Can Bitcoin Mining be Ecologically Sustainable?
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On this website you will find carefully curated content about Bitcoin as well as information for you to decide: can it be sustainable?
Bitcoin here and Bitcoin there – since its start in 2009, but probably more and more over the last couple of years, you might have stumbled across Bitcoin, or cryptocurrency in general as well as its impact on the environment: in newspapers, on social media or in conversations with friends. It seems clear that cryptocurrencies are here to stay. Despite the complexity of the topic it is important to dive into it and ask some key questions.
So, if you have ever (or never) heard of words like crypto-mining, proof of work, ASIC or intermittency, please continue browsing through this page or start right below with the podcast episode “Planet Bitcoin”. There, Bitcoin’s ecological sustainability is discussed by Niko Jilch, a financial journalist and expert on cryptocurrencies, and Heinz Wittenbrink, an advocate for sustainability.
Journalist, presenter, speaker, lecturer, podcast host, Nikolaus Jilch is a true multi-talent. Years of experience and a wide range of expertise make him a significant professional in the fields of finance, monetary policy, cryptocurrencies and new technology trends.
I think we will see in the future that bitcoin mining will get more decentralised and it will get cheaper for everyday people to use it. It could maybe come to a point where you use the energy you produce in your own house to mine some bitcoins and monetize them.
For the past 20 years, Heinz Wittenbrink has been an integral part of the FH JOANNEUM and taught ambitious students in the fields of Online Journalism, PR, Content Strategy and much more. Besides this, he’s also an expert in the area of sustainability, activism and climate research.
Yes, we have energy which we cannot use, that’s correct. But we could also use this excess energy for other things, for example to produce green hydrogen which is highly needed if we want to change our climate system. In the long run bitcoin will increase consumption, over-consumption and it will lead investment into the wrong direction.
On the trail of Bitcoin’s ecological footprint
Since 2009, the topics of cryptocurrencies and especially Bitcoin have followed us in the news, social media, and private conversations. Though only few can easily understand and explain what the fascination is about, Bitcoin has attained more and more success. The more people got involved, the louder the question of its environmental footprint was raised. But can Bitcoin be completely sustainable?
5 Key Takeaways
Back in 2009, the amount of household electricity required to mine one coin was a few seconds’ worth. Today, the amount of household electricity required is nine years.
76% of miners already use renewable energy to produce Bitcoins, but as soon as it is involved in transactions, it relies on any kind of energy provided, no matter if it’s green or not.
Cryptocurrency consumes tons of hardware. The lifespan of Application Specific Integrated Circuits (ASIC) is about 3-5 years, if they are properly taken care of. Otherwise they need to be renewed after just a few months.
Bitcoins massive energy need relies on so-called „proof of work“: producing a single token involves large amounts of calculations and subsequently processing power.
Despite the economic potential of Bitcoin, there is a high demand for further studies in the pursuit of greener Bitcoin mining in order to keep the balance between economy and environment.
Bitcoin's energy consumption
To get to the bottom of this question, we must take a closer look at the cause of Bitcoin’s excessive energy consumption: mining. In 2009, when the cryptocurrency was still in its baby shoes, as a miner you could earn Bitcoin by setting up your regular PC in the living room and it required only a few seconds worth of your household’s electricity – so basically nothing, just like Bitcoin’s value back then. Nowadays, to mine one precious coin – that is worth about $ 50,000 by the way – you need special equipment worth thousands of dollars as well as nine year’s worth of your household’s electricity (about $ 12,500).
The demand for high performance computers along with Bitcoin’s rising popularity can be directly linked to a higher energy consumption. To be more specific, Bitcoin mining needs 66 times more electricity today than it did in 2015, being responsible for the usage of more electricity than Finland needs to power the whole country.
Greener mining as a solution?
Looking at the data that is available until now, Bitcoin doesn’t seem like the solution for a greener energy future. According to the Bitcoin Clean Energy Initiative, this is about to change: Mining is presented as a solution for problems renewable energy production is confronted with, like grid congestion and intermittent power supply. With that approach Bitcoin mining is also supposed to encourage more investments in solar systems and therefore enabling renewables to generate a higher percentage of grid power. The concept itself sounds promising but the reality is a different one. In the U.S. a large amount of electricity that is produced never even reaches the customer. And with Bitcoin being responsible for the revival of a gas plant in the U.S., its ambitions to be the future of green energy remains questionable.
So how about moving mining centers to “green havens” such as Iceland? Energy is inexpensive and green there, as it comes from hydroelectric dams and geothermal power plants. Since Bitcoin mining’s energy demand rises every year and the region’s energy supply is limited, Iceland is even expanding its green energy sources by building new hydroelectric dams. Now, northern countries might seem like the ideal solution for all of Bitcoin’s energy consumption, but recent studies have shown that the amount of excess energy that was occupied for Bitcoin mining could be significantly reduced since the need of green energy is increasing in other growing sectors due to climate issues.
Also, even though 76% of the miners use some kind of renewable energy, as soon as an individual Bitcoin is used in transactions, it will inevitably be processed by other miners. Thus, a “green” Bitcoin can easily turn into an unsustainable one. And even if the mining is environmentally friendly, the equipment that is used, is not: The majority of mining machinery has a shortened lifespan, resulting in an annual e-waste of up to 30.7 metric kilotons.
With Bitcoin being the largest cryptocurrency, it is only logical that in comparison to smaller ones it is also responsible for most of the energy consumption. Still, it’s worth taking a look at the alternatives. The three most energy efficient currencies are IOTA, XRP and Chia, and as the demand for green choices is rising, there are more sustainable currencies expected soon. However, cryptocurrencies being “greener” than Bitcoin doesn’t always mean that they are more energy efficient. Some are only smaller and therefore involve fewer daily transactions. The actual ecologically sustainable alternatives rely on a different protocol system. Bitcoin uses a system called “Proof of Work”, where the mining of a single token involves large amounts of calculations and processing power. Other approaches would be “Proof of Storage” or “Proof of Stake”, which require not as much energy, the latter even 99.99% less than the “Proof of Work” system.
Bitcoin’s biggest competitor, Ethereum, has already spotted this trend and has been working on changing their protocol to “Proof of Stake” for nearly two years. In 2022, this process is expected to be completed and significantly increases the competitiveness of the second largest cryptocurrency.
Coming to a definite result if Bitcoin will once be completely sustainable or not seems like an impossible task – at least for now. But initiatives of governments as well as more sustainable competitors at least raise the awareness and put pressure on the most prominent cryptocurrency. Making clear that its future also depends on having a positive impact on our Earth’s.
After all this research, do we think Bitcoin can ever be green? To answer this question we might as well flip a coin.
This is a research project for the course “Stakeholder Analysis and Digital Strategy” of the master program Content Strategy at the FH JOANNEUM in Graz, class of 2021.