The Huge Environmental Cost of Bitcoin
Photo Source: Wikimedia Commons
In the past few months, the electronic currency or cryptocurrency, Bitcoin, has surged in value to over $60,000 a coin. Only a year ago, it traded at just above $6000 a coin. The massive rise in value drew support, in part, from the very public move by Elon Musk to purchase over $1.5 billion in bitcoin while simultaneously declaring that his electric vehicle company Tesla will now accept payment in bitcoin. (wsj.com) Such a surge in value and steps toward legitimacy have put Bitcoin more squarely into the public consciousness and created a measurable environmental impact.
Bitcoin, unlike physical money, only exists electronically in computers connected to the internet. In contrast to a dollar, a pound, or a yen, you cannot touch a bitcoin. No trees, cotton, inks, gold, or silver are needed to make a bitcoin, which at first glance would make the electronic currency an environmentally favorable way to do business with no mining, agriculture, or chemistry needed. However, for bitcoin, that could not be farther from the truth.
The creator of Bitcoin, Satoshi Nakamoto, did not simply “print” or make bitcoins. Instead, he created an ingenious system that requires bitcoin “miners” to use computers to solve complex puzzles that protect Bitcoin transactions. The puzzle solutions produce special, unique locks and keys that cannot be tampered with. Such solutions help make Bitcoin safe and secure from thieves and hackers. Think of the puzzles like a jigsaw puzzle with tens of thousands of pieces in black and white that, once put together, reveals a unique barcode that Bitcoin uses to verify Bitcoin transactions. Additionally, Satoshi built in an incentive to entice miners to work on Bitcoin. Whoever solves the puzzle first gets paid 6.25 bitcoins. (coindesk.com) At $60,000 a coin, it is no surprise that the competition among bitcoin now rages fiercely.
The mining process for Bitcoin continues around the clock as new puzzles get solved every ten minutes. The Bitcoin system makes the puzzles harder to solve when more miners work on the puzzles. In the early days of Bitcoin, around ten years ago, Bitcoin miners had little competition and could mine coins with home computers. Today, massive operations with hundreds of dedicated computers run twenty-four hours a day fighting to solve puzzles and get bitcoins. Such operations consume enormous amounts of electricity to power so many computers. The University of Cambridge Judge School of Business hosts an online calculator that estimates in real-time the total amount of electricity consumed at any moment by the Bitcoin network. Developed by Mark Bevand in 2017, the Cambridge Bitcoin Electricity Consumption Index (CBECI) today estimates that the Bitcoin network consumes somewhere between 137,000 and 470,000 gigawatt hours per year. (cbeci.org) To put that in perspective, the average home in the United States, according to the U.S. Energy Information Administration, consumes 0.01 gigawatt hours per year. At the lower estimate of 137,000 gigawatts per year, this is enough electricity to power the average home for the next 12.9 million years! That represents more energy consumption than many countries such as Sweden, Norway, or Argentina, according to Enerdata’s Global Energy Statistical Yearbook. (enerdata.net) Bitcoin consumes nearly 1% of the world’s electricity.
The cryptocurrency Bitcoin grabbed headlines recently as the value of a single coin has increased ten times over the past twelve months to $60,000. Market speculation and the legitimizing effect of more businesses such as Tesla, AT&T, and Overstock accepting Bitcoin as payment for goods and services has fueled the recent explosion in price. Bitcoin production and security depend on a process of puzzle-solving called mining. The mining serves to support and protect the Bitcoin network, and the founder of Bitcoin built an incentive into the mining process. The first to solve a puzzle receives six and a quarter bitcoins. With the skyrocketing price of bitcoins, the competition in mining has rapidly increased in volume.
Additionally, Bitcoin makes the puzzles harder as more miners join the network. The massive amount of mining has put measurable pressure on the electrical supply of the world. What initially felt like an environmentally beneficial alternative to physical money without the need to mine metals or produce paper, Bitcoin now consumes nearly 1% of the world’s electricity. Since electricity comes mostly from non-renewable sources such as coal, natural gas, and nuclear, Bitcoin could not be farther from green.
Dr. Smith’s career in scientific and information research spans the areas of bioinformatics, artificial intelligence, toxicology, and chemistry. He has published a number of peer-reviewed scientific papers. He has worked over the past seventeen years developing advanced analytics, machine learning, and knowledge management tools to enable research and support high-level decision making. Tim completed his Ph.D. in Toxicology at Cornell University and a Bachelor of Science in chemistry from the University of Washington.
You can buy his book on Amazon in paperback and in kindle format here.