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- The recent protest of Bitcoin has rekindled fears that the mining of the currency is harmful to the environment due to the energy needed.
- But cryptocurrency experts argue that concerns about bitcoin’s energy consumption have been taken out of context.
- Miners say they are increasingly moving to use renewable energy, but data supporting its extent is unclear.
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Bitcoin’s 890% period over the past year has rediscovered the fear that the exploitation of cryptocurrency consumes a large amount of energy and harms the environment.
Mining is the process by which transactions on bitcoin’s public ledger, called the blockchain, are verified without relying on a central authority. To verify new transactions, mining computers have to race to solve an extremely complicated problem, and the calculations require a lot of energy. Once a bitcoin miner solves the problem, they are rewarded with a transaction fee and freshly cut bitcoins.
Exactly how much energy the bitcoin network consumes depends on who you ask. According to estimates from the University of Cambridge, the total annual electricity consumption of the Bitcoin network is 127.70 terawatt hours, while Digiconomist estimates the network’s electrical energy at 79.63, which according to the website is comparable to the power consumption of Chile.
A technology that consumes the same amount of energy as an entire country sounds worrying, but Dan Held – head of growth at cryptocurrency exchange Kraken – argues that the bitcoin network has been unfairly targeted by people policing bitcoin around its take energy consumption out of context.
“What it’s really about when people do not like bitcoin’s energy consumption is … they simply do not like Bitcoin,” Held said. “And so people who are against crypto think that any energy consumption of Bitcoin is wasteful.”
Hero emphasized that everything in the world needs energy, and as technology advances, the amount of energy needed to power technology will inevitably increase. He also estimates that the existing banking system uses more than 650 terawatt-hours of energy per year.
But calculating the energy consumption of the bitcoin network and the existing financial system is difficult because it is difficult to account for every factor that supports each network. If one considers the air conditioning in a banking branch as a contribution to the total energy consumption of the financial system, you can also argue that the electricity used to power a bitcoin trader’s cell phone must be taken into account is used in calculating bitcoin’s energy consumption.
Because bitcoin miners are financially incentivized to make the cheapest electricity possible, it sometimes means using energy that would otherwise be wasted, according to Mason Jappa, CEO of Blockware Solutions, an operator of some of the largest mines in the US .
Jappa told Insider that some US equipment is powered by a process called ‘gas flare recovery’. When natural gas is extracted, part of the gas is flared up in the air. Bitcoin miners capture the torch and use it for energy, preventing it from being released into the open air.
But the need for cheap energy also means that many miners still rely on coal, which is the cheapest form of energy in many areas around the world, said Aroosh Thillainathan, CEO of Northern Data, a company that develops and operates infrastructure. . for bitcoin mining and other high-performance computing needs.
There is no clear data on exactly how much of the total bitcoin network is powered by renewable versus non-renewable energy, but Thillainathan estimates that about 50% of mining takes place in China, and a significant portion of mining is powered by coal.
Thillainathan told Insider that as the bitcoin network grows and the profitability of mining increases, more energy is needed. As a miner himself, he said that miners should bear a responsibility towards the environment. Northern Data’s high – performance computing centers in Norway, Sweden and Canada use only renewable energy.
He hopes that as mining becomes more profitable as bitcoin expands and prices rise, more miners will reconsider their operations and use more sustainable energy sources.
“I really like to believe in bitcoin itself,” he told Insider. “It’s a great way to store your wealth … but as an infrastructure provider, we need to be as environmentally friendly as possible.”
Thillainathan said that the exploitation of ‘dirty energy’ is not sustainable in the long run, because he expects governments to one day suppress the use of coal plants.