Is Bitcoin a Climate Killer? The University of New Mexico says yes!

Climate change is one of the most pressing issues of our time, and it is becoming increasingly clear that we must take action to reduce our impact on the environment. Cryptocurrencies are one of the major contributors to climate change, and their impact is only getting worse.

Bitcoin, the most well-known cryptocurrency, has a market capitalization of around $960 billion and a global market share of around 41 percent. Although it is often compared to gold mining, the reality is that Bitcoin mining is much more harmful to the environment.

A recent study by the University of New Mexico found that Bitcoin mining is a major contributor to climate change, and that the problem is only getting worse. Between 2016 and 2021, the amount of electricity used for Bitcoin mining increased significantly, and it is now more than the power consumption of Austria or Portugal.

The majority of the power used for Bitcoin mining comes from fossil fuels such as coal and natural gas, which results in enormous amounts of air pollution and carbon emissions. This is having a negative impact on our climate and health.

The study found that in some cases, the climate damage caused by Bitcoin mining is greater than the value of a single Bitcoin. This is extremely worrying from a sustainability perspective, and it is

This paper provides economic estimates of the energy-related climate damages of mining Bitcoin (BTC), the dominant proof-of-work cryptocurrency. We provide three sustainability criteria for signaling when the climate damages may be unsustainable. BTC mining fails all three. We find that for 2016–2021: (i) per coin climate damages from BTC were increasing, rather than decreasing with industry maturation; (ii) during certain time periods, BTC climate damages exceed the price of each coin created; (iii) on average, each $1 in BTC market value created was responsible for $0.35 in global climate damages, which as a share of market value is in the range between beef production and crude oil burned as gasoline, and an order-of-magnitude higher than wind and solar power. Taken together, these results represent a set of sustainability red flags. While proponents have offered BTC as representing “digital gold,” from a climate damages perspective it operates more like “digital crude”.

- Nature Article Introduction

Source: You can download the Full Paper as pdf form Nature.com.

The internet has allowed for the emergence of various digital assets which are either fungible or non-fungible. These assets are often priced and traded in markets, but can be subject to volatility. Some digital assets, like cryptocurrencies, use production schemes that are energy intensive. These production schemes, known as proof-of-work, can have a large carbon footprint.

There is a policy challenge in regulating an industry that is decentralized and largely unregulated. However, it is important to consider the climate impacts of this industry. Estimated climate damages per unit of some digital assets should not be increasing over time. Additionally, the market price of a digital asset should always exceed its estimated climate damages. To contextualize the sustainability of an asset, estimated climate damages should favorably compare to the climate damages of other sectors and commodities.

These criteria can be used as red flags to signal when an industry might be causing unsustainable climate damage. If these red flags are present, it may be time to take collective action, like increased regulation, to mitigate the climate impacts of this industry.

The decentralization of the Bitcoin blockchain means that there is no central authority overseeing the network. Instead, individual miners compete to add new blocks to the chain. This process is energy intensive, as miners must employ highly specialized computer equipment and machinery to generate guesses of the target hash identifier. As more miners participate in the network, or as more efficient mining rigs are employed, the overall energy use of mining activity increases.

The POW blockchain technology used by Bitcoin is energy intensive because it requires a great deal of computing power to verify transactions and add new blocks to the chain. As more miners participate in the network, or as more efficient mining rigs are employed, the overall energy use of mining activity increases. This is a major concern, as the Bitcoin network is already responsible for a significant amount of greenhouse gas emissions. If the network continues to grow at its current rate, it could have a devastating impact on the environment.