Bitcoin’s climate impact is bigger than beef farming – and it’s only getting worse: ScienceAlert

Based on market share, the world’s most notorious cryptocurrency Bitcoin results in more climate damage than the production of beef and almost as much damage as crude oil, researchers in the US have calculated.

The findings of the new three-part analysis suggest that Bitcoin is potentially unsustainable and could have catastrophic social and environmental consequences in the future.

From 2016 to 2021, CO₂-equivalent greenhouse gas emissions for Bitcoin went from less than a ton (metric ton) per coin to 113 tons per coin.

Each Bitcoin mined in 2021 likely resulted in $11,315 in climate damage, totaling around $3.7 billion for that year alone.

To put it into perspective, researchers compared digital currency mining to other energy-guzzling activities.

Bitcoin is a multi-billion dollar industry, and over the five-year study period, the study found climate damages averaged 35 percent of market value. So that means if you take one US dollar of Bitcoin, about 35 cents of that dollar is climate damage.

And Bitcoin’s climate damage per dollar was only slightly less than natural gas (at 46 cents per dollar in value) and gasoline from crude oil (at 41 cents per dollar in value).

But they were slightly more than beef production (at 33 cents) and far more than gold mining (at 4 cents). None of these activities are currently considered sustainable.

“Taken together, the results represent a set of red flags for any assessment as a sustainable sector (investment or otherwise),” University of New Mexico environmental economist Benjamin Jones and colleagues write in their published paper.

“While advocates regularly offer [Bitcoin] as a kind of “digital gold” from a climate damage perspective [Bitcoin] works more like “digital crude oil”.

To consider Bitcoin truly sustainable, climate damage should be reduced over time as the technology matures and becomes more efficient. But these new calculations show that clearly isn’t happening.

Bitcoin mining itself is based on an exponential growth in computing power, which in turn requires exponentially more electricity.

In 2020, for example, Bitcoin mining required more energy than either Austria or Portugal used in the same year.

Bitcoin, like many other cryptocurrencies, is based on “proof-of-work” mining (PoW), which is a very energy-intensive way of providing encrypted validation of money in 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.

Special computers could theoretically keep generating new blocks forever, but each one adds huge amounts of energy to the verification process.

In other words, each new blockchain that is mined is harder to find than the previous one.

If the computational effort required to mine blockchains was powered by renewable energy, the system could be more sustainable. But today, estimates show that more than 60 percent are powered 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 changes, it may be time to abandon a ‘business-as-usual’ approach and consider collective measures,” such as increased regulation, write Jones and colleagues.

Tesla, for example, recently announced that it would stop accepting Bitcoin as payment due to energy concerns.

The current estimates of Bitcoin’s climate damage are based on the global electricity consumption required for PoW-based cryptocurrencies, but there are other, greener options 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 away the next block on the blockchain randomly, rather than to the winner. Although it requires less investment of hardware, in order to join the game, individuals still have to pay a significant “stake”, which requires having the capital to begin with.

But switching from a PoW to a PoS system would require Bitcoin miners to exchange all that hardware for money, a cost of time and effort few would be willing to do.

Ethereum, another popular cryptocurrency, recently announced that it will switch to PoS sometime in 2022, and the change will reportedly reduce the platform’s energy needs by more than 99 percent.

If Bitcoin were to do the same, the authors say, “the energy use, and, by extension, its climate damage estimated in this work, would likely become negligible.”

However, Bitcoin is unlikely to make the switch. Experts say the Bitcoin community is already too invested in its PoW system to want to change.

Bitcoin currently accounts for around 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 the production path away from PoW, or move towards PoS, this class of digitally scarce goods may need to be regulated, and delays are likely to lead to increasing global climate damage.”

The study was published in Scientific reports.