When companies operate their business solely online, one would think that they have a substantially lower environmental impact than those who conduct business traditionally; however, a study suggests that this is not the case.
A case study on bitcoin operations reveals that bitcoin’s carbon footprint — the world’s most robust cryptocurrency — is so massive to the extent that it can rival the environmental impact caused by Las Vegas or a small country like Sri Lanka. According to the study conducted by Christian Stoll, Lena Klaaßen, Ulrich Gallersdörfer from Technical University of Munich and Massachusetts Institute of Technology, Bitcoin generates about 22 megatons in CO2 emissions each year.
While it is true that cryptocurrencies supposedly depend on online blockchain technology to process transactions like transferring of funds, and doesn’t have a physical infrastructure that is huge enough to cause such amount of carbon emissions, the researchers said that this validation process uses “vast amounts of electricity,” which causes some severe carbon emissions.
During 2018, according to the study, the computing power required to solve a Bitcoin puzzle increased more than 4-fold until October and heightened electricity consumption accordingly. Speculations about the Bitcoin network’s source of fuel have suggested, among other things, Chinese coal, Icelandic geothermal power, and Venezuelan subsidies. To keep global warming below 2°C—as internationally agreed in Paris COP21—net-zero carbon emissions during the second half of the century are crucial.
Bitcoin mining operations use too much electricity
One area of interest for researchers is the effect of bitcoin mining, the process by which people can earn bitcoins without spending money through painstakingly scavenging for small amounts across the internet. To estimate the electricity consumption, the study authors used IP addresses and hardware data from recent IPO filings. It was determined the annual electricity consumption of Bitcoin, as of November 2018, to be 45.8 TWh and estimate that yearly carbon emissions range from 22.0 to 22.9 MtCO2.
The study revealed that “There is no typical size of cryptocurrency mining operations.” The operations range from college students aiming to earn enough funds to pay for their electric bills, to gamers who leverage their graphics cards whenever they are not playing (as reflected in Nvidia’s volatile sales allocated to crypto), all the way up to large-scale crypto-mining farms. These mining operations have consumed enough electricity around the world to compare with electricity consumption like that of Jordan, a small middle-eastern country.
Regulation on mining operations necessary
According to the discussion presented by the researchers, their study sets up baseline information that would lead to a better understanding of the environmental impacts of cryptocurrencies and serves as a guide for a policymaker to develop climate-positive policies. They said that the results of the study could not be overlooked and should be a basis for policymakers to build balancing regulations.
Furthermore, the results were said to highlight the necessity of cost/benefit trade-offs for blockchain applications in general. While the researchers do not invalidate the benefits of cryptocurrencies, the “current debate is focused on anticipated benefits, and more attention needs to be given to costs.” And as the researchers have been pushing, policymakers should not ignore these results.
“Naturally, there are bigger factors contributing to climate change. However, the carbon footprint is big enough to make it worth discussing the possibility of regulating cryptocurrency mining in regions where power generation is especially carbon-intensive,” one of the authors, Christian Stoll, said in a statement.
“To improve the ecological balance, one possibility might be to link more mining farms to additional renewable generating capacity.”
Tip of the iceberg
Meanwhile, the researchers said that their analysis of carbon footprint of bitcoin is just the “tip of the iceberg” as other cryptocurrencies also carry significant carbon footprints upon their shoulders as well. This highlights the need to regulate cryptocurrency mining operations as it has external impacts – specifically to the environment.
“Bitcoin’s power consumption may only be the tip of the iceberg. Including estimates for three other cryptocurrencies adds 30 TWh to our annual estimate for Bitcoin. If we assume correlation to market capitalization and consider only mineable currencies (unlike second layer tokens or coins with other consensus mechanisms), the remaining 618 currencies could potentially add a power demand over 40 TWh. This more than doubles the power consumption we estimate for Bitcoin,” the study concludes.