Bitcoin mining is criticized because it uses a lot of energy. But according to Katrina Kelly-Pitou of the University of Pittsburgh, this should be put in context. Many new technologies use large amounts of energy. The important point is how carbon-intensive its energy use is. That depends on where the mining takes place. Courtesy The Conversation.
The word “bitcoin” is as likely to garner feverish excitement as it is glaring criticism. The financial community sees speculative promise in the form of trade that currently has little to no regulation. Meanwhile, others argue that it’s a distraction that detracts from the overall longevity of U.S. financial institutions.
Bitcoin’s energy consumption has become a recent talking point in the debate. A Forbes article published May 30 indicates that bitcoin dramatically increases global energy consumption – and that electricity is its “Achilles heel.”
I am a researcher who studies clean energy technology, specifically the transition toward decarbonized energy systems. I think that the conversation around bitcoin and energy has been oversimplified.
New technologies – such as data centers, computers and before them trains, planes and automobiles – are often energy-intensive. Over time, all of these have become more efficient, a natural progression of any technology: Saving energy equates to saving costs.
By talking specifically about just the consumption of energy alone, I believe many fail to understand one of the most basic benefits of renewable energy systems. Electricity production can increase while still maintaining a minimal impact on the environment. Rather than focusing on how much energy bitcoin uses, the discussion should center around who indeed is producing it – and where their power comes from.
Unlocking a bitcoin requires an intense amount of computational power. Think of bitcoin as sort of a hidden currency code, where its value is derived by solving a programmable puzzle. Getting through this puzzle requires computer brainpower.
Electricity is 90 percent of the cost to mine bitcoin. As such, bitcoin mining uses a large amount of power: somewhere between an estimated 30 terrawatt hours alone in 2017 alone. That’s as much electricity as it takes to power the entire nation of Ireland in one year.
In Europe, for example, Iceland is becoming a popular place for bitcoin mining. That nation relies on nearly 100 percent renewable energy for its production
Indeed, this is a lot, but not exorbitant. Banking consumes an estimated 100 terrawatts of power annually. If bitcoin technology were to mature by more than 100 times its current market size, it would still equal only 2 percent of all energy consumption.
Bitcoin is certainly consuming an increasing amount of power worldwide, but is it increasing the world’s carbon consumption? Bitcoin miners have traditionally set up shop in China, where coal supplies 60 percent of the nation’s electricity.
Now, bitcoin mining is exploding in areas with cheap power, like the Pacific Northwest. Power there is mainly cheap due to the massive availability of hydropower, a low-carbon resource.
Bitcoin mining in China, with a largely fossil-based electricity source, may indeed be problematic. China is already one of the world’s major contributors of carbon emissions. However, bitcoin mining in Oregon? Not the same thing. Not all types of energy generation are equal in their impact on the environment, nor does the world uniformly rely on the same types of generation across states and markets.
In Europe, for example, Iceland is becoming a popular place for bitcoin mining. That nation relies on nearly 100 percent renewable energy for its production. An abundant supply of geothermal and hydropower energy makes bitcoiners’ power demand cheap and nearly irrelevant.
Similarly, in the hydropower-driven Pacific Northwest, miners can still expect to turn a profit without contributing heavily to carbon emissions.
The right discussion
Like many other aspects of the energy industry, bitcoin is not necessarily a “bad guy.” It’s simply a new, and vaguely understood, industry.
The discussion about energy consumption and bitcoin is, I believe, unfair without discussing the energy intensity of new technologies overall, specifically in data centers.
Rather than discussing the energy consumption of bitcoin generally, people should be discussing the carbon production of bitcoin, and understanding whether certain mining towns are adding to an already large environmental burden.
Perhaps people should quit criticizing bitcoin for its energy intensity and start criticizing states and nations for still providing new industries with dirty power supplies instead
Although there has been extensive discussion in the media of bitcoin’s energy consumption, I’m not aware of any studies that actually calculate the comparative carbon footprint of the bitcoin process.
Global electricity consumption is going up overall. The U.S. Energy Information Administration predicts that world use will increase nearly 28 percent over the next two decades. But increasing energy consumption is bad only if we aren’t shifting toward less carbon-dense power production. So far, it seems that only miners are currently shifting toward cleaner parts of the world.
So perhaps people should quit criticizing bitcoin for its energy intensity and start criticizing states and nations for still providing new industries with dirty power supplies instead.
Katrina Kelly-Pitou is Research Associate in Electrical and Computer Engineering at the University of Pittsburgh. This article was first published on The Conversation and is republished here with permission from the author and under a Creative Commons license of the publisher.
Mike Parr says
“Rather than focusing on how much energy bitcoin uses, the discussion should center around who indeed is producing it – and where their power comes from” – perhaps more to the point – a discussion on distributed ledgers (on which bitcoin is based) and their application (if any) would be useful.
In the case of banking & its energy consumption (and using this as a justification re bitcoin) – the counter argument – giving 2007 – is that the banking sector is oversized and under-regulated. May be it could be better regulated by limiting the amount of energy it uses (or wastes?). Ditto bitcoin?
There is growing neo-con support for bitcoin on the basis that it sidelines governments – which the neo-cons see as a “good thing”. However, I’d suggest it is a very bad thing. Focusing on issues such as bitcoin’s energy consumption constitute useful diversion from other key issues – such as state mandated fiat currencies vs fictious currencies like bitcoin.
Which brings me back nicely to the point:
“who indeed is producing it – and where their power comes from” – “it being bitcoin and “power” being the legitimacy or otherwise of those “producing” bitcoin – not what the author meant but certainy in keeping with my points.
Roger Arnold says
The author misses a key point about bitcoin mining. There is no fixed amount of computational — an hence energy — power required for the bitcoin system to operate. The bitcoin algorithm itself is inherently an example of Jevon’s paradox on steroids: the cheaper computational power becomes the more that must be applied to keep the system going. It’s an unfortunate feature of the design that renders it non-scalable.
There are alternative crypto-currencies that are more scalable. They avoid the major problems that hamper bitcoin, but to do so, they all fall back to a degree on trusted sites. As far as I know, none of them manage to replicate the fully distributed “trust no one” nature of bitcoin. But even bitcoin has proven to have vulnerabilities.
“Banking consumes an estimated 100 terrawatts of power annually” .. what do you mean?