How bad is Bitcoin for the environment, really?

Written by Lori Campbell on 26th May 2021

In just over a decade, Bitcoin has risen from a fringe technology to become the ninth most valuable asset in the world, even overtaking Facebook.

The cryptocurrency’s speedy rise has created millionaires and reimagined the future of money with its revolutionary, decentralised technology.

Then, earlier this month, Tesla CEO Elon Musk announced that the electric car company would not, after all, accept Bitcoin as payment because of its environmental impact – a move that sent the currency’s price plunging.

So what is the cost to the environment of Bitcoin?

Bitcoin is created when high-powered computers compete to solve complex mathematical puzzles, a process known as ‘mining’. It is an energy-intensive activity that currently mostly relies on electricity generated from fossil fuels, particularly coal.

Bitcoin uses ‘as much energy as Argentina’

According to the University of Cambridge, the computing power required to support Bitcoin mining now eats through almost as much energy as the entire country of Argentina, or enough to power all the kettles in the UK for 27 years.

“This is a stunning amount of electricity,” says Trinity College Dublin’s Professor Brian Lucey. “It’s a dirty business – it’s a dirty currency.”

The energy demands of Bitcoin are closely tied to its price, which has risen dramatically from £3,600 in March 2020 to £45,823 in April 2021 (before falling by 10 per cent following Musk’s about-turn). The more the price rises, the more competition there is for the currency and therefore, the more energy it consumes.

Charles Hoskinson, CEO of leading blockchain firm IOHK says: “Bitcoin’s energy consumption has more than quadrupled since the beginning of its last peak in 2017 and it is set to get worse because energy inefficiency is built into [its] DNA.”

No tracking of miners

The problem is that miners of Bitcoin will go wherever electricity is cheapest. Currently, 75 per cent of miners are based in China where two thirds of energy is produced by coal.

Since there is no government body or organisation that officially tracks where Bitcoin is being mined, and what type of electricity miners are using, there is no way of accurately knowing whether it is being fuelled by renewable energy or fossil fuels.

Mining rigs can move from place to place depending on where energy is cheapest, which makes mining particularly hard to track.

“The places where you mine [Bitcoin] can be moved around and, in some cases, you don’t even know where they are,” said Camilo Mora, a professor of geography and environment at the University of Hawaii.

Is there is a greener solution?

Although it’s still early days, momentum is gathering to improve Bitcoin’s green credentials. A new Bitcoin Mining Council was announced this week to improve the crypto-currency’s sustainability, following a meeting of “leading Bitcoin miners” and Elon Musk.

It was created to promote transparency 0ver the energy used to mine Bitcoin as well as “accelerate sustainability initiatives worldwide.” Tesla CEO tweeted the development was “potentially promising”.

However, if Bitcoin’s transition to cleaner energy sources doesn’t happen fast, investors and consumers are likely to look to other cryptocurrencies – there are 4,500 types in existence – that are less environmentally damaging.

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