Is Bitcoin (mining) bad for the environment?


Bitcoin has been a hot topic in recent years. However, as the cryptocurrency gains more attention, concerns about its impact on the environment have also emerged.

One of the most significant environmental concerns associated with Bitcoin is its mining process. This article will explore the question of whether Bitcoin mining is bad for the environment and examine the potential consequences of this process on our planet.

How Bitcoin mining consumes energy

The process of Bitcoin mining, which is central to the functioning of the blockchain network, is often criticized for being energy-intensive.

Bitcoin mining involves a decentralized network of computers around the globe, which secure the blockchain, the virtual ledger that documents cryptocurrency transactions. These computers, or 'miners', contribute their processing power to maintain and secure the blockchain. In return, they are rewarded with new bitcoins, creating a self-sustaining cycle.

In order for miners to earn the right to create the next block in the chain, they need to run a computational race against other miners. This race involves repeatedly running a proposed block through a hash function — making a slight change each time — until it gets the desired result. Whoever gets there first gets to be next in line to create a block and this restarts the race.

Bitcoin miners use electricity to power computers — known as ASIC miners — that crunch these hash functions over and over again. If they have more machines, they are more competitive against other Bitcoin miners and may be able to take home a larger percentage of the rewards that are handed out.

It's important to note that the energy consumption stems from mining new blocks on the blockchain, not from individual transactions.

How Bitcoin mining has grown over time

As long as the electricity cost of mining a Bitcoin is below the price of a Bitcoin, then there will be an incentive for more miners to join the network — or for existing miners to expand their operations.

Over time, as bitcoin's price has risen and miners have ramped up their operations, the amount of computing power used to mine bitcoin has increased.

In general, this reflects an increasing amount of energy usage. That said, newer mining machines are more efficient and can crunch more hashes with the same amount of energy. Plus, this doesn't correlate directly with carbon emissions because it depends on whether miners are using renewable or non-renewable energy.

Understanding the energy consumption of Bitcoin mining

There has been a lot of debate over how bad Bitcoin mining is because it depends on the types of energy used for mining operations — and this data isn't public.

But there have been a few reports that have looked into where Bitcoin mining is mostly located and the typical energy use of those areas, creating estimates of how much of the network is using renewable energy.

The Cambridge Bitcoin Electricity Consumption Index estimates that the Bitcoin network uses 120 terawatt-hours — 120 million megawatt-hours — of electricity per year. It estimates that this produces around 61 million tonnes of carbon dioxide equivalent (MtCO2e) per year. Its best guess is that around half of the energy used is renewable.

The Index is based on average energy usages for given locations, as opposed to information from mining companies about what types of electricity they use. It is also based on electricity profiles for given areas, which it notes are updated infrequently. Plus it doesn't account for any activities that miners use that reduce their carbon emissions, such as flare-gas, waste head recovery or carbon offsetting.

In January 2023, the Bitcoin Mining Council released a report based on information about Bitcoin mining electricity use provided from 53 mining companies that represented 48% of the network's hash rate at the time. It claimed that miners use about 175 terawatt-hours of energy per year — based on data from Q4 2022. The miners polled said 64% of their energy mix came from renewable sources.

Disclaimer: This article was produced with the assistance of OpenAI’s ChatGPT 3.5/4 and reviewed and edited by our editorial team.

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