Bitcoin
The dirty truth
Totting up the cryptocurrencys environmental costs
Apr 10th 2021 | words 423
AS COINBASES IPO shows, cryptocurrencies have many fans. But they have detractors, too. Environmentalists, in particular, fret about how much energy bitcoin uses. In a paper in Nature Communications, a group of academics led by Dabo Guan of Tsinghua University and Shouyang Wang at the Chinese Academy of Sciences examine bitcoins energy use in China. They conclude that, in the absence of legal curbs, bitcoin could by 2024 become a non-negligible barrier to Chinas efforts to decarbonise its economy.
Bitcoins hunger for energy stems from its design. It forgoes centralised record-keeping in favour of a blockchain, a transaction database that is distributed among users. The blockchain is maintained by miners, who validate transactions by competing to crack mathematical puzzles with solutions that are hard to find but easy to check. Each successfully mined block of transactions generates a reward, currently 6.25 bitcoins ($357,000).
The system varies the difficulty of the puzzles to ensure that one new block is created, on average, every ten minutes. High bitcoin prices make it worthwhile to spend more computing powerand therefore electricitychasing mining rewards. But bitcoins automatic stabilisers will ramp up the mathematical difficulty in response. Like the Red Queen in Through the Looking-Glass, competing miners find themselves running faster simply to stand still.
Despite the currencys democratic ambitions, mining is concentrated among a handful of professional operators. About 70% takes place in China. The researchers use economic modelling to try to work out how much carbon all this make-work produces. They conclude that, without regulation, Chinese bitcoin mining could consume around as much energy as Italy or Saudi Arabia by 2024. Annual carbon emissions, at 130m tonnes, would approach those of Nigeria.
Such numbers should be taken with a good deal of salt. Bitcoins energy use depends crucially on its price, which swings wildly. The authors assume that the long-term trend will be upward, because the rate at which new bitcoins are created is designed to halve every four years. Reality will doubtless prove more complicated. But the general picturethat bitcoin is a dirty businessfits with other research. One oft-cited model, which uses publicly available blockchain data, reckons its global energy consumption is already equal to that of Kazakhstan, and that its carbon footprint matches Hong Kongs.
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