Saturday, 26 February 2022 12:59

What you should know about Bitcoin energy consumption

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Bitcoin mining has been popular for years now and it has become a very profitable business for many. The mining process requires a lot of electricity however, because computers need tor run calculations to mine Bitcoin and globally, this means a lot of energy consumption.

In the last 2 years, Bitcoin has been observed to contribute significantly to humanity’s carbon footprint because energy sources have partly been diverted to supply electricity for cryptocurrency mining. So how much energy does all this require and what is Bitcoin’s effect on the planet? Let’s have a look.

Bitcoin and energy

Did you know that it takes four times more energy to mine a mere $1 of bitcoin than it takes to mine $1 of gold? Of course, if you look at it, Bitcoin mining is only possible by using electricity, while mining gold can be done by hand. Still, in 2021 Bitcoin electricity consumption was more than 70 terawatt hours. What does this number mean? Well, it is Austria’s electricity consumption in a whole year. Yes, Bitcoin mining has basically added a new country to the world which consumes power. Not in the literal sense, but in the global energy consumption sense. But where does energy come from these days?

The world still runs primarily on fossil fuels, meaning coal, oil, gas, etc. These are burned to gain energy, which can then be turned into electricity. In 2021 the Bitcoin network consumed about approximately 1 % of all the electricity in the world, which doesn’t seem like much but as new crypto currencies emerge and more people want to mine them, this number will only grow. It is estimated that more than 60% of Bitcoin mining activity depends on fossil fuels, so no solar, wind or aquatic power. This means that next to humanity’s usual carbon footprint, Bitcoin introduces 36 more million tonnes of CO₂ into the environment. Imagine if we just put 2.5 million extra diesel cars on our roads each year.

Due to this, more and more people are calling for a crypto carbon offset, which means that in order to continue crypto mining, we have to take measures to counter its harmful effects and conserve the environment. The problem with CO2 for example is that it diffuses evenly throughout the lower atmosphere in a few months after being emitted. This is actually a good thing because if we reduce emissions on one side of the atmosphere, the positive effects can be felt everywhere. Crypto carbon offset relies heavily on this phenomenon.

The nature of Bitcoin

Bitcoin energy consumption is high because of the basic nature of this cryptocurrency. It involves a method known as the blockchain which makes it secure and pseudo-anonymous, but requires all participants to contribute. The transactions are recorded on the blockchain and this blockchain is run by everyone who participates in mining. So, the Bitcoin system spreads out the responsibility across its users while requiring them to solve complex mathematical calculations to get more Bitcoin. These calculations tax the computer heavily, so people realized that if they want to mine a lot of currency, they need a lot of strong computers.

Bitcoin mining farms have been set up all over the world for the sole purpose of solving calculations and mining the coins. These farms usually consist of video cards and processors operating in a room because these are the most effective PC parts for this purpose. The Cambridge Bitcoin Electricity Consumption Index (CBECI) collected real-time geographical Bitcoin mining data and they have found that the biggest mining activity is concentrated to China and Kazakhstan. If we take a look at Bitcoin energy consumption in these parts, we can draw the conclusion that more than 85 % of all energy supply comes from coal-powered plants.

As mentioned, burning fossil fuels gives us electricity but at the cost of emitting harmful gases into the atmosphere. Therefore, crypto carbon offset has never been more important. The idea is simple, for every mined Bitcoin, we should maybe plant a tree or something to counter the bad effects of the industry. Another problem is that Bitcoin has increased the demand for fossil fuels and the reserves are not infinite. Sooner or later, they are going to r un out and we will have to rely on renewable energy sources, which are not as abundant.

How to reduce Bitcoin’s carbon footprint

Bitcoin energy consumption is at an all-time high, so we should actively start thinking about reducing or converting this energy consumption into more a more sustainable form. Our biggest goal is to reduce the usage of fossil fuels for Bitcoin mining. If people want to mine Bitcoin, then it should be solely on renewable energy sources. Miners should generate their own power and electricity which is independent from the civil network. This way, everyone wins.

Impact Scope offers detailed audits on how miners can achieve a more neutral carbon footprint with their Bitcoin mining activities. We are glad to work with you to come up with a CO₂ footprint reduction strategy. This way, you can realign your resources towards more sustainable power model. It would be ideal if fossil fuels disappeared from crypto mining in the next 10-15 years. What fossil fuels we have left should be focused on transportation of goods and the general well-being of people. This includes heating for example.

Bitcoin is not necessarily an enemy. If we think about it, it has introduced a new decentralized way of trading which the big corporations and banks have no real control of. This is what made it so appealing to a lot of people and why mining has become such an important role in the world. However, we can’t forget about the side effects of this new industry and we should always actively work towards a viable crypto carbon offset and a more sustainable Bitcoin energy consumption model. One thing is for sure, cryptocurrencies are here to stay. The question is whether we can make them a friendly player in the field.

 
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