With the state of the public debate around bitcoin mining, non-fungible tokens and the energy consumption that goes into them, it’s fair to say cryptocurrencies have had a rough ride when it comes to recent scrutiny of their environmental impact.
Recent headlines in the New York Times and other media outlets have decried the large energy cost of bitcoin mining, which requires complex computational power and is vital to the security of the Bitcoin blockchain. As the original cryptocurrency’s price reaches new highs and institutional investors wade into bitcoin, the security of its trillion-dollar market cap and the industry around it is more important than ever. On the other hand, it’s certainly justifiable also to have a debate about the energy cost of mining bitcoin and the carbon emissions that result from it.
But the current debate largely falls into two categories. One is focused on the energy costs and what may be done (or not) to mitigate them. The other is on refuting those claims, diving into the minutia of energy consumption, scale and the vast array of complexities that are electrical grids, mining equipment and well, bitcoin, generally.
Both of these focal points are essential but what’s missing is a situating of bitcoin mining and energy in a larger context. Not only does this mean considering what energy costs the status quo seemingly sees as inherently necessary and valuable, but also recognizing there are ripple effects from bitcoin that go well beyond the “number go up” price watchers and gawkers, and extend to asking fundamental questions about the organization of the world today.
“When looking at bitcoin and comparing its energy use to all of Argentina for example, what, to me, that should do is compel the next question, which is, what’s the energy consumption of the Internet of Things (IoT) or even [artificial intelligence]. What are the other large, computationally driven practices that are becoming more and more prevalent in our everyday lives?” said Bill Maurer, director, Institute for Money, Technology and Financial Inclusion at the University of California, Irvine, in a call.
In essence, in a world with finite resources and energy, how does bitcoin fit?
The question is one of bitcoin and how we ascribe value, but also of everything else such as all the processes of our lives that we take for granted or as a matter of settled fact. The question isn’t just about bitcoin but about the human rights, political and environmental impacts of it versus its counterparts.
The energy costs
Bitcoin mining’s energy costs are high relative to most comparisons people make. As noted, it’s been compared to the entire country of Argentina.
“The reason that bitcoin mining has been discussed much in research and the media is because its energy consumption is significant,” said Susanne Köhler, a researcher at Aalborg University in Denmark who has conducted life-cycle analysis of blockchain technology. “Bitcoin’s energy consumption is approaching that of all data centers globally. In 2020, electricity consumption of bitcoin mining was estimated between 0.1 and 0.3% of the global electricity use. With updated numbers it could be closer to 0.69%.”
Köhler goes on to say that the energy consumption of bitcoin mining is significant and has been growing over the past years. She said if miners are serious about reducing the energy consumption of bitcoin mining, switching to a different consensus mechanism is the obvious step to take and that she was unaware of any other approach that would lead to a comparable reduction of the energy consumption. Data from miners would also be desirable for assessing the environmental impacts related to bitcoin mining.
CoinDesk Research today published an expansive report on the wide-ranging environmental impacts of bitcoin mining titled “Does Bitcoin Have an Energy Problem?” in which its author, research associate George Kaloudis, addresses a wide array of energy concerns.
Kaloudis said bitcoin uses a relatively clean energy mix and there is meaningful investment into renewable-powered bitcoin mining. Kaloudis points out around 40% of mining energy is renewable and just over three-quarters of miners use renewables in their energy mix. By comparison, he said, the world by comparison uses around 20% renewable energy.
“Bitcoin provides a means to monetize wasted energy, improving the financial standing of energy companies, allowing for…