Cryptocurrency mining, essentially the Bitcoin industry, consumes more electricity annually than countries like Switzerland, Argentina, or Finland. This is according to a recent analysis conducted by the Cambridge Centre for Alternative Finance (CCAF) and reported by the BBC.
The cryptocurrency mining process consumes a lot of electricity. The machines and servers responsible for mining or extracting Bitcoin are connected to a large cryptocurrency network. Their task is to verify each transaction made by people sending or receiving currencies, a process that involves solving complex algorithms and mathematical puzzles.
To increase their profits, miners connect more and more computers, aiming to boost their chances of obtaining Bitcoin. Since these devices work day and night to solve the puzzles, electricity consumption is extremely high.
According to university researchers, this Bitcoin mining process uses around 121.36 terawatt-hours (TWh) of electricity per year, setting a consumption record that has a significant environmental impact.
Bitcoin pollution: Carbon footprint vs high electricity consumption.
There is a significant difference between carbon footprint and high energy consumption, with carbon footprint understood as “the total amount of greenhouse gases emitted directly or indirectly by an individual, organization, event, or product,” measured with an indicator under this name.
According to a report published by the cryptocurrency-focused site Digiconomist, the carbon footprint of Bitcoin mining exceeds 17,000 kilotons of CO2 per year. This figure is significantly higher than the annual carbon dioxide emissions in 2015 of countries like Lithuania or Slovenia and exceeds the CO2 emissions of Spanish regions such as Aragon and the Basque Country in the same year.
Digiconomist also estimates that the current electricity consumption for Bitcoin mining surpasses that of countries like Denmark, Belarus, and Bulgaria, accounting for more than 15% of Australia’s consumption, 10% of the United Kingdom’s, and over 25% of the Netherlands’.
Moreover, if the transaction volume per second rises to 400—equivalent to just one-fifth of what Visa generates—the mining process would consume 30,582 megawatts of electricity per month. This amount of energy consumption exceeds the electricity supply of many European countries.
Some experts warn of the need to curb this upward trend in electricity consumption to mine the currency. While Bitcoin’s system is decentralized, it must improve its reward mechanism and mining processes to become more energy-efficient and reduce its global carbon footprint.
Bitcoin mining with renewable energy
Nic Carter, founder of the blockchain-focused venture capital firm Castle Island Ventures, argues that while it is true that most of the electricity produced comes from fossil fuels such as coal, gas, or oil, some renewable energy sources (such as wind, hydroelectric, or nuclear energy) are also used.
For instance, in China, there are miners who take advantage of excess hydroelectric power from dams to generate Bitcoins. If this energy were not used, it would simply go to waste.
Another example involves certain miners capturing flared or vented methane (a byproduct of oil extraction) and using it to generate the electricity their computers need.
Bitcoin mining is already partly green
A comparative study recently published by the University of Cambridge reveals a surprising statistic, stating that as of today, 76% of cryptocurrency miners use electricity from renewable energy sources as part of their energy mix.
The study found that over 39% of the total energy consumed by PoW (Proof of Work) coins, including BTC (Bitcoin), ETH (Ethereum), and BCH (Bitcoin Cash), comes from green energy sources.
Additionally, it identifies hydroelectric power as the most commonly used source by miners, accounting for nearly 62%. Gas and coal rank second and third, with 38% and 36%, respectively. Other sources like wind, solar, and oil are also widely utilized by crypto miners.
Finally, the report breaks down energy consumption by region, noting that miners in Asia, Europe, Latin America, and North America use a similar percentage of hydroelectric power compared to electricity from other sources such as natural gas, wind, and oil.
Other alternatives and “green” projects
- Victor García Font, professor at UOC and an expert in computer science, states that there are ways to reduce high energy consumption by promoting more equitable foundations in crypto production. This could be achieved by following the example of Ethereum, a cryptocurrency that implements an algorithm based on Proof of Stake. In this model, miners of this digital currency deposit a predetermined monetary amount to gain access to generating new encrypted code.
According to the professor, this model “uses almost no energy” because it does not encourage wasting a large volume of energy during production, as miners operate under equal conditions.
- On the other hand, the Winklevoss brothers, creators of Gemini (Exchange), in partnership with the nonprofit organization Climate Vault, purchased permits for nearly 350,000 metric tons of carbon to help offset Bitcoin’s environmental footprint. Additionally, the company Greenidge Generation announced that it would offset the CO2 emissions of its 7,000 ASIC devices used for Bitcoin mining.
- Another country undergoing an energy transition in Bitcoin mining is El Salvador, which has created Bitcoin mining centers adjacent to facilities generating geothermal energy from volcanic activity. The goal is to power the machines with this 100% clean, renewable, and very affordable energy. So far, they have managed to produce 200 euros worth of Bitcoin.
Companies sign agreement to generate 100% renewable cryptocurrencies
In October 2021, RMI, Energy Web, and the Alliance for Innovative Regulation announced the “Crypto Climate Accord.” This project, inspired by the Paris Agreement, aims to decarbonize the cryptocurrency mining industry in record time by using 100% clean energy.
The agreement’s goals include ensuring that all blockchains worldwide operate with 100% renewable energy by 2025. Additionally, it seeks to achieve zero pollutant emissions in the cryptocurrency industry, along with off-blockchain business operations, by 2040.
So far, over 20 individuals and companies from the digital currency, technology, energy, finance, and climate sectors have signed the agreement.
The key strategies involve changing algorithms to significantly reduce energy consumption, as the current model is not scalable, and ensuring that the energy used comes from renewable sources. This would reduce the environmental impact of cryptocurrencies as much as possible. If these measures are implemented, the digital currency world would cause less harm to the planet, but it requires a global effort. Undoubtedly, the mission is challenging, as many states that carry out numerous transactions still have not implemented the necessary measures.