Tech

Bitcoin has a significant environmental and economic cost

The rise in value of bitcoin over the past period also threatens to drastically increase the ecological footprint of its production. The mining of the crypto coin can therefore even cause as many emissions as the entire London metropolis. This is evident from the Bitcoin Energy Consumption Index of the Dutch economist Alex de Vries, who argues, however, that the production of crypto coins could also put other economic sectors under pressure.

The Bitcoin Energy Consumption Index is one of the first systematic attempts to estimate the energy consumption of the bitcoin network.

Norway

“Three years ago, bitcoin mining achieved a total worldwide energy consumption of 30 terawatt hours,” explains de Vries. “That corresponded to the completely national production of a nation such as Ireland. In the meantime, however, the consumption of bitcoin mining has already risen to a level between 78 terawatt hours and 101 terawatt hours per year. This means that the activity requires just as much electricity as Norway. ”

“To be able to produce new bitcoins, computers have to be used, which have to perform a whole series of complex calculations,” says the Dutch economist. “However, as more bitcoins are produced, it also takes longer to mine new coins. This means that more electricity must also be invested in the process. The price of the electricity used represents about 80 percent of the cost of mining the bitcoin. ”

“The more money the producers receive per bitcoin, the more resources they can invest in further mining,” suggests de Vries. “Due to the recent price increases in the bitcoin market, it can also be expected that the energy consumption of the mining will increase sharply in the short term.”

“After all, the manufacturers have more resources to invest in additional hardware. In addition, the sector will also attract more interested parties. By January of this year, the price of a bitcoin had reached a level of $ 42,000. At that rate, producers could earn just over $ 15 billion this year. ”

“However, this could also increase the electricity consumption of the sector to 184 terawatt hours per year”, De Vries says. “That volume is roughly equal to the annual consumption that is jointly caused by all the data centers in the world that are used for other digital activities.”

“However, that high electricity consumption also means that bitcoin is associated with a large emission of carbon dioxide. Each kilowatt hour consumed causes an emission of between 480 grams and 500 grams. Consumption of 184 terawatt hours would therefore result in an ecological footprint of 90.2 million tons of carbon dioxide. That corresponds to the total emissions of the London metropolitan area. ”

Chip shortage

“But bitcoin mining has other consequences for the economy,” warns de Vries. “After all, the producers need powerful computers with specialized chips for their activities. To prepare a million computers for bitcoin mining, a significant portion of global silicon production would have to be reserved for the industry. However, this can pose significant problems for deliveries to other sectors, such as artificial intelligence, transportation or consumer electronics. ”

According to de Vries, there are a number of policy instruments that can limit the growing impact of the sector. He refers, among other things, to the Canadian province of Québec, which has introduced a moratorium on new bitcoin mining.

“One could also take inspiration from the example of Iran, where it was decided to confiscate equipment after it was found that bitcoin mining had overloaded the electricity grid, resulting in serious breakdowns,” he notes.

“The production of specialized hardware could also be subject to heavier tax levies, by analogy with the tobacco industry,” says De Vries.

(jvdh)

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