Bitcoin (BTC) has long been criticized for its large environmental footprint. Some are trying to counter that a switch to renewable sources will help reduce carbon consumption. But the truth is, Bitcoin mining still uses a huge amount of energy – and renewables are only a small part of the story.
Here are four reasons why we need to deal with Bitcoin’s environmental problems.
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According to Digiconomist, a platform that studies the unintended consequences of digital trends, mining Bitcoin uses as much energy each year as a small country. Its carbon footprint is roughly the same as Romania’s. To put this in context, Romania has almost 20 million people.
Bitcoin mining – the way transactions are validated on the network and new coins are produced – is inherently power hungry. Bitcoin is not backed by a central authority like a bank or government, which means it needs a different way of validating its transactions to avoid errors and fraud.
This is where mining comes in. Without going into too much detail, miners must solve complex math puzzles to earn the right to create a new block on the chain. This is called a proof of work extraction model.
As Bitcoin gains in value, Bitcoin mining becomes more lucrative and there are more economic incentives to solve the puzzle. This means mining companies are investing in even more computing power – hence the pictures you’ve probably seen of huge mining farms with lines and lines of machines.
But only a limited number of Bitcoin can be produced each day. So, as more and more miners go online, the puzzle automatically gets harder to slow down production. Bitcoin is simply not designed to be energy efficient. On the contrary, Bitcoin’s ever-increasing energy consumption is written in its DNA.
2. An American household consumes approximately the same amount of energy in two months as Bitcoin in a single transaction
If we think in terms of individual transactions rather than annual consumption, it’s even clearer why environmentalists are concerned. The average Bitcoin transaction consumes 1,785.5 kilowatt-hours, which is roughly equivalent to the energy needed to power an American household for 61.2 days.
Looking at it another way, a single Bitcoin has the same carbon footprint as 1,879,709 Visa transactions, according to Digiconomist.
The most disturbing fact about these numbers is that Bitcoin’s energy consumption is increasing. At a time when many countries and industries strive to reduce their carbon footprint and energy consumption, the energy costs of keeping the world’s largest cryptocurrency running are increasing.
3. Renewable energies represent less than 40% of Bitcoin consumption
There is a common argument that renewables will pull Bitcoin out of the coal fire. But the latest research from the University of Cambridge on the environmental impact of the cryptocurrency industry has shown that only 39% of proof-of-work mining is powered by renewable energy.
This data does not take into account the changes that will result from the crackdown on crypto mining in China. But the full impact of this movement is not yet clear. Some miners have settled in the United States where the focus is on renewable sources, but others have settled in countries like Kazakhstan where fossil fuels still reign supreme.
Read more: Can Bitcoin Ever Be Green? 2 sides of the debate
Moreover, even in the United States, there are many non-renewable Bitcoin miners. For example, according to Techspot, a Bitcoin mining company in Pennsylvania called Stronghold just bought the coal-fired Scrubgrass power plant. Stronghold says he will convert the state’s coal waste into energy for Bitcoin mining.
This is not the only example of crypto miners buying failing fossil fuel power plants and putting them back into production. It goes against the gradual elimination of these factories in favor of renewable energies.
In Stronghold’s case, environmentalists fear that coal waste – the leftover material from coal mining operations – could leach harmful chemicals into the soil and surrounding water sources. And it still produces carbon dioxide when burned.
Right now, with little incentive to do otherwise, Bitcoin miners are likely to go for the cheapest source of energy. Sometimes it will be renewable, but only sometimes.
4. Bitcoin mining produces as much electronic waste as the Netherlands
In addition to its high energy consumption, Bitcoin mining also produces huge amounts of electronic waste (e-waste). Research by Digiconomist founder Alex de Vries published in Resources, conservation and recycling suggests that Bitcoin accounts for over 24 kilotons of e-waste each year. This is roughly the same level of electronic waste as in the Netherlands.
Electronic waste is problematic for several reasons. First, there is a limited availability of certain resources like quartz and silicone that are used in chip production. Second, when electronic equipment is thrown away, toxic chemicals and heavy metals can then seep into our soil and water supply.
Bitcoin miners use very specific hardware that cannot be easily reused and quickly becomes obsolete. De Vries estimates that the devices used by minors last around 18 months. This means that a lot of material is used up and quickly thrown away again.
Bitcoin’s environmental costs cannot be ignored
Bitcoin supporters argue that Bitcoin’s social benefits – such as giving the billions of unbanked people around the world access to financial services – outweigh the environmental costs. Additionally, they believe that not only will renewables help reduce the carbon footprint of popular cryptocurrency, but Bitcoin will also help boost the development of renewable energy sources around the world.
They might be right, but it’s also hard not to think of Bitcoin as a big old smoke-spitting truck as it’s being overtaken by faster, more environmentally friendly models. Cryptocurrency exchanges are full of Bitcoin alternatives. Many newer cryptocurrencies use more environmentally friendly mining models, which environmentally conscious investors may want to check out.