Bitcoin has a climate problem.
The cryptocurrency consumes huge amounts of electricity and with the price of a single bitcoin going up over $ 50,000, bitcoin miners are now producing as much carbon as a medium-sized nation.
- Bitcoin uses as much electricity as a medium-sized nation
- When the price of Bitcoin goes up, power consumption goes up
- Most of the electricity Bitcoin consumes is powered by fossil fuels
“Bitcoin consumes more electricity per transaction than any other known method,” said Microsoft founder Bill Gates, when he recently spoke on the social media platform Clubhouse.
“It’s not a great climate thing.”
A Bitcoin mine was opened in the Siberian industrial city of Norilsk. (
Bitcoin could soon use over 200 terawatt hours (TWh) of electricity, according to a new study by data scientist Alex de Vries in Joule magazine.
“This is not far from the amount of power used by all data centers around the world,” he wrote, referring to the infrastructure that ran the Internet.
“What makes these numbers mind-boggling is that these data centers serve most of global civilization.
“Bitcoin serves almost no one, but still manages to use roughly the same amount of electricity.”
The Australians consumed 192 TWh of electricity in 2020.
Inefficiency is the characteristic, not the flaw
Most of the energy consumed goes into the “Proof of Work” process, which is used to create new bitcoins, also known as bitcoin mining.
James Manning is the founder of the Bitcoin miner Cosmos Capital.
Delivered: Cosmos Capital
Proof of work is deliberately energy-intensive in order to prevent hacking and to maintain the value.
“There’s a lot to be said for network security around proof of work,” said James Manning, founder of Australian bitcoin miner Cosmos Capital.
“For the bitcoin community, the inefficiency of bitcoin is the trait, not the flaw.”
“It’s what gives Bitcoin its value,” said Northumbria University cryptocurrency researcher Peter Howson.
“When we say, ‘Oh, let’s do it efficiently’, you’re just saying, ‘Let’s reduce the value of a bitcoin’ – why should you do that?”
Could Renewable Energy Power Bitcoin?
According to the Cambridge Center for Alternative Finance at Cambridge University, sixty-one percent of Bitcoin mining was powered by fossil fuels last year.
The remaining 39 percent was estimated to be powered by renewable energies, primarily hydropower.
According to Australian bitcoin miner Iris Energy, large institutional investors are now creating a market for renewable bitcoins.
“Our unique energy strategy and environmental, social and governance (ESG) overlay means that we also keep investors happy with green and climate-related commitments,” said co-founder Daniel Roberts.
The company said its data centers used excess hydropower in British Columbia, Canada.
“All of our activities today are powered by excess renewable energy,” said Roberts.
Iris Energy uses Canadian hydropower to mine Bitcoin. (
Delivered: PPL Energy
Cosmos Capital said it was in talks with Australian electricity companies to use cheap excess renewable energy to power bitcoin mines in regional Australia.
“Cosmos is actively looking for ways to leverage bitcoin mining on a larger scale to ease the existing transition to renewable energy,” Manning said.
He said despite Australia’s world-class renewable resources, the Australian electricity market needs more flexible rules to be attractive to energy-intensive industries like data centers.
“Australian energy is globally competitive at a wholesale price for electricity,” said Manning.
“The big challenge we have in Australia is our transmission and distribution.”
Cosmos Capital plans to build Bitcoin mines with renewable energy in Australia. (
Delivered: Mars Australia
Bitcoin miners are scouring the world for cheap electricity
According to the Cambridge Center for Alternate Finance, almost two-thirds of bitcoin mining takes place in China.
The United States, Russia, Kazakhstan, Malaysia and Iran are other big players.
“Bitcoin miners are trying to find the cheapest and most stranded sources of energy,” said energy analyst and commentator Ketan Joshi.
In China, miners roam all over the country hunting the cheapest energy.
In China’s dry season, coal is the main source of electricity for Bitcoin mining. (
Reuters: Jason Lee
“You can get really cheap hydropower in China during the rainy season and then use coal for the other half,” Manning said.
“They actually have to physically pick up and move their mining equipment.
“Anecdotally … the level of coal usage is not as bad as everyone thinks, and that’s because the renewable material is generally cheaper and these people are very profit-maximizing.”
In Iran, Bitcoin miners were accused of causing power outages earlier this year because the mining operations there used government-subsidized power plants that burned low-quality oil that released high levels of sulfur dioxide.
In Iran, bitcoin miners use cheap oil power. (
Reuters: Raheb Homavand
Bitcoin miners have until April to stop using Inner Mongolia’s coal power to meet China’s clean air goals.
And miners have set up data centers in declining industrial cities in Siberia to harness cheap excess gas and hydropower.
Is Bitcoin becoming more sustainable?
According to the Cambridge Center for Alternate Finance, bitcoin mining using renewable energies rose from an estimated 28 percent to 39 percent between 2018 and 2020.
“The unique thing about energy hungry things that use electricity is that they are the easiest things to decarbonize,” Joshi said.
“But the side problem there is that you actually have to have some kind of industrial or municipal focus to actually choose zero-emission power sources for the things you do.”
In China, hydropower is cheap and abundant in the rainy season. (
Wikimedia Commons: Dan Kamminga
Mr Joshi is concerned that the decentralized, trustless structure of Bitcoin has attracted investors with libertarian attitudes that do not necessarily prioritize solving climate change.
“I’ve seen a tone or culture of libertarian thinking that focuses on antagonism towards government – the hatred of centralized control,” he said.
“This worldview has played a very important role in combating climate protection measures, particularly climate protection measures that involve some level of government regulation or subsidies for renewable energies.”
Could Bitcoin just use less electricity?
Mr Howson said cryptocurrencies don’t have to be that power hungry.
“Bitcoin was up-to-date to begin with, but this is old technology,” he said.
“What we have now are other cryptocurrencies that are much more advanced and use negligible amounts of energy to secure the network.”
But he wonders what the incentive is to change while Bitcoin investors are making so much money.
“There are only so many people exposed to the profit potential of Bitcoin that they don’t want anything else,” Howson said.
“And why should you, when you have 5,000 bitcoin and each of those bitcoins is worth $ 55,000?
“You’re not going to say, ‘Hey, let’s stop doing bitcoin – let’s do something different.'”
Bitcoin is used as a currency in some retailers. (
ABC RN: Ben Hays