The world’s most controversial cryptocurrency, Bitcoin, has a climate impact greater than the production of beef and results in nearly as much environmental damage as crude oil, researchers in the United States have calculated.
Research from the University of New Mexico in Albuquerque, published in the journal Scientific Reports on Thursday, assessed the climate cost of various commodities as a portion of their overall market cap.
According to the new study, cryptocurrency mining is energy intensive because it requires highly specialized computers, and most of the electricity it consumes is generated by burning fossil fuels, which in turn greatly impact climate. The climate-related economic damage caused by Bitcoin mining exceeded its market value on 6.4 percent of the days it traded between 2016 and 2021.
Furthermore, over the five-year study period, it was found that Bitcoin’s climate damage averaged at 35 percent of its market value. That means thirty-five cents of one US dollar of Bitcoin would be valued as climate damage as a direct result of the cryptocurrency.
Bitcoin mining leads to climate damage greater than beef production
Each Bitcoin mined in 2021 likely resulted in US $11,315 in climate damages, altogether amounting to about US $3.7 billion for that year alone. To put that into perspective, researchers compared digital currency mining to other energy consuming activities.
Consequently, the study found that Bitcoin’s resulting climate damage was only slightly less than that of natural gas at forty-six cents per dollar of value while the climate impact of crude oil is valued at forty-one cents per dollar. Furthermore, Bitcoin’s damage is greater than that of beef production, which sits at thirty-three cents, and far more than gold mining, valued at four cents.
On more than one day during the study, climate damage from Bitcoin mining exceeded the value of the coins produced mostly due to electricity consumption. Even if renewables could cover this demand, the authors maintained that the climate damage for each dollar of value created was “10 times worse” for bitcoin than for wind or solar generation.
According to The University of New Mexico’s environmental economist Benjamin Jones and his colleagues, “Taken together, the results represent a set of red flags for any consideration as a sustainable sector (investment or otherwise).”
They added that “while proponents regularly [present Bitcoin] as…a kind of ‘digital gold,’ from a climate damages perspective, [Bitcoin] operates more like ‘digital crude.'”
Carbon emissions equivalent to Afghanistan
Bitcoin mining, which represents roughly forty-one percent of the global cryptocurrency market, consumed more energy than what was used to power entire countries like Austria or Portugal in 2020 alone.
According to research, the mining of Bitcoin, Ether, Litecoin, and Monero coins generated three to fifteen million metric tons of carbon dioxide emissions from January 2016 to June 2018. That’s equivalent to the emissions of Afghanistan, Slovenia, or Uruguay in 2018.
Bitcoin’s carbon footprint also grows over time because, in order to mine new coins, multiple miners compete to verify transactions on the blockchain. The fact that an ever-growing number of miners compete to solve increasingly difficult operations means the overall energy use rises, as well.
Tesla recently announced it would stop taking Bitcoin as payment due to energy concerns.
Climate friendly alternatives
The current estimates on Bitcoin’s climate damage are based on the global electricity usage required for PoW-based cryptocurrencies. However, there are other climate-friendlier alternatives.
Cryptocurrencies based on a proof-of-stake (PoS) system have recently been put forward as a solution to the high-energy nature of PoW processes. PoS is another way to validate cryptocurrencies that gives away the next block on the blockchain at random instead of to the winner. While it requires less investment of hardware, individuals still need to pay a substantial amount, which requires having the capital to start with.
Switching from a PoW to a PoS system would, however, require Bitcoin miners swap all of that hardware for cash, and that requires further time and effort.
If Bitcoin would choose to do this, the authors say “its energy use, and, by extension, its climate damages estimated in this work, would likely become negligible.”
However, experts say that the Bitcoin community is already too invested in its PoW system to want to change.
Researchers concluded that “PoW-based cryptocurrencies are on an unsustainable path,” and added: “If the industry doesn’t shift its production path away from PoW, or move towards PoS, then this class of digitally scarce goods may need to be regulated, and delay will likely lead to increasing global climate damages.”