Tags of crypto fans got their weave in a twist recently when Elon Musk, an occasional cheerleader, expressed concerns about the cost of Bitcoin’s environment. "Cryptocurrency is a great idea on many levels," read a statement shared on its Twitter feed. "We believe he has a bright future, but he can't do much for the environment."
So how harmful is bitcoin to the planet? And does Musk's radical U-turn mark the beginning of the end of the crypto revolution? Join us on a trip down the mines for a vague look at Bitcoin’s energy consumption. You’d be forgiven for thinking ‘hang on, Bitcoin is that weird fake internet money, right? How on earth does it even have a carbon footprint?’ Traditional tender, such as banknotes printed on hacked-down forests or shiny coins minted on rough extracted gold should, intuitively at least, be worse for the environment, right?
To understand how it’s a bit more complicated than that, let’s look at the fundamental conundrum Bitcoin sets out to solve. All digital currencies, at some stage or another during their development, run up against the so-called ‘double spending problem.’ If I want to buy, say, a car using shady internet money, it’s impossible for the car salesman to know for sure I’m not simultaneously using the very same shady internet money to buy a boat.
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If I can somehow convince both boat and car salespeople that both transactions are legit, I’ll get both a car and a boat and be hundred miles away before anybody realizes they’ve been had. With conventional credit cards, all transactions are logged and verified centrally. Which means you can’t spend the same money twice, or Visa will do you in. Bitcoin is different though. It strives above all else to be decentralized.
Bitcoin creator Satoshi Nakamoto’s greatest stroke of genius was developing the block chain. Instead of some all-powerful central bank giving the nod, network computers around the world race to verify the legitimacy of all recent Bitcoin transactions by solving, or ‘hashing’ elaborate math’s puzzles. When one lucky computer somewhere on earth pulls that off, a verified record of recent Bitcoin transactions is minted – a ‘block’– that gets coupled to all previous blocks – a ‘block chain’ – which then gets copied and shared around the network as a reliable, decentralized ledger of all Bitcoin movements. No one individual can tamper directly with the block chain.
Which is the basis of all its value. Back to our example. Whichever transaction – car or boat – is first verified in the hashing feeding frenzy wins, while the other is automatically rejected. And whichever computer out there on the network happens to have won the race to verify that block of transactions is rewarded – at the time of writing – with 6.25 bitcoins. This is worth around $283,000, to that computer’s lucky owner. And no double-spending in sight. That subtle, complex confirmation mechanism– known as ‘proof of work’ – is certainly effective at keeping the block chain in check.
Trouble is it consumes a vast amount of computing horsepower. To maximize your chances of solving the hash and collecting those 6.25 Bitcoins, it makes sense for you, the miner, to have computers by the hundred greedily hashing night and day, in gigantic scary server farms. The more computers running, statistically, the more likely they are to succeed. And even though the energy bills are sky high, they’re more than offset by the rising value of Bitcoin. Bigger farms run many thousands of computers– well, graphics cards technically.
All but one of those hardworking graphics cards will fail in the attempt, but – and this is key – every single one is still burning up energy in the attempt. That’s the problem. How much energy? As interest in Bitcoin soars, Bitcoin mining now consumes some 129 terawatt hours of electricity a year. Compare that to Google’s net consumption of a measly 12.4 Terawatt hours, and the scale becomes obvious. In terms of emissions.
Driven by a latter-day gold rush of enterprising nerds gunning great battalions of graphics cards 24/7, Bitcoin’s carbon footprint alone is now said to rival that of Argentina. Over the past two years, carbon emissions from all that fake mining has grown by some 40 million tons, or the equivalent of 8.9million cars. Bitcoin is a bigger emitter than American Airlines, and is fast catching up with the carbon footprint of the entire Federal US government.
If you want a British analogy, it’s said the energy expended mining Bitcoin in a year could power every kettle in the UK for 27years. Almost no other human activity is so flagrantly wasteful. But so long as ‘proof of work’ remains the standard, it’s just good business sense for Bitcoin farmers to leave their vast banks of graphics cards on constantly as it generates a constant stream of revenue. Energy consumption itself isn’t a big deal, by the way. But much of the energy that runs those giant Chinese Bitcoin mines comes directly from dirty coal.
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As Greenpeace puts it, Bitcoin miners are‘…powering 21st-century technology with 19th-century energy sources’. In Iceland, locals are concerned that rivers are being dammed and natural beauty destroyed purely in order to run the country’s thirsty Bitcoin mines. Back to Elon Musk’s intervention. "Tesla banned the purchase of cars using bitcoin," the statement said. “We are concerned about the rapid rise in oil prices, including the acquisition and sale of bitcoins, especially coal, which has the worst life cycle.
When Tesla announced it planned to accept Bitcoin back in March the decision was swiftly criticized by industry analyst David Gerard, who observed: “Tesla got $1.5bn in environmental subsidies in 2020, funded by the taxpayer. “It has come to the fore at a cost of $ 5 billion on bitumen, which is the main source of electricity from coal. Their subsidy needs to be explored. "Only technological business cooperates in solving this problem.
NVIDIA, one of the more popular graphics card manufacturers, recently launched a drive update in order to deliberately make their devices less attractive to crypto miners working on the ethereal block chain. Crypto miners’ insatiable appetite for the cards often leaves real gamers unable to buy them for their intended purpose. The good news is not all cryptocurrencies are alike. Take Cardano, a rival to Bitcoin, which runs on a ‘proof of stake’ consensus, as opposed to ‘proof of work’.
This basically means miners tie up some of their own coin as collateral whilst validating transactions, with rewards trickling their way in exchange for participation. Crucially, millions of processors aren’t competing in the same space, which means radically lower energy consumption – as little as6 gwh across for all Cardano mining. Cardanos’ coin, named Ada after British female computing pioneer Ada Lovelace, works on these principles, as does an ambitious new coinage from the people who created Ethereum, called Ethereum 2.0.
China, yet another cryptocurrency, uses a novel ‘proof of space’ validation system. Users offer the network empty space on their hard drives, which is a far less energy-intensive process than proof of work. Although, in fairness, Chia has caused physical shortages of hard drives in Vietnam and parts of China.
Bitcoin is by no means the only environmentally disastrous cryptocurrency. Ethereum’s carbon footprint is as big as Hong Kong’s. Bitcoin defenders are quick to point out the convention banking system is a far worse culprit, burning through over 260 tw/h compared to their crypto coin’s comparatively modest 129 tw/h. But when you consider more than half the world’s population uses conventional banking, and maybe 100 million use bitcoin, that comparison starts to look a bit daft.
So what’s to be done? Hopefully Bitcoin will see the error of its ways and amend its ‘proof of work’ approach. Or hopefully renewable energy sources will pick up the slack. Either way, its worth remembering Bitcoin’s carbon footprint is only half that of unused domestic appliances lazily left on standby across America. One problem at a time though eh.
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