Cryptocurrency

Research: A fresh take on Bitcoin mining

Bitcoin mining and its energy consumption have been the subject of much heated debate recently. A network that consumes a lot of will go unnoticed.

Various data aggregators and trackers work around the clock to provide the market with an accurate amount of energy consumed by the network. Many offer interesting comparisons for the purpose of showing just how much power Bitcoin requires.

For example, data shows that the bitcoin network consumes enough electricity in one year to power the entire University of Cambridge for 758 years. His one year energy consumption of this network also powers all the kettles used to boil water in the UK for his 23 years. Bitcoin also uses more power than all refrigerators and TVs, and uses almost twice as much power as all lightning strikes across the United States.

Although this story is popular, it doesn’t paint a clear picture and deliberately obscures the wider context.

Data analyzed by crypto slate It shows that Bitcoin’s share in global energy consumption is very small.according to Cambridge Bitcoin Power Consumption Index, Bitcoin’s share in global electricity consumption is only 0.45%. This estimate is based on 2018 global energy statistics, so it may be slightly off today, but it still puts Bitcoin consumption into a broader context.

Bitcoin mining energy consumption
Bitcoin share in global energy consumption (Source: The Cambridge Electricity Consumption Index)

Comparing the energy consumption of the Bitcoin network to gold further illustrates this point. A 2019 estimate showed that gold mining consumes about 131 TWh of energy per year. The environmental impact of gold mining goes beyond power consumption. To assess the impact an industry has on the environment, we need to look at the amount of pollution it causes. That means the carbon dioxide the industry puts into the atmosphere, the land it deforests, the water sources it pollutes, and so on.

bitcoin mining energy gold
Energy consumption of gold mining compared to Bitcoin mining (Source: The Cambridge Bitcoin Electricity Consumption Index)

And while experts continue to debate the sustainability of gold mining, the direct environmental impact of gold mining is visibly greater than mining Bitcoin.

However, governments and institutions around the world are not trying to outright ban gold mining.

Unlike gold and other energy-intensive industries, Bitcoin mining is highly liquid. Not tied to a specific location, miners will travel wherever there is cheap and abundant electricity to quickly and efficiently set up new facilities around the world.

Bitcoin miner mobility was best seen in the summer of 2021. When crypto-related activity in China was banned statewide, thousands of his mining operations were looking elsewhere. At the time, miners in China’s hydro-rich provinces accounted for almost three-quarters of Bitcoin’s hashrate.

When faced with an impending ban in China, the miners quickly regrouped and started relocating. Some moved to neighboring countries such as Kazakhstan and some overseas to the United States.

Companies that moved their operations to the United States benefited from the welcoming attitudes of states such as Texas and Wyoming. In addition to mobility, Bitcoin miners also have unique advantages when it comes to energy consumption. We do not compete with other industries for the same energy resource.

Bitcoin mining farms can leverage energy assets at their point of production rather than getting power through the regular power grid. This means miners can absorb excess energy that would otherwise be lost or wasted, reducing their environmental impact and increasing profitability.

According to the U.S. Energy Information Administration (EIA), between 2016 and 2020, about 5% of all electricity transmitted and distributed through the grid was lost. These losses equate to about 206 TWh of power, which is enough to power the entire Bitcoin network 2.1 times his. Natural gas lost through flaring and venting in oilfields can generate 688 TWh of electricity, which is enough to power the entire Bitcoin network 6.9 times.

Bitcoin mining network
Comparison of energy loss from various sources and bitcoin network consumption (Source: Cambridge Bitcoin Power Consumption Index)

Some Bitcoin miners are aware of these potential energy losses. A Bitcoin miner in Texas turns off his ASIC to return power to the grid when demand is high, and devours excess energy when demand is low.

There are also several companies working on the utilization of natural gas found in oil fields. They use gas that would otherwise have been flared or released into the atmosphere to power the generators that produce the electricity used by the Bitcoin mining machines. This approach of killing two birds with one stone reduces the environmental impact of natural gas and delivers benefits.

Another very important point that is often overlooked when discussing Bitcoin’s sustainability is its economic impact.

Data centers around the world consume twice as much electricity as the Bitcoin network, yet their economic value is so high that sustainability is out of the question. Air conditioners consume about 220 TWh of energy each year and are rarely the subject of aggressive environmental marketing.

Bitcoin mining energy consumption comparison
Compare Bitcoin energy consumption with other large domestic and industrial consumers (Source: Cambridge Bitcoin Power Consumption Index)

Bitcoin’s increased energy consumption could bring economic prosperity outweighing its environmental impact.

Energy-intensive countries rank highly globally on the GDP per capita scale, indicating that increased consumption correlates with improved living standards. Qatar, United Arab Emirates, United States, Switzerland, Japan, and Macau rank high in terms of GDP and have high per capita electricity consumption.

gross domestic product per capita
Graph comparing energy use per capita with GDP per capita (Source: OurWorldInData.com)

When you look at Bitcoin mining through the eyes of economic prosperity and GDP, you can see that it’s not an environmental disaster. It is not certain whether increased energy consumption effectively translates into economic affluence, but the correlation is certainly too high to be ignored.

Increased energy consumption due to the influx of Bitcoin miners will lead to an increase in highly skilled labor force, resulting in a notable increase in income and improved infrastructure around it. while absorbing energy that would otherwise have been wasted.

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