Critics of bitcoin’s sustainability cite tremendous energy consumption during mining as one of its main issues. The Cambridge Bitcoin Electricity Consumption Index estimate suggests the annual global electricity consumption on account of bitcoin mining is nearly 105 Terawatt Hours. To put it into perspective, it is higher than the total annual electricity consumption in the Philippines. So, how far away is renewable bitcoin mining from reality?
Why Bitcoin Mining Consumes A Large Amount Of Energy?
The large electricity consumption can be attributed to energy-hungry computing systems necessary for mining. The Proof of Work (PoW) consensus mechanism upon which Bitcoin mining takes place requires miners to solve highly complex mathematical problems. Miners race worldwide for solving these problems. The person to solve a puzzle first earns a chance to inscribe transaction data on a block within the blockchain network and crypto tokens as a reward for efficient task completion.
Prevalent among Bitcoin and a lot of other cryptocurrencies, mining computers featuring GPUs and ASICs exist in millions. The difficult math puzzles are mostly solved through trial and error. As many as 130 quintillions (1018) guesses are made each second of the day, on a global scale. Energy consumption patterns are proportional to bitcoin valuation- rising and shrinking accordingly.
Impact On The Environment
High energy consumption also leads to rising emissions, global warming, and worldwide pollution. Research reveals greenhouse gas emissions in China alone are equivalent to the annual output in the Czech Republic or Qatar. Other groups such as the non-profit Energy Web doubt the overall impact on greenhouse emissions, even in a complete transition to renewable bitcoin mining. The reason for their doubt stems from unverifiable self-reported data.
The manufacture and disposal of humongous mining computer systems along with their electronic components and machinery contributes significantly to emission. The power consumption cycle continues as the machines compute. And, also when they overheat and require cooling. Meanwhile, AI-powered PoW blockchain networks similar to the ones cryptocurrencies use are also being used for optimizing electricity distribution and sales.
Also Read: AI-Blockchain Prototype for Energy Consumption and Distribution Patterns
Possible Solutions And Their Viability
Change In Mining Structure
In the PoW environment, higher computational power is equivalent to a better chance of earning bitcoins. A better alternative is the PoS or the proof of stake, where the validator’s capability and preference are based on the amount of cryptocurrency in possession(there is a minimal amount for consideration). Removing the computational aspect altogether, PoS is capable of a 99.95% reduction in energy consumption. Ethereum 2.0 will soon feature PoS in upcoming updates, while some altcoins already incorporate it in their infrastructure. However, a complete PoS implementation may face severe backlash.
There are major hurdles for the PoS to overcome. Though reduced, Bitcoin still has the lion’s share of the global cryptocurrency market cap at 40.89%. Experts similarize the improbable Bitcoin’s PoS transition to changing a plane’s engine on air. Also, PoW’s decentralized mechanism is viewed as the most secure. Centralization in PoS is inevitable, as ones with the highest stakes stand to gain the most.
Bringing In Carbon Emission Laws
A carbon emission law has been viewed as a potential incentive for miners to look out for green energy resources. A tax based on carbon emissions may reduce the bitcoin craze- effectively reducing its value. As explained earlier, this would reduce consumption, earnings, and the climate impact of bitcoin mining. Miners would reduce spendings on computing systems. But, imposing carbon taxes on mining also has its own drawbacks.
Keeping independent centralized tabs on the decentralized bitcoin is a mammoth task. It is also unjustified- industrial domains like oil and gas, logistics, transportation, steel, and electronics manufacturing are responsible for much higher amounts of carbon emission. Mining enterprises can simply shift their operations base to locations with no carbon emission laws.
Switching To Renewable Bitcoin Mining
Renewable bitcoin mining or mining using renewable energy is quickly gaining traction. Cheaper costing is more responsible for this trend rather than environmental concerns. Yes, per megawatt expenditure for creating solar plants is presently below fossil fuels, as per the International Energy Agency.
The switch to renewable energy is also arriving much faster than expected. A Bitcoin Mining Council survey reveals renewable energy sources account for as much as 56 percent of the total energy consumption by global bitcoin mining during Q2, 2021. The value is higher than sustainable energy use in nations like the US, China, or Germany.
Recent Developments in Renewable Bitcoin Mining
The survey conducted by Bitcoin Mining Council(BMC) included 32 percent of the present worldwide bitcoin network to estimate energy consumption patterns. A voluntary congregation consisting of global mining and bitcoin companies, the BMC strives to popularize transparency in energy consumption and expedite sustainable mining practices all over the globe.
In its report, the BMC observes that the industry is optimizing rapidly, incorporating a higher percentage of sustainable energy resources than global superpower countries and major industries. Just 0.1 percent of the global energy consumption is attributed to bitcoin mining. At 2.8%, the bitcoin mining sector also has a much lower contribution to energy wastage.
Renewable bitcoin mining implementation cases
Bitcoin mining projects in Canada have already started shifting away from fossil fuels. Energy sources in consideration include hydroelectricity, wind power, and solar energy. Some projects are already up and running, and several more are in the pipeline, undergoing development.
Bitcoin enthusiast and Tesla CEO Elon Musk have been collaborating with a Canadian crypto-mining enterprise on an Alberta-based project labeled Pure Digital power. The project aims to mine clean energy Bitcoin in a sustainable fashion relying on solar power(90%), wind energy, and natural gas (combined 10%). The pilot project aims to use solar as the primary natural source, natural gas as a backup, and wind turbines during the night.
In another example, Blockstream and leading alternative energy infrastructure investor Macquarie joined forces to develop a carbon-neutral renewable bitcoin mining facility. Blockstream is a veteran in enterprise-level mining infrastructure with mining and hosting facilities across Quebec, Canada, and Georgia. Its latest innovative service titled Blockstream Energy optimizes renewable energy production and allows the producers to sell excess energy. As of March 2021, Macquarie had 44 gigawatts of renewable power generation assets in development.
Low electricity rates have been a blessing for crypto miners in Venezuela. Initial capital investment is the biggest hurdle as inflations are presently soaring at 3000%. Reports indicate consumption charges for a mining facility of even 80 ASCI circuits may cost less than 10 USD for a month.
Machinery costing is the biggest problem in Venezuela. Mining is legal and controlled by a legal national entity- the Sunacrip. Investors have to adhere to Sunacrip’s regulation guidelines and act accordingly. Improvement in the existing power infrastructure is necessary as outages are not uncommon. Miners acclimatize to the power outages and repair machinery as and when necessary. A significant section of unemployed people has turned towards crypto gaming for earning, particularly a game titled Axie Infinity. Owing to the above conditions, crypto has also deeply penetrated into the Venezuelan economy.
Also Read: Venezuela Gains Bitcoin Mining Boom due to Cheap Electricity
El Salvador is one of the latest nations to legalize Bitcoin as a tender. The government announced plans to use state-owned geothermal energy sourced from volcanoes to power Bitcoin mining. The energy source is slated to be 100 percent clean and renewable, with zero emissions.
An estimated 70 percent of the nation’s population can’t access conventional financial services. Placing hopes on Bitcoin’s growth potential, President Bukele said that he expects an increase in investment and the citizen’s assets.
Also Read: El Salvador Welcomes New Era Of Digital Currency with 200 New Bitcoins
Contrary to popular opinion, the bitcoin mining industry is among the quickest adopters of sustainable energy practices. Innovations and implementations incorporating a mix of different types of sustainable energy resources are happening worldwide. Lowering costs compared to fossil fuels is the most significant factor, along with a goal to address climate and environmental concerns. All aspects point to one conclusion- renewable bitcoin mining is sustainable in the long run.