Bitcoin’s explosive growth in popularity and value has made it one of the most well-known cryptocurrencies in the world. However, its rapid rise has also raised concerns about its negative environmental impact. According to the University of Cambridge’s Bitcoin Electricity Consumption Index, as of September 2021, Bitcoin’s annual energy consumption was around 121.36 terawatt-hours (TWh), which is more than the annual energy consumption of Argentina and the Netherlands combined. Furthermore, the same index estimated that the energy consumption per transaction for Bitcoin was around 715 kilowatt-hours (kWh), which is equivalent to the energy consumption of an average U.S. household for more than three weeks.
The process of mining new bitcoins is energy-intensive, and most of the mining activities rely on fossil fuels, leading to a significant carbon footprint. Bitcoin mining is the process of validating transactions and adding new blocks to the blockchain. To do this, miners need to solve complex mathematical equations using powerful computers. The computational power required to mine new bitcoins is enormous, and this process requires a significant amount of energy. As a result, the highly competitive nature of Bitcoin mining incentivizes miners to use even more energy to gain a competitive advantage. This creates a “race to the bottom” dynamic where miners consume more and more energy to remain profitable.
The environmental concerns associated with Bitcoin mining may also lead to regulatory and reputational risks for companies and investors who hold Bitcoin or are involved in the cryptocurrency industry. As governments and regulators around the world become more aware of the environmental impact of Bitcoin, they may start imposing stricter regulations and taxes on the cryptocurrency industry. This could lead to increased costs for Bitcoin mining and trading, reducing the profitability of the industry.
In conclusion, the sustainability problem with Bitcoin is a significant concern for the cryptocurrency industry. The energy-intensive process of mining new bitcoins, combined with the reliance on fossil fuels, leads to a large carbon footprint. The highly competitive nature of Bitcoin mining further exacerbates the problem, leading to a “race to the bottom” in energy consumption. As a result, investors and companies in the cryptocurrency industry should be aware of the environmental risks associated with Bitcoin and take steps to mitigate them.
Resources:
https://www.iea.org/reports/the-role-of-china-in-the-global-supply-chain-for-bitcoin
https://cbeci.org/
https://www.nature.com/articles/s41558-018-0321-8
https://www.gemini.com/cryptopedia/gemini-climate-survey-2021
Pictures:
https://www.hedgeweek.com/2021/03/27/297851/disastrous-direction-travel-why-bitcoin-now-collision-course-esg
https://www.freepik.com/premium-vector/cryptocurrency-sustainability-problem-bitcoin-crypto-currency-mining-energy-consumption-environment-friendly-concept-big-bitcoin-with-electric-plug-sucking-energy-from-planet-earth_16243275.htm
alejeune
April 9, 2023 — 5:31 pm
I had no idea how environmentally damaging bitcoin is but seeing all this data reminded me of when I learned that if you delete 30 e-mails you can save 222 Wh, which is pretty much the equivalent of a low energy light bulb left on for a day. It was a friend who told me this and that day I went through my whole inbox and deleted as many emails as possible.
I have noticed a strong movement towards digitisation and electricity as a solution for the climate crisis. For instance, countries are encouraging people to purchase an electric vehicle as it is more sustainable. But one question I’ve always asked myself is: are electric things actually better for the environment, because how was the electricity powering all these things produced? If it’s from fossil fuels then is an electric car really better?”.
kkochh01
April 16, 2023 — 5:48 pm
I found this blog to be really interesting as I had no idea about the impact crypto/ bitcoin had on the environment and how it could be related to sustainability. Additionally, the data and facts provided were really helpful in understanding their relationship.
This got me thinking about the potential impact electric-powered substitutes would have on the environment. I’m curious about your thoughts on the matter.