A new research paper suggests that previous estimates on the electrical consumption and carbon footprint of Bitcoin mining have been grossly exaggerated and based on poor assumptions.
Published by the research team at CoinShares, a London-based cryptocurrency investment firm, the report argues that significant Bitcoin mining operations are principally powered by cheap renewable energy, and use roughly half the amount of energy that has been previously suggested.
According to the report, published today, the Bitcoin mining industry consumes approximately 35 TWh every year; 50% less than the 70TWh currently claimed by the Bitcoin Energy Consumption Index, which also argues that BTC mining has a carbon footprint that exceeds 32m tonnes annually.
“The argument has long gone that the carbon footprint of mining is antithetical to the world’s environmental needs”, says the head of CoinShares Research, Christopher Bendiksen, who co-wrote the paper which reportedly took many months of research.
“Many miners we’ve spoken to have objected to the data used by Digiconomist; although they don’t make their methodology clear, it appears that they have taken a bottom-up approach by assuming a small pool of miners is representative of the community”.
Although previous findings have argued that the energy consumption of Bitcoin mining is roughly equivalent to that of Ireland – a nation of nearly 5m people – the CoinShares report suggests that it is in fact less than the primary energy demand (the amount of energy a country uses) of Luxembourg, which has a population of just under 600,000 people.
“Our findings strictly contradict both of these figures and we believe that they rest on incorrect assumptions resulting from inadequate research”, says the report.
The report also challenges claims that Chinese BTC mining runs off energy derived from coal, arguing that the principal energy source is more likely to come from hydropower.
“China has huge excess electricity generation capacity locked up in hydropower stations in the south and southwestern provinces”, says the report, which cites that a substantial energy overcapacity has reportedly led to a cheap and renewable source of electricity for Bitcoin mining operations.
“Overall, we find that contrary to previously reported assumptions, bitcoin mining is largely driven on cheap renewable energy, dominated by hydro, with the limited permanent use of, and some seasonal migrations to, coal-based generation in certain areas of China only representing a small part of the network’s total electricity demand.”
The Bitcoin Mining Energy Controversy
The PoW consensus protocol, which uses mining to mint new coins as well as confirm transactions, is never too far from controversy; over the past weeks, there have been concerns that mining operations or pools that have high hash rates have the potential to stage successful 51% attacks on smaller networks.
Since April, the Verge network has been subject to at least two (some argue three) 51% attacks; and at the beginning of this week, it was revealed that the privacy coin ZenCash had also been attacked, with hackers making off with $600,000 in ZEN tokens.
As mining has transitioned from a hobby to a specialized industry, so has the mining equipment also become increasingly hi-tech. Serious operations often utilize ASIC rigs, specifically designed to mine blockchain networks at high rates and which also consume large amounts of energy.
Fears over the environmental impact of Bitcoin mining are longstanding. Estimates made in November of last year suggested that Bitcoin alone consumed 0.12% of the world’s energy usage, more than is used by Iceland and something Crypto Briefing reported on at the time.
In other, slightly more positive news, the report also calculated that Bitcoin mining was still profitable. Based on data collected from May 21st, the marginal costs of producing one bitcoin stands at roughly $6,400.
At current prices, this would give prospective miners a $1,100 profit per mined coin.
Disclaimer: The author is invested in BTC, which is mentioned in this article.