Over the past couple of weeks and months, the debate over Bitcoin mining and energy consumption has flourished. Critics of the mining process have been rather vocal. Their arguments were strengthened by Elon Musk and Tesla´s withdrawal of acceptance of Bitcoin as a means of payment over environmental concerns. Moreover, China´s huge crypto mining ban only supported the current trend of hate towards crypto mining (Change, 2021).
Yet, the vast majority of the arguments used by the critics of Bitcoin mining are far from the truth. Many studies that have been released in the past few months have completely destroyed the arguments of the critics of mining and have shown that the current narrative is far from reality. Therefore, this article will look at 3 of the most common myths connected to Bitcoin mining and provide reasonable research and studies that reject those myths.
Myth Number 1: Bitcoin Mining Is Contributing to Climate Change
One of the most often used arguments of the critics is also probably one of their weakest once. From a purely theoretical standpoint, anything that produces and consumes energy contributes to climate change, whether we like it or not. Even if it’s through green or renewable energy resources, this argument is one that is just pushed to the edge for the narrative or “clickbait” headline.
With regards to the Bitcoin mining, the recent CBECI study ( Cambridge Bitcoin Electricity Consumption Index) showed that the effect of Bitcoin mining on the climate change is “marginal at best.” So even in the current worst-case scenario of Bitcoin consuming huge amounts of energy, its overall impact on climate change is far lower than what is currently being highlighted by mainstream media (Bitcoin Mining Map, 2021).
Myth Number 2: Bitcoin Uses Too Much Energy
Compared to the competition in the form of gold markets or even the whole financial sectors, Bitcoin mining consumes far less energy. A recent study of Galaxy Digital showed that the combined estimated energy used on mining is around 115 TWh per year. The global average of CO2 produced per kWh is 0,6 tonnes, meaning that the overall Bitcoin mining is emitting around 70 million tonnes of CO2 per year. Definitely not a low number, however, compared to the competition, it’s by far the lowest ( Fabiano, n.d.).
Only last year the World Gold Council released a paper entitled “Gold and Climate Change: Current and Future Impacts.” This study for instance showed that the gold industry consumes approximately 270 TWh of energy in a single year, which leads to the emissions of 145 million tons of CO2 (Gold and climate change: Current and future impacts, 2019).
This figure (270 TWh) is also an estimate of the energy used by ATMs, bank branches or data centers by 100 biggest global banks. Yet, some reports show that the overall consumption of the whole banking industry is around 700 TWh per year, which can produce more than 400 million tonnes of CO2. It is therefore really unreasonable to look at the consumption of Bitcoin and state that it is contributing to climate change or is consuming too much energy, since all the competitive industries are doing far worse and are not being punished for it.
However, to put all of these numbers into perspective, whole energy production is estimated to be around 160 000 TWh, with more than 50 000 TWh being lost due to energy inefficient solutions. Therefore, the consumptions of all these three sectors combined are just a drop in the bucket ( Hannah & Roser, 2020).
Myth Number 3: Bitcoin Wastes Energy
Some critics of Bitcoin go as far as to say that Bitcoin not only uses too much energy, but completely wastes energy. Their main premise is that BTC is worthless and therefore any amount of energy produced and used on Bitcoin mining is wasted energy. To understand why this is not true, one would need to explain what Bitcoin is, what it does and how much value it brings to its users. This would however require more than a paragraph or an article, which is a reason why we will demystify this statement from a different angle.
We have already shown how much energy is being wasted by solely inefficient energy solutions. However, this argument can be also highlighted in many examples. For instance, the energy that is wasted by on-but-inactive household devices in the US is the same amount, that would be sufficient for powering Bitcoin mining for more than 1.5 years. Yet, no one wants to “shut on-but-inactive households devices down.”
Energy consumption of Bitcoin is often compared to the energy consumption of some countries. The latest comparison that is commonly used in the media is that “Bitcoin spends as much energy as Norway.” By this, the critics usually try to point out how much mining wastes compared to other, easy-to-compare figures. In actual fact, this comparison makes no sense, since it’s comparing two vastly different things ( country vs payment system). Further to that, the analogy has its own limitations. For instance, when you look closer at this argument, the GDP of Norway is around 360 billion dollars, whereas the whole capitalization of Bitcoin was at its peak more than 1,2 trillion dollars ( now around 730 billion dollars). This does not mean that Bitcoin is more than any country or its inhabitants, this just purely shows that Bitcoin is able to produce even more output with the same production of energy as a well-developed country like Norway (GDP (current US$) – Norway, 2020).
Bitcoin Incentivizes Green Energy Usage
If demystifying these poorly managed critiques and myths of Bitcoin mining is not enough, let’s see if Bitcoin mining has any good impacts. These are not the technical and ideological impacts of BTC transactions security and decentralization of the whole network. But Bitcoin leads to something more than just energy spending. It incentivizes the use of renewable energy sources.
For miners to be profitable, they always want to lower their costs of production. This is especially true, if they have access to any form of renewable energy, which is a reason why more than 75% of miners have in their energy production at least some form of renewables. Moreover, as this survey finds out, almost 40 % of all the mining comes from renewable energy resources. This is also the lowest estimate, with some of them climbing as high as 50 %. The average portion of green energy in all the other industries is estimated to be around 20 %. This means that Bitcoin mining is much more energy efficient than most of the other industries (Blandin, 2020).
With all of the studies and research that has been going on in the past few months, a lot of the myths can be easily refuted. But as expected, many still choose to stay oblivious to the facts simply to hurt Bitcoin’s reputation. Yes, it is true that Bitcoin uses a lot of energy for mining. However, as we have shown, the amount used is much lower than competing industries if you put it into perspective. Bitcoin mining is also not at all the most “inefficient” energy consumer. In fact, Bitcoin incentivizes miners to use green and renewable energy, so they can profit more from mining, which is another reason why the current sentiment of Bitcoin mining bashing is nothing more than just “an overblown clickbait trend.”
Change, C. (2021, 7 22). Bitcoin climbs as Elon Musk says Tesla ‘likely’ to accept it again. Retrieved from BBC: https://www.bbc.com/news/business-57924354
Bitcoin Mining Map. (2021, 4 21). Retrieved from CBECI: https://cbeci.org/mining_map
Fabiano, A. (n.d.). On Bitcoin’s Energy Consumption: A Quantitative Approach to a Subjective Question. Retrieved from Galaxy Digital: https://www.galaxydigital.io/post/on-bitcoins-energy-consumption-a-quantitative-approach-to-a-subjective-question/
Gold and climate change: Current and future impacts. (2019, 10 23). Retrieved from Gold: https://www.gold.org/goldhub/research/gold-and-climate-change-current-and-future-impacts
Hannah , R., & Roser, M. (2020). Energy Production and Consumption. Retrieved from Our World in Data: https://ourworldindata.org/energy-production-consumption
(2020). GDP (current US$) – Norway. US: World Bank.
Blandin, A. (2020). 3rd Global Cryptoasset Benchmarking Study. London: University of Cambridge.