The industry of Bitcoin mining has grown massively since the currency launched, from the hobbyist right up to industrial scale professional operations. But just how much power is consumed in the mining of Bitcoin?
A professional Bitcoin mine
In 2017, several media organisations were granted access to one of the world’s largest Bitcoin mines, located in Inner Mongolia (China), operated by Bitmain Technologies. An excellent analysis of the mines operation by PWC analyst Alex DeVries estimated that the 25,000 mining machines at the factory emits 8,000 t0 13,000 kg of CO2 per Bitcoin mined. That works out at 24,000 – 40,000 kg of CO2 per hour.
That’s a lot. The US Environmental Protection Agency estimates that the average passenger vehicle emits about 0.404 KG of C02 per mile driven. So for every hour the mine in Mongolia operates it emits at least the same amount of CO2 as 59,405 miles travelled by a car. So if we drove a car from our office in the UK to Mongolia and back seven times we would emit the same CO2 as the mine does in an hour.
The cost of electricity
Energy costs are obviously one of the key costs associated with Bitcoin mining. In China electricity is approximately four US cents per kWh which is very cheap. In the UK it is over five times more expensive at about 22 US cents per kWh. A country with low energy costs is therefore very advantageous to set up a professional Bitcoin mining operation.China accounts for the majority of mines which is probably no surprise with energy costs as low as these.
How many professional Bitcoin mines are there?
There is no easy answer but in the example quoted above the analyst estimated that of the 25,000 machines at the mine, 21,000 were dedicated to Bitcoin mining representing “nearly 4% of the processing power in the global Bitcoin network”.
So let’s assume a total network of Bitcoin mining machines at roughly 525,000. Obviously the miners will be spread over the globe. Some of them will be based in countries using clean energy sources (e.g. Iceland’s electricity is produced almost entirely from renewable energy sources: hydroelectric (70%) and geothermal (30%)) and some using less clean energy sources. However, to avoid getting into even more complex calculations we’re going to use the 24,000 kg of CO2 per hour used by the 25,000 machines from the Mongolian mine example.
So that works out at 0.96 kg of CO2 per hour per machine. So for a global group of 525,000 mining machines that works out at 504,000 kg of CO2 per hour. And remember this was using the bottom of the estimated range of the CO2 production of the machines at the mine
In our driving example, we could drive our car 50 times around the earth and produce the same amount of CO2 as one hours global production of Bitcoin.
Manufacturing without purpose
Of course, everything takes energy, time and resources to produce. When we drive our car we produce CO2. When we get on an aeroplane we produce CO2. Growing fruit, transporting it and selling it in our supermarkets produces CO2.
But is there any intrinsic value in Bitcoin? If there’s none then is it simply being manufactured for no other purpose than supporting the Bitcoin market? Alan Greenspan, former chairman of the US Federal Reserve, isn’t sure. He has commented: “You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. Maybe somebody else can.”
Let’s look at another commodity such as gold. Even though it is heavily traded and invested in it does have intrinsic value. It can be used for the manufacture of jewellery and electrical components. Even speculative bubbles generally have something with intrinsic value at the centre.Tulips anyone?
If Bitcoin has no intrinsic value and is not providing a significant benefit to society, then the impact of manufacturing on the environment is a real concern.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.