Bitcoin miners are putting as much carbon dioxide into the atmosphere as the entire city of London for the benefit of "almost no one", a new study has found.
The digital currency, which relies on millions of computers around the world running day and night in a process called 'mining', uses almost as much electricity as every data centre in the world put together, says Alex de Vries - 184TWh (terawatt hours).
"That's a pretty mind-blowing number," said de Vries, a financial economist, whose latest research was published on Thursday in journal Joule. "Those data centers serve the most of global civilization, and then there's bitcoin, which serves almost no one but still manages to consume about an equal amount of electricity."
That's also about 4.5 times as much electricity as New Zealand consumes, according to the International Energy Agency, and three times as much carbon dioxide emissions.
Rising value - but for who?
Bitcoin has rocketed in value lately, currently $75,000 each - encouraging more and more people to 'mine' the currency. Based on the amount of computer power needed to create a single bitcoin, de Vries' calculations suggest the currency creates 90.2 million tonnes of carbon dioxide a year, comparable to metropolitan London.
"As of January 11, 2021, it is estimated that all miners combined make over 150 quintillion attempts every second of the day to produce a valid new block," his paper reads.
A new block of bitcoins are created every 10 minutes or so, one lucky miner taking the proceeds.
"With the chance of success being random, a miner's share of the total available miner income will average to the proportional share of the total computational power in the network owned," says de Vries - meaning if you're going to make money mining bitcoin, you need an ever-increasing amount of computer power, resulting in more electricity usage.
The cost of mining bitcoin has prompted many to set up shop in places where electricity is cheap, like Iran - but it's only cheap there because it's created using the region's plentiful fossil fuels.
'Threat to international safety'
It's not just the environment bitcoin is putting at risk either, de Vries says. Iran, for example, "has adopted cryptocurrency mining as a way to boost revenues while its oil exports suffer from international sanctions". Most bitcoin mining is done in China, which produces more than half of its electricity using coal.
"If Bitcoin is enabling Iran to circumvent economic sanctions, this could pose a threat to international safety, given that these sanctions were imposed to prevent the nation from developing military nuclear capability."
But even Iran has said enough's enough, moving to confiscate some miners' equipment after the strain bitcoin put on the grid - accounting for 8 percent of the country's entire electricity usage at one point - resulted in outages earlier this year.
An earlier study found a single bitcoin transaction has the same carbon footprint as watching more than 51,000 hours of YouTube, and making 680,000 equivalent transactions using a credit card.
Demand for chips
The demand for powerful computer chips to run mining rigs is also a threat to climate change, de Vries says.
"Prior to the latest surge in Bitcoin price, it was already reported that there was a global shortage of chips for an array of electronic devices. The economic recovery after the COVID-19 crisis has led to increased consumer demand, resulting in chip shortages and delays in manufacturing.
"These shortages are also affecting the production of (self-driving) electric vehicles, which will play an important part in meeting global goals for climate change, as well as personal electronics required to work from home.
"Because the manufacturers of Bitcoin mining devices need a substantial number of chips to produce these machines, this will only exacerbate the shortage."
And it's not just bitcoin - there are several other cryptocurrencies running now, together which use about 50 percent what bitcoin does.
The solutions
The primary short-term solution to solving bitcoin's energy usage is a collapse in the price - if it fell to about NZ$15,000, de Vries estimates its energy usage would be cut by about two-thirds, with fewer people interested in mining it.
Bitcoin is also designed in a way that over time, fewer and fewer will be made available to miners - at present, 6.25 bitcoins are awarded with each block; that will halve in 2024, and so on every four years after that.
"You can do a lot about these problems," said de Vries. "Mining facilities are usually centralised. They're pretty easy to target. Policymakers can intervene by raising electricity rates or confiscating mining equipment.
"Taxing bitcoin mining device manufacturers or limiting their access to chips are also strategies to consider.
"Although bitcoin is a decentralised currency, government agencies can regulate exchange platforms and prevent its trading to influence the value."
