Bitcoin mining consumes a whole lot of electricity, even more than those consumed by nations. This article further delves in to this topic and explains why this phenomenon is so.
Bitcoin mining is the method through which new bitcoins are placed into circulation. Bitcoin mining is laborious, expensive, and only seldom profitable. However, because miners are compensated for their work with cryptocurrency tokens, mining has a magnetic allure for many investors who are interested in cryptocurrencies.
Due to growing rivalry, bitcoin mining has developed into a different sector that calls for specialized equipment, servers, and sizable data centers with adequate cooling to prevent overheating computers.
Bitcoin requires computers to tackle increasingly difficult math problems in order to verify transactions. It takes a lot more energy to operate this proof-of-work consensus process than most people understand.
Bitcoin mining and energy usage
Although the process of mining bitcoins requires a lot of energy, no one really knows how much energy is used by the Bitcoin community.
Mining takes place all over the world, frequently in areas with a plentiful supply of inexpensive energy. A significant portion of Bitcoin mining has historically taken place in China, but recently, sanctions have been imposed.
According to University of Cambridge researchers who have been monitoring Bitcoin mining, China’s share of the world market fell from 75% in late 2019 to 46% in April. At the same time, the United States’ percentage of mining increased from 4% to 16%.
It is quite simple to determine how much energy Bitcoin uses by looking at its hashrate (i.e., the total aggregate processing power utilized to mine Bitcoin and process transactions), from which you may infer the energy needs of the hardware that miners are employing.
Environmental impacts of Bitcoin Mining
Various concerns have been raised about the negative impacts of bitcoin mining on the environment, some of these impacts have been discussed below.
- Air Purity
- Acid Mine Drainage
- Habitat and Wildlife
In mining operations, hundreds of tons of rock are dug out, transferred, and crushed, greatly boosting the amount of dust and particulates in the air.
Furthermore, mine tailings, which may contain finely crushed and even poisonous waste, are capable of dispersing into the air. Human health may be directly impacted by this air pollution.
Acid Mine Drainage
The main cause of water pollution from mining is acid mine drainage. Large quantities of ore containing sulfides, iron, and precious metals like gold and silver are discovered through mining.
Sulfuric acid is produced when the sulfides in the ore are exposed to water and the atmosphere. This acid can seep from mines and waste rock piles into streams, rivers, and groundwater. Acid mine drainage is the term for this seepage.
Habitat and Wildlife
Wildlife can be displaced, and habitats might be damaged or destroyed since mining is frequently a significant industrial operation that involves road construction and the use of heavy gear.
Birds and other species may become poisoned from drinking tailings pond water. Salmon, trout, and other aquatic organisms can perish as a result of increased acidity or sedimentation.
Exposure to heavy metals can prevent fish from growing, even in extremely low quantities. Fish consume macroinvertebrates, which typically inhabit stream silt, and consume algae, which frequently have greater metal concentrations than surface waters.
Bitcoin mining and electricity consumption explained
The mining process for Bitcoin didn’t require huge amounts of electricity in its early years. Given bitcoin’s steep price rise in recent years, it is reasonable to anticipate that the demand for electricity will increase.
The annual electricity consumption of the Bitcoin network in 2017 was 30 terawatt hours (TWh). De Vries’ calculations show that the network now consumes between 78 and 101 TWh per year, or almost the same amount of energy as Norway.
The Cambridge Center for Alternative Finance (CCAF) estimates that Bitcoin now uses about 110 Terawatt Hours annually, or about 0.55% of the world’s electrical production or about as much energy as tiny nations like Malaysia or Sweden use in a year.
Bitcoin proponents claim that since renewable energy is becoming more affordable and mining uses significantly less energy than other, more inefficient uses of power, it is becoming more common to power mining operations with electricity from these sources.
According to the Cambridge Bitcoin Electricity Consumption Index, the energy lost by plugged-in but unused household appliances in the US alone could run bitcoin mining for 1.8 years.
The summer months are when electricity demand is at its maximum due to the hot weather, therefore Iran earlier this year temporarily banned crypto mining during those times.
- Stunning data from recent research by the New York Times put energy use in perspective:
- Around 91 terawatt-hours of electricity are used annually for bitcoin mining.
- That is greater annual electricity use than the whole 5.5 million person nation of Finland.
- That’s a 10 times increase from just five years ago and accounts for approximately 0.5% of the entire global electricity use.
- That amounts to more than a third of the electricity used for household cooling in the US each year, which is roughly equal to the amount of electricity used in the state of Washington each year.
- And it consumes more than seven times as much electricity as the entire global operation of Google.
Solutions to Bitcoin’s Energy Problems
Bitcoin’s enormous energy usage issue can be resolved without switching back to centralized systems. Instead, those who support Bitcoin have a variety of options.
- Embracing Proof-of-Stake systems
- Employ renewable energy
- Introduce carbon credits
Pre-mining has been included in some coins to prevent inefficient computing. Pre-mining is a mechanism that functions very similarly to stocks or fiat money.
These systems still require a decentralized network of validators to verify transactions before they are recorded on the blockchain for the currency. Still, the parties to the transaction may be required to pay a small transaction fee to reward the validators for their work since the currency system itself may not always do so.
Embracing Proof-of-Stake systems
Proof of stake uses fewer resources and requires less energy than proof of work to solve challenging issues.
Proof of stake systems does not involve competitive computation, which “saves energy and allows each computer in a [proof of stake] system to work on one problem at a time, as opposed to a PoW system, where a number of machines are frantically trying to answer the same problem.”
As part of Ethereum 2.0, Ethereum, the second-largest cryptocurrency by market capitalization after Bitcoin, is in the process of switching from proof of work to proof of stake. As a result, blockchains and coins based on Ethereum will consume roughly 99.95% less energy.
Employ renewable energy
Renewable energy-based bitcoin mining declined after China took action to outlaw it within its borders, forcing mining there to move underground.
The percentage of renewable energy used to power cryptocurrency mining has decreased since China’s crackdown last year, from over 42% in 2020 to 25% in August 2021.
Numerous firms are attempting to reduce the carbon footprint of Bitcoin by finding innovative ways to switch to renewable energy for mining.
Introduce carbon credits
The ability of a business to release a specific amount of carbon emissions into the environment is represented by carbon credits, which are approved by the government.
In the instance of a cryptocurrency mining company, this can entail switching to greener energy to save money or buying carbon credits from another business to help offset the emissions it produces.
Bitcoin mining is a rather lucrative industry, but it also uses a lot of energy and resources. Mining Bitcoin consumes a lot of electricity in mining and this has industrial miners looking for more environmentally friendly and sustainable energy sources.