Bitcoin's damage to the planet - the coal-powered Chinese phenomenon that uses more electricity than the whole of Argentina

The global electricity consumption of Bitcoin mining is now greater than the total amount of electricity consumed in Argentina or the United Arab Emirates, and it is almost on a par with Norway.  Those startling figures come from the Cambridge Centre for Alternative Finance at the University’s Judge Business School, which publishes a real-time updated index of Bitcoin electricity consumption worldwide (www.cbeci.org). They mean that if Bitcoin miners were a nation, it would now be in the top 30 consumers of electricity worldwide, though the currency was only founded in 2009.

The issue is important as it demonstrates that Bitcoin, cryptocurrencies, and distributed computing or ledger systems (such as blockchain) demand vast amounts of processing and energy, which has implications for the environment and for climate change.

According to CBECI, Bitcoin mining alone consumes an estimated median average of 121.36 TWh (Terawatts per Hour) of electricity every year. By comparison, United Arab Emirates consumes 113.2 TWh across all uses of electricity, Argentina 121 TWh, and Norway (at 29 in the global league of consumers) 122.2 TWh.

However, it is possible that Bitcoin mining uses a lot more energy than that: CBECI cites an upper estimate of 289.5 TWh – consumption that would be greater than Mexico’s entire annual electricity usage and approaching that of the world’s twelfth largest national consumer, the UK (300.5 TWh).

CBECI’s median estimate of 121.36 TWh already represents enough electricity to power all of the UK’s kettles for 27 years, says the organisation. While if the highest estimate is correct, then it would be equivalent to roughly half of the electricity generated worldwide from biofuels and waste recycling.

The statistics are based on a variety of data and energy calculations (see Methodology on the CBECI website). The upper estimate represents a worst-case scenario ie: the use of the least efficient mining rigs currently available) and the lower rate the best/most efficient case. 

The median therefore represents what researchers believe is the reality: a mix of old and new hardware, but it stands to reason that many miners will be using old equipment to keep their hardware costs to a minimum.

But the research is not just about power in the sense of energy usage. It is also about political and financial power.

The map of Bitcoin

CBECI’s in-depth data exposes the geographic breakdown of the network (an inexact science, as IP addresses can be faked or cloaked). This reveals some important insights about where alternative finance power actually resides in the world.

It shows that Bitcoin mining is overwhelmingly based in Asia and Eastern Europe. Nearly two-thirds (65 percent) of it takes place in China (as a percentage of the global hash rate mapped against IP location). Roughly seven percent is in the US, just under seven percent in Russia, six percent in Kazakhstan, four percent in Malaysia, and nearly four percent in Iran.

This snapshot of Bitcoin’s footprint in the physical world shows that there are nine times more Bitcoin miners in China than in the US, and the vast majority of mining – at least 86 percent of it – takes place outside of Western economies.

Overall, CBECI’s data has other real-world implications. First, the notional value of any cryptocurrency is meaningless unless it includes the cost per watt of mining it via expensive, power-hungry GPU-based systems, FGPAs, and other rigs, such as the more energy-efficient ASICs. 

All of this hardware is costly to manufacture and ship across the world, rapidly becomes obsolete, and so eventually ends up in landfills – as do other types of ICT hardware, of course. Mining rigs also generate a lot of heat, which demands cooling, so the environmental impact is significant in every respect. 

However, the critical difference is that if the notional value of a Bitcoin – or any cryptocurrency – is low at a given time, then some miners will be spending more on rigs, electricity, operation, maintenance, and labour than they make from mining the coins in traditional money terms. In short, they will be losing dollars.

This is why crypto-jacking – the covert use of other people’s processing power (and therefore energy) to crack the codes – is growing.

China crisis

But what of the Chinese aspects of the coin? Why are they significant – beyond the vast accumulation of virtual wealth in one nation (two thirds of all Bitcoin mining)? This is where energy becomes a critical factor – and especially coal.

China is already by far the world's largest user of electricity – the 2018 CIA World Factbook estimate of 7,225 TWh a year is nearly twice that of the US, which was calculated at 3,989 TWh in 2019. That said, China’s population (1.4 billion) is over four times greater than that of the US (328 million), so Americans are using a lot more energy per capita.

However, while China is the world’s leading investor in clean energy, it remains highly reliant on fossil fuels. Indeed, between 1990 and 2019 China's coal consumption nearly quadrupled, according to US think tank the Center for Strategic and International Studies (CSIS). So the environmental impact of its electricity habit is massive.

The CSIS estimates that coal still powers almost 58% of all Chinese electricity usage. Roughly 21% of the world’s carbon emissions came from China between 1990 and 2019, and the CSIS estimates that nearly 80%t of those emissions were from coal.

For context, a 2013 report by analyst Mark P Mills, then CEO of Digital Power Group, estimated that global ICT electricity usage, including smartphones and cloud platforms, was then in the region of 1,500 TWh. 

That data is eight years old, of course, and so omits many more recent distributed, mobile, and cloud devices, platforms, and/or applications. But it still gives us an approximate estimate of the energy consumption of Bitcoin today, relative to other ICT uses. It appears to be roughly eight percent of total ICT electricity consumption – at least, as it was calculated in 2013. 

Bear in mind, this is just for Bitcoin – just one of the numerous digital coins, tokens, crypto assets, and distributed computing applications that are now on the market, with others emerging all the time. And total ICT energy consumption in 2013 included every phone, computer, and data centre that was then on the planet.

This is why distributed processing networks present a potential environmental catastrophe, at least in the short to medium term – the only term that counts when it comes to slowing global warming. 

The human population is increasing and energy consumption is rising anyway, though the increase typically slows during economic downturns and (ironically) in warmer weather. Either way, now is not the time for the world to switch over to systems, currencies, and networks that use vastly more energy than existing alternatives.

So the subtext ought to be clear: despite its promise of digital newness and disruption, Bitcoin is largely a coal-fired technology whose energy usage is soaring and its carbon footprint growing. That should be something for mega-fan Elon Musk to ponder while the world’s richest man develops his electric vehicles and plays 'billionaire bottle-toss' with space rockets.

My take

The core message here is that all forms of distributed computing are far from virtual phenomena; they leave a massive footprint in the physical world in terms of heat and carbon, in the same way that ‘the cloud’ is based in physical data centres on land. Those facilities also consume colossal amounts of energy and throw off vast plumes of heat.

Clearly, all ICT has an environmental impact, including the smartphones, cloud platforms, and data centres we all rely on – such as those that power the traditional financial system, of course.

But cryptocurrencies and blockchains typically demand much higher processing power than other applications, and therefore use comparatively more energy – at a time when other systems are becoming more, not less, energy efficient.

This needs to be addressed both strategically and operationally as more and more organisations turn to cryptocurrencies, digital tokens, and blockchain-powered initiatives – many of which also offload their energy costs onto consumers. 

All are powered to a large degree by fossil fuels in the physical world – including, ironically, the handful of blockchain and digital token initiatives that are designed to help people offset their carbon footprints.