Why does this matter?
Bitcoin’s recent surge has renewed discussions about its environmental impact. The process of verifying bitcoin transactions – dubbed “mining” – requires significant computational power and has previously been accredited with consuming 0.2% of the world’s electricity.
What exactly does bitcoin mining entail?
Due to bitcoin’s decentralised nature, transactions need to be verified independently. “Miners” essentially audit groups of transactions in exchange for bitcoin – meaning the process also serves to put more of the cryptocurrency into circulation. In order to be rewarded, however, miners have to solve complex numerical problems before anyone else. This requires a huge amount of computational power – standard mining rigs need at least a 1,000 W power supply and can often function 24/7. A fuller explanation of the process can be found here.
Is bitcoin’s carbon footprint greater than other stores of value?
A 2018 study showed bitcoin’s energy consumption is almost on par with that needed to physically mine for gold. The cryptocurrency, however, obviously doesn’t have any of the other environmental consequences associated with real-world mining activities. Producing enough gold for one ring, for example, can generate 20 tonnes of waste, while also potentially causing sulphuric acid and other deadly chemicals to leach into surrounding environments.
This is not to say bitcoin’s power requirements aren’t a concern. Additionally, the majority of bitcoin miners reside in China, a country still heavily reliant on fossil fuels for electricity production. In 2019, for example, coal made up 57.7% of China’s energy use. Miners gravitate towards areas with cheap electricity, so providing better access to cheaper renewable alternatives to power the process could be a priority.
