Bitcoin accounts for as high as 77% of the total electricity consumed by cryptocurrencies
Bitcoin (BTC) is currently the largest cryptocurrency in the world and has been for some time. And with its enormous popularity comes enormous power consumption. A recent BanklessTimes.com data presentation shows that BTC accounts for as high as 77% of electricity consumed on crypto.
The Bitcoin network currently uses between 90 and 145 billion kWh annually, of which the US accounts for 38% of the total hash rate. As of mid-August 2022, estimates put the US share of global BTC electricity use at between 33 and 55 billion kWh per year, which is comparable to the consumption of some nations, states or critical energy utilities.
This can have serious environmental consequences. The US crypto industry currently emits between 25 and 50 million tons of CO2 annually, of which the BTC network accounts for most of the emissions. Rising BTC popularity threatens to escalate these emissions to dangerous levels.
Why is Bitcoin such an energy guzzler?
Bitcoin’s high power consumption can be attributed to its proof-of-work algorithm and block size limit. The proof-of-work algorithm requires miners to solve complex mathematical problems to verify transactions.
This process consumes a lot of energy since miners have to use powerful computers to solve these problems. The block size limit also contributes to high power consumption since it requires more transactions to be verified.
Recently, there have been calls for new forms of mining that do not require such large amounts of electricity. There are also plans to abandon proof-of-work mining altogether and move towards more sustainable models such as proof-of-stake mining. If these changes are made, they could go a long way to alleviating some of Bitcoin’s environmental concerns.
Bitcoin’s Link to America’s Climate Conservation Movement
As climate change continues to be an urgent global issue, it is important to discuss potential risks and consequences. An important consequence of climate change is the economic consequences. By 2021, climate disasters will set the US back $145 billion.
This figure is only expected to rise in the coming years as climate change becomes more severe. Moreover, climate change risks reducing US GDP by 3% to 10% and US federal revenues by 7% annually by the end of the century.
The United States has committed to reducing greenhouse gas emissions by 50% to 52% below 2005 levels by 2030 and achieving a carbon-free electricity grid by 2035. This would put the country on track to reach net-zero emissions by 2050 at the latest.
Possible political interventions
The United States needs to focus its policy on cryptoassets in several key areas to achieve these goals. First, the policy should aim to reduce greenhouse gas emissions from crypto-asset operations. Second, it should avoid processes that would increase the cost of electricity to consumers or reduce the reliability of electrical grids.
Third, the policy should aim to support a clean energy transition that equitably benefits local communities across the country. Likewise, it should be targeted to reduce electronic waste and pollution and address data gaps to better manage electricity demand.
By focusing on these key areas, the United States can develop a comprehensive crypto-asset policy to help the country meet its climate goals.
