Bitcoin, one of the cryptocurrency pioneers that emerged in the late 2000s, has become the topic of much debate over recent years. With seemingly equal parts admiration, detestation, and wild speculation, one of the most controversial aspects of this purportedly untraceable digital currency is its impact on the environment.
Unlike traditional currency, which needs to be printed to enter circulation, Bitcoin needs to be “mined.” This mining was initially benign, but as the demand for Bitcoin grew and the intensity of mining difficulty skyrocketed, it is now one of the most energy-intensive operations in the world — and along with this energy use comes increased carbon emissions.
A recent push to run Bitcoin mining on renewable energy in some areas is encouraging, but it is likely, given the proportion of global energy generation that is carbon intensive, that the vast majority of mining activity is carried out with a considerable carbon footprint that may appear to be growing rather than shrinking. At present, the best way to reduce the impact of Bitcoin mining on the environment is may be through carbon offsets.
What Is Bitcoin Mining?
Bitcoin mining is the process by which this form of cryptocurrency is “created” and enters into circulation. It is also critical for the development and maintenance of the blockchain ledger on which all Bitcoin activity is recorded. Mining is functionally performed by solving extremely complex mathematical computational problems. Essentially, you receive Bitcoin as a reward for solving and completing “blocks” of these problems, which are considered verified transactions. These blocks are then added together to form the backbone of any cryptocurrency: the blockchain.
With mining, cryptocurrency is earned without having to put down or exchange money for it. Bitcoins are awarded to miners that complete lengthy solutions to incredibly complex math problems. An application-specific integrated circuit (ASIC) or graphics processing unit (GPU) is essential for any serious mining activities.
ASICs are integrated circuit chips that are customized for a singular use as opposed to general purpose use, such as for high-efficiency bitcoin mining. GPUs, on the other hand, are designed to accelerate the creation of images for output to a display device. But it’s their highly parallel structure that makes them more desirable than central processing units (CPUs), which are for general purpose use, for algorithms that process huge blocks of Bitcoin data in parallel.
Today, Bitcoin mining is incredibly painstaking, costly to the environment, and only sporadically rewarding. Nevertheless, it is still very appealing to people interested in cryptocurrencies because of the fact that there is always a possibility of earning increasingly valuable Bitcoins as a potential reward.
How Much Energy Is Needed for Bitcoin Mining?
Plainly put, Bitcoin mining requires a lot of energy — and given the increasingly complicated and difficult equations to solve, it is poised to require increasingly more energy. The actual amount of energy needed can be explained by looking at how much energy is needed per block on the blockchain.
Smooth functioning of the Bitcoin blockchain is crucial to process and verify transactions; therefore, the entire network aims to have one block produced every 10 minutes or so. This is important because it indirectly affects how much total computing power is needed.
Given the value of Bitcoin, there are millions of mining operations around the world. If one block is produced every 10 minutes, then the more mining activity that occurs, the more difficult the computational solutions need to be. Bitcoin is designed to constantly evaluate and re-adjust mining difficulty every 2,016 blocks. This essentially increases the demand for power usage every two weeks, more or less. With a stable rate of block production and mining designed to increase in difficultly, that means more computing power is necessary as time goes on.
To put this in perspective, in 2009 when Bitcoin launched, the difficulty level for completing one block was 1. As of 2021, it is nearly 14 trillion. Needless to say, if people want to seriously earn money from mining, it is imperative that they invest in powerful computer equipment, such as GPUs or ASICs, which can cost anywhere from $500 to the tens of thousands.
Estimates vary, but it is thought that Bitcoin mining uses more than 120 terawatt hours of electricity (TWh) a year, which is just slightly more than the entire country of Argentina.
How Much Carbon Is Produced From Bitcoin Mining?
Given the range of estimates for energy usage, Bitcoin mining is thought to generate somewhere between 22 and 23 megatons of carbon dioxide emissions per year. This is about as much CO2 as the entire country of Sri Lanka generates in a year.
Other estimates put the carbon footprint of Bitcoin even higher. Digiconomist claims that the cryptocurrency produces more than 67 megatons of CO2 annually, as of July 2021.
Why Is Bitcoin Mining So Carbon-Intensive?
Bitcoin mining is incredibly carbon-intensive for two mutually related reasons: It requires increasingly more energy resources, and the majority of the energy that it uses comes from fossil fuels with high carbon emissions. Simply put, carbon emissions are directly consistent with the Bitcoin blockchain energy consumption intensity.
Even as the world moves toward more renewable and clean energy the carbon intensity of Bitcoin remains high. Some people are going as far as specifically seeking out locations to run mining operations on renewables, such as in Iceland, where there is an abundance of geothermal energy. This is because overall energy usage for mining continues to increase, effectively negating the portion of activity that is done using clean energy and keeping the carbon-based energy utilization high.
The only ways to lower the carbon intensity of Bitcoin will be to move to a much higher percentage of renewable or clean energy, utilize large amounts of carbon offsets, or reduce the overall computing power needed to solve computational equations. Since the last of these options is almost certainly not going to happen, at least not until Bitcoin is no longer able to be mined, the only realistic way to lower overall emissions is to increase clean energy potential and offset as much Bitcoin-induced CO2 emissions as possible.
Alternative Energy Potential for Bitcoin Mining
Although Bitcoin is incentivizing extreme and increasing amounts of energy usage, it is also incentivizing renewable and alternative energy use. As mentioned above, serious miners are setting up operations in places like Iceland to take advantage of reliable clean energy sources that are also economically feasible.
Controversies over whether to accept Bitcoin or not from major companies, such as Tesla, prompted the creation of the Crypto Climate Accord (CCA), similar in nature to The Paris Agreement on climate change. The main objectives of the CCA are, one, to reach net-zero emissions for all cryptocurrency mining from electricity consumption by 2030 and, two, to reach net-zero greenhouse gas emissions from all aspects of all cryptocurrencies by 2040. The agreement has collected more than 40 signatories to date, including at least 20 prominent cryptocurrency companies.
Unfortunately, no matter how much we utilize renewables, Bitcoin mining will always reward energy waste, which is problematic regardless of the energy source used. Even a good-faith effort to use cleaner sources will likely not be enough to meet the increasing energy demands or to mitigate growing carbon emissions. Carbon offsets for mining may become more and more important in the years to come.
Utilizing Carbon Offsets to Reduce Bitcoin Mining’s Carbon Footprint
One simple, yet effective, solution to stem the mounting tide of emissions resulting from Bitcoin mining is to purchase carbon offsets in the form of carbon credits.
Carbon offsets effectively sequester or capture the equivalent amount of CO2 that is emitted from certain activities or actions. They are measured in CO2e, which stands for carbon dioxide equivalents, because they can also sequester other types of greenhouse gases, with carbon being the main one and default form of measurement.
Offsetting is typically accomplished by purchasing and retiring carbon credits. These credits are created when various projects capture and remove carbon dioxide from the atmosphere. Individuals and companies can purchase credits to offset emissions associated with Bitcoin mining — and if enough offsets are purchased, it can result in the mining activities becoming carbon neutral.
Just note that credits must be retired after they are purchased in order to legitimately remove the associated amount of carbon from the air. Retirement means that the offsets at hand cannot be counted again, eliminating double counting and keeping recorded emission reductions closer to actual amounts.
There are so many verified and trustworthy carbon offset programs that it is impossible to list them all — but there are better ones than others when it comes to offsetting something as carbon-intensive as Bitcoin mining. Terrapass, for example, offers large-scale offsetting plans that can cover all aspects of mining for cryptocurrencies, even if you are utilizing huge amounts of nonrenewable energy. The current amount of CO2 emitted for every Bitcoin mined can be negated with two Terrapass carbon credit offsets. This can effectively make the Bitcoin you hold carbon neutral, while also helping to support Terrapass initiatives.
It is good to know that there are reliable options available to offset emissions from Bitcoin mining, buying the world time to increase uptake of renewables and transition to cleaner energy sources. Seeing as how this will likely take a long time — and Bitcoin mining energy needs are set to continue increasing into the foreseeable future — we should act as quickly as possible. It is absolutely imperative to utilize effective carbon offsets for mining activities to lower the collective carbon footprint of the growing (and often baffling) world of cryptocurrencies.