The environment has become a hot topic over the last few years. Some people even believe that the global pandemic is a consequence of us not looking after the environment. So what about Bitcoin? What is the impact of mining Bitcoin on the environment? Is it as bad as media make it out to be? And is the production of Bitcoin more sustainable than the production of ‘traditional’ money? I did some research.
Producing Bitcoin is called ‘mining’. Bitcoin is mined by creating certain algorithms on a computer. Bitcoin miners will go to extremes for efficient ways to mine Bitcoin. As a result, the hashrate (computer power used to increase safety) has gone up immensely. As you may have guessed, a higher hashrate also means higher energy consumption.
Because not every Bitcoin miner works as efficiently, and different kinds of machines are being used, it is hard to know how much power is exactly being used for mining Bitcoin. The Cambridge Bitcoin Electricity Consumption Index has estimated that Bitcoin consumes around 63 TWh per year. As stated previously, it is hard to put an exact number on it. But we cannot deny that a reasonable amount of energy is used to mine Bitcoin.
Bitcoin’s annual electricity consumption (Source: cbeci.com).
That being said, most of the energy used for mining Bitcoin, is green energy. According to a CoinShares report, the percentage of sustainable energy used for mining Bitcoin, even goes up to about 73 %. With this whopping amount of sustainable energy, the Bitcoin mining industry is one of the greenest industries in the entire world!
Bitcoin miners often choose renewable energy not because of the environment, but because it is cheaper for them in the long run. Bitcoin miners are mainly situated in places where there is an oversupply of renewable energy, in remote areas, for example. That means they can get good deals when it comes to buying means of renewable energy. Research suggests that even more miners will use renewable energy in the future.
Some research has been done in regards to the amount of CO2 mining Bitcoin would produce. It is said that the CO2 emission of the Bitcoin industry equals that of countries such as Jordan and Sri Lanka.
The measured CO2 emission is lower in places where mostly renewable energy is being used to mine Bitcoin. It is said that applying certain regulations for mining Bitcoin could help reduce the amount of CO2 emissions internationally.
How sustainable is the production of ‘traditional’ money you ask? Well, there’s just a lot more to producing traditional money. When it comes to cash or coins, you have to factor in the energy consumption, logistics, water usage, deforestation …
Another issue with the production of cash money, is the wear and tear. Banknotes cannot be used forever. They are often misused and handled carelessly (by people with substance abuse problems, for example). This causes them to have a shorter lifespan, which means new banknotes need to be printed quite often. If only there was a magic money tree …
There was the idea of producing polymer banknotes. Polymer notes would have a longer livespan. Research suggests, however, that the production of polymer banknotes would produce three times as much C02 emission as paper banknotes would. So polymer isn’t the solution after all.
Even paying with credit or debit card isn’t very friendly for the environment. Research says it is only 36 % more sustainable than paying cash. A Dutch bank worked out that paying with card uses as much electricity as an 8-watt lamp burning for one and a half hours. For cash, the lamp would have to burn 2 hours.
ATM’s or cash registry systems in shops have to be produced as well and are disposed of way too often. Electronic waste has become a huge environmental issue. Furthermore, ATM’s for cash withdrawal are usually on 24 hours per day, which means they use electricity all day long. Finally, more rare materials are needed to produce microprocessors and lithium batteries.
Yes, mining Bitcoin costs quite a lot of energy. However, most of the energy used to mine Bitcoin is renewable energy. The production process for traditional money is way more complex and there are a lot more factors such as electric waste, logistics and deforestation.
We don’t have the exact numbers to compare the two, but my belief is that using Bitcoin could have less consequences for our environment than the production of traditional money in the long run.
Besides that, the Bitcoin industry has the potential to make renewable energy grow more popular. Stimulating people to think of new ways to recycle energy, or being an inspiration to other industries which don’t use renewable energy.