It’s been widely reported that bitcoin alone utilizes more energy than some countries. Additionally, ecologists and other experts have issued several warnings about bitcoin’s sizable carbon footprint.
However, crypto enthusiasts point to rough data and bigger emitters, affirming bitcoin is much greener than today’s entire banking system and that the benefits of a decentralized privacy-focused digital asset are worth the “relatively small” price paid.
In this article, we will discuss the roots of crypto mining and the environmental concerns surrounding the matter and how even swapping from BTC to USD might have implications for our environment.
Why Do Cryptocurrencies Spend So Much Energy?
In essence, the amount of energy spent on cryptocurrency mining goes back to the consensus mechanism involved in the process, called proof-of-work (pow). mining refers to the process of creating new blocks for pow-based blockchains.
For people who cannot figure the concept out easily, it’s possible to explain a blockchain as a list of transactions recorded in digital blocks. As blockchains are decentralized, instead of a bank or government, they’re managed (validated) by a global network of miners.
The miners are responsible for recording and verifying the blocks of transactions and are rewarded with newly minted cryptocurrency. However, before adding a new block, miners have to play into a “crypto lottery.”
Each block comes with a mystery number, a complex mathematical problem to be solved by miners. Hence, the first miner to solve the problem correctly and faster gets to mine the block, obtaining the reward.
Ultimately, the only way to solve a block is by trial and error, as miners need to go through a colossal number of numerical sequences and calculus to reach their goal and get a reward.
Every second, miners have to process 160 quintillions non-stop, and that’s where the huge energy consumption comes from. Yet, the high energy inefficiency is a security feature, as malicious actors would have to spend more computing power and money than it would be worth to attack the network.
Where Are Crypto Miners Located?
In the spring of 2020, most crypto miners were established in China (65%), the United States (7,2%), Russia (7%), Kazakhstan (6.1%), Malaysia (4.3%), and Iran (3.8%).
Even considering China’s government ban on cryptocurrencies, most miners are still concentrated primarily in the provinces of Xinjiang and Inner Mongolia. These two regions have an abundance of coal, which is considered one of the “dirtiest” energy sources.
In this sense, it’s been reported that crypto mining in China threatens the country’s climate targets. Nonetheless, it is safe to affirm that even if bitcoin’s entire network were powered entirely by coal, its footprint would be just a small fraction of global emissions.
Bitcoin – Most Valuable Digital Asset vs. Most Polluting Cryptocurrency
The energy consumption in different blockchain networks changes all the time, but bitcoins alone currently account for about half a percent of global energy consumption. When compared to countries, bitcoin’s energy consumption in May 2021 (119.91 TWh) is bigger than Sweden’s energy consumption (around 131.80 TWh).
Also, its crucial to point out that bitcoin is not the only energy-hungry blockchain network, as several others still use proof of work as their consensus mechanisms, such as Ethereum, Dogecoin, Litecoin, Ethereum Classic, ZCash, and others.
Considering all the pow networks with miners actively processing blocks via pow, you can add roughly 50 percent on top of what bitcoin is consuming in terms of energy.
Plus, the numbers get even more complex to deal with considering bitcoin’s carbon footprint. Energy consumption itself cannot give you an exact carbon footprint, especially as each power source emits a different amount of carbon to produce the same amount of energy.
Hence, to determine bitcoins carbon footprint, it would be necessary to know where miners are getting their energy from, which is still a controversial topic to this date.
The most recent data on the subject comes from studies conducted by Cambridge University, which assessed about a third of the global mining network in mid-to-late 2020.
According to the study, over three-quarters of miners spread around the globe used renewable power sources as part of their activities, but two-thirds of their energy came from fossil fuels.
Yet, although the majority may be using a “dirty” energy source, it does not say much at the end of the day. Currently, the estimated carbon footprint associated with crypto mining is around 50 metric tons of carbon, which is compared to Hong Kong’s carbon footprint.
Conclusion
Ultimately, what could be done to maintain the sustainability of cryptocurrencies? In fact, the solution may be simpler than everybody assumes. Miners can replace mining with a greener alternative that does not require computational power, which is called PoS consensus or Proof of Stake.
PoS has been used by several blockchain networks (e.g., Polkadot) and proved to be the best – and cheaper – solution for the “environment controversy” around Bitcoin. We hope that once we’ve solved these “issues”, we can finally see the BTC price flourish without FUD related to crypto mining operations.