is stated that 39% of the energy consumed by Bitcoin originates from renewable sources. Secondly, it is claimed that a significant quantity of the energy used comes from “stranded energy” – in other words, surplus energy from renewable sources such as hydropower which would otherwise go to waste. The third argument is that there are plenty of other things which form part of daily life that require significant energy output. Bitcoin supporters state that these things are not criticised as wasteful in the same way Bitcoin is.
However, counter arguments are available to all three assertions. While 39% of Bitcoin’s energy usage might come from renewable sources, 61% comes from non-renewable sources. To make matters worse, fossil fuel companies have discovered a way to mine bitcoin through the electricity created from burning waste fossil fuels, something which drives further profit to these industries. Furthermore, it is difficult to quantify how much stranded energy exists, and even if this is calculated, the energy would be put to better use if it was connected to national grids. Finally, while it might be true that there are benefits to Bitcoin, the sheer size of Bitcoin’s energy output (it uses 0.1% of all the energy in the world) is disproportionate to its efficiency. While Bitcoin processes seven transactions a second, companies such as Visa process thousands of transactions in the same period.
Overall, this emerging discussion about Bitcoin’s impact on the environment points to a wider drive to regulate cryptocurrencies. However, cryptocurrencies, decentralised by their very nature, will undoubtedly put up a fight to resist this.
Report written by Edie Essex Barrett
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