How To Turn Bitcoin Green

How To Turn Bitcoin Green
Milou Beunk

over 2 years ago4 mins

  • Bitcoin mining is energy intensive if you consider the so far limited use of the cryptocurrency in the real economy.

  • There are innovative ideas on how to improve that but those might take a while to catch on.

  • So meanwhile, eco-minded investors might need to think again before investing in bitcoin.

Bitcoin mining is energy intensive if you consider the so far limited use of the cryptocurrency in the real economy.

There are innovative ideas on how to improve that but those might take a while to catch on.

So meanwhile, eco-minded investors might need to think again before investing in bitcoin.

Mentioned in story

What’s going on here?

Tesla’s pro- then anti-bitcoin stance this year has reignited the debate around the OG cryptocurrency’s environmental impact. The consensus is that bitcoin mining consumes a lot of energy and you may well wonder how bitcoin’s intensive energy consumption can be reconciled with many investors’ aspirations to help tackle climate change through the power of their portfolios. I thought now would be a good time to investigate the cryptocurrency’s current green credentials (or lack thereof) and explore what the prospects are of bitcoin mining becoming more eco-friendly in the future.

What does this mean?

Concerns about bitcoin’s energy demands are nothing new: pioneering cypherpunk (and first-ever bitcoin recipient) Hal Finney worried about its emissions way back in 2009, the same year the cryptocurrency was first created.

Hal Finney's 2009 tweet about bitcoin's emissions.
Source: Twitter

It’s important to be clear what bitcoin mining’s all about. This is the process by which both new bitcoins are created and the network’s most recent transactions are verified. Computers check a megabyte’s worth of transactions while also competing to crack the combination to a mathematical lock, with the first to do so – and thereby add the “block” of transactions to the “blockchain” – winning a few (currently 6.25) new bitcoins.

The code is cracked, and the bitcoin mined, once every ten minutes. In order to keep that rate stable, the problem’s difficulty varies depending on how much computing power is being thrown at it. In 2011, you could mine bitcoin with an average laptop. Now, however, only the most powerful and power-hungry computers stand a chance. This means that as bitcoin gets more valuable, the computer effort expended in creating it and the energy the network consumes inevitably increase.

It's unclear exactly how much energy bitcoin mining uses. Cryptocurrencies are, after all, hard to track by design – and the studies that have attempted estimates have reached differing conclusions. The Cambridge Centre for Alternative Finance (CCAF), for example, found that bitcoin's current energy consumption is somewhere between 40 and 475 terawatt hours per year (TWh), with a central estimate of about 140 TWh.

If bitcoin were a country, that would make it the 27th-most electricity-consuming one in the world. Tech news site Digiconomist’s closely tracked index, meanwhile – which puts consumption closer to 90 TWh – would still mean bitcoin uses more power than all of Finland.

Annualized footprints of Digiconomist’s estimate for bitcoin’s energy use
Annualized footprints of Digiconomist’s estimate for bitcoin’s energy use (Source: Digiconomist)

What’s more, even though the majority of miners use renewable energy to some extent, both CCAF and Digiconomist reckon about two thirds of the energy bitcoin consumes is generated by fossil fuels.

The flipside of this argument is that bitcoin’s climate footprint is still small compared to other digital industries or the banking sector. But those activities are, for now at least, more widely used by the global population – while bitcoin remains mainly a speculative investment rather than, say, a mainstream medium of exchange.

Why should I care?

With a growing awareness of the climate crisis going hand in hand with a desire to make investment more sustainable, it makes sense to be mindful about the assets you’re choosing to support.

There may be ways to make bitcoin mining more environmentally friendly. For starters, the energy that it uses could come from more renewable sources – or perhaps explicitly exploit excess production, rather than diverting power supply often required for people’s day-to-day existence.

The big challenge with energy is getting it where it’s needed most. There are limits to how far you can transport electricity from both practical and economic points of view – but bitcoin mining could theoretically be located anywhere in the world, using energy sources that are simply going to waste today. Some ad-hoc projects are already being carried out: running mining machines, for example, on byproducts of oil and gas production that would otherwise be burned.

A few progressive thinkers take this one step further, asking whether the infrastructure built to mine bitcoin in isolated places could form the basis for human settlements close to cheap and clean energy sources. Bitcoin wouldn’t just move power to the people, but move people to the power.

Any such reality is likely at least a few decades away. More feasibly forward-thinking, however, is the project started in Sweden by cryptocurrency firm Genesis Mining. It’s trying to recycle the heat generated by its bitcoin-mining computers for use in greenhouses.

So what should you make of all of this? In my opinion, bitcoin mining remains pretty energy intensive and environmentally damaging, especially considering the cryptocurrency’s currently limited use in the real economy. There are innovative ideas out there about how to improve that in the future, but these are only likely to be explored in earnest if bitcoin finds a more established place in society. Until then, eco-minded investors might want to think again before investing.

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