Bitcoin could be as bad for the planet as beef

Cryptocurrency mining is energy intensive because it requires highly specialised computers - and most of the electricity it consumes is generated by burning planet-warming fossil fuels. — AFP

Bitcoin mining’s climate impact is comparable to farming cattle or burning gasoline when taken as a proportion of market value, according to researchers at the University of New Mexico in Albuquerque.

Cryptocurrency mining is energy intensive because it requires highly specialised computers - and most of the electricity it consumes is generated by burning planet-warming fossil fuels.

The climate-related economic damage caused by mining the popular digital token, bitcoin, exceeded its market value on 6.4% of the days it traded between 2016 and 2021, the paper published in Scientific Reports on Thursday found.

The study calculated the climate cost of mining bitcoin against its average market price, and compared it with other commodities like crude oil, gold or beef. That means the results don’t reflect total emissions by these industries, which would be far greater, but their relative impact.

The climate impact of mining gold, to which bitcoin is often compared, is just 4% of its average market price on an average year, compared to 35% for the world’s most popular cryptocurrency between 2016 and 2021.

And the environmental impact has grown as the cryptocurrency market has matured, calling into question the sector’s overall sustainability.

"While proponents have offered (bitcoin) as representing ‘digital gold,’ from a climate damages perspective it operates more like ‘digital crude,’” the researchers said, signalling the need to find more efficient ways to produce the tokens, or to increase regulation.

Mining of bitcoin, which represents roughly 41% of the global cryptocurrency market, consumed more energy than was used to power entire countries like Austria or Portugal in 2020. The mining of bitcoin, ether, litecoin and monero coins generated three to 15 million metric tons of carbon dioxide emissions from January 2016, to June 2018, according to research cited by the paper.

That’s equivalent to the emissions of Afghanistan, Slovenia or Uruguay in 2018.

Bitcoin’s carbon footprint also grows over time because, to mine new coins, multiple miners compete to verify transactions on the blockchain.

The fact that an ever-growing number of miners compete to solve increasingly difficult operations means the overall energy use rises. That’s why a bitcoin mined in 2021 would have emitted about 113 metric tons of CO2 equivalent - 126 times more than one mined in 2016, according to the researchers.

The paper estimates the economic value of that damage at US$11,314 (RM52,463) for a single bitcoin mined last year, while the value of total climate damages generated by all Bitcoins mined between 2016 and 2021 could have been as high as US$12bil (RM55.6bil).

In recent months, plunging profit margins from mining bitcoin have pushed miners to operate more efficient machines - a move that’s resulted in a decline in greenhouse gas emissions from the industry, according to a different report earlier this week.

Emissions this year are estimated to be 14.1% lower than in 2021, representing about 0.1% of human emissions globally, and about half of what gold miners generate in absolute terms.

Cryptocurrency miners are also ramping up efforts to source a larger share of the energy they consume from renewable sources like geothermal, hydro, solar and wind. Researchers at the University of Albuquerque ran a simulation and concluded that, if renewables like wind and solar had represented 88.4% of the total amount of power used to mine bitcoin between 2016 and 2021, climate damages would have dropped to just 4% of average market price.

Another way to reduce climate impact is to shift to a different mechanism to verify transactions - and produce coins. Ether, the second largest cryptocurrency, this year moved to a mechanism called Proof of Stake, which the study said should reduce its estimated energy use by more than 99%. – Bloomberg

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