In 2017 a report stated that bitcoin miners in Iceland use the same amount of electricity as all Icelandic households combined.
According to an article from November 2018 by Forbes and 4 other major US news sites (Telegraph, Washington Post, Bloomberg, USA Today) the bitcoin boom threatens the global energy transition.
This is not good news for environmentally conscious people. But is it true? Where do these numbers come from? Let's take a closer look!
Mining = Destruction in the name of prosperity?
Since Bitcoins are created through mining - a process where special computers have to solve a complicated mathematical puzzle - they requires the use of computing power and therefore electricity.
As a result in the Bitcoin network there is no need for intermediaries such as banks, payment or credit card companies, there should be no corruption possible and transactions cannot be changed. There is no hierarchy, no one can access their coins and the account cannot be locked.
There is no monetary inflation because no one can just create Bitcoins like it happens with Euros or Dollars because everyone has to follow the Bitcoin protocol. All people can use Bitcoin without permission as long as they have internet and a cell phone. Transactions are possible across borders and take a few minutes. Sending crypto currencies will soon be as easy as sending an email. The cost and energy consumption for the banking system could be partially eliminated.
Throughout the history of mankind, progress and the improvement to the quality of life and prosperity have always been linked to increased energy consumption. According to the International Energy Agency global electricity consumption has quadrupled since 1971.
The largest share of this is accounted for by industry, followed by private households, commercial and public services, agriculture (including fisheries) and transport. According to the IEA website, Bitcoin's global energy consumption was 0.2% in 2018.
Energy consumption = CO2 emissions?
Bitcoin mining is an essential security function of the network, a non-exchangeable component of the whole. Considering the benefits Bitcoin will bring to humanity, the electricity used for it is not a waste of energy. Rather, it is a useful application.
And the simple math for miners is: the cheaper the electricity, the more profit.
Since Mining is completely location-independent and decentralized; computer farms can be set up anywhere. Therefore, most mining farms are set up where there is cheap electricity. These can be places that are far away from consumers. To date, transporting electricity over long distances is an unsolved problem because of the loss of electricity that occurs in the process. That is, the use of wind or solar energy from remote areas, is not possible to date. However, this natural energy can be converted into Bitcoin locally and sent to the world via the Internet. Bitcoin is, in this way, a battery that provides energy in the form of value.
With alternative energy, like solar, wind or hydroelectric power plants, electricity production continues even when there is little demand. Let's go back to the mining farms in Iceland from the start, because they take advantage of this. Electricity in Iceland is cheap because it is generated from natural geothermal energy. If the consumption of the miners in Iceland is as high as that of private households, it is irrelevant because the electricity comes from a natural renewable source.
100x more Bitcoins = 100x more energy consumption?
Mining costs will not increase exponentially as more Bitcoin transactions are made. The mining process runs according to set rules. Every 10 minutes, a block of transactions is attached to the blockchain. The number of transactions contained in the block has nothing to do with energy consumption. The mathematical puzzle for which the computing power is needed is solved for the block and it can contain many transactions. What happens is this: as the value of bitcoin increases, new miners come in and use additional computers to mine. These additional computers need power, just like any PC or smartphone, and therefore power consumption increases.
Miners are businessmen who want to make profit. Therefore, they will always work as energy efficient as possible. In addition, the reward for mining decreases every four years. That means the profit for the miners decreases, so they will again look for cheaper and more efficient energy sources. If there are more renewable and cheap energy sources, miners will locate there and help finance new power plants as a result.
New technologies will reduce the number of transactions directly on the Bitcoin blockchain.
New year, new me?
In November 2019, a study by The Danish Centre for Environmental Assessment was published, concluding:
"In contrast to previous studies, the production, maintenance, and disposal of mining computers has been found to contribute only a small fraction of Bitcoin's environmental footprint. While the overall hash rate of the Bitcoin network is expected to increase, the energy consumption and environmental footprint per terahash mined will decrease."
According to a study by CoinShares Research, released in the beginning of 2020, 73% of the electricity used for Bitcoin mining comes from renewable energy. This puts bitcoin mining in a better position than almost any other major industry in the world in terms of renewable energy use.
In the end, let's just compare other mining techniques used worldwide (2018):
- Bitcoin currently uses about 3.6 million GJ (gigajoule) of energy, producing about 0.6 million tons of CO2.
- Gold mining uses 475 million GJ of energy every year, producing ~54 million tons of CO2.
- The banking system as a whole uses 2340 million GJ of energy, producing ~390 million tons of CO2
So tell me: do we need to get better with our energy consumption?
Yes, of course! But the climate change doesn't appeared because of Bitcoin mining, it's there because nobody cared for a long time.
We should invest more into alternative energy sources and not foul mouth alternative currency systems. There's no Planet B(itcoin)!
