Is Bitcoin Bad For The Environment?

Bitcoin is increasing in popularity, there’s no denying that. More people know about Bitcoin now than ever before! But did you know that as more and more people use Bitcoin, it uses more and more energy? If you ask most people, they would say that they think Bitcoin is bad for the environment because they saw it on Twitter or something. But they probably don't know why. Today we are going to try to understand why Bitcoin could be bad for the environment and the impacts it has. But we are also going to look at some ways Bitcoin could reduce its impact on the environment.

Why Do People Think Bitcoin Is Bad For The Environment?

The reason that Bitcoin could be bad for the environment is because it uses an insane amount of energy. However, this energy consumption is absolutely needed to keep Bitcoin alive.

Why Does Bitcoin Use So Much Energy?

The energy used by Bitcoin is to mine blocks. Mining is a very important part of the blockchain process. Arguably, the most important. Bitcoin itself uses a proof of work consensus method. When a block is full of transactions, miners race against each other to generate a code that will securely connect blocks. This code is extremely difficult to come up with and is basically a guessing game. Every single miner on the network (around 10,000) is using a computer to try and guess this complicated code. Since the code is difficult to find it takes a lot of time, about 10 minutes for Bitcoin with every miner trying to guess. Calculating an extremely complicated code takes a lot of effort (work, in proof-of-work) on the computer's part, therefore using a lot of energy by itself. But with so many individual computers competing against each other all trying to calculate this code at the same time, it leads to a massive amount of energy used all around the world. Mining is needed so that everyone on the blockchain's network will agree with each other. Without getting into too much detail, miners make sure that transactions on the blockchain are valid and secure. They also introduce new Bitcoin into circulation. When a miner is successful in mind a blog they are rewarded with crypto, in this case, Bitcoin. Right now, you receive 3.125 Bitcoin for every block you mine. At $60,000 per Bitcoin, you would get about $187,500 for mining a block. Though it’s extremely difficult, you can see why someone might want to mine Bitcoin.

How Much Electricity Does Bitcoin Use?

If you could mine just one Bitcoin, it would use about 335,000 kWh of electricity and cost about $65,000 (in New York prices) spread out over all the miners on the network. For the individual miner, it would be about 33.5 kWh of electricity and cost about $6.53. That’s about 1,050 kWh per transaction. There’s a pretty well known graph that's been circulating for a while showing that Bitcoin uses more electricity than certain countries like Norway, Switzerland or Bangladesh, which is true. These charts usually show energy consumption with countries like China being on top, then the United States, then Germany, then Bitcoin, then the Netherlands, then Bangladesh, blah blah blah. They try to make it seem like Bitcoin is the 4th or 5th biggest consumer of energy, which is simply not true. Bitcoin does use approximately the same amount of electricity as Malaysia (about 150,000 GWh per year), but they are the 26th country on the list of countries by electricity consumed. This is only about 0.6 percent of all the electricity used on earth. But this is such a silly comparison as you could choose anything that consumes electricity and compare it to the amount of electricity certain countries use. Let’s take for example refrigerators. A refrigerator uses about 4.32 kWh per day, which is 1,576.8 kWh per year per refrigerator. In the United States, there are about 110 million refrigerators. That means that refrigerators in the United States alone use about 173,400 GWh per year compared to Bitcoin's 150,000 GWh per year. Refrigerators would be 24th on the list of countries by energy consumption and use about as much electricity as Thailand. You can practically do this with anything. Anyway, that's fun and all, but there's no arguing that Bitcoin uses a lot of energy.

Bitcoin’s Impact On The Environment

Since Bitcoin uses a lot of energy it does have an impact on the environment since that energy has to come from somewhere. Unfortunately, fossil fuels are the main source of energy in most countries that mine Bitcoin, including the United States, which means that the energy that Bitcoin uses is responsible for the emissions those fossil fuels release into the atmosphere. Bitcoin is responsible for about 114 million tons of carbon dioxide that is released into the atmosphere per year. This is about the same amount of carbon dioxide generated by the Czech Republic. Bitcoin also creates an enormous amount of electric waste. Something like 37,000 tons of waste. Mining hardware is constantly updating to be better and better, leaving older miners in the dust quickly. Since there are specific computers used to mine Bitcoin, they can't really be used for anything else, which makes them totally useless.

Can Bitcoin Be Green?

But Bitcoin can be green! In fact it already is! 26% of all the energy Bitcoin uses is from renewable energy. At one point, almost half of energy used was renewable energy to mine Bitcoin. 46.1% of the energy used to mine Bitcoin was with renewable resources until China, one of the largest miners, banned Bitcoin mining, forcing miners to move to other countries where renewable resources weren't as available, dropping that percentage to 26%. But we can watch that number increase. Here are ways that Bitcoin could be less impactful on the environment.

Using Solar, Wind, Water, or Geothermal

Having Bitcoin miners be hooked up to solar panels or windmills is probably the easiest way for Bitcoin to be green and have less of an impact on the environment. Or, if you're cool like El Salvador, you can mine Bitcoin with a volcano! The United States is home to almost half of Bitcoin's miners. Unfortunately, since most of the energy used in the United States is from fossil fuels it means most of its Bitcoin is probably mined with energy generated by fossil fuels. Right now, the United States only gets about 20% of its energy from green sources. And about 9 percent of that is from nuclear power, which leaves 11% generated by renewable energy. Of that, only a little over half is energy created with solar, wind, water, or geothermal methods. So there is definitely room to improve. However, on the plus side the United States has doubled its share of energy from renewable sources since 2010. Yup, from about 5.5% to 11%. We still have a ways to go. Kazakhstan (yes, the country in Borat) has the second largest Bitcoin mining community. Unfortunately here only about 4 percent of energy is generated through renewables. It is slightly up from 2010, but hardly, and is actually down from their all-time high of almost 6% in 2002. The good thing is that most of the countries in the world are increasing their percentage of energy generated by renewable resources, but it’s slow. It’s really not Bitcoin’s fault that the world is slow to harness the power of these resources. Over time more and more countries will increase the use of solar panels and these other methods of energy generation instead of using fossil fuels. This will give Bitcoin miners a better opportunity to use green methods of energy. As the world becomes more green, Bitcoin will naturally become more green.

Using Stranded Energy

Have you ever seen pictures of a natural gas plant with big flames above the towers? That's a gas flare and it's excess energy just being tossed away. When transporting natural gas, sometimes the pipelines cannot always transport the amount produced due to safety reasons. Instead, natural gas companies are forced to burn off the excess gas or send it into the air. Obviously, this is going to harm the environment and is a complete waste of energy. What some companies are doing is setting up Bitcoin miners to make use of this excess energy that would otherwise go to waste. Instead of burning it or sending it into the air, the natural gas gets diverted into generators that power Bitcoin miners. It would be better to use renewables, but hey, at least they are attempting to put the energy to use instead of harming the environment for no reason.

Can Bitcoin’s Energy Be Recycled?

Since all the computers are trying to guess that code at the same time and only one can mine a block, only that one computer has put its energy to good use. The rest have completely wasted their energy failing to mine a block. That means most of the energy that Bitcoin uses is completely wasted. But, the energy used by mining Bitcoin doesn’t have to go to waste! This energy can be used to heat buildings. By connecting Bitcoin miners to heating systems, the heat the process generates can be used to warm buildings including homes. It can also be used to heat up water too. This is some crazy new idea either. There are buildings that are heated using the waste heat produced by data servers.

There Are Better Methods of Consensus For The Environment

Bitcoin uses a lot of energy due to its proof of work consensus method, but there are other consensus methods like proof of stake that are a lot less energy intensive. With proof of stake, users lock their crypto for a chance of “randomly” being selected to validate the block’s transactions. Then, if you’re selected, you are rewarded in crypto for keeping the network alive. The main difference of proof of stake for the environment is that there aren’t thousands of computers trying to solve a complex problem at the same time, thus that energy is not used. Instead, hardly any energy is used. There are some other methods of consensus like proof of burn, proof of history, proof of elapsed time, and proof of capacity, but we won’t get into the details here. Bitcoin is the cryptocurrency which is used the most, and the other crypto using better methods are not as popular yet. It’s up for question whether or not they will ever be.

Summary

Bitcoin could possibly be bad for the environment since it uses a lot of energy. The energy that Bitcoin uses is needed to mine blocks, which is important for keeping the network secure, validating transactions, and introducing new coins into circulation. Bitcoin uses about 150,000 GWh of electricity per year, which is about the same amount of energy that Malaysia uses. It's responsible for about 114,000 tons of carbon dioxide released into the atmosphere, and about 37,000 tons of electronic waste per year. There are a few ways that Bitcoin mining can be green and have less of an impact on the environment. These include renewable energy sources like solar, wind, hydro and geothermal and also stranded energy, which is using excess energy from natural gas plants to mine Bitcoin instead of being burned for no reason. It’s possible that Bitcoin’s energy can be recycled in the form of heat, which can be used to warm homes in cold areas. Proof of work isn’t the only way to mine cryptocurrency, it is just what Bitcoin uses. There are other methods that are a lot less energy intensive and have less impact on the environment.