Prior studies have reported vastly different estimates of how much electricity the Bitcoin network consumes. Cambridge has launched an index that dynamically tracks the electricity consumption of the network with plans to also estimate how much energy is sourced from renewables.
- Cambridge Centre for Alternative Finance develops an index to track Bitcoin electricity consumption
- The index is the only one which dynamically updates with the exception of the Digiconomist metric
- As a second step of the project, a map to track the location and percentage of renewables used by mining facilities will be launched
Cambridge Bitcoin Electricity Consumption Index
The Cambridge Centre for Alternative Finance (CCAF) launched an index to track the annual electricity consumption of the Bitcoin network. The Cambridge Bitcoin Electricity Consumption Index (CBECI) updates estimates every 30 seconds along with upper and lower bounds for the estimate.
The motivation for launching the index was noted in a tweet thread by researcher Michel Rauchs. The index was launched to provide some robust evidence to the common debate surrounding the environmental impact of bitcoin mining. Studies to date have varied in their figures due to using vastly different methodologies.
The majority of prior studies have also provided an estimate for the electricity consumption only at a given point in time. The Digiconomist Bitcoin Electricity Consumption Index is the only other metric which has been designed to dynamically update. However, the assumptions underlying the model BECI is based on have received scrutiny from researcher Marc Bevand. Bevand has detailed how the BECI likely overestimates energy consumption by a factor of 1.5 to 2.2x.
The model for the CBECI was based on research by Bevand which has been widely cited in publications and outlets including Bloomberg, the journal Nature Sustainability, and the New York Times. The model provides upper and lower bounds based on the efficiency of mining hardware on the market. The upper bound for the electricity estimate assumes that all miners are using the least energy-efficient hardware which is still profitable. The lower bound assumes that miners are using the most energy-efficient hardware. The best estimate assumes miners use a basket of profitable hardware. The estimates assume that the global cost of electricity for miners averages at $0.05 per kWh. However, users of the CBECI site have the option to adjust this between $0.01 to $0.20 to see how this impacts the energy consumption estimate.
The current seven-day average estimate of the annual consumption provided by the index on July 7th is 61.76 TWh. This is less than the BECI estimate which currently stands at 70.85 TWh. However, the noted research by Bevand demonstrates that this figure is likely overstated.
The figure is higher than recent studies published by CoinShares and the journal Joule which estimate 41 TWh and 45.8 TWh respectively. The discrepancy here is likely due to the increase in hash rate since these studies were published.
CBECI.org also has a comparisons page to put the consumption figure into perspective. The current estimate indicates the Bitcoin network consumes more energy annually than Switzerland. It consumes enough energy to power Cambridge University for 365 years at current consumption figures. On the other hand, all of the always-on but idle electrical devices in the USA could power the Bitcoin network for four years. It is clear that the goal of the index is not to support either side of the argument regarding whether powering the Bitcoin network is a valuable use of energy or not. The index adds some data to those who lie on either side of this argument.
Renewables Energy Estimate
The second step of this project is to estimate how much of the energy powering the Bitcoin network is sourced from renewables. CoinShares recently estimated this figure to be 74% based on their bi-annual research of the mining industry. However, earlier studies (Rauch et al. 2018) have estimated the figure to be less than 20%.
With miners highly incentivised to source low-cost energy solutions, it is logical that a significant portion of the energy consumption is sourced from renewable sources. The differences among previous renewables estimates is another area that the CBECI project aims to tackle. It is noted on the website that the second stage of the CBECI project is to “launch an interactive map that tracks the location and energy mix of Bitcoin mining facilities”.