Bitcoin mining, a process essential to the operation of the cryptocurrency, is rapidly becoming a significant environmental issue. According to recent research from the University of New Mexico, the climate costs associated with mining Bitcoin are comparable to industries like beef farming and gasoline burning.
Cryptocurrency mining is notoriously energy-intensive, requiring specialized computers, and much of the electricity used is derived from fossil fuels, which contribute to the climate crisis. The study, published in Scientific Reports, revealed that the climate-related economic damages caused by mining Bitcoin actually exceeded its market value on 6.4% of the days it traded between 2016 and 2021.
The research specifically calculated the climate costs of Bitcoin mining against its average market price, offering a glimpse into its relative impact when compared to other industries like crude oil, gold, and beef. It found that Bitcoin’s climate impact was an alarming 35% of its average market price, while gold’s was just 4%. As the cryptocurrency market matures, these environmental costs are growing, raising concerns about its long-term sustainability.
Bitcoin’s carbon footprint is significant, with the energy consumption for mining surpassing that of entire countries like Austria and Portugal in 2020. Between January 2016 and June 2018, the mining of Bitcoin, along with other cryptocurrencies like Ether, Litecoin, and Monero, emitted between 3 and 15 million metric tons of CO2—equivalent to the emissions of countries like Afghanistan, Slovenia, or Uruguay in 2018. The situation has worsened over time, with the increasing competition among miners to solve complex blockchain operations, driving up overall energy consumption. In fact, a Bitcoin mined in 2021 emitted 113 metric tons of CO2, 126 times more than one mined in 2016.
This growing environmental toll translates into high economic costs. The damage from a single Bitcoin mined last year is estimated at $11,314. Over the entire five-year period between 2016 and 2021, Bitcoin mining could have caused as much as $12 billion in climate-related damages.
However, the industry is taking steps to mitigate its environmental footprint. With profits from mining decreasing, Bitcoin miners have turned to more energy-efficient machines, helping lower the carbon emissions from the sector. According to a recent report, emissions this year are estimated to be 14.1% lower than in 2021. Furthermore, a growing number of cryptocurrency miners are seeking to use renewable energy sources, such as wind, solar, hydro, and geothermal, to power their operations.
In a simulation, researchers found that if 88.4% of the power used to mine Bitcoin between 2016 and 2021 had come from renewable sources, the climate damages would have dropped significantly to just 4% of Bitcoin’s average market price. This shift could make a world of difference in reducing the environmental impact of cryptocurrency mining.
Moreover, some cryptocurrencies, like Ether, are shifting their transaction verification mechanism to drastically reduce energy consumption. In 2022, Ether adopted the Proof of Stake mechanism, which, according to the study, could reduce its energy use by over 99%.
While these steps represent a move in the right direction, the cryptocurrency industry still faces a long road ahead in balancing innovation with environmental responsibility. The challenge remains: how to continue mining cryptocurrencies without significantly exacerbating the climate crisis.
