Don’t expect to get rich from bitcoin mining.
According to crypto guide HowtoToken, you could end up spending at least $1,080 per month on standard equipment, peripherals and energy as a miner. That excludes maintenance costs.
For critics, bitcoin’s cost to the environment is even steeper. Not only does it guzzle our limited energy, but it corrodes our environment with carbon dioxide (Co2) that damages our ecosystem.
Bitcoin’s Carbon Footprint
Bitcoin miners use 21% of the world's supply of energy. That’s enough to power Ireland for one year—or more energy than Hungary used in 2018, according to Alex de Vries, researcher at Netherlands' PricewaterhouseCoopers (PwC).
Put another way, it takes about17 megajoules of computer power to generate one US Dollar in bitcoin—and that discounts the energy used by peripherals such as coolers.
According to the Bitcoin Energy Consumption Index, each bitcoin transaction requires the same energy as 4,000 Visa card transactions, reports Greentech Media. Critics fearbitcoin will consume earth’s dwindling and limited energy resources.
All this energy consumption emits about 22 megatons of toxic carbon dioxide annually, according to a study in the scientific journal Joule. That’s as much as the carbon dioxide produced by a million transatlantic flights or by a million cars, according to Nature.
Before the Industrial Revolution, CO2 levels in the atmosphere were 270 parts per million (ppm.) By 1960 that had increased to 313 ppm. C02 levels reached 400 ppm earlier this year. Scientists say we urgently need to lower carbon dioxide levels to 350 ppm to reduce flooding and droughts and to feed our growing population.
How Bitcoin Mining Works
To mine bitcoin and process transactions, you need to have special equipment. The more bitcoin you mine, the more money you get. In 2014, running 600 servers a year yielded 0.43 bitcoin—then worth about $275.08.
Today, the only way to get rich from bitcoin is to use more energy-intensive equipment that produces bitcoin faster. That’s because the algorithm that makes bitcoin becomes more challenging each passing year as bitcoin becomes scarce.
For that reason, the very lowly standard multi-core computer that would have made you about five dollars a day in 2009 has long been supplanted by a mining rig, like the standard Antminer S9 that produces around 13.5 thousand trillion hashes per second. (The more hashes, the more you mine). That excludes the energy used by peripherals, including fans and coolers. (Read also: How Bitcoin Can Change the World.)
Most bitcoin miners use cloud mining companies, like Genesis Mining, to lease mining hardware or hashing power. They’re barely profitable and also absorb huge amounts of energy.
To the extreme, industrial-scale bitcoin mining rigs, like New York’s Greenidge Generation, invest in industrial-scale mining rigs that house row after row of powerful processors. The largest rigs have around 25,000 machines cranking cryptographic puzzles.
These work around the clock, seven days a week, to guzzle enough megawatts of electricity an hour that could feasibly light a thousand homes. Greenidge Generation currently consumes 14 megawatts of the 106 megawatts used in their local environment. To put that in perspective, that’s enough electricity to power over 11,000 3-bedroom homes.
According to testimony presented to the U.S. Senate Committee on Energy and Natural Resources, the energy these machines use to produce one bitcoin equals 1% of the world's energy consumption.
According to de Vries, bitcoin mining gobbles far more electricity per transaction than all the world’s banks put together.
In 2018, de Vries told me bitcoin's carbon footprint is about 271 kilograms of CO2 per transaction—or several hundred times that of a standard credit card payment and mostly comes from the very toxic coal.
Bitcoin enthusiasts say the criticism is overblown.
More than three-fourths of global bitcoin mining comes from replenishable renewable or clean energy, rather than from finite sources like coal, according to a report by digital-asset management firm Coinshares. (Robert Sharratt, former employee of the Natural Resources and Power Group, puts the number closer to 85% and rising.)
Mining farm Genesis Mining, for instance, uses hydropower in Iceland, while its competitor Greenidge Generation uses natural gas from Dresden. (Read also: Liberland: The Country on the Blockchain.)
On top of that, each year sees a growing number of bitcoin miners transfer to cleaner parts of the world, like Iceland and the Pacific Northwest, said Katrina Kelly-Pitou, a research associate in electrical and computer engineering at the University of Pittsburgh. Some rigs transfer to hydropower; others use solar power that is less risky than oil, cheaper—and cleaner.
In 2019, Robert Sharratt, environmentalist and crypto enthusiast, told me
"Former power industry colleagues' in Hong Kong estimate is that more than 80% of all Chinese miners are located in Sichuan province... where they use geothermal and hydro-power energy."
In short, most bitcoin miners use renewables that reduces C02 toxic emissions...
So what could be wrong?
"Cleaner" Isn't Clean
Not so fast, say those on the other side. The percentage of bitcoin mining that comes from renewables may be misleading. Hydropower in China is volatile. It is high in the wet season during the summer months and low in the dry season during the winter months, when miners must supplement hydropower with massive amounts of coal.
According to Devries:
“Climate change makes China’s hydropower volatility worse year to year. Each year, bitcoin miners get less horsepower than the year before. This means, each year they have to add more coal to waters in dry months than the year before. Bitcoin miners in Sichuan get three times hydropower in the summer than they do in the winter.”
De Vries totaled the gigawatts of ¨dirty¨ bitcoin mining in Mongolia with that produced by hydro sources in Sichuan during its winter season and found that in those six dry months, bitcoin mining produces between 482 to 500 gCO2eq/kWh (grams of carbon dioxide equivalent per kilowatt-hour.)
“That’s an emission factor,” he said, “that’s precisely the same level as natural gas.”
Money Drives the Discourse
From 2011 to now, Alex de Vries tracked a seven percent year-on-year increase in energy demand in Iran, mostly for bitcoin mining—and he saw a correlated flow of Chinese miners to that region. As China’s drought raised the country’s energy prices, Iran’s devalued rial lowered Iran’s already cheap energy costs.
Chinese bitcoin enthusiasts like billionaire Chandler Hongcai Guo urged local miners to move to Iran, where (as he told his YouTube viewers) electricity drops to well below $0.01 kilowatt-hour and where people can make profits in one to two months.
A startup in Chengdu, China, told CoinDesk:
"Iran has vast natural gas resources and thus the electricity cost can be as low as 0.04 yuan [$0.006] per kilowatt-hour….Now that secondhand miners are being sold cheaply in China, it’s a rather reasonable business decision. With electricity that cheap, you can generate profits in one to two months."
That startup had already deployed 2,000 miners in Iran.
“I can't confirm how many miners are moving there from China,” de Vries told me last year, “But it's definitely happening to some extent.”
China’s miners transferred to Iran’s gas - which de Vries said, “is thoroughly carbon-dense.” He elaborates:
“Pit environment concerns against making a profit and it’s money that drives the discourse.”
A 2018 Global cryptoasset benchmarking study that tracked the migration of bitcoin miners to “dirtier” resources came to the same conclusion:
"Miners appear to be relatively indifferent with regards to their energy mix and whether it contains renewables. Instead, they prioritize low cost electricity and a steady reliable energy supply."
The conclusion is that profit trumps environmental science.
Energy-Efficient Bitcoin Systems
While Bitcoin, Bitcoin Cash and Ethereuem each depend on energy inefficient data mining methods known as Proof of Work (PoW) to operate, newer mining methods that use far less computing power are starting to become more popular.
Proof of Stake (PoS) cuts down on energy consumption by allocating mining power to the amount of bitcoins you have (otherwise known as your stake of bitcoins). Example, a miner with 3% bitcoin is allowed to mine 3% of available bitcoin blocks.
Bitcoin Byzantine Fault Tolerant protocols (pBFT), meanwhile, uses node consensus to undercut energy consumption. Key bitcoin stakeholders achieve consensus on accomplishing bitcoin transactions without using massive energy to unravel algorithms.
Particularly promising is the Delegated Proof of Stake (DPoS) system which combines PoS with pBFT.
Finally, second-layer solutions such as Lightning Network plaster bitcoin’s original blockchain with a layer that’s like a bitcoin freeway. This shrinks the route transactions have to travel, thereby shaving energy consumption.
Profit need not trump environmental science. The trend is for more bitcoin energy-efficient solutions for a sustainable, healthier world. (Read also: The Future of Blockchain: Experts Predict the Next Big Use of Blockchain Technology.)
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