Bitcoin has been a hot topic in recent years. However, as cryptocurrencies gain more attention, concerns about their environmental impact also arise
Bitcoin has been a hot topic in recent years. However, as cryptocurrencies gain more attention, concerns about their environmental impact also arise.
One of the most important environmental issues related to Bitcoin is its mining process. This article will explore the issue of whether Bitcoin mining is harmful to the environment and investigate the potential consequences of this process on our planet.
How Bitcoin Mining Consumes Energy
The Bitcoin mining process is the core of blockchain network operation, but it is often criticized for its energy intensive nature.
Bitcoin mining involves a globally dispersed computer network that protects blockchain (a virtual ledger that records cryptocurrency transactions). These computers or 'miners' contribute their processing power to maintain and protect blockchain. In return, they will receive new Bitcoin as a reward, creating a self-sustaining cycle.
In order for miners to have the right to create the next block in the chain, they need to compete in calculations with other miners. This competition involves repeatedly running the proposed block through a hash function - with slight changes each time - until the desired result is achieved. Whoever arrives there first becomes the next person to queue up to create the block, which will restart the competition.
Bitcoin miners use electricity to power computers (known as ASIC miners), which repeatedly process these hash functions. If they have more machines, they will be more competitive compared to other Bitcoin miners and may receive a larger proportion of rewards.
It is worth noting that energy consumption comes from mining new blocks on the blockchain, rather than individual transactions.
How Bitcoin Mining Grows Over Time
As long as the electricity cost of mining Bitcoin is lower than the price of Bitcoin, there will be an incentive to attract more miners to join the network or existing miners to expand their business.
Over time, as the price of Bitcoin increases and miners increase their operational efforts, the computing power used to mine Bitcoin also increases.
Generally speaking, this reflects an increase in energy usage. That is to say, the updated mining machine has higher efficiency and can handle more hash values with the same energy. Additionally, this is not directly related to carbon emissions, as it depends on whether miners use renewable or non renewable energy.
Understand the energy consumption of Bitcoin mining
There is much debate about the severity of Bitcoin mining, as it depends on the type of energy used in mining operations, and these data are not publicly available.
But some reports have investigated the main locations of Bitcoin mining and the typical energy usage in these areas, thus estimating how much renewable energy is used in the network.
The Cambridge Bitcoin Power Consumption Index estimates that the Bitcoin network uses 120 terawatt hours (120 million megawatt hours) of electricity annually. It is estimated that approximately 61 million tons of carbon dioxide equivalent (MtCO2e) will be generated annually. The best guess is that about half of the energy used is renewable energy.
This index is based on the average energy usage of a specific location, rather than information from mining companies about the types of electricity they use. It is also based on the electricity profiles of specific regions and points out that these profiles are rarely updated. In addition, it did not take into account any activities used by miners to reduce carbon emissions, such as torch gas, waste head recycling, or carbon offsetting.
In January 2023, the Bitcoin Mining Committee released a report based on the electricity consumption information provided by 53 mining companies, which accounted for 48% of the network computing power at that time. It is said that according to data from the fourth quarter of 2022, miners use approximately 175 terawatt hours of energy annually. The surveyed miners stated that 64% of their energy structure comes from renewable energy.
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