Because of China's anti-cryptocurrency crackdown in 2017, many "miners," who use powerful computers to generate new Bitcoins, fled to other parts of the world.
The flight of cryptominers, which already consumes more electricity than many countries, may have made things worse for the climate, as evidenced by new research. Bitcoin's use of renewable energy sources such as wind, solar, or hydropower plummeted from an average 42 percent in 2020 to 25 percent in August 2021 according to a peer-reviewed study in the journal Joule.
For one thing, during China's wet summers bitcoin miners were unable to acquire hydropower from locations that had previously provided them with cheap, abundant, and sustainable energy to run their computers. As a result, a large number of miners migrated to neighboring Kazakhstan and the United States.
Miners in Kazakhstan and the United States have increased their use of fossil fuels, primarily coal and natural gas. Because fossil fuels like coal and natural gas emit large volumes of climate-warming carbon dioxide into the atmosphere when they are used, they are major contributors to global warming.
About 65 megatons of carbon dioxide may be released each year by Bitcoin mining, according to experts from Vrije Universiteit Amsterdam, Technical University of Munich, ETH Zurich, and the Massachusetts Institute of Technology. "It's bad news for Bitcoin owners since their assets just got more soiled," said Alex de Vries, a co-author of the study.
In the beginning, "there was a lot of optimism that China restricting Bitcoin mining would make mining greener," Mr. de Vries said. It was already a sleazy business, and it just got worse.
At a time when Bitcoin's status in mainstream finance has expanded, new research has added to the discussion concerning the environmental impact of Bitcoin mining. In particular, the mining of Bitcoin has been scrutinized due to its architecture, which makes it more difficult as more miners join, increasing the energy required to mine each Bitcoin. An alternate technique is being developed by Ethereum, another cryptocurrency, that would use significantly less energy.
In the past, estimates for the share of renewable energy sources used by Bitcoin miners have ranged substantially. According to a study by the Cambridge Centre for Alternative Finance, the global average for renewables in mining is around 40%. An industry body, the Bitcoin Mining Council (BMC), has stated that the figure is closer to 60%. According to the digital asset investing firm Coinshares, up to 73% of the electricity Bitcoin miners consume is generated from renewable sources.
These discrepancies can be explained in part by the fact that it is very impossible to locate every single Bitcoin miner on Earth. Data on the global distribution of miners has been compiled for some years now by Cambridge academics using information gathered from four "mining pools," or groups of miners that pool their computing power. But as of October 2021, that only accounted for around 44% of all Bitcoin mining activity.
New research made use of data on the country's electrical generation's carbon footprint, which were matched with data from Cambridge.
Data from Foundry USA, a mining pool that provides for a more detailed breakdown of miners' locations, was used in the study for the United States because how electricity is generated and how much renewable energy is part of the energy mix differs across the country. However, this breakdown was not accessible for other countries.
One of Coinshares' principal researchers Chris Bendiksen said that his firm used geographical data from financial filings and unique industry data to determine the amount of energy being generated by Bitcoin. A growing number of US miners were entering into contracts with natural gas drillers to use extra gas that would otherwise have been "flamed" — purposely burned off as trash — or just released into the atmosphere unburned and unused. This was also taken into account.
According to him, the ultimate purpose of the Bitcoin sector remained in line with global climate change objectives. "I believe we can all agree that fossil fuels must be phased out." We need to build up and decarbonize the grid," he stated.
He further suggested that Bitcoin could help achieve this goal by creating demand for any excess electricity provided by renewable sources, but it would immediately shut down if there was a shortage of those sources. However, in the vast majority of the world, extra renewable energy is quite uncommon.
As a University of New Mexico assistant professor of economics who studies the environmental impacts of cryptomining, Benjamin A. Jones said the newest findings were consistent with what he would predict given the departure of cryptominers from China where they had access to renewable hydropower.
According to estimations published in the energy research journal Joule, the percentage of renewable electricity needed to operate the Bitcoin network fell from more than 40% in 2020 to roughly 25% in August 2021. Natural gas's share of China's electricity mix increased from roughly a third to about half as a result of the exodus of coal miners. The study found that whereas Chinese miners used coal to power their operations, the miners who relocated to Kazakhstan began utilizing coal with an even higher carbon content.
In order to keep the Bitcoin network running smoothly, miners are paid with virtual cash by running difficult calculations on their computers. Mining companies claim their operations generally use clean power and can support the development of less polluting energy sources, but climate activists have blasted them for consuming as much electricity as entire countries do.
In the wake of China's prohibition on mining, miners fled the country and moved to neighboring nations, where there is less spare renewable capacity for mining camps. "It's not a surprise to me," he said. Bitcoin mining is headed in the wrong direction, if these claims are accurate.