Based on its market share, the world’s most notorious cryptocurrency Bitcoin results in more climate damage than beef production and almost as much damage as crude oil, researchers in the United States have calculated.
The findings of the new triple analysis suggest that Bitcoin is potentially unsustainable and could have devastating social and environmental impacts in the future.
From 2016 to 2021, CO2-equivalent greenhouse gas emissions for Bitcoin increased from less than one ton (metric ton) per coin to 113 tons per coin.
Each Bitcoin mined in 2021 likely resulted in US$11,315 in climate damage, totaling approximately US$3.7 billion for that year alone.
To put this into perspective, the researchers compared cryptocurrency mining to other energy-consuming activities.
Bitcoin is a multi-billion dollar industry, and over the five-year study period, the study found that its climate damages averaged 35 percent of its market value. That means if you take a dollar of Bitcoin, about 35 cents of that dollar is climate damage.
And Bitcoin’s climate damage per dollar was slightly less than natural gas (at 46 cents per dollar of value) and crude oil gasoline (at 41 cents per dollar of value).
But it was slightly more than beef production (33 cents) and much more than gold mining (at 4 cents). None of these activities are currently considered sustainable.
“Overall, the results represent a number of red flags for any view of visa as a sustainable sector (investment or otherwise),” University of New Mexico environmental economist Benjamin Jones and colleagues write in their published paper.
“While supporters regularly offer [Bitcoin] as it represents a kind of “digital gold” in terms of climate damage [Bitcoin] it works more like ‘digital slow”.
For Bitcoin to be considered truly sustainable, its climate damages will have to decrease over time as the technology matures and becomes more efficient. But these new calculations show that this is clearly not the case.
Bitcoin mining itself relies on an exponential increase in computing power, which, in turn, requires exponentially more electricity.
In 2020, for example, Bitcoin mining required more energy than Austria or Portugal used in the same year.
Bitcoin, like many other cryptocurrencies, is based on “proof of work” (PoW) mining, which is an extremely energy-intensive way to provide encrypted validation of money on a decentralized public ledger.
The verification process is inherently competitive, with “miners” competing to solve cryptographic puzzles to validate transactions on the blockchain and create new coins.
Dedicated computers could, in theory, keep creating new blocks forever, but each one adds enormous amounts of energy to the verification process.
In other words, each new blockchain that is mined is harder to find than the last.
If the computational effort required to mine blockchains were powered by renewable energy sources, the system might be more sustainable. But today, estimates show that more than 60 percent is fueled by fossil fuels such as coal and natural gas.
Even in a scenario where Bitcoin mining uses a much higher proportion of renewable energy than it does today, the authors of the new study estimate that there will still be large and increasing climate damage from this industry.
“In the absence of such change, it may be time to abandon a ‘business-as-usual’ approach and consider collective action,” such as increased regulation, Jones and colleagues write.
Tesla, for example, recently announced that it would stop accepting Bitcoin as payment due to energy concerns.
Current estimates of Bitcoin’s climate damage are based on the global electricity use required for PoW-based cryptocurrencies, but there are other, greener alternatives out there.
Cryptocurrencies based on a proof-of-stake (PoS) system have recently been proposed as a solution to the high-energy nature of PoW processes.
PoS is another way of validating cryptocurrencies that gives the next block in the blockchain randomly, instead of the winner. Although it requires less hardware investment, to be in the game, individuals must pay a significant “stake”, which requires them to have the capital to get started.
But moving from a PoW to a PoS system would require Bitcoin miners to exchange all that hardware for cash, a cost of time and effort few would be willing to undertake.
Ethereum, another popular cryptocurrency, recently announced that it will make the transition to PoS sometime in 2022, and the change will reportedly reduce the platform’s energy requirements by more than 99 percent.
If Bitcoin did the same, the authors say, “its energy use, and by extension, its climate damages estimated in this work, would likely be negligible.”
However, it is unlikely that Bitcoin will make the transition. Experts say the Bitcoin community is already too invested in its PoW system to want to change.
Bitcoin currently makes up about 41 percent of the global market share among cryptocurrencies.
“PoW-based cryptocurrencies are on an unsustainable path,” the authors of the new paper conclude.
“If the industry does not shift its production path away from PoW or move towards PoS, then this class of digitally scarce goods may need to be regulated, and the delay will likely lead to increasing global climate damage.”
The study was published in Scientific Reports.