Environmental impact of Bitcoin

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One environmental impact of Bitcoin is that it worsens climate change. [1] This is because bitcoins are made using electricity partially generated by gas and coal-fired power plants. When burned, coal and natural gas emit greenhouse gases, which heat the Earth and change the climate. [2] As of 2022, such bitcoin mining is estimated to be responsible for 0.1% of world greenhouse gas emissions. [3] A second environmental impact is the air pollution caused by coal-fired electricity generation, and a third is the e-waste due to the short life expectancy of bitcoin mining equipment. [1]

Contents

Bitcoin is a cryptocurrency made by proof-of-work, [2] [4] while some other cryptocurrencies, such as Ethereum, are made by proof-of-stake, [5] which consumes less electricity. [6] [7] As of 2022, the Cambridge Centre for Alternative Finance (CCAF) estimates that bitcoin consumes around 100 TWh annually, and says bitcoin mining uses about as much electricity as Egypt. [8] [9] But it is difficult to find out how the electricity used for mining was generated, and thus bitcoin's carbon footprint. [10] [11] [12] [13] One study found that from 2016 to 2021, each US dollar worth of bitcoin mined caused 35 cents worth of climate damage, comparable to the beef industry and the gasoline industry. [14] [15] [16]

As of 2021, bitcoin's annual e-waste is estimated to be over 30,000 metric tonnes, which is comparable to the small IT equipment waste produced by the Netherlands. Creating one bitcoin generates 270 to 380 grammes of e-waste. The average lifespan of bitcoin mining devices is estimated to be about 1.3 years. [17] [18] [19] Unlike most computing hardware, the used application-specific integrated circuits have no alternative use beyond bitcoin mining. [20]

Reducing bitcoin's environmental impact is difficult; possible remedies include making bitcoin only where or when there is excess clean electricity. [21] [22] Some policymakers have called for further restrictions or bans on bitcoin mining. [23] [24]

Bitcoin energy consumption

Electricity consumption of the bitcoin network since 2016 (annualized) and comparison with the electricity consumption of various countries in 2019. The upper and lower bounds (grey traces) are based on worst-case and best-case scenario assumptions, respectively. The red trace indicates an intermediate best-guess estimate. (data sources: Cambridge Bitcoin Electricity Consumption Index, US Energy Information Administration; for details, see methodology Archived 11 August 2021 at the Wayback Machine
) Bitcoin electricity consumption.png
Electricity consumption of the bitcoin network since 2016 (annualized) and comparison with the electricity consumption of various countries in 2019. The upper and lower bounds (grey traces) are based on worst-case and best-case scenario assumptions, respectively. The red trace indicates an intermediate best-guess estimate. (data sources: Cambridge Bitcoin Electricity Consumption Index, US Energy Information Administration; for details, see methodology Archived 11 August 2021 at the Wayback Machine )

As of 2022, the Cambridge Centre for Alternative Finance (CCAF) estimates that Bitcoin consumes 131 TWh annually, representing 0.29% of the world's energy production and 0.59% of the world's electricity production, ranking Bitcoin mining between Ukraine and Egypt in terms of electricity consumption. [25] [9]

George Kamiya, writing for the International Energy Agency, said that "predictions about Bitcoin consuming the entire world's electricity" were sensational, but that the area "requires careful monitoring and rigorous analysis". [26] One study in 2021 by cryptocurrency investment firm Galaxy Digital claimed that Bitcoin mining used less energy than the banking system, with Galaxy Digital later clarifying that bitcoin mining's energy usage is not correlated with its "transactional volume or throughput" as it is in banking. [27]

Sources of energy

Until 2021, according to the CCAF, much of the mining for Bitcoin was done in China. [28] [29] Chinese miners relied on cheap coal power in Xinjiang [30] [31] in late autumn, winter and spring, and then migrated to regions with overcapacities in low-cost hydropower, like Sichuan, between May and October. In June 2021 China banned Bitcoin mining [32] and the miners moved to other countries. [33] By December 2021, the global computational capacity had mostly recovered to a level before China's crackdown, with more mining being done in the U.S. (35.4%), Kazakhstan (18.1%), and Russia (11%) instead. [34] Coal power plants in Kazakhstan generate most of the country’s electricity and emit lots of local air pollution. [35]

Greenidge Generation, a natural gas coal power plant in Dresden, New York, had originally been built for coal and had shut down in 2011 due to lack of demand. The plant reactivated in 2016 as a natural gas plant but failed to find sufficient demand. It switched entirely to bitcoin mining in 2019. In addition to emitting around 220,000 metric tons of carbon dioxide in 2020, the plant's cooling intake and discharge of heated water into Seneca Lake coincided with a significant decrease in fish and other wildlife populations. [36] In 2022, the plant's air permit request was denied by the New York State Department of Environmental Conservation (DEC). [37] [38]

As of September 2021, according to the New York Times, Bitcoin's use of renewables ranged from 40% to 75%. [2] Experts and government authorities have suggested that the use of renewable energy for mining may limit the availability of clean energy for ordinary uses by the general population. [2] [39] [40]

Negative impact of mining

Bitcoin carbon emissions

Concerns about bitcoin's environmental impact relate the network's energy consumption to carbon emissions. [41] [42] The difficulty of translating energy consumption into carbon emissions is due to the way bitcoin mining is distributed, making it difficult for researchers to identify miner's location and electricity use. The results of studies into bitcoin's carbon footprint vary. [10] [11] [13] Per a study published in Finance Research Letters in 2021, the differences in underlying assumptions and variation in the coverage of time periods and forecast horizons have led to bitcoin carbon footprint estimates spanning from 1.2 to 5.2 Mt CO2 to 130.50 Mt CO2 per year. [43] According to studies published in Joule and American Chemical Society in 2019, Bitcoin's annual energy consumption results in annual carbon emission ranging from 17 [44] to 22.9 MtCO2 which is comparable to the level of emissions of countries as Jordan and Sri Lanka. [13]

In September 2022, a report in the journal Scientific Reports found that from 2016 to 2021, each US dollar worth of mined bitcoin market value also caused 35 cents worth of climate damage. This is comparable to the beef industry which causes 33 cents per dollar, and the gasoline industry which causes 41 cents per dollar. Compared to gold mining, "Bitcoin's climate damage share is nearly an order of magnitude higher" according to study co-author economist Andrew Goodkind. [14] [15] [16]

Electronic waste

The total active mining equipment in the Bitcoin network and the related electronic waste generation, from July 2014 to July 2021. Total active mining equipment and electronic waste generation in the Bitcoin network over time.jpg
The total active mining equipment in the Bitcoin network and the related electronic waste generation, from July 2014 to July 2021.

Bitcoins annual e-waste is estimated to be over 30,000 metric tons as of May 2021, which is comparable to the small IT equipment waste produced by the Netherlands. One bitcoin generates 272g of e-waste per transaction. Due to the consistent increase of the Bitcoin network's hashrate, mining devices are estimated to have an average lifespan of 1.29 years until they become unprofitable and need to be replaced. [17] [18] Other estimates assume that a bitcoin transaction generates about 380g of e-waste, equivalent of 2.35 iPhones. [19] Unlike most computing hardware the used application-specific integrated circuits have no alternative use beyond bitcoin mining. [20] [45] [46]

Alternative energy usage

The development of intermittent renewable energy sources, such as wind power and solar power, is challenging because they cause instability in the electrical grid. Several papers concluded that these renewable power stations could use the surplus energy to mine Bitcoin and thereby reduce curtailment, hedge electricity price risk, stabilize the grid, increase the profitability of renewable energy infrastructure, and therefore accelerate transition to sustainable energy and decrease Bitcoin's carbon footprint. [47] [48] [49] [50] [51]

The Mechanicville Hydroelectric Plant in New York State [52] and three hydroelectric power plants in San Pedro de Poás, Costa Rica [53] have reactivated to mine cryptocurrency. According to the owners of the Mechanicville plant, the mining prevented the plant from being dismantled. [52]

Responses

A survey [54] on technologies approached cryptocurrencies' technological and environmental issues from many perspectives and noted the plans of using the methods of unconventional computing and grid computing to make bitcoin both greener and more justified.

Per a 2021 study in Finance Research Letters, "climate-related criticism of Bitcoin is primarily based on the network's absolute carbon emissions, without considering its market value." It argues that the inclusion of Bitcoin in an equity portfolio reduces that portfolio's "aggregate carbon emissions". [43]

Policy to move from proof of work to proof of stake has been compared to policy to move from fossil-fueled to electric cars, with some calling for a ban on PoW. [23]

Bitcoin developers are working on the Lightning Network. The aim is to reduce the energy demand of the network by moving most transactions off the blockchain. [55] [ better source needed ]

Some papers have suggested that cryptocurrencies and other blockchain applications might encourage a transition to a circular economy. [56] For example, token reward models could be used to incentivize individuals to recycle. [57]

Related Research Articles

<span class="mw-page-title-main">Electricity generation</span> Process of generating electrical power

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<span class="mw-page-title-main">Environmental impact of electricity generation</span>

Electric power systems consist of generation plants of different energy sources, transmission networks, and distribution lines. Each of these components can have environmental impacts at multiple stages of their development and use including in their construction, during the generation of electricity, and in their decommissioning and disposal. These impacts can be split into operational impacts and construction impacts. All forms of electricity generation have some form of environmental impact. This page is organized by energy source and includes impacts such as water usage, emissions, local pollution, and wildlife displacement.

<span class="mw-page-title-main">Sustainable energy</span>

Energy is sustainable if it "meets the needs of the present without compromising the ability of future generations to meet their own needs". Most definitions of sustainable energy include considerations of environmental aspects such as greenhouse gas emissions and social and economic aspects such as energy poverty. Renewable energy sources such as wind, hydroelectric power, solar, and geothermal energy are generally far more sustainable than fossil fuel sources. However, some renewable energy projects, such as the clearing of forests to produce biofuels, can cause severe environmental damage. The role of non-renewable energy sources in sustainable energy has been controversial. Nuclear power is a low-carbon source whose historic mortality rates are comparable to wind and solar, but its sustainability has been debated because of concerns about radioactive waste, nuclear proliferation, and accidents. Switching from coal to natural gas has environmental benefits, including a lower climate impact, but may lead to a delay in switching to more sustainable options. Carbon capture and storage can be built into power plants to remove their carbon dioxide emissions, but is expensive and has seldom been implemented.

Proof of work (PoW) is a form of cryptographic proof in which one party proves to others that a certain amount of a specific computational effort has been expended. Verifiers can subsequently confirm this expenditure with minimal effort on their part. The concept was invented by Moni Naor and Cynthia Dwork in 1993 as a way to deter denial-of-service attacks and other service abuses such as spam on a network by requiring some work from a service requester, usually meaning processing time by a computer. The term "proof of work" was first coined and formalized in a 1999 paper by Markus Jakobsson and Ari Juels.

<span class="mw-page-title-main">Bioenergy</span> Energy made from recently-living organisms

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<span class="mw-page-title-main">Greenhouse gas emissions</span> Sources and amounts of greenhouse gases emitted to the atmosphere from human activities

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<span class="mw-page-title-main">Coal-fired power station</span> Type of thermal power station

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<span class="mw-page-title-main">Fossil fuel phase-out</span>

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<span class="mw-page-title-main">Environmental impact of the energy industry</span>

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<span class="mw-page-title-main">Variable renewable energy</span> Class of renewable energy sources

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<span class="mw-page-title-main">Cryptocurrency</span> Encrypted medium of digital exchange

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<span class="mw-page-title-main">Energy transition</span> Renewable energy replacing fossil fuels

The energy transition is the process of downshifting fossil fuels and re-developing whole systems to operate on low carbon energy sources. More generally, an energy transition is a significant structural change in an energy system regarding supply and consumption. The current transition to sustainable energy is largely driven by a recognition that global greenhouse-gas emissions must be brought to zero. Since fossil fuels are the largest single source of carbon emissions, the quantity that can be produced is limited by the Paris Agreement of 2015 to keep global warming below 1.5 °C. Over 70% of our global greenhouse gas emissions result from the energy sector, for transport, heating, and industrial use. Wind power and solar photovoltaic systems (PV) have the greatest potential to mitigate climate change. Since the late 2010s, the renewable energy transition is also driven by the rapidly increasing competitiveness of both. Another motivation for the transition is to limit other environmental impact of the energy industry.

<span class="mw-page-title-main">Bitcoin network</span> Peer-to-peer network that processes and records bitcoin transactions

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<span class="mw-page-title-main">Renewable energy in Turkey</span>

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<span class="mw-page-title-main">Climate change in Malaysia</span> Impact of global warming on the south-east Asian country and mitigating and adaptating to it

Climate change is having a considerable impact in Malaysia. Increasing temperatures are likely to greatly increase the number of heatwaves occurring annually. Variations in precipitation may increase the frequency of droughts and floods in various local areas. Sea level rise may inundate some coastal areas. These impacts are expected to have numerous environmental and socioeconomic effects, exacerbating existing environmental issues and reinforcing inequality.

<span class="mw-page-title-main">Greenhouse gas emissions by China</span> Emissions of gases harmful to the climate from China

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Further reading