While bitcoin (BTC) continues to break price records, the debate over the environmental impacts of its mining becomes more evident. A new report by the multinational investment bank Citigroup revealed that activity-related energy consumption has grown 66-fold since 2015.
Bitcoin energy consumption increases along with price
The main reason for concern about cryptocurrency mining, especially that of bitcoin, is the consequent carbon emissions. The activity requires that countless machines and computers around the world give up their processing power to encrypt and record all transactions involving digital currency. Thus, miners are rewarded with administrative fees and the generation of new BTC units.
According to Citigroup analysts, “as the value of bitcoin increases, so should its energy consumption”. The more transactions are carried out and the more cryptocurrencies are handled, the greater the number of processes that the blockchain network needs to process. Electric demand has increased by 66 times since 2015, but it is still a slower pace than the growth in the price of the digital asset, which has already risen more than 170 times in the same period.
Mining in China is the main polluting factor
The report also cites data from the Cambridge Bitcoin Electricity Consumption Index (CBECI), which measures the energy consumption associated with cryptocurrency mining. The bitcoin network demands about 138.5 terawatt hours per year, more electricity than entire countries like Ukraine and Sweden.
According to the Cambridge University Index, China accounts for 65% of all bitcoin mining in the world. This statistic is the main polluting base of cryptocurrency. The energy matrix of much of the country is coal, which generates intense atmospheric pollution. This also makes Chinese electricity cheap, which attracts miners to carry out the activity there.
“Mining and the use of these currencies consume a lot of energy and may face greater regulatory pressure as adoption expands, especially if the US continues to expand its participation in the crypto market and if China, the market leader, starts to repress mining of bitcoin if it ends up negatively affecting your climate goals, ”the report said Citigroup.
China processes 80% of all bitcoin transactions
Last week, another study was published by the journal Nature, revealing that, at the current pace, bitcoin mining in China is expected to generate 130 metric tons in carbon emissions by 2024.
According to the study, 80% of all bitcoin transactions in the world are processed in China, while it is estimated that 40% of the power plants present in the country are powered by coal. In view of the extremely high energy consumption related to cryptocurrency mining, bitcoin has created a strong carbon footprint.
Climate deal wants “sustainable bitcoin”
The cryptocurrency market is aware of this problem, which is why the “Crypto Climate Accord” was created earlier this month and already has more than 20 members. The initiative seeks to migrate all blockchain networks to renewable and non-polluting sources of energy. The goal is to bring the entire sector to carbon neutrality by 2040.
For this, the biggest problems need to be solved: bitcoin and ether, the two largest cryptocurrencies on the market and the main responsible for the carbon emissions associated with digital currencies. That said, the agreement’s goals seem unrealistic.
Task may be impossible
Bitcoin, for example, operates under a protocol that naturally consumes more and more energy. It is a system based on “proof of work” checks, poorly optimized and which demands more and more processes as the activity with the cryptocurrency grows.
Ether (ETH), the native cryptocurrency of the Ethereum network, also works under the same protocol and its blockchain is responsible not only for digital currency, but also for most smart contracts and NFTs on the market. However, there are plans to update the system in the future, creating the possibility to optimize energy consumption across the network.
Given these problems, migrating all blockchains to regions that use clean energy is a very expensive and complex task. It would take a huge amount of subsidies to make the price of clean electricity less competitive compared to that which comes from burning fossil fuels.
With information: Bloomberg