In theory, an all-digital form of currency may seem environmentally friendly. But although cryptocurrency doesn’t require the printing of cold, hard cash, it can still require vast resources to verify transactions.
Scientists have traditionally estimated the carbon emissions of cryptocurrency on the basis of estimates of power consumption. Now, in a new study published in Joule, researchers have collected data on hardware and power sources to estimate carbon footprints. They found that for the most popular digital currency, Bitcoin, carbon emissions rivaled that of a major American city or even a small country.
Cryptocurrencies like Bitcoin rely on third parties to validate and verify transactions. After each transaction, computers in a decentralized network compete for the chance to solve puzzles, called blocks. Anyone who has a computer fast enough to complete the puzzles can participate. The process is called mining, and the puzzle solvers are called miners.
For each transaction, a block is released every 10 minutes. Miners all over the world compete to solve the puzzle first. These puzzles are then linked together in what is called a blockchain. The blockchain acts as sequential validation of the transaction.
“Everyone in the entire network competes to solve the next riddle, and only the first one who solves the puzzle gets a compensation,” says Christian Stoll, a doctoral candidate at the Massachusetts Institute of Technology Center for Energy and Environmental Policy and lead author of the new study.
Because of this competition, miners often join forces, creating a group. Stoll compares the group effort to a pool of people who chip in to play the lottery. The mining pool is more efficient at finding and solving a block, and all members split the payout. Today, nearly all miners are organized in such pools.
“Solving these blocks—this process of mining—consumes a lot of electricity,” says Stoll. “Back in the day, you could mine with your personal computer, and later on miners used graphic cards.”
In the past year, Stoll and his colleagues found that the computing power needed to solve a Bitcoin puzzle increased more than fourfold.
“During 2018, more and more miners connected to the network, and the difficulty [of the puzzles] adjusted accordingly,” says Stoll, adding that with the increase in computing power, there is also an increase in power consumption.
To understand just how much energy is being consumed, the researchers looked at two things: the hardware being used and the type of energy sources (such as geothermal, coal, and renewables) used to support mining.
“The first breakthrough we had was [learning that] three major producers of mining hardware had to disclose the sales numbers when they filed their IPOs [initial public offerings],” says Stoll. From those sales numbers, the team calculated how much energy was needed for each type of hardware used.
The next step was figuring out the energy sources for these mining pools. “Depending on where you are globally, the carbon intensity of electricity varies,” says Stoll. Miners in Mongolia, for example, would use a high share of energy from coal-fired power plants (with more intense carbon emissions), whereas those in Iceland would use geothermal energy (with little to no carbon emissions).
Cryptocurrency and Carbon
Collecting data on power consumption and energy sources allowed researchers to calculate carbon emissions. They estimated the annual carbon emissions from Bitcoin are between 22.0 and 22.9 megatons of carbon dioxide (MtCO2)—the equivalent carbon footprint of the Kansas City metropolitan area or somewhere between the carbon levels of Jordan (21 MtCO2) and Sri Lanka (23 MtCO2).
This particular approach to estimating Bitcoin energy and “finding where that mining activity occurred across the globe really hasn’t been shown before,” says Max Krause, an environmental engineer with the Oak Ridge Institute for Science and Education who was not involved with the study. He adds that the study’s approach in gathering data from mining pools and using public ledger information was “very insightful.”
“What they’ve done is what I would consider a top-down estimate; they’re looking at the entire Bitcoin network,” says Krause.
Although their study is an important step in estimating carbon footprints of cryptocurrencies, Krause notes that “what would be pretty useful is a site-specific, bottom-up approach where you physically read the meter, just like your utility guy.”
Krause says collecting data about the number and type of machines, operation and maintenance costs, and energy used over time “would give you a very acute knowledge of the energy mix they’re using” in the mining pool. He adds that this detailed information would help verify the results of top-down estimates.
Stoll notes that his team’s future work will dig into the energy and resources used in the production of the hardware and infrastructure (computers and cooling systems) needed to solve puzzles.
The researchers will also focus on the carbon impact from other cryptocurrencies—after all, it’s not just Bitcoin that has a large carbon footprint. “We did a quick calculation based on the total amount of cryptocurrencies that was out there and came up with another 70 TWh [terawatt hours]. The energy demand would nearly triple if we include all the other cryptocurrencies,” says Stoll. “Bitcoin is only the tip of the iceberg.”
—Sarah Derouin (@Sarah_Derouin), Science Writer
18 July 2019: This article has been updated to correct the amount of carbon dioxide emissions associated with Bitcoin transactions.