- Bitcoin’s price is back at record highs last seen in April – and that means its energy use is soaring, too.
- It uses as much electricity each year as the Netherlands, an uncomfortable fact as world leaders meet at COP26.
- Yet many big players are shifting to renewable energy, meaning bitcoin’s carbon emissions aren’t necessarily shooting up too.
Bitcoin has made a dramatic comeback over the last couple of months and is once again trading around record highs between $60,000 and $65,000.
The bitcoin bounce means people are rushing to “mine” more of the cryptocurrency. And that means bitcoin’s energy use is shooting up once again.
Bitcoin’s “hash rate” – the amount of computing power dedicated to mining the digital currency – has risen sharply, and analysts say it’s likely to hit a new high soon. Its electricity consumption has also jumped, and is nearing the all-time highs seen in May, according to Cambridge University data.
Bitcoin is currently using around as much electricity each year as the Netherlands, an uncomfortable fact just as world leaders meet in Glasgow, UK to try to tackle climate change at COP26.
Bitcoin is so energy intensive because of the system it uses to verify transactions and keep the network secure. Ethereum – the second-biggest cryptocurrency – also uses the same system, meaning the two dominant tokens are giant energy guzzlers.
Under the system, users called miners hook up massive computers to compete against each other to solve complex “cryptographic” puzzles. Solving these puzzles gives the miners the right to verify transactions, and earns them some cryptocurrency in reward.
Naturally, the higher the bitcoin price goes, the more attractive mining is. Miners’ revenues soared in October to $1.72 billion, according to data from The Block, just shy of March’s record high of $1.75 billion.
As more people start mining, the hash rate rises. Alex de Vries, founder of bitcoin energy data service Digiconomist, told Insider that it “seems inevitable” that the hash rate and electricity consumption will soon hit a new high, given the current bitcoin price.
As well as using huge amounts of energy, the mining process also generates tonnes of electrical waste, because miners constantly jettison old machines in favor of more efficient new ones. A recent Digiconomist report said a single bitcoin transaction creates as much waste as throwing out two iPhones.
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A heated debate
Yet just because bitcoin’s electricity consumption is surging, that doesn’t necessarily mean its carbon emissions are too.
Although lots of bitcoin fans argue that its electricity consumption isn’t a problem, many of the biggest players are trying to clean up its act and shift towards renewable energy.
After Elon Musk criticized bitcoin’s energy use, big crypto names such as Michael Saylor’s tech company MicroStrategy founded the Bitcoin Mining Council, which promotes greener mining.
Estimates are tricky, but in 2020 Cambridge University reckoned around 40% of bitcoin mining was powered greenly. The Bitcoin Mining Council estimated last month that it could be around 58%. That would make it one of the greenest industries in the world – although bitcoin critics say that energy could be more useful to society elsewhere.
China’s major crackdown on crypto mining is likely to have helped bitcoin become greener. Most mining used to take place in the country, where coal is the dominant energy source. But the US, where renewables are often the cheapest energy source, is the new global mining hub.
The major environmental push in finance is also likely to make a difference, with less energy-intensive tokens and networks more likely to attract the big bucks from institutions.
Ethereum has grand plans to differentiate itself from bitcoin by switching to a much more environmentally friendly security and validation system by the end of 2022. JPMorgan has spoken approvingly of the changes, in a sign of the way the winds are blowing.