The author discusses several common misconceptions surrounding the Bitcoin sustainability debate, and ultimately argues that it’s up to the crypto community to acknowledge and address environmental concerns, work in good faith to reduce Bitcoin’s carbon footprint, and ultimately demonstrate that the societal value that Bitcoin provides is worth the resources needed to sustain it.
How much energy does an industry deserve to consume? Right now, organizations around the world are facing pressure to limit the consumption of non-renewable energy sources and the emission of carbon into the atmosphere.
According to the Cambridge Center for Alternative Finance , Bitcoin currently consumes around 110 Terawatt Hours per year — 0.55% of global energy production, or roughly equivalent to the annual energy draw of small countries like Malaysia or Sweden.
If you believe that Bitcoin offers no utility beyond serving as a ponzi scheme or a device for money laundering, then it would only be logical to conclude that consuming any amount of energy is wasteful.
Understanding Bitcoin’s energy consumption may not settle questions about its usefulness, but it can help to contextualize how much of an environmental impact Bitcoin advocates are really talking about making.
While determining energy consumption is relatively straightforward, you cannot extrapolate the associated carbon emissions without knowing the precise energy mix — that is, the makeup of different energy sources used by the computers mining Bitcoin.
Furthermore, many high profile analyses generalize energy mix at the country level, leading to an inaccurate portrait of countries such as China, which has an extremely diverse energy landscape.
In December 2019, one report suggested that 73% of Bitcoin’s energy consumption was carbon neutral, largely due to the abundance of hydro power in major mining hubs such as Southwest China and Scandinavia.
Another key factor that makes Bitcoin’s energy consumption different from that of most other industries is that Bitcoin can be mined anywhere.
These regions most likely represent the single largest stranded energy resource on the planet, and as such it’s no coincidence that these provinces are the heartlands of mining in China, responsible for almost 10% of global Bitcoin mining in the dry season and 50% in the wet season.
But Bitcoin miners from North Dakota to Siberia have seized the opportunity to monetize this otherwise-wasted resource, and some companies are even exploring ways to further reduce emissions by combusting the gas in a more controlled manner.
To be fair, the monetization of excess natural gas with Bitcoin does still create emissions, and some have argued that the practice even acts as a subsidy to the fossil fuel industry, incentivizing energy companies to invest more in oil extraction than they otherwise might.
Regions with the capacity to produce more energy than could be consumed locally, such as Iceland, Sichuan, and Yunnan, became net energy exporters through aluminum — and today, the same conditions that incentivized their investment in smelting have made those locations prime options for mining Bitcoin.
As such, simply looking at Bitcoin’s total energy draw to date and dividing that by the number of transactions doesn’t make sense — most of that energy was used to mine Bitcoins, not to support transactions.
This was the premise of a widely-reported 2018 study that was recently cited in the New York Times, making the shocking claim that Bitcoin could warm the earth by two degrees Celcius.
At the same time, many organizations within the mining industry have launched initiatives like the Crypto Climate Accord — inspired by the Paris Climate Agreement — to advocate for and commit to reducing Bitcoin’s carbon footprint.
Today, miners receive small fees for the transactions that they verify while mining , as well as whatever profit margins they can get when they sell the bitcoins they have mined.
However, the protocol is built to halve the issuance-driven component of miner revenue every four years — so unless the price of Bitcoin doubles every four years in perpetuity combined with users’ finite tolerance for paying fees limit the growth potential of this as a revenue source.
As with every other energy-consuming industry, it’s up to the crypto community to acknowledge and address these environmental concerns, work in good faith to reduce Bitcoin’s carbon footprint, and ultimately demonstrate that the societal value Bitcoin provides is worth the resources needed to sustain it.