Bitcoin mining is more environmentally costly than global beef production according to new US data.
The analysis, published today in Scientific Reports, found that Bitcoin, despite being a non-physical currency, is as physically damaging for the planet as some of the world’s most energy intensive industries, including beef, gas, and crude oil.
This isn’t the first time Bitcoin’s hefty environmental cost has come to light: In 2021, Bitcoin mining’s carbon footprint was estimated to match that of Greater London. In December 2021, Bitcoin had an approximately US$960 billion market value, with a roughly 41% global market share among cryptocurrencies.
The new report presents economic estimates of climate damages from Bitcoin mining between January 2016 and December 2021. The authors report that in 2020, Bitcoin mining used 75.4 terawatt hours per year (TWhyear-1), a higher cumulative energy usage than the whole of Australia or Portugal, at 69TWhyear-1 and 48TWhyear-1 respectively.
The report assesses Bitcoin’s climate impact across three sustainability criteria: whether the estimated climate damages are increasing over time, whether the market price of Bitcoin exceeds the economic cost of climate damages, and how the climate damages per coin mined compare to other sectors and commodities.
The team found that the energy emissions for Bitcoin mining have increased 126-fold, from 0.9 tonnes of emissions per coin in 2016 to 113 tonnes per coin in 2021.
Calculations suggest each Bitcoin mined in 2021 generated US$11,314 in climate damages, with total global damages exceeding US$12 billion – 25% of market price.
When compared with other industries and commodities like beef farming, crude-oil processing and precious metal mining, the authors found that Bitcoin mining, which produced climate damages of about 31% of its market value overall, was less damaging than natural gas and crude oil processing (at 46% and 41% respectively), but more damaging than beef production (33%) and gold mining (4%).
So why is Bitcoin, a non-physical currency, so energy intensive?
“There are a couple of ways to get Bitcoin,” explains Dr Dennis Desmond, a lecturer in cyberintelligence and cyber security at the University of the Sunshine Coast (USC).
“One is you can buy it through an exchange, direct peer to peer transfer, and another way is through mining, which is basically solving mathematical problems in order to approve a transaction.”
These aren’t simple mathematical problems, either.
“When people mine, they’re incentivised to approve the transactions and they receive what are called Satoshis [named after Satoshi Nakamoto, the alias of the mysterious creator of the protocol used in the Bitcoin blockchain], which is the component part of the cryptocurrency,” says Desmond.
“If they perform enough of these consensus approvals, through the solving of mathematical problems, they receive up to four Bitcoins – and with Bitcoin running between 12 grand and 60 grand in the past, you can see the incentive.”
What makes Bitcoin mining so energy intensive is the complexity of these mathematical problems.
“So, you and me running a normal machine and trying to solve these problems are probably not going to be able to compete with, say, an organisation or a nation state running dozens and dozens and dozens of machines to solve the problems.”
That much computing power requires intense volumes of energy. And Desmond says there are massive conglomerates of miners, linking up their machines in vast networks, busy cracking open these equations to access the financial gold inside.
“In order for a mining ‘rig’ to run, it requires a great deal of processing power,” Desmond explains.
Could these mining rigs be made more sustainable somehow?
“If you’re talking about mining only, which is a process called Proof of Work, no, it’s very difficult,” Desmond says. “These mining rigs run 24/7, regardless of what the energy demand is, which is problematic.”
In theory, miners could run their rigs only at low peak periods, or shift to relying only on geothermal, wind or hydroelectric power, for example.
But the incentive isn’t there, given rigs need to be running constantly and battery technologies are still falling short of the storage levels needed. Moreover, Bitcoin is an unregulated market, so there’s no body that can set down rules.
“Interestingly, the White House just came out with a White Paper and a plan to regulate cryptocurrency tokens,” says Desmond.
“So, I think that might be a criteria that the government might use, saying that I the number of nodes within a country exceeds a certain quantity, or we have the highest amount of nodes within our country, then we would exercise control over that specific token.”
But, as so often happens, the technology has thus far outpaced regulatory demands. And, alarmingly, mining might never stop. That’s because even though Bitcoins, like physical currencies, are a finite resource, the mining process can be redirected.
When the Bitcoin market was created, Desmond explains, it was created with a finite number of coins – about 21 million – because, like any currency, infinite creation would haemorrhage its value.
“There’s never going to be any more than the 21 million that are limited,” he says.
There are approximately 19 million coins currently in circulation, and on average around 900 to 1,000 new coins are mined every day. But once all 21 million coins have been mined, the mining process won’t become obsolete.
“What’s going to happen is it will shift from mining to acquire Bitcoin to mining to serve the consensus mechanism,” he says.
The consensus mechanism is the process of approval of transactions of Bitcoin, and it requires the solving of problems. Any transaction of Bitcoin involves a transfer fee: that fee will be paid to the mining rig that approves the transaction by solving these mathematical problems.
It’s an alarming prospect.
So, could Bitcoin be decarbonised?
According to Desmond, Ethereum, another cryptocurrency could provide the model.
“Ethereum, which is probably the second most popular cryptocurrency token, went a different way,” he says. “They shifted from Proof of Work to what’s called Proof of Stake, which is ownership. Those who hold a majority of tokens are able to perform these consensus approvals for transactions.”
This kind of approvals process is far less damaging: “This resulted in a 99% drop in energy usage by Ethereum,” Desmond says.
But Desmond says this kind of shift is unlikely, at least in the near term, in Bitcoin.
“Because it’s an older, established system, it would be very difficult,” he says. “They’d have to actually create another blockchain in parallel, and do a token shift, and there’s a whole lot of infrastructure shift that has to occur.”
