So, how much energy does Bitcoin mining actually consume, and is it really harmful to the environment? These questions, it turns out, keep some people awake. Let’s figure it out together.
As the description of Bitcoin says on Coinmarketrate.com when people mine BTC, they are actually updating the registry, a transparent ledger of transactions known as the blockchain. Solving complex cryptographic puzzles gives them a chance to receive a reward in the form of brand new Bitcoins if they come to a solution before others. This is the nature of the Proof-of-Work (PoW) consensus mechanism used in Bitcoin.
PoW provides decentralized network security because it does not depend on intermediaries or a single point of failure. However, solving these complex puzzles is a very energy-intensive process, and as the price of Bitcoin rises, competition in the mining market increases.
That is why mining complexes for Bitcoin mining began to appear all over the world – giant “farms” filled with computers. These farms allow people to increase the hashrate (the higher the hashrate, the more chances they have to get to the solution first). Of course, this also means that Bitcoin’s electricity consumption is increasing.
The main concern of environmentalists here is that mining may become less effective as cryptocurrency prices rise. If prices continue to rise, the network will need more computing power and energy to process the same number of transactions.
In addition, in addition to the energy consumption of Bitcoin, mining can also generate a significant amount of electronic waste. This is especially true for application-oriented integrated circuits (ASICs) – specialized equipment used for mining the most popular cryptocurrencies. Unlike other computer equipment, ASICs cannot be used for any other purpose, which means they quickly become obsolete.
Improving the efficiency and profitability of mining
When people decide to become miners, they take into account the costs of hardware, software, Internet connection and electricity.
Now, when several Bitcoin cycles have already been completed, people are trying to maximize the profit from mining. That’s why many people move to other countries to become miners. People are looking for a cooler climate, high-speed Internet and places with a lower cost of electricity.
Having found the right balance between all these factors, they find ideal places for mining, including Russia, Georgia, Estonia, Canada, the USA and other countries. This allows you to maximize profits and balance losses.
Comparison of Bitcoin’s Energy Consumption
OK, we know that BTC mining consumes a lot of electricity, but how much energy does Bitcoin actually consume?
To put the situation in perspective, let’s look at it in the context of countries and see how many terawatt hours (TWh) it will consume annually:
According to a BBC report, Bitcoin consumes about 121.36 TWh per year — that’s more than the whole of Argentina or Sweden consumes. Despite the relatively small consumption compared to such energy powers as China and the United States, this cannot go unnoticed.
However, it is important to note that Bitcoin’s energy consumption is not equivalent to carbon dioxide emissions. For example, one unit of hydroelectric energy has a much smaller impact on the environment than the same unit of energy produced from coal.
In addition, the Bitcoin network consumes less than 10% of what traditional banking systems use. However, it is also important to understand that the banking system widely serves billions of people.
Bitcoin can Use Different Types of Energy
We must remember that BTC miners are not geographically fixed, which allows them to go where there is additional energy. In other cases, the energy must be produced close to the end users. Bitcoin has no such limitation, which allows it to rely on various types of energy.
The combination of various energy sources used by BTC miners is called the energy balance. It is very simple to find out the energy consumption of Bitcoin: you can look at the BTC hashrate, and make an educated guess based on this. However, carbon dioxide emissions are a completely different story. To determine this, we will need the exact composition of the energy, which is difficult to obtain. Miners, as a rule, do not spread much about their activities, and estimates of what percentage of Bitcoin mining uses renewable energy sources vary greatly.
In addition, transaction confirmation consumes less energy than mining. After the coin is mined, the energy requirements decrease dramatically, so it is even more difficult to make an accurate conclusion about how much energy mining actually consumes.
Another point that complicates the calculation of carbon emissions is that there are Bitcoin mining enterprises, and they really use clean and renewable energy. Take El Salvador as an example. La Geo, a state-owned geothermal electric company, has announced that they have begun exploring the possibility of mining Bitcoins using the energy of their volcanoes. They are working directly with the President of El Salvador to “develop a plan to provide mining opportunities using very cheap, 100% clean, 100% renewable energy with zero emissions” from their volcanoes. Well, you’ve probably heard about the miracle city.
At the same time, miners from El Salvador are not the only ones who are exploring clean energy. A Russian data center located at a remote facility in Siberia uses cheap excess energy from dams to mine Bitcoin. This data center has also built other facilities in regions with nearby renewable energy sources and excess electricity. It is estimated that the share of these mining enterprises in Russia, operating on hydroelectric power plants, accounts for 7% of the world’s production of military-technical equipment.
Another promising area for zero-carbon mining is the burning of natural gas. In the process of oil production, a significant amount of natural gas is released as a by-product. This incinerated natural gas is, in fact, energy that pollutes the environment. However, it is wasted because it never gets into the network. Since this type of energy is concentrated in remote oil platforms, more traditional applications cannot use it.
Since miners are not tied to geographical coordinates, this alternative can be a way to solve a common problem – an overabundance of energy.
A greener future
Despite the huge energy consumption of Bitcoin, many believe that mining will have a greener future. As a result, both BTC and blockchain technology attract both retail and institutional investors at the corporate level.
As the popularity of cryptocurrencies grows, many are likely to turn to the question of Bitcoin’s carbon footprint again. However, this is not necessarily a bad thing. The more people realize this problem, the more they start thinking about solving it.
Currently, the specific data is a little vague, and the readings are a little inaccurate, some miners are not as frank about their activities as they would like, and cryptocurrency skeptics are blowing a molehill out of a molehill.
Against the background of all this, one thing can be said with certainty: there are many more interesting things in this story. As BTC goes live, we will learn more and see how people can further improve the system. Who knows? Perhaps we are moving into a future where cryptocurrencies will be mined only with the help of clean energy.
