The energy used by the computer network that feeds the digital currency is comparable to that of many developed countries and rivals the emissions of large fossil fuel users and producers, such as American Airlines Group Inc and ConocoPhillips, according to a new report by the Bank of America Corp.
Bitcoin’s big recovery in the past year means it is only getting worse for the environment.
The energy used by the computer network that feeds the digital currency is comparable to that of many developed countries and rivals the emissions of large fossil fuel users and producers, such as American Airlines Group Inc. and ConocoPhillips, according to a report by the Bank of America Corp. The level of emissions, which rose along with a spike in the price of Bitcoin, has grown by over 40 million tonnes in the past two years. And when digital assets are trading around $ 50,000 – which is done for much of this year – it uses about 0.4% of global energy consumption.
Most worrying, according to the report entitled “Bitcoin’s dirty little secrets,” is that rising prices could mean that Bitcoin’s energy consumption will soon rival that of some of the world’s largest countries.
“What worries me is the pace of growth in demand for energy,” Francisco Blanch, head of commodities and derivatives research at Bank of America and lead author of the report, said in an interview. “The rate of change is huge – nothing is growing at this rate in the energy world.”
Bitcoin soared in the spotlight during the Covid-19 pandemic amid unprecedented fiscal and monetary stimuli that have been a boon to more speculative parts of the financial markets. The world’s largest cryptocurrency has grown almost 10 times in the past year. This meant a greater use of energy as well.
As the money supply is limited, any excess demand can drive up prices even further. The price increase encourages so-called mining activity and may, consequently, raise CO2 emissions even further, according to Bank of America.
Bitcoin transactions are processed by miners – cryptographic slang for companies that operate a wide range of computers. Miners compete to confirm transactions and receive new coins in return – but they require a lot of energy to function. Spurred on by increased competition, only a handful of these companies – the majority based in China – controlled about 50% of all computing power on the network, Bloomberg News reported last year.
According to Bank of America, it has since become even more concentrated, with about three quarters of the so-called hash power now concentrated in the country. This is also worrying for Blanch, as almost 60% of Chinese electricity generation is derived from coal-fired power plants.
“At the moment, this thing is consuming a lot of energy and it is possible that if everyone comes and prices go up, there will be a lot more energy,” he said.
But crypto fans argue that Bitcoin’s energy use is irrelevant when placed in a broader context. Many say, for example, that their carbon footprint is quite insignificant compared to that of cars, power plants and factories. And even with rising prices, there is unlikely to be a ripple in the energy markets, according to analysts at BloombergNEF.
“Bitcoin miners use any available energy and the focus is absolutely on the lowest cost energy possible,” said Jaime Leverton, executive director of Hut 8 Mining Corp., in an interview with Bloomberg Television.
Your company’s mining operations are located in Alberta, Canada, where natural gas and wind are among the predominant energy sources. “It is a conversation that certainly needs to evolve over time and does not accurately reflect how we talk about energy in other technology sectors,” she said.
Nic Carter, a partner at Castle Island Ventures, a crypto-focused venture company, said he expects Bitcoin’s long-term energy use to come almost exclusively from sources – including hydro and flared gas – that would otherwise be wasted.
Still, “there is a moral case to be made for Bitcoin, even in the presence of a carbon disbursement, which is very useful for society,” said Carter by telephone. “The focus should be on making the network greener in the aggregate, not trying to veto a line item and saying that this specific use of society’s energy is illegitimate.”