Many are growing more critical of bitcoin mining - a process that uses vast amounts of energy from fossil fuels. So just how dirty is the virtual currency, and can it clean up its act?
By Avi Asher -Schapiro
June 17 (Thomson Reuters Foundation) - Bitcoin eats so much energy - first to create the cryptocurrency, then to process transactions - that it can strain electrical grids, earning a reputation as the world's dirtiest money.
As the currency's price and profile have increased, now attracting interest from mainstream financial institutions, some environmentalists have called for restrictions, citing the risk of such a swift jump in energy usage to our climate.
But the exact environmental impact is hard to measure.
It is difficult to know how much of the energy used in the network is renewable, and the location and scale of Bitcoin mining is changing all the time.
Bitcoin enthusiasts, for their part, believe a decentralised digital currency is worth the energy cost - which they say is relatively low, compared to other key sectors of the economy.
What is bitcoin?
Bitcoin is built on a technology called blockchain, a list of transactions recorded in chunks - or blocks.
Instead of a bank or government running the currency centrally, bitcoin is managed virtually by a global network of miners who record and verify the blocks of transactions, and are rewarded for their efforts with newly minted cryptocurrency.
Why then does it use so much energy?
Before a new block can be added, miners have to play a kind of lottery. Each block comes with a mystery number, and the first miner to guess the right number gets to ‘mine the block’ and obtain the reward.
Setting up a network of computers to perform this ‘proof of work’ is what is known as bitcoin mining.
How much energy does it really use?
The energy usage of a cryptocurrency changes all the time. Currently bitcoin accounts for about half a percent of global energy consumption - more than Sweden, but less than is used by idle household electronics in the United States each year.
Most mining takes place in China, on the back of cheap hydropower in Sichuan and Yunnan provinces in the wet season, then moving north in the dry season, often fuelled by coal.
Mining has also taken root in North America, especially in areas with cool climates and cheap hydro-electric power.
So, what’s the climate impact?
Bitcoin operations can generate planet-heating carbon dioxide - like any other activity that consumes energy.
But estimates of its climate impact vary.
The scientific journal Joule in 2018 calculated that bitcoin generated 22 million metric tons of CO2 a per year.
A survey by scientists at Cambridge University in 2020 found that 75% of miners used renewables in their energy mix, but two-thirds of their energy still came from fossil fuels.
All this is guess work, though, as it’s impossible to know the exact carbon intensity of bitcoin mining in real time, as the industry is neither centralised nor regulated.
Some bitcoin boosters say the industry is cleaning up as it moves out of China, with its heavy use of coal power.
What’s the backlash?
Some U.S. cities have tried to restrict or outright ban bitcoin mining, citing climate concerns.
The World Bank rejected a request from El Salvador to help with the implementation of Bitcoin as legal tender, citing concerns over the environmental impact of Bitcoin mining.
In June, Yunnan province in China ordered a probe into what it said was unauthorised use of electricity by bitcoin miners, following restrictions in several other areas of the country.
The northwestern province of Qinghai and a district in neighbouring Xinjiang have ordered cryptocurrency mining projects to close. Inner Mongolia has unveiled measures to root out crypto-mining, while Sichuan is probing the industry.
Is bitcoin going green?
In April, a nonprofit coalition launched the Crypto Climate Accord, a global industry-backed initiative urging cryptocurrency enterprises to switch to using renewable energy.
At the same time, a couple of shuttered fossil fuel plants were reopened to power crypto-mining, raising questions about whether renewables besides hydro can meet mining’s appetite for cheap, reliable energy.
In May, Tesla founder Elon Musk discontinued Bitcoin payments for his vehicles, saying he would renew them when miners shifted to more renewable sources.
(Reporting by Avi Asher-Shapiro. Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)