Being an electronic currency, Bitcoin and other crypto consume some energy. But, is it enough to be a problem? Some recent press and studies make it sound like it.
Here, we’ll talk about why Bitcoin uses energy and how much energy it uses. That way, you can make up your own mind.
Why Does Bitcoin Use Energy?
So first off, why does Bitcoin use energy?
For most people who use it, it doesn’t. Buying and selling Bitcoin or using it to make purchases doesn’t use more energy than using a credit card.
However, Bitcoin mining can use quite a bit of energy.
Bitcoin mining is the process of producing Bitcoin by confirming the complex mathematical operations that make up the blockchain.
This doesn’t take a supercomputer but it requires more than any old laptop. A custom computer for mining, called a “rig”, does use quite a bit of energy. Further, some hardcore miners run multiple rigs at once.
This can use so much energy that mining on a large scale can end up costing money in places with high energy costs. In Iran, the government recently seized mining rigs that it was able to locate by their high energy usage.
How Much Energy Does It Use?
Now that we’ve established why Bitcoin uses energy, how much does it use?
That’s a difficult question. For one thing, Bitcoin is decentralised so there’s no way of knowing how many mining rigs there actually are out there. Further, we don’t know how they’re all powered and where power comes from is more important than where it’s going. Mining rigs powered by hydroelectric, wind, or solar are better for the environment than those plugged into a coal-fired grid. Without a Domesday Book-style account of all of the mining rigs, we can’t really know what their footprint is. However, studies have found that most mining rigs actually are powered by renewable energy like hydroelectricity.
That doesn’t mean that people haven’t guessed. One recent figure says that Bitcoin uses as much energy as the country of Ireland. Remember that statistic, we’ll get back to it.
Another damning study found that Bitcoin emissions alone could push global warming above 2 degrees celsius.
All of that sounds pretty bad. However, that’s just one way to look at those numbers.
How Much Does It Really Take?
Bitcoin uses as much energy as Ireland? you ask.
Egads! Ireland is a whole country! But, let’s examine that claim.
Remember how we pointed out earlier that virtually all of Bitcoin’s energy footprint comes from mining? And that you don’t need to be a miner to use Bitcoin?
We know how many Bitcoin wallets there are on the blockchain. People can have more than one, so that’s not an exact number. However, market estimates say that there are just over 7M active Bitcoin users. Meanwhile, there are just under 5M people in Ireland. That means that if Ireland and Bitcoin use the same amount of energy, cryptocurrency is more energy-efficient in per-capita terms.
Further, studies point out that the top four cryptocurrencies generate between 3 and 15 million tonnes of carbon dioxide. The study mentions that that is more than the carbon footprint of gold. However, it also mentions that crypto mining consumes less energy that mining aluminium.
Furthermore, Dr. Katrina Kelly-Pitou, a researcher who studies clean energy technology, specifically the transition toward decarbonised energy systems, says that banking actually consumes more energy than Bitcoin.
Banking consumes an estimated 100 terawatts of power annually. If bitcoin technology were to mature by more than 100 times its current market size, it would still equal only 2 percent of all energy consumption.
The Next in an Unending Line of Bunk
Older readers may think that all of this talk sounds familiar.
In the early nineties, predictions about the internet’s energy use were prevalent. None of them were good.
However, more in-depth studies later found that those predictions were much higher than reality. As software was developed and hardware became more efficient, the energy use of the internet dropped further. There’s no reason to imagine that the story will be different for crypto.
Hopefully, these numbers have helped you understand where the carbon footprint comes from and why it’s there.
One thing that we didn’t address, however, is the fact that crypto isn’t some superfluous luxury. Cryptocurrencies have allowed millions of people to protect their wealth from inflation, fight censorship, store wealth without access to banks, and much more.
Why some people choose to attack cryptocurrencies is unclear. To quote Dr Kelly-Pitou again,
perhaps people should quit criticizing bitcoin for its energy intensity and start criticizing states and nations for still providing new industries with dirty power supplies instead.