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- The recent rise of Bitcoin has rekindled fears that mining the coin is harmful to the environment, because of the amount of energy needed.
- But cryptocurrency experts argue that concerns about bitcoin’s energy consumption have been dismissed.
- Miners say they are increasingly adopting renewable energy, but the data that proves the extent of this is unclear.
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Bitcoin’s 890% rise last year has rekindled fears that cryptocurrency mining is consuming a lot of energy and harming the environment.
Mining is the process by which transactions in the bitcoin public ledger ledger, called blockchain, are verified without depending on a central authority. In order to verify new transactions, mining computers must run to solve an extremely complex problem, and these calculations require an enormous amount of energy. After a bitcoin miner solves the problem, he is rewarded with a transaction fee and newly minted bitcoins.
Exactly how much energy the bitcoin network consumes depends on who you ask. Cambridge University estimates indicate that the total annual electricity consumption of the Bitcoin network is 127.70 terawatt-hours, while the Digiconomist estimates the electricity of the network to be 79.63, which the website claims is comparable to consumption Chile’s energy sector.
A technology that consumes the same amount of energy as an entire country looks alarming, but Dan Held – head of growth at the Kraken cryptocurrency exchange – argues that the bitcoin network has been unfairly targeted by people who police bitcoin by taking their energy consumption off of context.
“What really happens when people don’t like the energy consumption of bitcoin is … they just don’t like Bitcoin,” said Held. “And then people who are against cryptography think that any Bitcoin energy consumption is a waste.”
Held emphasized that everything in the world requires energy and, as technology advances, the amount of energy needed to power that technology will inevitably increase. He also estimates that the existing banking system uses more than 650 terawatt hours of energy per year.
But calculating the energy consumption of the bitcoin network and the existing financial system is difficult, as it is difficult to account for all the factors that support each network. If we consider that a bank branch’s air conditioning contributes to the total energy use of the financial system, it can also be argued that the electricity used to power a bitcoin trader’s cell phone should be counted when calculating bitcoin’s energy usage.
In addition, since bitcoin miners are financially encouraged to operate with the cheapest electricity possible, this sometimes means that they use energy that would otherwise have been wasted, according to Mason Jappa, CEO of Blockware Solutions, a operator of some of the largest mining platforms in the US.
Jappa told Insider that some US platforms are powered by a process called “gas burner recapture”. When natural gas is extracted, some of the gas is burned in the air. Bitcoin miners capture the flag and use it to generate energy, preventing it from being launched outdoors.
But the need for cheap energy also means that many miners still depend on coal, which is the least expensive form of energy in many areas around the world, said Aroosh Thillainathan, CEO of Northern Data, a company that develops and operates infrastructure for bitcoin mining and other high-performance computing needs.
There is no clear data on exactly how much of the total bitcoin network is powered by renewable and non-renewable energy, but Thillainathan estimates that about 50% of the mining is done in China and a significant part of the mining there is powered by coal.
Thillainathan told Insider that as the bitcoin network grows and mining profitability increases, more energy will be needed. As a mine operator, he said miners should be responsible for the environment. Northern Data’s high-performance computing centers in Norway, Sweden and Canada use only renewable energy.
He hopes that as mining becomes more profitable as bitcoin expands and the price increases, more miners will rethink their operations and switch to more sustainable energy sources.
“I really believe in bitcoin itself,” he told Insider. “It’s a great way to store your assets … but, as infrastructure providers, we have to act to be as environmentally friendly as possible.”
Thillainathan said mining using “dirty energy” is not sustainable in the long run, because he anticipates that governments will one day repress the use of coal plants.