- November 21, 2022
- |Bitcoin, Crypto News
Does Bitcoin Have An Energy Crisis?
Many argue that BTC mining is terrible for the environment and chews up inordinate amounts of power.
In April 2021, the Cambridge Bitcoin Electricity Consumption Index (CBECI) reported that BTC mining endeavors used energy at a rate that equaled Sweden’s average annual electric consumption. In addition, other research alleged that a single Bitcoin transaction was responsible for nearly a million times more carbon emissions than a Visa transaction.
Research studies like these have led many to speak out against crypto mining and Bitcoin’s proof-of-work consensus mechanism due to perceived environmental impact.
In September 2022, the White House Office of Science and Technology mentioned banning proof-of-work mining in a broader report on mining’s environmental impact. A month later, news emerged that the European Commission was working with global partners to encourage “more environmentally friendly cryptosystems such as proof-of-stake.”
Officials also drafted a proposal to call global leaders to apply pressure against Bitcoin mining’s energy consumption.
What's The Truth About Bitcoin's Energy Use?
While it’s easy to cast Bitcoin mining as a pariah for the environment, other research shows that the ecological debate needs more nuance.
Writing in Bitcoin Magazine, Marie Porteriaieva argues how talk concerning Bitcoin’s energy consumption is comparable to the fiat financial system and should be compared as such instead of abstract outputs, such as entire nations.
Analysis from Galaxy Digital found that bank branches, servers, ATMs, and card network data centers consume more than 263 TWh of electricity each year. More profound research from Michel Khazzaka of Valuechain Technology Ltd. found that when looking at additional elements like bank offices, printing and minting of physical notes and coins, and other fiat-related activity – the traditional money sector consumes about 4,981 TWh yearly.
Despite immense criticism – Bitcoin’s energy usage remains small.
Notably, the Bitcoin Mining Council published a report in October 2022 that totaled Bitcoin’s yearly energy usage at 266 TWh. This number is nearly the same as just a few core elements of the traditional financial sector.
Porteriaieva also argues that some popular Bitcoin energy consumption reports like the CBECI rely too heavily on electricity cost estimates through “simplistic weighing of profitable hardware” that skew results.
Compared To Global Energy Usage - Bitcoin's Environmental Footprint Remains Tiny
Additionally, Bitcoin’s energy usage remains tiny when placed in context with the total world energy output. To elaborate, the Bitcoin Mining Council estimates that BTC’s energy consumption is just about 0.16% of the yearly global energy output of 165,317 TWh.
Many might wonder how Bitcoin’s energy output ranks emissions-wise. It’s estimated that Bitcoin miners produce just 0.086% of the 34.8 billion metric tons of CO2 emitted into the atmosphere each year.
This small amount is due to increased green energy consumption by Bitcoin miners.
Since miners are attracted to the cheapest energy possible, they can rely on and use renewable energy as long as it provides affordable and reliable power. For example, Bitcoin mining rigs installed on two hydroelectric power plants in the Democratic Republic of the Congo ensured that both plants could become profitable to help build grid infrastructure to send power to local communities.
Forward Thinking & Environmentally Friendly
Now comprised of about 58% renewable energy, Bitcoin’s energy mix is notably higher than any other major industry.
It is also important to note that operators can turn bitcoin mining equipment off and on at any time; this flexibility is crucial in mitigating energy consumption and reducing wasteful energy usage. It’s much more challenging to control wasted energy within more traditional fields. According to Galaxy Digital, an estimated 2,250 TWh of power is wasted annually within conventional sectors.
There’s much more than meets the eye regarding Bitcoin’s energy usage.
Mining BTC grows more energy efficient each year as miners optimize their infrastructure. Bitcoin’s overall energy consumption remains a small fraction of global usage.