The Hard Truth About Bitcoin’s Energy Consumption

Bitcoin recently broke $60,000 for the first time, cementing its perch as the “big dog” of cryptocurrencies. It has been embraced by groups as disparate as politicians, NFL stars, and Tesla CEO Elon Musk. 

And the fact that cryptocurrency is entirely digital makes it sound, in theory, as though it would be the greenest currency the world has ever seen. After all, unlike paper money, no trees have to be cut down to create Bitcoin. 

But people and press have become increasingly concerned about whether Bitcoin eats up a tremendous amount of power.

The Guardian ran a video explainer on “Why Bitcoin is so bad for the planet.” Reutersrecently criticized Elon Musk for advocating clean energy while also dumping $1.5 billion into “energy intensive” Bitcoin, speculating that it “could complicate the company’s zero-emissions ethos.” An op-ed in the Washington Post declares that “buying a Tesla with Bitcoin would be environmentally unfriendly.”

A recent Cambridge University analysis concluded Bitcoin consumes more energy in a year than Argentina. That same analysis suggested that if Bitcoin were a country, it would be in the top 30 energy-consuming countries in the world. 

What still remains unclear is how much Bitcoin contributes to the world’s total carbon footprint. Almost any use of the internet today—sending an email, scrolling social media, sending money online via your bank—contributes to humanity’s carbon emissions. 

When put into context, is Bitcoin’s energy consumption a major contributor to carbon emissions, or is the fear of Bitcoin as an environmental villain overblown?

Bitcoin’s carbon footprint: The data

Annual energy consumption is typically calculated in terawatt hours (TWh). This tracks a unit of energy equal to outputting one trillion watts for one hour, and it’s used to track the annual energy consumption of entire countries. 

And Bitcoin’s figure is in constant flux. Cambridge University’s Centre for Alternative Energy uses an index called the Bitcoin Electricity Consumption Index (BECI) to calculate Bitcoin’s energy consumption. The BECI updates every thirty seconds, and provides an estimate energy consumption figure alongside a theoretical upper and lower limit. At the time of writing, the BECI is at 129 TWh. The high and low estimates vary greatly, and are currently 444 TWh and 40 TWh, respectively. 

So what does the BECI estimate figure actually mean in terms of Bitcoin’s carbon footprint? And how does the cryptocurrency’s carbon footprint compare to other large sources of carbon emissions?

Putting Bitcoin’s energy consumption into context

To calculate Bitcoin’s actual carbon footprint, we have to convert terawatt hours (TWh) to metric tons of carbon dioxide emissions (Co2). That also allows for apples-to-apples comparisons for Bitcoin’s footprint to other high-energy-usage industries. 

Calculating this is complicated. There are some key variables and assumptions that have to be taken into account—most importantly, the type of energy that’s being used. 

The US Environmental Protection Agency provides a calculator that helps us get some of the way there. It can be used to tell us what Bitcoin’s carbon footprint would be if every miner in the world used carbon-intensive means of production and excluded all forms of renewable energy like hydropower.

According to a September 2020 report from the Cambridge Centre for Alternative Finance, 39% of crypto mining energy is renewable. Meanwhile, CoinShares estimates the figure is as high as 77.6%. That’s a large discrepancy. (And you have to consider the source: CoinShares, a crypto asset manager, has skin in the game of downplaying Bitcoin’s environmental impact.)

If we conservatively use the Cambridge Centre study’s 39% estimate, 78.7 TWh of Bitcoin’s annual total of 129 TWh is based on non-renewable energy. Thus, according to the EPA, Bitcoin’s non-renewable electricity consumption equates to 61 billion pounds of burned coal, 9 million homes’ average electricity consumption for the year, or 138 billion miles driven by an average passenger vehicle. For perspective, Pluto’s greatest distance from Earth at any time is 4.6 billion miles. 

It’s also important to know where this consumption takes place. We know Bitcoin mining is big business in Asia, and companies like Bitfarms lead the way in North America. In 2019, a study published in science journal Joule estimated the regional footprint of Bitcoin by tracking IP addresses, and found that almost 70% of Bitcoin mining energy is consumed in Asia, with 17% happening in Europe and 15% in North America. 

Bitcoin’s defenders rush to point out that a lot of Bitcoin mining uses clean energy to fuel the network, mostly in areas of China where hydropower generates the majority of the electricity used for Bitcoin mining. But Bitcoin mining also takes place—as the Joule study notes—in regions with heavy reliance on coal power like Inner Mongolia, where the government recently proposed closing Bitcoin mining farms. 

So how does Bitcoin match up with other sources of carbon emissions?

According to the Global Carbon Project, the world produced 34 billion metric tons of carbon emissions in 2020. That is about 620 times more than Bitcoin’s current estimated average annual carbon emissions (if you’re using Cambridge Centre’s 39% renewable energy estimate for Bitcoin). Thus, Bitcoin represents a mere sliver of the world’s total carbon footprint. 

So if Bitcoin’s carbon footprint is so comparatively low, what is all the fuss about? One reason Bitcoin gets criticized so heavily for its energy usage is because it’s far less environmentally friendly than the longstanding alternative—government currencies. 

According to research conducted last month by Digiconomist (which hosts the BECI), the energy consumption for one Bitcoin transaction is the same as 453,000 Visa transactions. In carbon footprint language, this means that a Bitcoin transaction is 710,000 times “dirtier” than a Visa transaction. 

But Bitcoin doesn’t just size up badly against Visa transactions. It also doesn’t look so green when it’s compared to some of our everyday gadgets. 

For example, Bitcoin’s annual carbon emissions are currently equivalent to 7 billion charging smartphones—enough energy to equal every single person in the world owning an iPhone. In addition, all the world’s physical data centres account for roughly 200 TWh, according to the International Energy Agency (IEA), or about 1% of the world’s total electricity demand per year. That’s currently more than Bitcoin, but not by much. 

Mining with hydroelectric power

Bitfarms—the largest Bitcoin mining operation in North America—is at the forefront of Bitcoin’s energy usage challenge. Notably, Bitfarms is not burning any carbon to power its mining operation at the moment—it’s all hydroelectric. 

But it’s unclear whether Bitfarms can stick with hydroelectric power for good, as president Geoff Morphy acknowledges: “As we expand, can we stay with pure hydroelectricity? We don’t know,” he told Decrypt. “If we do switch to some type of carbon because the world has an opportunity where there’s surplus somewhere, and we can take advantage of that surplus, then we will.”

Morphy added that Bitfarms would never use coal to power its operations and would instead look to natural gas as an alternative. But he also frames energy usage as a necessary evil for the crypto industry. “We will likely always consume a lot of energy,” Morphy said. “In the scheme of importance, it’s necessary to drive the decentralized economy.”

And some of Bitfarms’ future energy consumption might take place in South America, where Morphy says the firm is considering expansion. That inevitably means more energy consumption, but it also provides that region—which is going through a tremendously challenging economic period—an opportunity for growth. 

“If we set up there and pour hundreds of millions of dollars into that area and employ hundreds of people at a new facility, that’s really giving back to that area as well,” Morphy said. 

Taking a look in the mirror 

Many big-name Bitcoiners dismiss the cryptocurrency’s environmental impact seemingly out of hand, arguing it shouldn’t be an issue.

Pierre Rochard, strategist at cryptocurrency exchange Kraken, described Bitcoin’s accusers as intellectually lazy. “Listen to the scientists, look at the data, don’t politicize the facts. Bitcoin is good for the environment,” he tweeted.

CoinShares CSO Meltem Demirors told Decrypt the moral argument against Bitcoin’s energy use doesn’t necessarily match up with its actual consumption, or its utility. 

“Christmas lights are a horrible use of energy, yet there is no energy police telling people to turn them off,” she said, adding, “Free markets dictate where and how energy is captured and used. Bitcoin is the only tool we know of that can effectively be a money…