Bitcoin seeks end to energy woes but is it tip of iceberg?
Bitcoin’s carbon footprint is one dark stain, but are there other hidden problems?
- Bitcoin environmental impact
- Greenidge Generating Station
- Innovative alternatives
- Renewable energy
- Bigger Picture
- What does this have to do with crypto?
- Mass data
From burning GOB, otherwise known as “garbage of bituminous”, to working with wind farms to harness renewables, bitcoin miners are employing a host of new means to legitimise the validity of their trade.
The original crypto coin, hit by an onslaught of attacks, is increasingly under pressure to go “green”. With a host of new coins, including cardano, employing the proof-of-stake model, a process which advocates suggest is more than 99.5% more energy efficient, all eyes are on Bitcoin, by far the biggest crypto, to clean up its ways.
While no steps have been taken to jump from the proof-of-work model, bitcoin miners are looking at ways to harness green energy.
But what is green energy? Is the environmental cost of bitcoin a worthy drain on any resources, regardless of how allegedly “green”? Where does this leave the future of crypto mining? Furthermore, does the alarming impact of Bitcoin signal a future where the digital world becomes a major drag on the environment?
Before we answer these questions, let’s take a look at the environmental bitcoin mining cost.
Bitcoin environmental impact
According to the Cambridge Centre for Alternative Finance, Bitcoin consumes more than 100 terawatt-hours of electricty annually. A single transaction on the Bitcoin network has the same carbon footprint as 680,000 Visa transactions.
Research undertaken by the Oak Ridge Institute found that a dollar’s worth of bitcoin (BTC) used 17 megajoules of energy. This, they reported, was more than double the energy it takes to mine one dollar’s worth of other commodities, including gold and platinum.
To put it into perspective, Bitcoin uses more electricity per year than the Philippines, and just less than the Netherlands.
As revelations emerge about the true environmental cost of Bitcoin, charities, academics and environmentalists are, unsurprisingly, coming out in arms, pointing out the absurdities of crypto’s energy consumption given the world is already facing a climate crisis.
Alex de Vries, for example, researcher and founder of Digiconomist, argues that Bitcoin mining is essentially waste by design. De Vries says: “It’s a system where participants are forced to waste resources to provide some level of security on the network. The more value bitcoin has, the more money it’s worth, the more we spend on resources.”
Elon Musk, once an avid supporter of Bitcoin, announced in May 2021 that payment for Tesla cars in BTC would no longer be accepted due to its carbon footprint. “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment,” he said.
Even Vitalik Buterin, the computer scientist who founded Ethereum, told IEEE Spectrum how mining cryptos are “a huge waste of resources, even if you don’t believe that pollution and carbon dioxide are an issue”, arguing that “There are real consumers – real people – whose need for electricity is being displaced by this stuff”.
While Ethereum, the second-largest crypto network after Bitcoin, is just as damaging, the network has pledged to switch to the much more efficient proof-of-stake model by 2022 at the latest.
However, it’s not just how much energy that Bitcoin requires that is causing problems, it’s also the type of energy which it uses. Miners tend to migrate to countries like China and Russia where cheap electricity is available. China has recently cracked down on mining activities, meaning many miners are increasingly heading to other coal-rich countries.
According to a recent study, non-renewables still dominate mining. While 76% of surveyed miners say they use renewables, only 39% of total consumption comes from renewables. This means a staggering 61% of energy still comes from non-renewables.
While it’s difficult to guage precise statistics around renewables vs non renewable useage due to the fact many mining operations are anonymous and operating in far-flung countries, it is clear that the environmental impact of the coin is profound and the situation is far from ideal.
Indeed, new research by Nature Climate Change, cited by the FT, projects Bitcoin alone could cause global warming to increase past two degrees within three decades.
Zula Luvsandorj, project finance advisor to the UK Cabinet Office, on the subject of bitcoin energy consumption, said: “In general, more than half of the bitcoin mining power consumption globally is in China now. And the Chinese Government, as well as others, have recently been catching up with miners to limit that by using industrial tariffs, which might be consuming lots of energy from the grid and increasing overall demand...For smaller emerging market countries, this is a potential threat, as energy consumption can easily go up and the grid could [struggle to] cope with demand from other industrial users.”
Greenidge Generating Station
Increasingly, miners, in an effort to preserve the future of crypto mining, are looking for new ways to get energy. In the US, for example, whereas of April 2021, 16.85% of mining occurred, crypto companies have started taking over old power plants to fund their activities. The Greenidge Generating Station in Dresden, New York, for example, closed down in 2011 before opening in 2017 to provide power during times of high demand. In 2019, however, it was announced it would power bitcoin mining. Greenidge, the first bitcoin mining company to wholly owns a power plant, said it intended to double bitcoin mining operations by 2022. It did, however, announce in May 2021 that it would begin buying carbon credits to offset its carbon footprint. While this may meet ESG (environmental, social and governance) standards for banks and asset managers looking to get a slice of the pie, it rather puts a sticking plaster on the problem than solves it. While buying up energy sources is no doubt a good business proposition for electricity-guzzling bitcoin companies, it is deeply problematic from a sustainability perspective.
Other miners are heading out to oil fields to obtain excess energy which otherwise, because of being “stranded low volumes of gas that don’t justify a pipeline” would be “flared” or burnt, according to Steve Degenfelder, land manager at the Wyoming-based producer Kirkwood Oil & Gas. By selling or giving away the gas to miners, energy companies can reduce the carbon emissions on their books.
Similarly the entrepreneur Bill Spence bought the Scrubgrass Generating Plant in Pittsburgh, burning “gob”, or “garbage of bituminous”, waste coal, to power bitcoin mining. Compared to just three cents per kilowatt hour if Scrubgrass was selling to the power grid, selling to Bitcoin he makes around 20 cents.
Furthermore, despite the outrage this has caused, the plant collects Pennsylvania renewable-energy tax credits because it is disposing of this toxic waste.
Other mining companies, however, are trying more sustainable routes to ward off possible regulatory clampdowns on cryptocurrency miners using excess energy. This includes piling into renewables. While bitcoin miners still use mostly non-renewables, their renewable energy usage is still far higher than, say, the US, which uses electricity that is only 30% renewable, while in China the figure is less than 15%.
Renewables are the reason why China is responsible for 10% of mining in dry season and 50% in the wet season, according to Chris Bowden, founder and MD of the clean energy firm Squeaky.
Miners transport hydroelectric power machines from north to south of China during the wet season, to generate energy which would not be otherwise utilised because demand during the wet season vastly outstrips supply; and transportation and storage costs means it does not make sense for the traditional energy market to make use of it.
Some Bitcoin defenders suggest that not only do miners use energy which would otherwise be going to waste but even go as far as to suggest crypto mining could increase investment in renewables, and actually create more electricity on the grid.
In one study by Cathie Wood of ARK Invest and Jack Dorsey of Square, titled “Bitcoin is Key to an Abundant Energy Future”, the authors argue that bitcoin miners are uniquely positioned to utilise energy in a way that other energy markets cannot. Bitcoin energy buyers are flexible, can set up anywhere, and offer an “easily interruptible load”, basically meaning the electricity they use can be switched on and off easily. This, the paper suggests, means bitcoin, by crypto mining with solar power and wind power, can act as an energy buyer of last resort.
Renewables, of course, are not predictable. The sun can shine during the day when there is less requirement for energy and when everyone gets home from work, and demand peaks, there is no sun, so no solar energy supply. Renewable energy is difficult to store, and fluctuating supply and demand also creates grid congestion.
Solar-powered bitcoin mining can mitigate these issues by using energy as it is created, improving returns for renewable investors and developers and providing a grid with “excess” energy when demand spikes.
“A world with bitcoin is a world that, at equilibrium, generates more electricity from renewable carbon-free sources,” Wood wrote.
While utilising stranded energy and helping renewables with bottleneck sounds positive, the question remains: should any energy be going towards mining cryptocurrency in the first place? In a world where we are attempting to decarbonise, surely renewable energy should be going to houses, cars and hospitals, rather than bitcoin miners? Should the future of crypto mining remain intact?
The question around the carbon footprint of this or that can, at times, be somewhat decontextualised. The appropriate use of energy which should be expended or used is proportional to the value of the thing which is being created as a result of the energy being exerted. For example, using energy and materials to paint a beautiful picture, is, or at least has historically, been perceived as a worthy use of energy.
In Native American communities, the killing of animals was justified as long as all of the animal was eaten and none was wasted.
Ideas around what constitutes a waste of energy and valuable usage of energy is very much dependent on contemporary belief and value systems.
When it comes to crypto, most non-crypto believers are alarmed to hear of its environmental impact. Bitcoin, while originally intended as a currency, has become a very profitable way of making money. Of course there is always a cost to the drive for profit, and unfortunately the cost of Bitcoin is environmental. Thus, despite its anarchic beginnings it has become, arguably, the most potent expression of neo-capitalistic appetite for profit.
However, it is important to remember, crypto has not come out of a vacuum. After the birth of the internet, the next frontier for capitalistic growth has become the digital world, which, incidentally, is poised to become the biggest environmental drain in the coming years.
Recent reports have emerged about the increased impact internet usage and data centres are having on the planet.
According to a research paper undertaken at Yale University, the annual carbon footprint, excluding mobile data, roughly equates to the annual carbon footprint of activities in Finland and Sweden combined.
The study, published in the journal Resources, Conservation, and Recycling, reported that the water footprint annually of the internet, which comes from hydro electricity, could fill around one million Olympic swimming pools. Furthermore, it found the land taken up by housing data processing and transmitting centres equates to the land mass of Rio de Janiero, Mexico and New York combined.
In the US, these data centres, owned by tech giants such as Amazon, Google and Facebook, are responsible for 2% of the country’s use of electricity, and this trend has no sign of slowing down anytime soon.
Dale Sartor, a scientist at the Lawrence Berkeley National Laboratory, said: “I don’t think anybody envisions a reduction in the growth of our appetite for computation...So the chances we’re going to see an explosion in energy use sometime in the next couple of decades is pretty high.”
Indeed, estimates from the International Energy Agency forecast that the amount of power required to feed the world’s need for data storage and processing in 2028 will be equivalent to the total current energy needs of the US, the third-most heavily populated country in the world.
As Juan Salazar, writer at Data Natives, wrote: “The most exciting technologies of recent years are slowly becoming threats to our ecosystem. Few in the tech scene are talking about it and hardly anyone takes action.”
The lack of information available on the true environmental cost of tech is no doubt indicative of a blind spot, both on the part of consumers and companies.
Yale undertook its study to increase transparency, but in the process of trying to find data around mobile data and data centres, hit upon substantial roadblocks in getting adequate information as to what was going on.
What does this have to do with crypto?
Bitcoin is, from an environmental perspective, extremely damaging. However, as mentioned previously, it has not emerged out of a vacuum.
Western society has become so obsessed with data. Recording, analysing and tracking all parts of life, from the public to the private, from leisure to business, has become of prime importance. This obsessive tracking of data has also turned anonymity or privacy of any kind into a far-distant memory.
This issue was articulated effectively by Swedish researcher Anders Andrae back in 2017: “We have a tsunami of data approaching. Everything which can be is being digitalised. It is a perfect storm. 5G [the fifth generation of mobile technology] is coming, IP [internet protocol] traffic is much higher than estimated, and all cars and machines, robots and artificial intelligence are being digitalised, producing huge amounts of data which is stored in data centres.”
The obsession with recording information finds its greatest expression in blockchain technology, an immutable asset which only exists in the digital world. Generally speaking, data represents or underlies an asset from the real world. In blockchain, the digital ledger is the asset. It speaks to the need of the financial industries to mine new untapped areas which offer high yields when “real” assets have reached saturation point. In more abstract terms, it also speaks to a dystopian dream of pure transparent replication of the real onto the hyperreal.
What does this have to do with the the environmental cost of bitcoin?
The push towards exploring new uncharted digital realms to satiate an ever-growing need to imprint the real world onto the digital world is having real-world implications. The desire to invest energy, be it renewable or nonrenewable, into crypto but also into these gigantic data centres reflects this growing preoccupation with colonising the digital world, regardless of whether it is or is not adding greater or lesser value to society.
Considering we are only at the beginning of the accumulation of mass data, it is not outlandish to suggest whole swathes of the world could be consumed by vast data centres and mining rigs.
Such a phenomenon brings to mind the map-territory relation, whereby a one-to-one scale map of the world is created in obsessive detail and citizens, increasingly unable to decipher between reality and its representation, start using the map as the territory and the territory as the map.
While there are undoubtedly positive uses for blockchain, including providing the unbanked with access to a financial system, the systematic desire to streamline, record, track, analyse and ultimately envelop the globe into digitalisation should not be done just for the sake of it.
Given there is a cost which comes with each new evolution, it is important to gauge whether the evolution is actually worth the cost.
The cost of bitcoin mining is based on a variety of factors. These include: how expensive your equipment is, where you are in the world, what kind of electricity you are using and how many miners there are participating.
If, say, you are in a country where electricity is cheap, then your mining costs will be lower.
Estimates suggest the cost of mining one bitcoin hovers around the $7,000 to $11,000 (£5,000 to £8,000) mark.
While this may seem very expensive, it is important to take into account a miner can still make a tidy profit as each BTC can be sold for more than $40,000.
There is currently no way to just mine one bitcoin. A miner can mine one block and in return receive BTC6.25.
It takes approximately 10 minutes for the puzzle to be cracked by a participating miner. Once the puzzle has been cracked, the successful miner will mine the next block and be compensated in bitcoin.
Bitcoin mining’s profitability depends on a number of factors.
These include cost of electricity, cost of equipment, difficulty of cracking the puzzles and the cost of bitcoin compared to fiat currency. Obviously if BTC value drops then it cannot be sold for as much, rendering it less profitable to mine it.