The cryptocurrency Bitcoin has become a difficult topic of conversation among Canadians. With no known founder, no set headquarters, and little regulation, this relatively new, mysterious form of money has managed to both entice and confuse us all.
The environmental impact of Bitcoin, however, is only just being understood. This summer, a damning new report released by the scientific journal Joule, revealed that the mining of Bitcoin produces levels of CO2 equal to a small nation—and these emissions are increasing every year.
With the planet on track to hit three degrees of warming by the turn of the next century, and the Intergovernmental Panel on Climate Change (IPCC) urging us to reduce our carbon emissions by 49% of 2017 levels by 2030, it would seem the demands of climate action and the rapacious mining of cryptocurrencies are at stark odds.
The Joule report highlighted three main global electricity usage concerns:
- Bitcoin’s annual electricity consumption adds up to 45.8 terawatt/hours per year (by comparison, Google used 5.7 TWh worldwide in 2015).
- The corresponding annual carbon emissions range from 22 to 22.9 million metric tons of carbon.
- This carbon output rivals the levels produced by the nation of Sri Lanka (population 22 million).
How does the mining of an online cryptocurrency produce the same carbon output as a country with a population of 22 million? Much like the online currency itself, the answer is far from simple.
Bitcoin’s energy consumption is written into its DNA. Since there is no central banking system attached to Bitcoin, the network is forced to regulate itself through hundreds of thousands of individual computing devices. This is done through a distributed accounting system called blockchain. In blockchain, every bitcoin transaction ever made (referred to as a block), is tracked in a public ledger. It is tedious and timely to reconcile every block, and to verify one requires finding a cryptographic key; something that has become increasingly difficult by design.
This provides an opportunity for human incentive. Those who spend their time verifying and reconciling Bitcoin transactions, otherwise known as Bitcoin miners, are awarded with Bitcoin in exchange for their computing power.
With the price of a single Bitcoin sitting at $10,625 at the time of writing, this proves a worthwhile venture. However, to ensure that coins cannot be minted too quickly, Bitcoin protocol makes it incrementally more difficult to verify blocks. Approximately every 2,000 blocks, or every two weeks, the system is recalibrated. Miners must keep upgrading to stay on top of their venture. This requires increasing computing energy, and in turn, using increasing amounts of electricity. The more electricity used, the higher the carbon footprint.
Despite Bitcoin miners being incredibly dispersed and making up just under 1 percent of global electricity usage, they have still managed to match the total energy usage of countries such as Sri Lanka, Jordan and even Switzerland. Moreover, Bitcoin miners use about five times as much energy as they did a year ago, and they show no signs of slowing down.
In response to the Joule report, CoinShares, a company dealing in online currency asset management, made the claim that up to 75 percent of the energy used to mine Bitcoin was from renewable sources.
Lena Klaassen of the Berlin Institute of Technology, who helped co-author the Joule research, says of CoinShares claim: “Even if 70 percent of the electricity directly fueling Bitcoin originates from renewable sources, this energy is missing in the grid and has to be replaced by, or does not replace fossil fuels. Electricity is only carbon neutral if it would be wasted otherwise.”
Alex de Vries, a Bitcoin specialist and proprietor of Digiconomist, claimed he was skeptical of the report put forth by CoinShares, as it goes against other claims made by the University of Cambridge. In the University’s reports, Bitcoin mining facilities were indeed drawing on renewables to some extent, but the average share was just 28 percent.
Another concern surrounding Bitcoin is the sustainability of the mining devices themselves. These application-specific integrated circuit devices (ASIC) only last an average of two years, and once they reach the end of their lifespan, can not be repurposed for anything other than mining. When asked whether she thought Bitcoin could turn a new leaf and rebuild their systems in an eco-friendly manner, Klaassen says, “Yes, alternative protocols are theoretically available. However, this typically results in a lower degree of security or decentralization.”
Somewhere between 60 and 80 percent of all revenue made from Bitcoin goes back into paying for electricity. This means that miners search for the cheapest source of electricity possible, leading them to places such as China, Iran and Canada, where average electricity prices are lower than the global rate. Quebec has acted as a Bitcoin-mining nirvana in the past, although this status has since waned.
Amidst the current political landscape and the unfolding global climate crisis, it seems that economic growth and climate justice are distinctly at odds. When speaking of one, we find ourselves struggling to imagine the other. As long as our politics and societal values continue to circle the drain of endless economic growth, our climate action will remain slow and ineffective.
While Bitcoin remains profitable, miners will continue to use mass amounts of energy to reap huge profits. If we were to see another spike in the value of Bitcoin, it is likely we would see a corresponding surge in energy used to mine it, regardless of warnings from climate scientists urging us to cut down on our CO2 emissions.
“The problem is not Bitcoin,” urges Klaassen. “To achieve the goal of 1.5-2°C warming stated in the Paris Agreement, we need to decarbonize our entire economies.”
There is little doubt that Bitcoin is a carbon offender, but the solution does not lie in revamping Bitcoin systems, or scrapping them altogether. Achieving climate justice, after all, will require an ideological shift, not tinkering along the edges.
Abby Neufeld is a writer and climate activist based in Victoria.