Tesla CEO Elon Musk shook up the crypto market in 2021 when he said his company would no longer accept bitcoin for vehicle purchases. His reasoning had to do with the large amount of energy generated by fossil fuels that is needed to operate cryptocurrency. Musk has since taken a new approach by delivering Tesla Megapack batteries to a bitcoin mining facility in Texas in May.
Bitcoinethereal, dogcoin and other popular cryptos reached records in 2021just like crypto-dependent NFT, raising concerns about the increasing amount of energy required to mine the coins. As the crypto markets crashed in 2022, crypto mining has continued to consume about as much energy as Argentina and have a carbon footprint equivalent to that of Greece, according to a research report titled “Revisiting Bitcoin’s Carbon Footprint,” published in February. As the energy bill of cryptocurrency mining increases, so does the amount of carbon and waste, adding to the growing climate crisis.
Here’s what you need to know about crypto mining and its energy uses.
What is Crypto Mining?
When bitcoins are traded, computers around the world race to perform a calculation that creates a 64-digit hexadecimal number, or hash, for that bitcoin. This hash goes into a public ledger so anyone can confirm that the transaction for that particular bitcoin took place. The computer that solves the calculation first gets a reward of 6.2 bitcoins, or about $120,000 at current prices.
Other cryptocurrencies and NFTs use similar mining technologies, contributing to overall power consumption.
What is a crypto-mining platform?
It’s a barebones computer with several graphics cards, or GPU, instead of the single-board standard, and it does the work to perform a computation. The rigs typically use powerful GPUs from Nvidia and AMD to handle the computations and require high-powered power supplies. The popularity of mining has led to a shortage of graphics cards, which has led to an increase in their value.
A crypto-mining farm in Nadvoitsy, Russia.
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Why is crypto mining so energy intensive?
For starters, graphics cards in mining rigs work around the clock. This takes a lot more power than browsing the internet. A rig with three GPUs can draw 1,000 watts or more when running, which is equivalent to having an average-sized window AC unit turned on.
Crypto mining companies can have hundreds or even thousands of rigs in one place. A mining center in Kazakhstan is equipped to operate 50,000 mining rigs, and another mining farm in China has a monthly electricity bill of over $1 million as it mines 750 bitcoins per month.
Platforms not only consume energy, they also generate heat. The more platforms you have, the hotter it gets. If you don’t want your rigs melting, you need some cooling. Many mining rigs have multiple built-in computer fans. But if you have multiple rigs, the room gets hot quickly, requiring external cooling. Small operations, such as those run by individuals, can get by with a typical standing fan. Mining centers, however, need much more cooling, which requires even more electricity.
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What is Bitcoin’s true environmental impact?
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How much energy does mining take?
The Digiconomist’s Bitcoin Energy Consumption Index estimated that a bitcoin transaction requires 1,449 kWh, equivalent to about 50 days of electricity for an average US household.
To put this in monetary terms, the average cost per kWh in the United States is close to 12 cents. This means that a bitcoin transaction would generate approximately an energy bill of $173.
Bitcoin mining uses about as much energy as Argentina, according to the Bitcoin Energy Consumption Index, and at that annualized level of 131.26 terawatt hours, crypto mining would be in the top 30. countries based on energy consumption.
Power consumption for bitcoin mining was at its highest in late 2021 and the first months of 2022, consuming over 200 terawatt hours.
A wall of mining platforms in Quebec, Canada.
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Why is consuming so much energy bad for the environment?
Fossil fuels make up more than 60% of energy sources in the United States. A majority of this percentage is natural gas and a minority is coal. Carbon dioxide produced by fossil fuels is released into the atmosphere, where it absorbs heat from the sun and causes the greenhouse effect.
As mining rigs consume more energy, nearby power plants must produce more electricity to compensate, increasing the likelihood that more fossil fuels will be used. States with struggling coal-fired power plants, such as Montana, New York, and Kentucky, are trying to profit by courting crypto mining companies.
There is also the question of electronic waste. This can include broken computers, cables, and other equipment that the mining facility no longer needs. Bitcoin Mining’s e-waste is 34 kilotons, an amount comparable to the amount produced by the Netherlands.
What are we doing about this energy problem?
Not a lot. Cambridge University’s 3rd Global Crypto-Asset Benchmarking Study found that 70% of miners base their decision on which coin to mine on the daily reward amount. Energy consumption was only 30% of their choice.
Access to low-cost renewable energy attracts crypto miners, however. China’s Sichuan province has the second-largest number of miners in the country due to its abundance of cheap hydroelectric power. Its rainy season helps generate so much energy that cities are looking for blockchain companies to relocate to avoid wasting energy. Due to concerns over energy shortages, China cracked down on bitcoin mining facilities in late 2021, but farms went underground and bounced back.
The operators of Ethereum, the second most popular blockchain behind Bitcoin, are doing something to change the amount of energy consumed by its miners. Ethereum 2.0 is an upgrade that is currently being tested and is expected to go live in August. Instead of computers trying to solve calculations – called proofs of work – computers will be randomly selected to create blocks for the blockchain, while computers that were not selected will validate the blocks created.
To ensure that miners do their job, each miner must stake 32 Ethereum coins, also known as ether, which equals $32,000, hence the term for this protocol is called proof-of-stake. This change reduces the amount of energy needed to mine Ethereum by 99.95%.
What other cryptos are more energy efficient than bitcoin?
An increasing number of coins – there are over 19,000 – are using the proof-of-stake protocol that Ethereum 2.0 will transition to, which will lead to lower power consumption.
Cardano, for example, uses its own proof-of-stake protocol and consumed 6 gigawatt hours in 2021. Chia is another coin with a low-power approach called proof-of-space protocol. Instead of requiring intensive calculations, Chia asks farmers to allocate space on a computer’s hard drive, called “plots”, which will be demanded by the blockchain based on certain factors.
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