{"id":644,"date":"2022-03-13T19:51:12","date_gmt":"2022-03-13T19:51:12","guid":{"rendered":"https:\/\/grandpascrypto.com\/?p=644"},"modified":"2022-03-13T19:51:14","modified_gmt":"2022-03-13T19:51:14","slug":"bitcoin-mining-and-the-energy-debate","status":"publish","type":"post","link":"https:\/\/grandpascrypto.com\/bitcoin-mining-and-the-energy-debate\/","title":{"rendered":"Bitcoin Mining and the Energy Debate"},"content":{"rendered":"\n

tl;dr Summary:<\/strong>\u00a0 Bitcoin mining has been in the cross-hairs for using as much energy as a small country. This article presents facts about the energy consumption of Bitcoin mining, steps taken by companies to get their hands on clean and cheap energy, and new alternative sources of energy.\u00a0<\/em><\/p>\n\n\n\n

Bitcoin mining has been a subject of criticism1,2,3<\/sup> for its usage of fossil fuel energy and its indirect impact on the environment since inception<\/a>. <\/p>\n\n\n\n

The arguments made by the critics can be grouped into sensationalism, the need for energy cleanliness, a change to the Proof of Stake<\/a> (PoS) consensus model, and the necessity of bitcoin to exist as an open monetary system. <\/p>\n\n\n\n

I think we can keep aside sensationalism and the need for Bitcoin to exist. For those who suggest moving to PoS, this article<\/a> tells us why Bitcoin must stay on Proof of Work. <\/p>\n\n\n\n

Here, we will look at the energy consumption of Bitcoin miners to answer the question of cleanliness and also touch on newer alternatives.<\/p>\n\n\n\n

Bitcoin mining energy consumption<\/h2>\n\n\n\n

The obvious question that comes to mind is how much energy is consumed by Bitcoin mining? <\/p>\n\n\n\n

The Coinshares research<\/a> estimates that the Bitcoin network drew a total of 89 TWh (terawatt-hour) in 2021, which is 0.05% of the total world power consumption, estimated to be 162,194 TWh (2019 data).<\/p>\n\n\n\n

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According to CBECI<\/a> (Cambridge Bitcoin Electricity Consumption Index), a not-for-profit research institute, the Bitcoin network consumes 0.28% of the global energy consumption.<\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n

Also, according to the latest (July 2021) report by the Bitcoin Mining Council<\/a> (BMC), a voluntary and open forum for Bitcoin miners, the Bitcoin network uses 0.117% of the total global energy consumption. <\/p>\n\n\n\n

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Please note the BMC has used the CBECI June 29, 2021 data for this visualization.<\/p>\n\n\n\n

But why is there such a difference in the numbers (Coinshares\u2019 89 TWh and CBECI\u2019s 189 TWh)? <\/p>\n\n\n\n

There are four main contributors to this difference.<\/p>\n\n\n\n

  1. The model used for calculations and the assumptions made to arrive at these values.<\/li>
  2. The inability to make an apple-to-apple<\/a> comparison between Bitcoin and any other activity.<\/li>
  3. The quality of data available for calculations.<\/li>
  4. And a subjective analysis of the topic.<\/li><\/ol>\n\n\n\n

    As consumers of this data, we should keep these factors in mind and understand that the studies only provide a version of the best guess estimate. <\/p>\n\n\n\n

    Given the data above, it can be said that Bitcoin Energy consumption can range anywhere from 0.05% to 0.28% of the global energy production which is more than what Finland<\/a> consumes yearly. <\/p>\n\n\n\n

    Renewable energy consumption by Bitcoin<\/h2>\n\n\n\n

    The second important question to look at would be the amount of renewable energy used by the Bitcoin network. <\/p>\n\n\n\n

    According to BMC, global Bitcoin mining has the highest sustainable energy mix<\/strong> at 56% in Q2 of 2021 and it grew from 36.8% in Q1 2021. <\/p>\n\n\n\n

    \"\"\/<\/figure>\n\n\n\n
    \"\"\/<\/figure>\n\n\n\n

    And according to the Coinshares\u2019 report, as of December 2021, 41% comes from renewable sources. <\/p>\n\n\n\n

    \"\"\/<\/figure>\n\n\n\n

    graph created using data provided in this Coinshares report<\/a><\/p>\n\n\n\n

    Others include small amounts of oil, solar, and other renewables. <\/p>\n\n\n\n

    Based on these current estimates, the sustainable energy mix for Bitcoin mining ranges from 41% to 56%, which seems high and on an uptrend. Why is this so? <\/p>\n\n\n\n

    The reason for this lies in the fundamentals of Bitcoin mining. Bitcoin mining works by adding a transaction record to a public ledger for a reward of a newly minted coin and transaction fees but with time, the rewards get scarce by design.<\/p>\n\n\n\n

    \u201cDue to the diminishing block subsidy, growing global hash rate competition for the remaining transaction fees, and eventual decline of the current massive profit arbitrage opportunity to mine new blocks, miners over time will be forced towards ever cheaper energy. \u201c according to this report here<\/a>. And this is the reason why miners race to look for inexpensive and clean sources of energy. <\/p>\n\n\n\n

    Here are some examples:<\/p>\n\n\n\n