In fact, the CCAF has determined that the bitcoin industry uses a large amount of renewable energy, sometimes more than half, depending on the jurisdiction. This is evidence of the industry’s commitment to sustainability and its potential role in the green revolution.
Furthermore, it is common for technologies to start with a high level of inefficiency, including a larger emissions footprint. Over time, these technologies evolve and become more efficient, reducing their environmental impact. This pattern is evident in many technologies, such as solar power or electric vehicle batteries, which initially had higher emissions outputs that have been gradually reduced.
The primary driver of environmental damage is emissions, not energy use. And there are a variety of ways for bitcoin miners to reduce emissions while remaining efficient.
Demystifying bitcoin mining and energy use
To assess the ecological footprint of bitcoin, it is necessary to first understand the intricacies of bitcoin mining. Bitcoin mining is a complex and vital process for the functioning of the Bitcoin network. It plays two main roles:
- It facilitates permanent recording of transactions on the blockchain, thus removing the need for a central authority.
- It enables a fair distribution of the total bitcoin supply of 21 million coins, and rewards miners with new coins for using real-world resources, especially electricity, to secure the network.
In the bitcoin network, intense competition occurs between miners who use specialized computers, known as application-specific integrated circuits, to compute cryptographic hash functions. These accounts are like buying lottery tickets. The more a miner can calculate (for example, the more tickets he has), the better his chances of winning.
However, winning is not random. The goal is to compute a hash below a certain value, known as the network’s “difficulty”. This difficulty is adjusted approximately every two weeks, based on the network’s total computing power, to ensure that a new block is added to the blockchain approximately every 10 minutes.
As the popularity of bitcoin has increased, so has the number of miners. This greatly increased the difficulty of mining. In fact, over the past two years, the difficulty has increased by 3.6 times, which means miners have to work 3.6 times harder to win a block reward. As the difficulty increases, miners’ profitability subsequently diminishes.
A miner who achieves a “winning” hash gains the right to add a new block of transactions to the blockchain and is rewarded with new bitcoins. Currently, the block reward is 6.25 bitcoins, but this number is subject to “halving” approximately every four years.
The next halving event, scheduled for mid-2024, will reduce the block reward to 3.125 bitcoins. This event implicitly requires miners to double their energy efficiency every four years to maintain profitability. Not only does this built-in feature encourage miners to continually boost their efficiency, thus promoting technological advancements in mining, but it may also enhance the overall sustainability of the Bitcoin network. The ever-increasing mining difficulty amplifies this efficiency demand, forcing bitcoin miners to keep up with the growing challenge.
report from JPMorgan It highlights this stark fact: Bitcoin miners with access to cheap electricity and a high percentage of sustainable energy are more likely to survive in this progressively competitive space. Since we have reached an all-time high in mining difficulty, it is clear that being a Bitcoin miner is not an easy task.
The Evolution of Bitcoin Mining: A Journey Towards Efficiency
Since its inception in 2009, bitcoin mining has seen a major leap in efficiency. Initially, mining was done using CPUs. As the network expanded, GPUs took over, and since 2013, ASICs have become the hardware of choice due to their superior efficiency. The first CPU, the ARM Cortex A9, had 877,193 joules per terahash (J/TH) in 2009. In contrast, the Antminer S19xp has a J/TH of just 21.5, representing an efficiency increase of approximately 4,077,000%.
Bitcoin Energy Consumption: A Fair Comparison
Bitcoin is often criticized for its energy consumption, and in fact it uses less energy than many traditional industries. With an annual consumption of 129.45 TWh, it represents just that 0.078% of global energy use. In comparison, the gold industry consumes about 240.61 TWh annually, taking into account emissions from the various stages of production and refining. The traditional banking system, which includes data centers, branches, ATMs, and card network data centers, uses more energy, estimated at 638.88 TWh annually.
Other sources, such as cybersecurity engineer and cryptographer Michel Khazaga, told CoinTelegraph in an interview that the banking industry is using at least 56 times more energy than bitcoin. It is important to note that these comparisons are based on available data, and calculating exact energy consumption can be difficult due to a lack of disclosure in some industries.
Bitcoin emission intensity: a comparative analysis
When we delve deeper into the emission intensity of bitcoin (g/kWh) and compare it with other industries, it becomes clear that bitcoin, with an emission intensity of 296 g/kWh And its sustainable energy mix, at 52.6%, is more environmentally efficient than many other sectors.
The gold industry, which relies on a mixture of non-electric and electric energy sources, has a higher emission intensity of 679 g/kWh and a sustainable energy mix of only 12.8%, according to Goldmoney.com. These numbers underline the critical role of the energy mix in determining environmental impact, and put Bitcoin in a more favorable light when considering emission intensity.
Turning energy waste into wealth
Bitcoin miners are exploring a new solution to the problem of stranded energy, which refers to energy that is generated but remains unused due to its isolated location. For example, remote natural gas mining often allows some of the gas to escape.
By setting up bitcoin mining operations in such areas, bitcoins divert that wasted energy, Natural gas leak, into a valuable resource that fuels mining machinery. For the other example, bitcoin miners also harness stranded sources of Wind and solar energy, thus improving the financial viability of these renewable energy projects. Moreover, bitcoin miners like EZBlockchain and Crusoe Energy are also addressing a problem Burning natural gasIt is a common by-product of oil exploration, by using this gas to produce electricity for mining operations.
This strategy does more than just use stranded energy; It is also emerging as a cost-effective way to reduce atmospheric methane, a potent greenhouse gas. According to a report by ESG analyst Daniel PattenThis approach can greatly help in combating climate change. Surprisingly, bitcoin miners can play a beneficial role in preserving the environment. Patten’s study suggests that by 2045, bitcoin mining could reduce global warming by 0.15%. The report stresses that bitcoin mining is currently the only technologically viable solution to mitigating methane emissions.
Bitcoin’s journey towards sustainability
It is important to remember that in the grand scheme of things, Bitcoin’s environmental footprint is relatively small compared to its larger adjacent industries and sectors. These financial sectors require our immediate attention and concerted efforts to significantly reduce global carbon emissions.
In conclusion, the environmental narrative surrounding Bitcoin is multifaceted and evolving. Its journey towards sustainability is fueled by continuous innovation and efficiency improvements, making it a promising player in the green revolution. Bitcoin’s unique ability to harness stranded energy resources and mitigate greenhouse gas emissions makes it a potential ally in our fight against climate change.