Bitcoin as a climate killer? – A fact check

Critics of Bitcoin accuse the main cryptocurrency of being environmentally harmful and accelerating climate change due to its energy-guzzling concept. What’s the truth of the accusations?

Bitcoin proponents must always expect to come under criticism as environmental sinners. After all, Bitcoin is a digital currency that requires a great deal of computing power to organize – and the computers networked in the blockchain need electricity. However, the discussion about the alleged climate killer Bitcoin is often characterized by polemics. We calculate:

1. The energy consumption of Bitcoin is first measured in terawatt hours (TWh) or gigawatt hours (GWh). The renowned University of Cambridge provides a model calculator that uses the actions currently taking place in BTC’s blockchain to calculate the electricity consumption that occurs. There, it is shown that the energy consumption caused by Bitcoin is subject to large fluctuations, which are related to trading activities and the level of difficulty in solving cryptographic tasks, which is important for BTC mining. At the moment, according to the University of Cambridge, Bitcoin’s annual value is expected to be around 130 THW.

The second step is to convert the electricity consumption of Bitcoin into the so-called CO2 footprint. We use the calculator provided online by the US Environmental Protection Agency (EPA) here. However, the value of 130 TWh is not relevant, but it must first be estimated how much of the electricity consumed by Bitcoin comes from renewable sources and how much from climate-damaging sources such as coal, gas and oil. Cambridge University cites 39 percent energy from renewable sources for Bitcoin in a study; from the crypto industry, CoinShare, for example, estimates the percentage of “green” energy for BTC much higher at 77.6 percent in a study.

For our calculation, we choose the conservative approach of the University of Cambridge and thus arrive by 61 percent of 130 TWh at about 79 TWh annual energy consumption for Bitcoin from non-renewable sources. These lead to illustrative comparisons at the EPA’s calculator: According to this, Bitcoin consumes as much polluting electricity as about 9 million U.S. households or charging 7 billion smartphones annually. The often used comparison of Bitcoin in energy consumption to entire countries like Holland or Argentina, on the other hand, is lame, as it does not distinguish between the different energy sources.

3. So, since we are using mostly U.S. sources in our modeling here, we are now talking about the equivalent of about 61 billion Anglo-American pounds of coal dust that energy production for Bitcoin generates annually. This is a vanishingly small figure compared to global annual emissions of 34 billion metric tons.

4. However, things look different when we put Bitcoin’s energy appetite in relation to other payment systems. According to one estimate, a transaction on Visa’s network is about 700,000 times more energy efficient than a transaction on Bitcoin. The energy required to print banknotes is estimated to be about 5 TWh annually worldwide. Still other estimates say that the traditional banking system consumes around 100 TWh annually. In this category, Bitcoin is indeed not competitive with existing monetary systems from the point of view of environmentalists.

5. Another interesting comparison: The International Energy Agency puts the electricity consumption of data centers worldwide at around 200 TWh. This in turn corresponds to around 1 percent of global energy consumption.

Conclusion: Bitcoin is not environmentally friendly – yet.

We see: Bitcoin has reached orders of magnitude in its energy consumption, which hurts a good environmental conscience. This cannot be argued away – but still leads us to a rather optimistic outlook. Because with the importance of Bitcoin, the price per BTC has now risen to values of more than 50,000 US dollars, which in turn tends to make mining profitable outside China as well. This also increases efforts to realize Bitcoin mining and thus also the stability of the blockchain through the use of alternative energies. Hydroelectric power plants are particularly in demand, both in China and in America. So the chances are not bad at all that Bitcoin will even go down in history as a factor that accelerates the switch to alternative energies in terms of its impact on the environment. After all, this is basically the only adjusting screw that can be turned in Bitcoin with regard to the environmental impact caused by BTC.

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