Does Bitcoin Mining Have a Disastrous Impact on the Environment?

Cryptocurrency now utilizes as much electricity as Argentina but analysts assert technology will soon be mainly powered by renewable energy. Bitcoin has risen from a fringe technology well known with cryptographers in little over a decade, to the ninth most valuable asset in the world by market cap.

Energy Demands of Bitcoin

The dramatic ascent of cryptocurrency has made millionaires, reinterpret money, and launched an industry worth multi-billion dollars inspired by its revolutionary decentralised technology. But it has also brought some undesired side effect with it. The computing power needed to support the underlying network of bitcoin now requires almost as much energy as the whole country of Argentina, thereby causing criticism about its environmental footprint.

Analysis made by the University of Cambridge proposes the bitcoin network uses over 121 terawatt-hours (TWh) yearly, which would rank it in the top 30 consumers of electricity all over the world had it been it was a country. The demands of energy have been stoked up by the surging cost of bitcoin in recent months, which has seen it increase from below £3,600 ($5,000) last March to almost $50,000 today.

Concerns about the energy demands of bitcoin have been present since the very beginning, with Hal Finney, a crypto pioneer tweeting about possible future CO2 emissions on the 27th of January 2009 - just about two weeks after he received the first ever bitcoin transaction from the cryptocurrency's pseudonymous creator Satoshi Nakamoto.

Bitcoin DNA

The amount of energy consumed by bitcoin's network did not increase to serious prominence until 2017, when a great price rally extremely pushed up its energy requirements to the level of a small country. As the market cooled off in some years after, so did the energy demands, but the most recent all-time high hit during the middle of May is higher than double that of three and a half years ago. And this time its energy needs are even much greater.

CEO of leading cryptography firm IOHK, Charles Hoskinson, said to The Independent: "Since the start of its last peak in 2017, the energy consumption of Bitcoin has more than quadrupled and it is set to get worse due to the fact that energy inefficiency is built into the DNA of bitcoin." He added that Bitcoin's carbon footprint will get drastically worse because the more its price increase, the more the competition for the currency. It then tends to consume more energy.

Environmental Impact of Bitcoin

Bitcoin's environmental impact is aggravated by the fact that most miners are based in China, where more than two-thirds of power is from coal.

The mining process needed to create new units of the cryptocurrency has to do with solving complicated but arbitrary mathematical equations, which presently requires large amounts of computer processing power. Therefore Bitcoin miners move to where electricity is very cheap, implying the fundamental issue is not with bitcoin but with an absence of cheap renewable energy production.

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