The Environmental Impact of Bitcoin
In April of 2012, the price of one bitcoin was $5.04. In April of 2021, it reached an all-time high of almost $65,000. Now, it sits at $41,239.10—still quite an increase from its 2012 rate. Because some bitcoin investors become millionaires overnight, we’re seeing people flock toward investment opportunities in cryptocurrencies with the hope of striking gold. As the cost of investing in bitcoin has skyrocketed, so has the potential profit in “mining it” (a term referring to the process by which new bitcoins enter circulation), and while bitcoin mining is purely metaphorical, its environmental impact is anything but.
To understand bitcoin’s environmental impacts, let’s dig into how it really works.
What is Bitcoin?
A cryptocurrency is a digital currency that you can buy, sell, and exchange directly without an intermediary, such as a bank. It has no physical counterpart like the coin or the bill, and there are many currencies within itself. Just as we have Euros, Dollars, and Pounds, there exists Bitcoin, Ethereum, and Dogecoin.
Core to their decentralized nature, bitcoins aren’t backed by the government or any issuing institution. There is no true regulation. Therefore, a major advantage of using the currency is that sending money internationally is highly simplified: there are no transaction fees, and anyone can use it. While all transactions are tracked publicly, the people making them remain anonymous, which may lead to felonious transactions that could be of criminal, terrorist, or tax-evading nature.
How Does Bitcoin Mining Work?
New bitcoins are released into circulation through “mining,” which is the process of validating and recording new transactions in the blockchain, or the record of a series of linked blocks containing bitcoin transaction records. Miners compete to register the latest “block” of transactions by solving complex cryptographic puzzles, and the miner that accomplishes this first is rewarded with freshly minted bitcoin. Miners receive 6.25 bitcoin per block, which are currently worth more than three hundred thousand dollars. The higher the price of the bitcoin, the more miners who are competing, and the harder the puzzles become.
What was quickly discovered, however, was that specialized computing devices called mining rigs are far more effective at solving these puzzles. While mining was originally done by individuals, now the process has become heavily consolidated. Unfortunately, these mining rigs use significant amounts of computational and electrical energy.
Why Does Bitcoin Use So Much Energy?
The process of solving the cryptographic puzzle can take millions of tries. It is this trial-and-error method that consumes a lot of power. With hundreds of thousands of computers engaging in this fast-paced guessing game, bitcoin consumes about 1,173 kilowatt-hours per transaction. This volume of energy could power the typical American home for six weeks.
A mining rig can solve a puzzle much faster than an individual, but given that only one can finish first and succeed, whether it be a miner or rig, 99.9% of the all those competing fail. This leads to vast amounts of wasted energy and carbon emissions. Due to mining being done on different computers, with different cooling systems, with varying levels of energy efficiency, it’s difficult to pinpoint exactly how much power mining consumes annually.
A University of Cambridge analysis estimated that bitcoin mining consumes 121.36 terawatt hours a year. This is more consumption than that of the entire country of Argentina.
Only 39 percent of this energy comes from renewable sources, and this is mostly from hydropower, which can harmfully impact the ecosystem and biodiversity. Due to the energy-intensive nature of this process, miners are trying to find cheap power, which can be complicated. A few years ago, miners found the city Plattsburgh in New York to be their low-cost power haven. Much of the city gets its electricity from the St. Lawrence River hydroelectric dams. The power is relatively inexpensive, but once the city has consumed its allotted amount, it must purchase more at higher rates. Mining drove up the electricity costs of the city so dramatically in 2018 that Plattsburgh enacted an 18-month moratorium to ban cryptocurrency mining.
Greenidge Generation Holdings Organization found a way around this. They purchased a power plant and now get their power directly. In the fall of 2021, Greenidge announced to more than double its bitcoin-mining operations in Dresden by replicating its integrated mining model at other power sites. This will result in even more greenhouse gas emissions, and unless the state or federal government intervenes, more cryptocurrency firms may follow this model, opening the floodgates for the commissioning of other retiring powerplants.
Not all cryptocurrencies are as energy-intensive as bitcoin. There are sustainable alternatives such as Ethereum’s new alternative to mining NFTs. Bitcoin is a technological asset, but it’s up to the crypto community to acknowledge and address environmental concerns. What’s more is that we need to be aware of the environmental impacts that come with its mining process and consciously shift to using other cryptocurrencies that are less energy intensive.
References
https://www.newyorker.com/news/daily-comment/why-bitcoin-is-bad-for-the-environment
https://www.nerdwallet.com/article/investing/what-is-bitcoin
https://www.pcmag.com/how-to/how-does-bitcoin-mining-work
https://news.climate.columbia.edu/2021/09/20/bitcoins-impacts-on-climate-and-the-environment/
