Bitcoinâ€s purposeless power problem

If you’re a savvy cryptocurrency holder in Detroit, Michigan, you might be happy to learn that Detroit will now accept crypto as legal tender for your city taxes and fees. Same goes for those in Louisiana, Colorado, and Utah, where state fees can be paid with cryptocurrency. Other states, like Arizona and Ohio, are considering passing similar laws. Coupled with recent record-setting growth, it must be a pretty good time to be a Bitcoin owner. These benefits are concentrated among a small group of investors, but the consequences of Bitcoin’s growth are shared by everyone.

Cryptocurrencies like Bitcoin and Ether are valued because of their artificial scarcity. This scarcity is held in check by the complex and energy-intensive “mining†process that creates new coins. In 2023, Bitcoin mining accounted for 0.2% to 0.9% of global energy consumption, equivalent to the entire energy consumption of Greece or Australia, respectively. One study found Bitcoin consumes more energy than 85% of the countries in the world.

Why does Bitcoin require so much energy?

To mine bitcoin, crypto enthusiasts must solve complex mathematical problems that verify Bitcoin transactions and add them to the Bitcoin blockchain, the underlying ledger technology that records transactions. These problems are so complex that it requires powering computers to run an extremely complicated guess-and-check program. The complexity of the blockchain and its associated mining process means that an immense amount of computing power is required.

The process of mining cryptocurrencies such as bitcoin is decentralized, meaning many miners are competing to solve the same problem first in order to receive the reward of new bitcoin. As more miners participate, and more bitcoin is created, the cryptographic problems get increasingly complex–resulting in even more energy consumption.

Each transaction in Bitcoin leads to an additional 17.2 MWh of energy consumption driven by the mining process. This is 12 million times more energy consumption than a simple Visa transaction. In a world that is still powered primarily by burning polluting fossil fuels, such wasteful energy consumption has clear consequences for all of us.

The environmental impact of Bitcoin and cryptocurrency

With massive energy consumption, Bitcoin and other cryptocurrencies are driving an enormous amount of carbon emissions. In 2020 and 2021, cryptocurrencies were responsible for greenhouse gas emissions equivalent to running 190 natural gas-fired power plants. The energy-intensive mining also relies on cooling processes that use significant amounts of water. One study estimates that the annual water footprint of US bitcoin miners is roughly equivalent to the annual water consumption of 300,000 American households. It also requires land, with the equivalent of nearly 350,000 football fields being used for energy-intensive crypto farming in 2020 and 2021.

At all levels, Bitcoin and fellow cryptocurrencies are having an outsized impact on the environment. Both in terms of greenhouse gas emissions and natural resource usage, the impact of cryptocurrencies’ computer-intensive mining process is a demonstrably negative force plunging us further into reliance on harmful fossil fuels and slowing the transition to renewable energy. Even though renewables are on the rise, the majority of U.S. electricity is still provided by natural gas and coal.

So what should we do about Bitcoin?

We need to radically rethink our approach to technologies like cryptocurrency. When rampant energy consumption is involved, we ought to give serious thought as to whether energy usage is ultimately resulting in improved lives. In the case of Bitcoin, which is increasingly being used for criminal activities like drug and human trafficking, it seems like that answer is a clear no.

This is not to say that there is nothing compelling about the Bitcoin blockchain and cryptocurrency technology. But there is sufficient concern to suggest we reassess our endorsements and investments. Beyond just accepting cryptocurrencies as a form of payment, multiple states have used Bitcoinâ€s energy-intensive mining as justification for subsidizing or maintaining fossil-fuel driven plants, with no regard for the environmental consequences.

As it stands, the US does nearly 40 percent of all Bitcoin mining. It is time we understand the consequences its decentralized and deregulated creation process imposes on our environment, and reconsider our relationship with this technology before we blindly champion a major driver of fossil fuels and ecological destruction.