The recent surge to new crypto-highs has undoubtedly stimulated the debate on crypto-currency energy consumption. Critics call it an energy hog, while advocates hail it as less intense than the global economy.
One of these critics, Alex de Vries, editor of the DigiEconomist, said he’s never seen anything as inefficient as bitcoin. On the other hand, ARK Investment Management’s investigation found that the Bitcoin ecosystem consumes less than 10% of the energy needed for traditional banking services.
While people use the banking system, cryptocurrency is still maturing, and the early infrastructure phase is intensive like any industry.
Cryptocurrency Mining Debate
Of course, the bitcoin energy debate has some political aspects. There are reasons why some would like to stress or exaggerate the power consumption of Bitcoin, just as ideological arguments exist for defending it robustly.
The cryptocurrency mining industry, which in February 2021 alone raised nearly $1.4 billion, also has no exceptional environmental impact on other contemporary aspects in an industrialized society. Even de Vries said that if ecological regulators take every possible action with Bitcoin, it’s unlikely that all governments would support that mining regulation. Adding, ideally, change comes from within.
He hopes Bitcoin Core developers will alter the software to require less computational energy. He added that Bitcoin consumes half as much energy as all the world’s data centers at the moment.
Bitcoin miners use about 130 Terawatt-hours of energy, representing about 0.6% of global electricity consumption, based on the University of Cambridge’s Bitcoin Electricity Consumption Index. It equals Bitcoin’s economy with a small, developing country such as Sri Lanka and Jordan’s carbon dioxide emissions.
In principle, cryptocurrency mining does not generate extra coal emissions inherently because machines can use electricity from any source. In 2019, CoinShares published a study estimating that 73 percent of bitcoin miners use at least renewable energy as part of their electricity supply, including hydropower from China’s massive dams. The five top bitcoin mining pools, the miners’ consortium, depend heavily on hydropower for better profit.
De Vries, who pointed out that renewable energy is 39 percent of the mineral consumption, as per Cambridge researchers, does not impress this figure. “I’ve put a solar panel on my power station, and I also have a renewable mixture,” said de Vries.
Reducing Energy Consumption
The worldwide shortage of Bitcoin mining equipment is now due to rising cryptocurrency prices, added Blockstream CEO Adam Back, with demand going beyond supply and production up to 6 months. Emma Todd, MMH Blockchain Group’s founding consultancy, said the shortage pushes mining machines’ prices up.
Skeptics like de Vries argue that industrial miners are unlikely to reduce their power consumption by using more efficient new machines due to market forces.
Yet because the price of cryptocurrency is growing faster than new miners can build, Back says it is more lucrative to “replace” old machines with renewable energy sources than merely leaving them for new equipment. More than draining resources, Back said robust Bitcoin’s mining infrastructure could support communities. It is because bitcoin miners may contribute to the storage and arbitrage of power flows.