Bitcoin vs. the Environment
There have been numerous reports that Bitcoin (BTC), as well as other cryptocurrencies, have huge energy and environmental problems.
It's true that Bitcoin does indeed consume a lot of energy, and that energy use is growing annually. However, this might not be as large of an issue as people might actually think.
Before we dive into how Bitcoin has affected the environment thus far, though, let’s go into how all of it works first.
Bitcoin’s Proof-of-Work (PoW) System and How It Impacts Energy Consumption
Proof-of-Work (PoW) is the consensus mechanism used to confirm that the network participants, otherwise known as the miners, calculate valid alphanumeric code, known as hashes, as a means of verifying Bitcoin’s transactions, which get added to the next block within a chain. This is why it is called a blockchain network.
Participants within the network essentially contribute computing power through the usage of graphics processing units (GPUs) or other types of miners to solve complex cryptographic puzzles.
Once these puzzles get resolved, the miner who completes the process gets rewarded with the BTC cryptocurrency token. The reward of BTC tokens undergoes a halving when specific conditions are met.
Bitcoin halving is the process of halving the rewards of mining Bitcoin after each set of 210,000 blocks gets mined. The block reward is currently at 6.25 Bitcoins, and a new block is produced approximately every 10 minutes.
What Bitcoin’s Carbon Footprint Actually Is
In a report published by CoinShares Research, the company made an estimation that the Bitcoin (BTC) mining network emitted a total of 42 megatons, or Mt of carbon dioxide, or CO2 throughout 2021.
This amounts to less than 0.08% of the world’s total emissions of 49,360 Mts of CO2 in the same year. To get to these figures, CoinShares took a variety of estimates regarding the efficiency of the Bitcoin network, its energy use, hardware, and so on, on a global scale.
As such, the report estimate of worldwide CO2 emission is in-line with industry figures. Additionally, the report estimates the total electricity consumption of the Bitcoin network at 89 terawatt-hours (TWh).
Keep in mind that electricity consumption alone isn’t really a true contextual measure of the Bitcoin network's environmental impact.
Elon Musk, which is the CEO of Tesla and SpaceX, reconsidered the usage of Bitcoin for business use in the past due to energy use concerns. According to CoinShares research, approximately 60% of Bitcoin’s mining activity comes from fossil fuels. However, based on this report alone, Bitcoin's overall environmental impact could be considered negligible from a worldwide standpoint.
Note that this is just a single research report, and there are numerous companies out there that have searched and carried on researching the environmental impact of Bitcoin (BTC).
Can Bitcoin mining stabilize electricity grids?
A well functioning electricity grid requires a balance between supply and demand. Issues can arise when either demand is much lower or much higher than supply.
Many believe that Bitcoin fixes this. Bitcoin miners can run at any time of the day, virtually anywhere on the globe, and also shut down at a moment's notice. So, in theory, they could help stabilize electricity grids.
Texas is trying just this. Having suffered volatile price swings for some time, Senator Ted Cruz believes Bitcoin mining can help. This isn't all just theory either, it's happening now.
As a winter storm approaches Texas, Bitcoin miners are shutting down. Riot Blockchain has already shut down 99% of its operations.
How widespread this becomes remains to be seen. But the early signs are promising.
The Industry Issue
The mining industry currently has a very dark image issue. A hearing by the US Committee on Energy and Commercial Staff on "Cleaning up the Cryptocurrency: The Energy Impacts of Blockchain “showcased that many blockchains that use a Proof-of-Work (PoW) mechanism to support their systems require enormous amounts of energy to operate.
A total of 8 Democratic US lawmakers led by crypto critic, Senator Elizabeth Warren, are seeking answers from US-based cryptocurrency mining operations about the power consumption as well as the potential environmental impact of their businesses.
In fact, a series of letters were sent to six crypto mining companies, including Riot Blockchain, Marathon Digital Holdings, Stronghold Digital Mining, Bitdeer, Bitfury Group, and Bit Digital.
The letters ask how much electricity is consumed by the operations and how much carbon is generated as a result, alongside asking the companies if they have any special agreements in place with local power utility providers.
Note that no direct regulatory or legal actions are suggested within the letters. However, the Senators, as well as the Representatives, showcase grave concerns that could lead to such things at some point in the future.
The Bitcoin Image Problem
Galaxy Digital, which is the digital asset company owned by Michael Novogratz, increased its use of renewable energy for crypto mining after accepting that the industry is failing to convince investors of its green credentials. Novogratz said Galaxy Digital has already exceeded its target set six months ago to derive 80% of its crypto mining from renewable energy.
The company is also launching a sustainability program. This is an indication of a push towards getting the message out there that there are mining companies that are environmentally aware of the impact of BTC mining.
Additionally, the Houston-based tech company Lancium is spending $150 million to build Bitcoin miners across Texas, which will run on renewable energy, and the company has plans to launch over 2,000 megawatts of capacity across multiple sites, which Lancium calls “Clean Campuses.”
The Crypto Community
The crypto community have also of course shared their thoughts on the environmental issue. Note that while a lot of them do not share where the data is from, it comes extremely close to the data published by CoinShares Research.
@BlackCarbonn tweeted: “Energy use between Bitcoin and other industries, below charts shows Bitcoin isn’t harmful to the environment. Government just don’t want us win. #El Salvador #Bullish #IndiaWantsCrypto #trading”
Energy use between Bitcoin and other industries, below charts shows Bitcoin isn’t harmful to the environment. Government just don’t want us win. #El Salvador #Bullish #IndiaWantsCrypto #trading pic.twitter.com/Ob2Sua6wNl— 🧑💻 Champagne of Looks 🛸 (@BlackCarbonn) January 27, 2022
@willrcleaver compared the annual CO2 creation of Proton, Ethereum and Bitcoin, comparing how much larger Bitcoin’s CO2 footprint is when compared to altcoins.
Proton creates 230 tons of CO2 per year#Ethereum approx 14,000,000 tons#Bitcoin approx 40,000,000 tons— will.xpr 🤘⚛️ (@willrcleaver) February 2, 2022
So not only is @ProtonXPR fast, user friendly and without #gasfees, we’re also better for the environment.
Kill Fees, Not Trees. ⚛️🤘
@gary_woodfine tweeted “#Bitcoin uses 0.03% of the world’s energy per day.
But remember kids, #bitcoin is bad for the #environment”
It is clear that Bitcoin (BTC) and its Proof-of-Work (PoW) consensus mechanism do indeed have its environmental impact. However, it might not be as big as initially thought, based on various research and analytical data.
While there are other crypto projects out there that use far less energy than Bitcoin, based on the data, it's far from the biggest energy hog on the planet.
You don't have to look far to find many, argubly wasteful uses of electricity. Christmas tree lights and devices left on standby spring to mind. Perhaps our focus should be more on generating abundant clean energy and less on arguing what constitutes waste.
In any case, it is clear that a lot of companies, such as Galaxy Digital and Lancium, are environmentally-aware of the dangers and impact of mining Bitcoin (BTC) and, as such, are taking the proper precautions to reduce the carbon footprint of their mining operations.
Only time will tell how this will all pan out in the future, but for the time being, it is good to see that a lot of companies that specialize in mining are pushing towards greener alternatives.
Additionally, the push from the Democratic US lawmakers might also be a solid development, as the more they can learn about Bitcoin mining operations across a variety of different companies, the more they can push for a greener Bitcoin mining future, assuming it has not been achieved yet by the companies themselves.