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- Bitcoin's recent rally has reignited fears that mining the coin is harmful to the environment, because of the among of energy required.
- But cryptocurrency experts argue that concerns about bitcoin's energy consumption have been taken out of context.
- Miners say they're increasingly moving towards using renewable energy, but data supporting the extent of that is unclear.
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Bitcoin's 890% rally over the last year has reignited fears that mining the cryptocurrency is consuming a large amount of energy and harming the environment.
Mining is the process by which transactions on bitcoin's public accounting ledger, called the blockchain, are verified without relying on a central authority. In order to verify new transactions, mining computers must race to solve an extremely complex problem, and those computations require a tremendous amount of energy. Once a bitcoin miner solves the problem, they're rewarded with a transaction fee and newly minted bitcoins.
Exactly how much energy the bitcoin network consumes depends on who you ask. Estimates from the University of Cambridge say the total yearly electricity consumption of the Bitcoin network is 127.70 terawatt-hours, while Digiconomist estimates the network's electrical energy to be 79.63, which the site says is comparable to the power consumption of Chile.
A technology that consumes the same amount of energy as an entire country sounds alarming, but Dan Held - head of growth at cryptocurrency exchange Kraken - argues the bitcoin network has been unfairly targeted by people who police bitcoin's taking its energy consumption out of context.
"What it really comes down to when people don't like bitcoin's energy consumption is...they simply don't like Bitcoin," said Held. "And so people that are against crypto think that any energy consumption from Bitcoin is wasteful."
Held stressed that everything in the world requires energy, and as technology advances, the amount of energy needed to power that technology will inevitably increase. He also estimates that the existing banking system uses over 650 terawatt-hours of energy per year.
But calculating the energy consumption of both the bitcoin network and the existing financial system is difficult, as it's hard to account for every factor that supports each network. If one considers the air conditioning in a bank branch to contribute to the financial system's total energy use, one could also argue the electricity used to power a bitcoin trader's cell phone should be accounted for when calculating bitcoin's energy use.
Further, since bitcoin miners are financially incentivized to operate on the cheapest electricity possible, that sometimes means they use energy that otherwise would have gone to waste, according to Mason Jappa, CEO of Blockware Solutions, an operator of some of the largest mining rigs in the US.
Jappa told Insider that some US rigs are powered by by a process called "gas-flare recapturing." When natural gas is mined, a portion of the gas is flared into the air. Bitcoin miners capture the flare and use it for energy, preventing it from being released into the open air.
But the need for cheap energy also means that a lot of the miners still rely on coal, which is the least expensive form of energy in many areas around the world, said Aroosh Thillainathan, CEO of Northern Data, a company that develops and operates infrastructure for bitcoin mining and other high performance computing needs.
There's no clear data on exactly how much of the total bitcoin network is powered by renewable versus non-renewable energy, but Thillainathan estimates roughly 50% of mining is done in China, and a significant portion of mining there is powered by coal.
Thillainathan told Insider that as the bitcoin network grows and the profitability of the mining increases, more energy will be required. As an operator of mines himself, he said miners should have a responsibility to the environment. Northern Data's high performing computing centers in Norway, Sweden, and Canada use only renewable energy.
He hopes that as mining grows more profitable as the bitcoin expands and the price rises, more miners will rethink their operations and move towards using more sustainable energy sources.
"I'm a big believer in the bitcoin itself," he told Insider. "It's a great way to store your wealth...but as an infrastructure provider, we have to move to be as environmentally friendly as possible."
Thillainathan said that mining using "dirty energy" isn't sustainable in the long-term, because he anticipates governments will one day crack down on the use of coal plants.
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March 14, 2021 at 07:30PM
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3 crypto miners defend perception that bitcoin consumes too much energy - Business Insider
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