The energy used by the network of computers that power the digital currency is comparable to that of many developed countries and rivals the emissions of major users and producers of fossil fuels such as American Airlines Group Inc and ConocoPhillips, according to a new Bank report of America Corp.
The massive concentration of Bitcoin over the last year means that it is only getting worse for the environment.
The energy used by the network of computers that power the digital currency is comparable to that of many developed countries and rivals the emissions of major fossil fuel users and producers such as American Airlines Group Inc. and ConocoPhillips, according to a report by Bank of America Corp. The level of emissions, which has risen alongside a rise in the price of Bitcoin, has grown by more than 40 million tonnes in the last two years. And when the digital asset is trading at around $ 50,000 (which is done for much of this year), it uses about 0.4% of global energy consumption.
More worrying, according to the report titled “The Little Gross Secrets of Bitcoin,” is that rising prices could mean that Bitcoin’s energy consumption will soon rival that of some of the world’s largest countries.
“What worries me is the pace of growth in energy demand,” Francisco Blanch, head of commodity and derivatives research at Bank of America and lead author of the report, said in an interview. “The pace of change is huge: nothing is growing at this rate in the world of energy.”
Bitcoin has soared during the Covid-19 pandemic amid an unprecedented fiscal and monetary stimulus that has been an advantage for more speculative parts of the financial markets. The largest cryptocurrency in the world increased almost tenfold in the last year. This also means higher energy consumption.
Because the supply of currency is limited, any excessive demand can make prices even higher. Rising prices are boosting so-called mining activity and, as a result, could further increase CO2 emissions, according to Bank of America.
Bitcoin transactions are processed by miners: cryptographic jargon for companies operating a wide range of computers. Miners compete to confirm transactions and get new coins in return, but they require large amounts of energy to operate. Driven by increased competition, only a handful of these companies, mostly based in China, controlled about 50 percent of all network power, Bloomberg News reported last year.
According to Bank of America, it has since become even more concentrated, with about three-quarters of the so-called concentrated hash power in the country. This is also of concern to Blanch, as almost 60% of China’s electricity generation is derived from coal-fired power plants.
“Right now, that consumes a lot of energy and it’s possible that if everyone comes in and prices go up, it’s going to be a lot more energy,” he said.
But crypto enthusiasts argue that Bitcoin’s energy use is unimportant when placed in a broader context. Many say, for example, that their carbon footprint is quite negligible, compared to that of cars, power plants and factories. And even as its price increases, there has hardly been a deterioration in energy markets, according to BloombergNEF analysts.
“Bitcoin miners use all the power available and the focus is absolutely on the lowest cost power possible,” Jaime Leverton, CEO of Hut 8 Mining Corp., said in an interview with Bloomberg Television.
His company’s mining operations are located in Alberta, Canada, where natural gas and wind power are among the predominant energy sources. “It’s a conversation that certainly needs to evolve over time and that doesn’t accurately reflect how we talk about energy in other technology sectors,” he said.
Nic Carter, a partner at cryptography-focused business firm Castle Island Ventures, said he expects Bitcoin’s energy consumption in the long run to come almost exclusively from sources, including water and combustion gases, which d ‘otherwise they would be destroyed.
Still, “there is a moral case to be made for Bitcoin, even in the presence of a carbon expense, which is so useful to society,” Carter said over the phone. “The focus should be on making the grid greener overall, not trying to veto line items and saying that this specific use of society’s energy is illegitimate.”