The environmental impact of Bitcoin mining energy consumption

The annual energy consumption of the global Bitcoin mining effort is roughly the same as the annual consumption of the Czech Republic (with a population of nearly 11 million)

Everything we do consumes energy. Our homes, our cars, our trains, our computers, our hospitals. So, there is no question that little is accomplished as we go about our day-to-day business without the consumption of power. Power generation does impact the environment – of course it does. But when it comes to Bitcoin mining, the debate often turns into an argument about whether the impact is disproportionate or unnecessary.

The rewards of Bitcoin mining drive Bitcoin energy consumption

Because Bitcoin is valuable, it encourages people to become Bitcoin miners. As the popularity of Bitcoin has grown, it has attracted more miners into the mining effort. Mining for Bitcoins involves using a processor to solve computationally difficult problems, so the cost of electricity is a key component to the production of Bitcoins. The number of Bitcoins mined is always constant, so if more miners join the mining effort, it just becomes harder to mine (so more processing time is required).

In the early days, early adopters and enthusiasts mined Bitcoin on their home computers. But today, unless you invest in specialised mining equipment (super fast processors), it would be very difficult to make a financial return from mining.

Bitcoin energy consumption in numbers

Bitcoin mining uses an eye-watering amount of electricity. Just pause for a moment to consider this. The annual energy consumption of the global Bitcoin mining effort is roughly the same as the annual consumption of the Czech Republic (with a population of nearly 11 million).

Digiconomist publish and update the Bitcoin Energy Consumption Matrix which estimates energy consumption in Bitcoin mining. It makes fascinating reading. It estimates nearly 30 US households could be powered for a day using the power used to process one Bitcoin transaction. That transaction also produces 434 kg of CO2.

434 kg of CO2 is what a Boeing 737-400 jet will produce over a five-hour flight.

It’s clear what service a Boeing 737 is providing, but what about Bitcoin? Immediately, you can see why there is a debate on Bitcoin energy consumption and also why it can become quite emotional.

Industrial-scale Bitcoin mining in a professional Bitcoin mine

So we can see for the individual, Bitcoin mining is not really an option if the goal is to make money. The cost of electricity will outweigh the rewards. If you lived in a country with low electricity costs, it would make a big difference to the profitability of mining.

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 mine’s operation by PwC analyst Alex DeVries estimated that the 25,000 mining machines at the factory emit 8,000 t0 13,000 kg of CO2 per Bitcoin mined. That works out at 24,000–40,000 kg of CO2 per hour.

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.

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 importance of electricity costs

In China, electricity is approximately $0.04 per kWh. In the UK, it’s over five times more expensive, at about $0.22 per kWh. A country with low energy costs is going to attract professional Bitcoin mining operations.

China accounts for the majority of mines, which is probably no surprise with energy costs as low as these.

Is dysfunctional behaviour driving Bitcoin energy consumption?

As Bitcoin mining is lucrative with low electricity costs, it can encourage people to find less legitimate ways to mine Bitcoin.

In China, a man was arrested and the police seized 200 computers he was using to mine Bitcoin and Ethereum. Officers were alerted after the regional energy supplier registered unusually high power spikes near the suspect’s house where more than 150,000 kw of electricity was used over a two-month period. The average home used less than 11,000 kw in a year.

Another story from China involved a headteacher setting the computer room PC’s to mine Ethereum using the school’s electricity supply. Staff and pupils at the school in Hunan Province had reported a continuous whirring noise to the headteacher, together with a dramatic escalation in the facility’s energy bills, but the head had dismissed their concerns as simply overactive air conditioning and heating units.

It’s not a straightforward argument

Katrina Kelly-Pitou, Research Associate in Electrical and Computer Engineering at the University of Pittsburgh, believes that by talking about the consumption of energy alone, many people fail to understand one of the most basic benefits of renewable energy systems.

Bitcoin mining in China, with a largely fossil-based electricity source, may indeed be problematic. China is already one of the world’s major contributors of carbon emissions. However, Bitcoin mining in Oregon? Not the same thing,” she writes.

What is the point of Bitcoin?

A lot of the debate around environmental issues relating to the production of Bitcoin will talk about the fact that Bitcoin has a lack of purpose compared to other manufactured products. No intrinsic value, no benefit to the majority of society, no human needs being met by production, and so on. But the argument is more nuanced than that.

There is a vibrant and emerging industry involved in Bitcoin, cryptocurrencies, and blockchain technology that is increasingly influencing and driving change in society.

Bitcoin (and other cryptocurrencies) are rapidly becoming more widely accepted as a means of payment, and this is what supporters will say to the environmental lobby.


Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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