Breaking down the latest research on the energy consumption of the Bitcoin network
“The common public narrative surrounding the environmental impact of cryptocurrency mining is overwhelmingly negative”
- Recent research indicates that up to 77.6% of bitcoin mining may be using renewable energy sources
- Miners may be migrating to areas with higher amounts of renewable energy sources
- Miners may be having a positive impact on the business models of renewable energy suppliers
The energy consumption required to maintain the Bitcoin network is a common concern cited by the media, professionals, and the general public. Statistics such as the Bitcoin network consuming more energy than countries the size of Ireland are commonly cited to support this claim.
But is it a valid concern?
Bitcoin Mining in Context
The energy consumption of the Bitcoin network is estimated to be around 55 TWh per year. This is, in fact, greater than the majority of countries but is it a concern?
The energy expended in proof-of-work is a key feature of Bitcoin that secures the network against attacks. It makes it expensive for attackers to garner the necessary computing power to launch an attack on the network.
If considered in the context of the energy consumption of other industries and products, the consumption seems more reasonable for the utility of a decentralized peer-to-peer payment network. The global banking industry is conservatively estimated to consume 100 TWh per year while Christmas lights are estimated to consume 6.63 TWh per year by American households alone.
Furthermore, as the research referred to in this article has found, the hardware for mining the Bitcoin network continues to become more efficient. The development of new hardware models has historically continued to provide a greater hash rate per energy expended.
The State of Renewables
Recent research indicates that 77.6% of bitcoin mining may be conducted through renewable energy sources. This figure was put forward by CoinShares, a digital asset manager and research provider, in their bi-annual report on the mining industry.
The research admits that the amount of bitcoin mining completed with renewable energy sources versus non-renewable cannot be accurately estimated. CoinShares derive the figure by examining the renewables energy penetration rate in various areas and cross-examining this with the latest estimates on where bitcoin mining is taking place.
What is driving miners to adopt renewable energy sources?
There is a simple and logical reason. Miners are motivated to keep costs low and saving energy means reducing costs.
Although this research represents the most scientific methodology to examine renewable energy rates, it is not the only source to make such claims. A clean energy technology professional found similar conclusions that bitcoin miners are mostly concentrated in areas with high amounts of renewable energy sources and that the impact of mining on the environment may not be as bad as most media sources make it out to be.
The CoinShares research found a number of other findings of importance to the mining industry:
- Bitcoin miners are likely mining at a loss since the price crashes in November of 2017 but there are a number of conditions such as energy rate and hardware cost which may lead to them being profitable.
- Hardware for mining bitcoin continues to become more energy efficient
- Miners appear to be migrating away from China to areas with more friendlier regulations, cooler climates, and excess renewable energy sources.
Curtailment is a common issue that renewable energy suppliers face whereby they are unable to sell energy to the grid due to the risk of the grid becoming overloaded. This can often result in energy being wasted to the detriment of renewable energy suppliers.
Although requiring further research, the CoinShares research indicates that the mobility of bitcoin miners and their drive to lower costs may be having a positive impact on the businesses of renewable energy suppliers. There drive to source this renewable energy may be utilizing energy sources from suppliers that would have otherwise been put to waste.
Miners making use of this energy that would have otherwise been put to waste could potentially have a significant knock-on effect. It would likely result in greater profit margins to renewable energy suppliers enabling them to reinvest in the business and/or more easily gain funding.
The energy consumption of the Bitcoin network is a popular argument to make against both the feasibility of the Bitcoin as a sustainable payments network and to highlight proposed negative environmental impacts.
The evidence provided by the research referred to in this article provides a strong counter to these claims. It indicates that the mining industry is likely powered mostly by renewable energy sources and may even be having a positive impact on the business models of renewable energy suppliers.