Truth be told, nobody knows exactly how much energy bitcoin mining consumes globally. Cryptocurrency miners are secretive about their trade, but everyone agrees the electricity use of crypto mining must be very large.
A new study published in Joule—the first on the subject to undergo the rigors of peer review—argues that, globally, bitcoin mining consumes at least as much electricity in a year as all of Ireland (about 24 TWh). Worse still, it contends that the energy use is doubling every six months and could reach the annual consumption of the Czech Republic (about 67 TWh) before the end of 2018, which would be about 0.3% of the world’s electricity consumption.
Those are eye-popping figures. But is it really worth worrying about?
“A glib answer most economists would give is that markets would sort out the problem,” says Alan Shipman, a lecturer of economics at Open University. Let’s unpack that.
One of the early concerns over bitcoin’s electricity use was that almost all of it was sourced at polluting coal power plants in China. It’s likely true that a lot of it does still come from coal power plants, but in a bid to cut pollution the Chinese government has taken steps (paywall) in the past year, telling local utilities not to give crypto miners low-cost deals on electricity. The upshot is that many miners have since moved out of China.
In many of the places they’ve ended up, there is plenty of clean energy available. For example, the Canadian province of Quebec actively courted cryptocurrency companies to use the spare hydropower capacity it had built. The same is true of Iceland (with its spare geothermal) and Sweden (which, like Quebec, has plenty of hydropower).
That said, it’s not the fault of those mining for cryptocurrency that the world relies mostly on fossil fuels for its electricity. And just because there is a new and fast-growing source of electricity consumption is not enough reason for governments to regulate crypto companies.
Of course, ideally all our global electricity would come from zero-carbon sources. That shift will only happen if governments everywhere put a price on carbon, incentivizing everyone, not just bitcoin miners, to move to cleaner sources of energy. The good news is that a broader trend towards carbon pricing is gaining momentum. Most recently, China announced it will launch a carbon market, which will cover emissions from the power sector.
Comparing the energy use of bitcoin with that of the Czech Republic may be useful for perspective, but it’s not as if all the miners are sitting in Prague, doubling the country’s electricity consumption and putting pressure on its infrastructure.
Bitcoin mining can happen anywhere, and because electricity bills make up for 60% of the cost of mining a coin, according to Alex de Vries, an employee of the consultancy PwC and the author of the Joule study, miners are flocking to places that offer the lowest-priced electricity and favorable climates. (In colder countries you pay less to cool the servers.) Though China remains the largest hub, there are now big mining companies in the US, Canada, Iceland, Sweden, and Georgia.
Also, here’s another comparison for a different perspective: even though bitcoin mining might consume 0.3% of all electricity globally, in absolute terms (67 TWh) it is the same amount of energy consumed by electronic devices in the “off” or standby state (64 TWh) in the US alone, according to a 2015 study.
Some environmentalists argue that bitcoin is a speculative asset, a product of late capitalism that consumes tons of electricity but adds no real value to society. They say bitcoin is basically libertarian hogwash.
Economists don’t entirely disagree. “Economists regard bubbles as inevitable especially when there are exciting new technologies coming along,” says Shipman. “They still regard them as regrettable because there is misallocation of resources as long as the bubble lasts.” And, ever since cryptocurrencies were born, many economists have seen them as bubbly.
Still, some economists believe bitcoin and its ilk could have promise down the road. In countries with unstable currencies, for example, bitcoin could give citizens an option when their governments pursue policies that debase the local currency.
And beyond the tangible value of the coins, the underlying technology of bitcoin—the blockchain—certainly has already added value to society. It has given people the means to conduct transactions transparently and in a trustworthy manner without having a centralized body, such as a government, regulating each and every aspect of the transaction.
“The only case for worrying would be if there’s something wrong with bitcoin other than the power it is using,” says Shipman. “This could be because it’s being used for criminal activities or tax avoidance.”