When we talk about cryptocurrencies, Bitcoin dominates the headlines. The harbinger of the crypto-era debuted in 2009 and is still by far the most popular currency. However, there is a dark side to it. Bitcoin’s energy consumption is off the charts and each transaction consumes more energy than countries like Sweden or the Netherlands. Here are 8 Bitcoin facts that will help you understand why this cryptocurrency is so bad for the environment.
Cryptocurrencies are virtual currencies that can be traded or used to buy goods and services. Bitcoin is the first and currently the world’s largest digital currency and it has triggered the launch of hundreds of other cryptos in its wake. It is decentralised, meaning that it operates free of any central control or the oversight of banks or governments and instead relies on peer-to-peer technology to facilitate instant payments. Transactions are verified by individuals called ‘miners’ through high-powered computers. An increasing number of more traditional finance firms are investing heavily in the Bitcoin market, acknowledging some of its advantages such as high accessibility and proven security. Despite its popularity, Bitcoin has a dark side: its massive carbon footprint. Here are 8 Bitcoin facts to understand why this cryptocurrency is so bad for the environment.
1. The Value of Cryptos and Bitcoins Has Skyrocketed
Cryptocurrencies became popular in 2019 when pseudonymous developer Satoshi Nakamoto launched Bitcoin, the first decentralised cryptocurrency. Since its debut, the total cryptocurrency market cap has reached over USD$3 trillion. In 2021, the price of Bitcoin has reached an all-time high, exceeding USD$65,000 in value.
Figure 1: Bitcoin Market Price in USD$, 2009-2022
2. Creating Bitcoin is a Very Intricate Process
New Bitcoins are created through a process called mining, which consists of solving mathematical puzzles. As competition for this cryptocurrency grew, these puzzles became increasingly difficult, making it impossible to solve them with normal computers (CPUs). Miners now use much more efficient computers called ASIC systems, which require a substantially higher amount of electricity to work. Bitcoin also uses a software code, known as Proof of Work (PoW), that necessitates the use of massive computer arrays to validate and secure the ever-growing number of transactions worldwide.
3. Bitcoin Data Centres are Huge and Expensive to Run
Bitcoins are created in massive data centres, often referred to as ‘mining farms’. They consist of thousands of ASIC servers that cost anywhere from a few hundred dollars up to about USD$10,000. These servers are typically kept running incessantly as they are continually mining for Bitcoins. It is imperative to have massive cooling systems in mining farms to prevent servers from overheating. This, however, significantly increases the electricity costs associated with running these massive data centres.
4. Bitcoin Mining Requires Huge Amounts of Electricity
Bitcoins require massive amounts of energy. Each transaction uses around 2,100 kilowatt-hours, equivalent to what the average US household consumes in two months.
Furthermore, Bitcoin mining uses on average 91 terawatts-hours of electricity annually, a rate nearly seven times higher than that used to power Google searches worldwide and about 0.5% of the world’s electricity. In a year, countries like Finland, Sweden, the Netherlands, and Greece use roughly the same amount of energy. Furthermore, the fragile energy grids of some countries are threatened by crypto mining as they struggle to handle the power-intensive process. Several cities in Iran, Kazakhstan, as well as Kosovo, have often experienced long blackouts due to Bitcoin mining activities.
5. The Environmental Footprint of Bitcoins is Concerning
According to estimates, Bitcoin emits some 57 million tons of carbon dioxide annually, nearly half a ton of CO2 for every transaction. Offsetting such a huge amount of emissions would require planting 300 million trees. Furthermore, a 2018 study published in Nature Climate Change suggested that in 16 to 22 years’ time, the use of Bitcoin alone could push the world beyond the 2 degree Celsius warming threshold for climate catastrophe.
6. Some Countries Banned Bitcoin or Even Cryptocurrencies Altogether
Nine countries currently have a full ban on cryptocurrencies: Algeria, Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar, and Tunisia. While many governments cited environmental concerns to justify their decision, many believe that these moves come as a way to protect their financial systems. Following China’s ban on Bitcoin, many operations moved to the US. Kentucky is by far the state that produces more carbon from cryptocurrency mining than any other, currently providing 18.7% of Bitcoin’s collective computing power for mining, second to New York’s 19.9%.
7. Most Bitcoin Farms Worldwide Rely on Fossil Fuels
Bitcoin farms are often located in countries that heavily rely on fossil fuels, such as Kazakhstan, Iran, and Kosovo, raising concerns among environmentalists. Here, the already energy-intensive process has an even higher environmental impact than in countries that diversify their energy sources using renewables or even nuclear energy. In the US, Bitcoin miners often revive polluting coal plants that are on the verge of bankruptcy, accounting for a huge rise in emissions and threatening a partial resurrection of coal in the country. Others are using fracked gas, another energy source that is responsible for heating the planet.
8. What Alternatives Do We Have to Bitcoin and Are These Any Better?
The short answer is yes. There are so many better alternatives to the world’s most well-known cryptocurrency. On average, other cryptos use 99% less electricity than Bitcoin. According to a recent campaign launched by Greenpeace with the slogan ‘Change the Code, not the Climate’, a simple change in Bitcoin’s software code could significantly decrease the energy it requires to be created and used. If this were to happen, it would not be the first time: one of Bitcoin’s main competitors, Ethereum, recently announced its transition to a less energy-intensive code, cutting its electricity usage by 99.9% and drastically reducing its impact on the environment.