Bitcoin mining is reportedly using record levels of energy in the buildup to its April 15 halving. The digital asset’s miners used a massive 19.6 gigawatts of power in February 2024 and this is expected to keep on increasing till the halving date. One year ago, the figure for the same month was 12.1 gigawatts, showing a 62% increase in electricity demand for the mining process.
The largest digital asset by market capitalization has an energy-intensive mining process. At the heart of this mining process is a rudimentary equation. Miners try to solve this equation through their computers and the mining reward is shared according to their performances.
Anyone can participate in the process but not everyone can profit from it. Miners nowadays use expensive Application Specific Integrated Circuits (ASICs) for mining purposes. They organize these computing machines into setups called mining rigs.
What is the Current Trend for Bitcoin Miners?
According to data by The MinerMag, the top 13 bitcoin miners have already placed a massive $1 billion order for these ASICs. Big names like Riot Platforms Inc. and Cleanspark Inc. have netted a lion’s share of this amount with $473 million and $415 million respectively.
However, the machines are only one part of the equation. They simply cannot be profitable in areas with expensive electricity so they target localities where this important resource is easily available. They also tend to prefer colder climates as the rigs need to be cooled down considerably so that the miners can use them efficiently at higher speeds than stock settings.
Bitcoin mining started with a nice, decentralized community. But, over time centralized mining magnates have accumulated quite a lot of power. According to Asher Genoot, the Chief Executive of Hut8 Corp:
“Scale matters because you can get machines for better rates, bigger energy deals and drive down the cost of development…, when you have scale, you have more marginal and growth profits and you can cover your big costs”
Bitcoin Mining Energy Consumption Narratives
Cambridge Centre for Alternative Finance estimates that bitcoin miners used 121 terawatt-hours (TWh) in 2023. That is a big number. According to some calculations, it can power 3.8 million homes in Texas alone or a medium-sized country like Argentina.
That narrative could be true, but in many cases, Bitcoin miners are using energy that is stranded and would otherwise go to waste. Marathon, for example, has started a project that uses methane gas from landfills to power bitcoin miners. This, will in part, reduce methane emissions, which are far more harmful to the environment than the resulting CO2.
Many other mining companies are also investing in infrastructure to use flare gas in gas and oil drilling sites. These sources of energy cannot be routed to be used in cities anyway.
Nevertheless, due to the energy-intensive nature of bitcoin, environmental activists believe that it is one of the leading causes of carbon emissions in the world.
Is Bitcoin Mining Really That Bad for the Environment?
Bitcoin’s impact on the climate is difficult to calculate due to its distributed nature. There are some conservative estimates and then there are more liberal estimates on the matter. According to one estimate, the share of renewable energy in BTC mining is less than 33%. However, another estimate puts the figure at 55%.
Related reading: Bitcoin Mining Clean Energy and Grid Balance: ERCOT Study
However, the share of renewable energy is growing with time. This is especially due to the miners’ exodus from China. Bitcoin’s supposed 45% use of coal-based energy is no longer accurate. Much of that sector has relocated to other, cleaner destinations.
Even if we assume the worst of the worst, bitcoin produces less than 1% of global emissions, 0.2% according to a publication in Joule. This is less than other sectors like finance and insurance (4.45%), mining (4-7%), and fashion (10%).
The bitcoin mining sector also has the potential to become cleaner with time. One report in the USA found out that despite its lumbering energy requirements, the bitcoin network can actually support renewable energy infrastructure across the country.
Notaby, Daniel Batten, Managing Partner at CH4 Capital recently published a list of studies that highlight net-positive impact of bitcoin mining on green energy development and grid stability. If governments keep banning bitcoin mining outright, the mining companies might end up in countries with a much dirtier grid, thus affecting the environment even more.
