Bitcoin slayers denounce an “ecological disaster” because mining cryptocurrencies requires enormous resources of electricity. So what is the carbon footprint of virtual currencies? According to a study by the Cambridge Center for Alternative Finance, that of bitcoin, for example, is far ahead of certain new technologies. Barely democratized, some cryptocurrencies are considering turning to other operating modes based on renewable energies in order to reduce their impact on the environment …
Bitcoin, which has seen its price increased tenfold in a year, is regularly criticized for its massive electricity needs. Would a democratization of cryptocurrencies necessarily rhyme with ecological disaster, as the most virulent detractors of this sector claim?
What is the energy consumption necessary for cryptocurrencies?
The Cambridge Bitcoin Electricity Consumption Index (CBECI) estimates that the annual consumption of bitcoin could reach 128 TWh (terawatt-hour), or 0.6% of global electricity production, or a little more than the consumption of Norway. Figures “impressive compared to medium-sized countries or other new technologies such as electric vehicles (80 TWh in 2019), but more moderate compared to other technologies, such as air conditioning and fans which consumption 2,000 TWh per year ”, notes George Kamiya, analyst at the International Energy Agency (IEA).
According to him, Google thus consumed 12.2 TWh in 2019 and all data centers in the world, except those that mine bitcoin, consume around 200 TWh. The economist Alex de Vries, who set up one of the first clues on the subject in 2016, is even more pessimistic: he believes that the recent rise in bitcoin prices, its use in electricity will exceed that of all other data centers.
A giant data center dedicated to bitcoin mainly powered by fossil fuels. © Lars Hagberg, AFP
A giant data center dedicated to bitcoin mainly powered by fossil fuels. © Lars Hagberg, AFP
Understand why bitcoin is so energy intensive
If giant data centers are dedicated to bitcoin around the world, it is because they covet a hefty reward. The bitcoin code provides that the people who participate in the network, written “minors”, also prove their work by solving complex equations, which have no direct relation to transactions. In exchange, they automatically receive a bitcoin reward every ten minutes.
This is one of the founding principles of the star of cryptocurrencies, created in 2008, by one or more anonymous people who wanted a decentralized digital currency: proof of work (or “proof of work” in French) which aims to guarantee the security of the network. “Even if new machines use less electricity, you will use even more [to receive a larger part of the bitcoins paid to minors]”, estimates Michel Rauchs, who participated in the creation of the CBECI. And with a bitcoin price of over $ 55,000, miners are in full swing.
What is the environmental cost of bitcoin?
Bitcoin advocates say with the development of renewable energy faster for power plants than in other sectors, bitcoin has a moderate effect on the environment. But researchers at the University of New Mexico estimated in 2019, before prices recently took off, that every dollar of value created by bitcoin was causing 49 cents in damage to health and the environment in the United States.
In addition, the cryptocurrency slayers for their part underline the strong geographical concentration in certain regions of the world, such as Iran: in a country hit by international sanctions which prevent it from exporting its oil and where the cost of electricity melted, miners multiplied, cryptocurrency escaping Washington’s eye.
“Iran represents between 5 and 10% of bitcoin mining”, estimates Michel Rauchs. The vast majority of activity is located in China. According to him, part of the year, Chinese miners take advantage of the high production of hydroelectricity in the south of the country. But, in the dry season, they migrate to the North, where electricity is produced by particularly polluting coal, lignite. “Bitcoin’s carbon footprint changes completely from month to month,” he concludes.
A virtual universe that is already struggling to reform
“The question is, what would be the positive effects, once the cost is taken into account, of bitcoin for society,” comments Benjamin Jones, who participated in the study at the University of New Mexico. With the democratization of bitcoin, criticism has become fierce. The second cryptocurrency, Ethereum, plans to move from “proof of work” to a less energy-consuming system, which should make it possible to avoid using part of the processors.
But, it’s hard to see bitcoin adopt such a change, which would risk making the network less decentralized and secure. “The” proof of work “is so anchored in the values and the culture of bitcoin, that it would be almost sacrilegious”, underlines Mr. Rauchs, who recalls that, despite many attempts, no major reform of the cryptocurrency has been adopted by the community.