According to newly published research, the energy needed to “mine” one US dollar’s worth of the four top cryptocurrencies is more than twice the amount required to mine one dollar’s worth of copper, gold, or platinum. The study, “Quantification of energy and carbon costs for mining cryptocurrencies”, was carried out by researchers at the Oak Ridge Institute in Cincinnati, Ohio and published in the journal Nature Sustainability.
Researchers examined publicly available data and attributes of mining hardware to determine the power requirements for the top four cryptocurrencies: Bitcoin, Ethereum, Litecoin and Monero. The team then used market prices to calculate the energy consumed in the production of one US dollar worth of cryptocurrency between January 1, 2016 to June 30, 2018. Finally, they applied country-specific CO2 emission factors to the energy demands of each respective cryptocurrency.
The research team found that one dollar’s worth of bitcoin takes about 17 million joules of energy to mine compared to the 4, 5, and 7 million joules needed to mine copper, gold, and platinum - a joule is a unit of energy equivalent to the work required to produce one watt of power for one second.
Ethereum, Litecoin, and Monero came in at 7, 7, and 14 million joules. Overall, all four cryptocurrencies did well compared with aluminum, which requires 122 million joules to mine one dollar’s worth of raw ore. To determine this measurement the team compared the energy of mining the four cryptocurrencies with mining of actual metals.
"In 2018, bitcoin is on track to consume more energy than Denmark," stated Max Krause, a researcher at the Oak Ridge Institute for Science and Education and lead author of the study. Krause told AFP that the world is dealing with “an entirely new industry that is consuming more energy per year than many countries.” Krause and his team estimate that mining for all 4 cryptocurrencies was responsible for 3-15 million tons of CO2 emissions around the world.
Although the team recognizes that “decentralized cryptocurrencies represent a potentially revolutionary new technology” they warn that based on current trends “energy requirements will continue to increase”.
Other Research and Its Critics
The new research echoes past studies on cryptocurrency and energy consumption. In November 2017, The Guardian reported that the power consumption of the Bitcoin network was equivalent to that of the nation of Ireland. Another report from January 2018, noted Bitcoin mining was producing the same annual carbon emissions as one million transatlantic flights. More recently, the journal Nature Climate Change published a study claiming that Bitcoin mining will lead to an increase in global temperatures by 2°C within the next couple decades.
Critics of this research have rightfully pointed out the many variables involved in understanding the energy usage of cryptocurrency mining. For example, Bitcoin mining is dependent on several factors, including Bitcoin’s value, the cost of electricity, the efficiency of the mining equipment, and government regulation.
A recent analysis from Bloomberg attempts to address these concerns. Bloomberg notes that although one report has shown Bitcoin miners will consume estimated 8.27 terawatt-hours per year, this is “less than an eighth of what U.S. data centers use, and only about 0.21 percent of total U.S. consumption”.
When these numbers are compared to the estimated consumption for cash and coins a different picture emerges. “Global production of cash and coins consumes an estimated 11 terawatt-hours per year, while gold mining burns the equivalent of 132 terawatt-hours,” Bloomberg reports. “And that doesn’t include armored trucks, bank vaults, security systems and such. So in the right context, bitcoin is positively green.”
The Bloomberg piece also examines the environmental cost of running data centers and how the electricity use has reportedly flattened despite the continue growth of such high electrical cost data centers. Despite warnings about the environmental impact and electrical cost of Google’s data centers, improved efficiency in the form of better cooling and power management technology has helped relieve some of the impact.
Looking to the Future
As society grapples with the growth of cryptocurrency and blockchain technology, several important questions need to be asked.
First, to the cryptocurrency community, if the evidence does indeed show that mining of cryptocurrency, and specifically, the proof-of-work algorithm, has grave environmental consequences, what is the next plan of action?
Does this mean an end to cryptocurrency in general? Most certainly not.
Does it mean ideas like Proof-Of-Work need to be reworked or combined with new technologies? More than likely.
Members of the cryptocurrency space need to be willing to address these questions and ask others as they arise. We ought not ignore the costs of new technology simply because the benefits include financial success.
To the general public, what if the end result of investing in more cryptocurrencies and blockchain leads to an overall improvement in quality of life around the world? There are a number of new technologies that could be abandoned (smart phones for one) to help the environment and reduce carbon footprint, but what is the cost of such a drastic decision? In the end, are potential environmental costs worth the price of having a functional sound money that can be sent for relatively free across borders without permission from central parties such as government?
These are questions that should be considered by the masses who stand to benefit from the growth of cryptocurrency.
It’s a fairly safe assumption that the cryptocurrency market will provide for technological innovation and further developments in so-called “green mining”.
However, the push back against mining will continue as long as the consensus view is that the technology’s downsides outweigh the potential benefits. If the cryptocurrency community aims to continue making a profit via mining coins they have an incentive to become more efficient and reduce their environmental footprint. This means ideas like Bitcoin Green and Lightning Network (among others) will need to be explored if this new technology is to achieve its true potential.