The energy footprint of Bitcoin mining is extraordinary. The already gargantuan energy consumption of the process of minting new cryptocurrency coins has more than doubled during 2023 thanks to high prices. The United States, one of the world’s largest hubs for cryptocurrency mining, is at the center of an intensifying storm over containing cryptocurrency’s problematic energy consumption and associated emissions, but regulating it will not be easy.
By the end of last year, global energy consumption from bitcoin mining had increased 101% since January 1, reaching a whopping 141.2 TWh, according to data from Digiconomist. All of this equates to a carbon footprint of 78.7 million tonnes of CO2 per year. To put that into perspective, Bitcoin mining now consumes as much energy in a year as Australia and more than Egypt, which has a population of 110 million and emits more carbon dioxide than ‘Oman.
Bitcoin’s outsized energy and carbon footprint results from the cryptocurrency’s unique mining process. Bitcoin relies on a public ledger powered by blockchain to keep transactions anonymous, secure, and authenticable. To achieve this, each new entry in the ledger requires complex computing problem-solving known as “proof of work” that relies on trial and error – integrating random solutions and seeing if they fit. The “miner” who solves each unique puzzle the fastest receives a newly created Bitcoin. This means that miners using high-powered supercomputers that can do this work faster have a key advantage. This is where the massive amount of energy consumption comes into play.
As Bitcoin prices rise, more miners compete to solve these puzzles in real time. But if more miners led to the creation of more and more bitcoins, the market would flood and currency prices would fall. To avoid this, solving a proof of work becomes more and more difficult with each puzzle, so mining a Bitcoin should always take 10 minutes.
The result is the same amount of Bitcoin produced as usual, but with an ever-increasing energy footprint. In 2009, you could mine Bitcoin using just a few seconds of household electricity, whereas in recent years you would have had to use around 9 years’ worth. As a result, many miners have entire warehouses of supercomputers running 24/7.
And some countries and regions of the world bear the burden of this energy consumption more than others. China was once a powerhouse for Bitcoin mining operations, but Beijing banned Bitcoin and other cryptocurrencies in 2021. As a result, many Bitcoin miners moved their operations to the United States, following resource abundant energy and relatively lax legal restrictions.
In just a few years, the United States’ share of global cryptocurrency mining increased from 3.5% to 38%, making the United States the largest cryptocurrency mining market. In doing so, the Bitcoin boom has “strained local grids, increased electricity bills for nearby residents, and kept once-defunct fossil fuel plants operating,” according to a recent Grist report. But it is extremely difficult to establish precise figures on who is mining and where, as well as exactly how much energy each operation uses.
Today, the United States is trying to bring the situation under control. First step: try to understand the quantity of energy consumed by Bitcoin miners on American soil. Last week, the US Energy Information Administration announced that it would begin collecting energy consumption data from more than 130 “identified commercial cryptocurrency miners” operating in the United States.
“As cryptocurrency mining has grown in the United States, concerns have increased about the energy-intensive nature of this activity and its effects on the American electric power industry,” said l EIA in a new report that forms the basis of the investigation, which began this week. “Concerns expressed to the EIA include strains on the electricity grid during periods of peak demand, the possibility of higher electricity prices, as well as the effects on carbon dioxide emissions linked to electricity. ‘energy. »
But beyond accounting for the energy footprint of commercial-scale mining operations in the United States, actually changing these numbers will be an uphill battle. Past efforts to regulate the industry have been laughable, stemming primarily from recommendations and calls for miners to source their energy from cleaner, more sustainable sources. Such guidance is almost certain to fall on deaf ears, as much of the appeal of the crypto world lies in a complete lack of governance and oversight. “If anything represents free market capitalism at its most naked, it’s Bitcoin,” the BBC remarked in 2021, making efforts to promote voluntary sustainability standards “a bit bizarre.”
In the future, measures to reign in Bitcoin will have to be much stricter. And even more, they must be enforceable. Getting real numbers from the current EIA survey is a crucial first step, but it is unclear how the government will actually follow up with meaningful policy measures.
By Haley Zaremba for Oilprice.com
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