The carbon footprint of crypto-currencies
Wednesday 3rd January 2018
The astronomical rise in the value of Bitcoin and other crypto-currencies has made it into the mainstream media over the past month, with commentators pondering on the future of these assets. This discussion has been centered around volatility, transaction fees and the potential to transfer from crypto-asset to true currency. But energy use has been an issue raised by specialist media like Digiconomist for a long time as being unsustainable, particularly when compared to other financial transactions.
The nature of how Bitcoin is mined also means that the growth in popularity is making the production of each block in the chain less energy efficient. The Bitcoin protocol adjusts the difficulty of producing a valid block to ensure that one is produced every 10 minutes on average. As more and more users attempt to mine each block, there is an increase in the ‘wasted’ processing. Only one miner can ever successfully produce the next block in the chain, after which the other miners in the network check and accept the block, and discard the block they were working on themselves. The number of serious miners using application-specific integrated circuits (ASIC), which allow Bitcoin to be earned faster than using a standard computer, has grown. These are more energy intensive, and require a significant level of cooling.
The Bitcoin Energy Consumption Index shows that Bitcoin currently sits between Bulgaria and Qatar in terms of total energy use. Bearing in mind that most of the network is powered by coal-fired power plants in China, the annual carbon footprint of Bitcoin has recently been calculated at 18,113,000tCO2e. Pretty mind-blowing for companies who work hard to save 100tCO2e per year!
At current growth rates, there are articles that claim that the energy use of Bitcoin could outstrip the rest of the world by early 2020. There will need to be changes before this happens – a likely alternative is away from the ‘proof of work’ consensus algorithm that Bitcoin currently uses. Hopefully pressure from sustainability campaigners will drive this change before Bitcoin energy use cancels out the good work done by energy efficiency across the globe.