When it comes to thinking about which economic sectors and industry niches that consume the most energy, cryptocurrencies may not immediately come to mind. But for some of these crypto companies, their energy and carbon footprints are not just considerable, they’re massive. The most famous example, Bitcoin, has an annual energy footprint slightly larger than the entire nation of Switzerland. The company’s current energy consumption can be tracked here.
Last year, the University of Cambridge created an online tool that allows users to compare the boggling energy consumption of Bitcoin to other entities. At the time that this platform debuted, the tool estimated that “Bitcoin is using around seven gigawatts of electricity, equal to 0.21% of the world’s supply,” according to a BBC report. This shocking figure translates to “as much power as would be generated by seven Dungeness nuclear power plants at once.”
Now, just this week, CoinDesk columnist Nic Carter brought Bitcoin’s energy footprint back into the public conversation when he published “The Last Word on Bitcoin’s Energy Consumption.” Carter contends that while “much ink has been spilled on the question of Bitcoin’s energy footprint,” (guilty as charged), there remain significant gaps in the conversation about this cryptocurrency’s energy and carbon footprint. “Amid the clarifying details and the energy mix calculations,” he writes, “we have lost sight of the most important questions. Anyone who wades into this muddy debate must consider the fundamentals before making a final assessment.
While it is not arguable that Bitcoin eats up an ungodly amount of energy, it is important to not confuse or conflate these figures with greenhouse gas emissions. This all depends on the energy mix that is powering the Switzerland-sized nation-state of Bitcoin. An energy mix that is, well, mixed. It all depends on who is doing the data mining and where. In some parts of China, this may come from clean hydropower. In others, from the dirtiest coal. This certainly does not exonerate Bitcoin, but complicates any blanket statements about the company’s climate impact.
And then there are what Carter refers to as Bitcoin’s “silver linings.” “If Bitcoin ends up being worth substantially more in the future than it is worth today (say, by an order of magnitude), then the world will actually have received a discount on its issuance. The energy-externality of pulling those Bitcoins out of the mathematical ether will actually have been very low, due to the historical contingency of when, price-wise, those Bitcoins were actually mined,” Carter writes. In layman’s terms, this means that “Bitcoin’s energy expenditure may end up looking rather cheap in the final analysis. Coins only need to be issued once. And it’s better for the planet that they be issued when the coin price was low, and the electricity expended to extract them was commensurately low.”
While Carter makes some compelling points, it’s extremely doubtful that his column is anywhere close to “The Last Word on Bitcoin’s Energy Consumption.” These points are an interesting contribution to the conversation but are not conclusive, and in many cases seem more persuasive than scientific. .