Is bitcoin power-hungry? A look at the environmental cost of cryptocurrencies

All that energy has to come from somewhere. Image source: Pixabay.

By Warren Miller, contributing writer

The cost of one bitcoin has skyrocketed this year, nearly reaching $20,000 before settling at around $15,000. But what about the environmental cost of a single bitcoin? You might be shocked to find out that a single bitcoin transaction uses about 240 kWh of electricity, roughly the equivalent of enough energy to power the average American household for eight days. If that isn’t enough to amaze you, each bitcoin transaction also emits 117 kg of carbon dioxide into the atmosphere — goodbye, fluctuating currency; hello, global warming.

You may be asking yourself how a financial transaction could be using so much energy and causing so much pollution. After all, isn’t a currency exchange just a matter of swapping one kind of money for another? This is where a process called bitcoin mining comes in. Miners use tremendous amounts of computer processing power to collect and verify private bitcoin transactions; hence, the massive amounts of electricity being consumed. Because bitcoin is decentralized, anyone with the right hardware and relevant expertise can be a bitcoin miner, but mining operations that can deal in large quantities necessarily require huge supercomputing farms. By multiplying the 240-kWh-per-transaction number by the estimated 350,000 bitcoin transactions that occur every day, you end up with an annual energy consumption level roughly on par with the entire nation of Serbia.

All that energy has to come from somewhere, and that’s where the CO₂ emissions come in. Digiconomist suspects that burning coal is the answer and estimates that the bitcoin world is putting almost 16,000 kilotons of carbon dioxide into Earth’s atmosphere per year. That sounds quite terrible, but buckle up — it gets worse. While bitcoin is by far the world’s leading form of cryptocurrency, it’s far from the only one. Its competitors include Litecoin, Dash, Ripple, and the increasingly popular Ethereum, which uses an estimated 47 kWh of energy per transaction.

The fundamental problem that these types of currencies have is that they count on difficult computing problems to be the basic “mining” operation. Difficult computing problems take lots of energy to process. In fact, if processing becomes more efficient, the problems used by cryptocurrencies will need to get harder. Seems to me like this is a difficult problem to solve.

It doesn’t take a PhD in environmental science to know that this approach can’t be a good thing for the planet in the short- or long-term, and there doesn’t seem to be any sustainable alternatives on the horizon. Bitcoin was conceived as an alternative to gold as a reserve form of currency, one that wouldn’t be subject to wild fluctuations in interest rates or national economic disasters. One has to wonder: How long can a system this bad for the environment continue without effectively pricing itself (in terms of the cost of energy) out of the market?

Bitcoin and other cryptocurrencies are still operating on the fringes of the financial world, with the number of unique users ranging from anywhere from an estimated 3 to 6 million users — but it’s growing fast. Bitcoin value has tended to take wild dips and climbs since the open-source code was anonymously released in 2009, but 2017 has been a year of unprecedented growth. If these currencies are going to continue to encroach upon mainstream financial markets, one would think that they will have to find a way to address their fundamental processing power problem.