Bitcoin mining and its energy consumption have recently been the subject of many heated debates. As governments and institutions around the world continue to introduce new measures to combat pollution and climate change, Bitcoin’s energy-guzzling network sticks out like a sore thumb.
Various data aggregators and trackers work around the clock to provide the market with the exact amount of energy the grid consumes. Many offer interesting comparisons with the aim of illustrating how much energy Bitcoin requires.
For example, some data shows that the amount of electricity consumed by the Bitcoin network in a single year could power the entire University of Cambridge for 758 years. A year’s energy consumption from the grids could also power all the kettles used to boil water in the UK for 23 years. Bitcoin also uses more energy than all refrigerators and televisions, and nearly twice as much energy as all lightning bolts in the entire US.
While popular, this narrative does not paint a clear picture and intentionally obscures the larger context.
Data analyzed by CryptoSlate shows that Bitcoin’s share of global energy consumption is minuscule. According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin’s share of global electricity consumption is only 0.45%. This estimate might be a bit off today as it is based on 2018 global energy statistics, but it nonetheless places Bitcoin consumption in a larger context.
Comparing the power consumption of the Bitcoin network to gold further illustrates this point. Estimates from 2019 showed that gold mining consumes around 131 TWh of energy per year. Shop the effects that gold mining has on the environment don’t stop with your electricity usage. Assessing the impact of an industry on the environment requires looking at the amount of pollution it causes, i.e. the carbon dioxide it releases into the atmosphere, the land it deforests, the water sources it pollutes, etc.
And while experts still debate the sustainability of gold mining, the direct effect it has on the environment is visibly greater than mining Bitcoin.
However, governments and institutions around the world are not racing to impose strict bans on gold mining.
Unlike gold and other energy-intensive industries, Bitcoin mining is extremely mobile. With no ties to any one place, miners travel wherever there is cheap and abundant energy, quickly and efficiently setting up new facilities around the world.
The mobility of Bitcoin miners was best seen in the summer of 2021 when a statewide ban about cryptocurrency-related activities in China caused thousands of mining operations to look for alternative locations. At the time, miners located in China’s hydropower-rich provinces accounted for nearly three-quarters of Bitcoin’s hash rate.
Faced with an impending ban in China, the miners quickly regrouped and began moving, some to neighboring countries like Kazakhstan and others abroad to the US.
Those who moved their operations to the US benefited from the welcoming attitude of states like Texas and Wyoming. Bitcoin miners, in addition to their mobility, also have a unique advantage when it comes to energy consumption: they don’t compete with other industries for the same energy resources.
Bitcoin mining farms can harness energy assets at the point of production instead of getting their electricity through the normal power grid. This means that miners can absorb surplus energy that would otherwise have been lost or wasted, reducing their impact on the environment and increasing their profitability.
According to the US Energy Information Administration (EIA), about 5% of all electricity transmitted and distributed through power grids between 2016 and 2020 was lost. These losses represented around 206 TWh of electricity, which is enough to power the entire Bitcoin network 2.1 times. Natural gas lost through flaring and venting in oil fields could generate 688 TWh of electricity, enough to power the entire Bitcoin network 6.9 times.
Some Bitcoin miners have seen the potential for these energy losses. Bitcoin miners in Texas have been turning off its ASICs to return power to the grid when demand is high and consume excess power when demand is low.
Several companies are also working on using natural gas found in oil fields. They use gas that would otherwise have been burned or vented into the atmosphere to power generators that produce the electricity used by Bitcoin miners. This approach, which kills two birds with one stone, reduces the impact that natural gas has on the environment and makes it profitable.
Another very important but often overlooked point when discussing the sustainability of Bitcoin is its effect on the economy.
Data centers around the world consume twice as much electricity as the Bitcoin network, but its economic value is so high that any discussion of sustainability is out of the question. Air conditioners consume nearly 220 TWh of energy each year and are rarely the target of aggressive environmental marketing.
Bitcoin’s growing energy consumption can lead to economic prosperity that outweighs any effect it may have on the environment.
Countries with high energy use rank high on the GDP per capita scale, showing that higher consumption correlates with a higher standard of living. Qatar, the United Arab Emirates, the US, Switzerland, Japan, and Macau rank high when it comes to GDP and all consume large amounts of electricity per capita.
Looking at Bitcoin mining through the eyes of economic prosperity and GDP shows that it is not the environmental disaster that many make it out to be. While we can’t be sure that increased energy consumption actually leads to economic abundance, we know for a fact that the correlation is too high to ignore.
The increasing energy consumption caused by the influx of Bitcoin miners would lead to a growth in a highly-skilled workforce, bring about a notable increase in income, and improve the surrounding infrastructure. All while absorbing excess energy, renewable energy, and energy that would have otherwise gone to waste.