This year’s meteoric rise in retail investors’ adoption of cryptocurrency has been the stuff of legends. However, with this influx of inexperienced investors all keen to take advantage of the digital gold rush, apparently, it only takes a few ‘celebrity’ tweets and some negative coverage by the mainstream media to shake the fruit from the tree.
And the latest ‘FUD’ (fear, uncertainty, and doubt)? The idea that cryptocurrency is terrible for the environment due to its high fossil fuel energy consumption.
So is cryptocurrency bad for the environment? How energy-draining is cryptocurrency? In this article, we’ll explore the myths and truths about cryptocurrency’s energy consumption while considering industrial energy consumption as a whole.
How much energy does Bitcoin use?
It’s difficult to say precisely how much energy the Bitcoin network uses because it’s worldwide. While the results of different studies often contrast, it’s widely agreed that mining indeed utilizes a great deal of energy. But what does that mean in the context of global energy consumption? And is any of this energy renewable?
The University of Cambridge published an estimation showing that Bitcoin consumes between 0.40% and 0.60% of total electricity. That’s about 114 TWh per year (not far off what Sweden consumes in a year).
Why does Bitcoin mining consume so much energy?
It’s not new news that blockchain utilizes power. Bitcoin mining has been this way since its inception in 2009. The blockchain needs computers, and computers need electricity, right?
Without getting lost in the complexities of Bitcoin mining (we’ll save that for another article), the blockchain (network) consumes so much electricity because thousands of computers validate every transaction on all at the same time. These computers aren’t all in one place; they’re decentralized — spread around the world. However, as you might imagine, they consume a significant amount of electricity as they’re all operating together.
Are the crypto energy consumption figures accurate?
Research by the crypto investment firm Ark Investment earlier this year found that the Bitcoin ecosystem actually uses less than 10% of the energy consumed by the traditional banking system. Additionally, a new quantitive study by Galaxy Digital estimates the global banking system’s electricity consumption to be 238.92 TWh per year. That’s more than twice as much as Bitcoin. Of course, the banking system currently serves far more people, but as we move towards a cashless society, there’s a contrasting argument that the bankers’ time is over. The exponential growth of decentralized financial systems (DeFi) is evidence of that.
The thing is that the cryptocurrency mining industry (which took almost $1.4 billion in February 2021 alone) cannot be classed as unusually terrible for the environment compared to other aspects of industrialized society.
Curiously, the recent FUD about cryptocurrency’s energy consumption made little to no comparison with other industries. For example, according to the U.S. Energy Information Administration (EIA), the industrial sector uses more delivered energy than any other end-use sector, consuming about 54% of the world’s total provided energy. Within the industrial sector, manufacturing accounts for 77% of annual consumption. Then there’s mining (12%), construction (7%), and agriculture (5%).
As it’s a little off-topic, we won’t even get into the devastating impact of agricultural farming globally. However, it might be interesting to know that according to a recent documentary Need to Grow; industrialized agriculture is destroying the world’s farmland at a rate so alarming we only have 60 years of farmable soil remaining.
Back to the question that these statistics might well inspire:
Who does it serve to attack an industry’s alleged high energy consumption that stands for the general betterment of humanity?
Should we not instead take a macro view on industrial energy consumption as a whole and ask ourselves what the world needs more and less of to evolve into a better society?
A world of green crypto
Notwithstanding the fact that Bitcoin apparently consumes half as much power as all the world’s data centers, Bitcoin core developers will surely evolve the software, ultimately requiring less computational energy. Regardless, the reality is that many bitcoin mining businesses rely on environmentally friendly energy sources like hydropower or the ingenious capture of natural gas leaks from oil fields. According to a study by CoinShares, up to 73% of bitcoin miners use renewable energy as part of their combined power supply. This resource includes hydropower from China’s monster dams. The top five Bitcoin mining pools also rely on the consistent use of hydropower.
You may have read that El Salvador (or El HODLador, as it’s now known in crypto circles) recently became the first country to make Bitcoin legal tender. Shortly after passing the new law, El Salvador’s President Bukele confirmed its intention to mine Bitcoin using geothermal energy from its volcanoes. He stated the designs are already in place for a mining hub that will use ‘very cheap, 100% clean, 100% renewable’ volcanic energy to power this infrastructure. Perhaps it’s safe to assume that as more countries adopt cryptocurrency in this way, more renewable energy projects could well develop alongside them?
So just like every other industry on the planet, there is room for improvement in the crypto space. However, this wind of change has already swept across the globe, resulting in many revolutionary plans to reduce cryptocurrency’s carbon footprint. It is also worth noting that comparatively, cryptocurrency is in its infancy and has plenty of room to evolve and better itself in the near and long-term future.
So, in a nutshell
From the studies and reports we’ve evaluated, it’s our opinion that cryptocurrency mining does not naturally result in additional carbon emissions since computer owners can use power from multiple sources. Interestingly, the aforementioned Cambridge report states that renewable energy makes up 39% of crypto mining’s energy consumption. One has to wonder why there’s no mention of this in the mainstream media FUD reports…?
We’ll leave you with one more nugget. World leaders and celebrity influencers put ‘climate change’ at the top of the agenda, with warnings of future global lockdowns to help reduce emissions. At the same time, a single asset class receives the most historically profound and coordinated attack from the mainstream media, governments, and banks.
In contrast, the very same asset class offers the world’s population the opportunity of absolute and undeniable financial freedom.
That’s interesting, isn’t it?
Written by @Martinotoole