We have heard many times that Bitcoin mining is bad for the environment. Anti-crypto and anti-Bitcoin communities have been attacking the industry due to the large electricity consumption and the impact that this has on the environment. When we look at statistics, we see that Bitcoin is consuming more energy than mid-size countries. However, when Bitcoin attackers use this information, they forget to ask themselves which type of energy sources Bitcoin is using.
Moreover, there are other things that should be taken into consideration. What’s the value that Bitcoin mining gives to the community? Which impact does Bitcoin have in the energy sector? How could Bitcoin mining become more efficient? These are some of the questions that we will try to answer in the following sections of this post.
Is Bitcoin Mining Bad for the Environment?
In short, Bitcoin mining is not bad for the environment. And there are many reasons to believe that Bitcoin mining is not having a negative impact on the environment. Indeed, it could be said that Bitcoin mining is having a positive impact on the environment and renewable energies.
At the time of writing this article, Bitcoin’s electricity consumption is at 141.6 TW/h per year. This is much more than most countries in the world. Indeed, it consumes even more energy than countries such as Norway or Ukraine. This shows the large impact of Bitcoin on the electricity grid.
But where is all this electricity coming from? Is Bitcoin mining centralized in just one region? There are many things to take into consideration before wondering whether Bitcoin mining is bad for the environment or not. At a first glance, we could say that the energy consumption is quite high and that this could have a potential negative impact on the environment.
However, if we get into the details of how Bitcoin miners are currently sourcing their energy, we will see that Bitcoin is cleaner than many thought. The next sections will focus on explaining what Bitcoin mining is and how this could have an impact on the environment.
Thanks to investments in green energy sources and the goal to search for even cheaper energy sources, we see that Bitcoin miners are helping find new solutions to many of the problems that we had in the past (how to store excess energy or avoid energy waste, for example).
What is Bitcoin Mining?
Let’s start with what Bitcoin mining is. Bitcoin mining is an economic activity on the Bitcoin blockchain network that involves companies and individuals running specialized computers to solve hard computational problems. These computational problems became so difficult to solve that they required investors to use specialized hardware devices and large amounts of energy.
Basically, this shows that Bitcoin mining activities are similar to gold mining activities in terms of consumption. By investing in specialized equipment investors can “mine” Bitcoin, which means that they are rewarded for running these machines. But why should miners get rewarded?
Miners get rewarded because, without their work, the Bitcoin network would not be able to function. They make sure that all the transactions that have been validated by nodes are properly added to new blocks. The process requires large amounts of energy and could require more energy in the coming years as the hash rate increases.
As new miners enter the market, the rewards (which are fixed rewards every close to 10 minutes) get divided among a larger number of miners. This is why there is a tough competition to see who is able to have a larger hash rate. This has pushed ASIC mining companies (those companies that create specialized hardware to mine Bitcoin) to create more energy-intensive and powerful miners.
This is how the network becomes more secure and how miners are able to compete for a limited number of coins. The larger the hash rate on the Bitcoin network, the more secure it becomes. This is one of the reasons the hash rate has been growing over the last few years. In the future, the hash rate is expected to continue moving higher.
Bitcoin Halving Events
What are Bitcoin halving events and how can they influence Bitcoin energy consumption? We talked about Bitcoin miners competing for a limited number of coins. Remember that there will only be 21 million BTC ever in existence.
In order for that to happen, every 210,000 blocks, the Bitcoin network halves the rewards to miners. Therefore, rather than receiving 6.25 BTC like now, they will receive 3.125 BTC in the next halving event. This is something that has happened since Bitcoin was created.
The first four years of Bitcoin rewarded miners with 50 BTC each block (which is found every close to ten minutes). Then, the rewards dropped by 50% and miners earned 25 BTC. The next halving event in 2016 pushed rewards to 12.5 BTC and now, miners receive just 6.25 BTC per block.
In 2024, we should expect rewards to drop to 3.125 BTC per block. This is equal to 450 BTC per day being released to the market. Halving events play a very important role for Bitcoin miners. Having smaller rewards means that they have to make their operations more efficient in order to remain operative.
From one day to the other, Bitcoin mining rewards fall by 50% and miners have to adapt to these situations. In some cases, miners could operate with losses for a short period of time until they operate more efficiently.
One of the best ways to become an efficient miner is by investing in renewable energy sources. These resources are abundant and can be very useful to avoid paying fees for electricity. Another way to make their operations more efficient is by investing in new hardware devices that are more efficient. This is a process that can take some time, but there is a clear incentive for miners to become as efficient as possible and not to waste any energy throughout the whole process.
Bitcoin Energy Consumption
Now, Bitcoin’s energy consumption is comparable to that of a mid-size country, as we mentioned at the beginning of this article. According to data shared by the University of Cambridge, Bitcoin is now consuming 141.6 TW/h per year, more than Ukraine with 124.5 TW/h and Norway, with a consumption of 124.3 TW/h per year.
This is far much less energy than what countries such as the United States or China consume each year. That being said, Bitcoin consumes more energy than the whole gold mining industry in the market. Gold mining requires 131 TW/h per year, which shows that both of these activities are energy-consuming.
However, it is worth taking into consideration that this energy consumption is used to power a network that offers decentralized transactions and a store of value to people from all over the world. Indeed, Bitcoin is easy to transport and it cannot be censored by any government or centralized authority. Miners, therefore, play a crucial role in helping the network become stronger and more valuable.
It is also possible to compare Bitcoin’s energy consumption with how much energy is required to conduct many other activities. For example, lightning in the United States consumes 60 TW/h per year. The chemical industry is now consuming 1349 TW/h per year around the world. Copper mining is currently consuming 167 TW/h. This shows that Bitcoin mining is not the only industry that consumes large amounts of electricity.
There are many other economic sectors that are currently having a strong impact on the grid. This, however, does not mean that they should be criticized or attacked. Instead, new and more efficient ways to run these operations could be one of the best ways to reduce their impact on the environment.
Bitcoin Hash Rate and Difficulty Adjustments
Bitcoin mining also relies on hash rate and difficulty adjustments. Each Bitcoin miner contributes to the hash rate of the network. That means that when a new miner or ASIC miner is turned on and connected to the Bitcoin network, they are bringing more hashes.
The higher the hash rate, the more secure the Bitcoin network becomes. This happens because it would be completely difficult for an attacker to be able to make a 51% attack. These attacks can happen only if the network is small and does not have enough hash power.
Thanks to it, Bitcoin is protected against any possible attack or situation that could affect it. Nonetheless, when there is an increase in the hashes of the network and difficulty remains stable, blocks could be mined faster. Thanks to automatic difficulty adjustments, the Bitcoin network makes it more difficult for miners to take advantage of the low difficulty of the network. Hence, when hash rate increases, a difficulty adjustment should take place, taking some miners out of the network (because they would not be able to be efficient anymore). As this happens, the network becomes more secure and ASIC mining companies search for new ways to make ASIC miners more efficient and secure.
Investments in Green Energy
Over the last few years, we have seen how new investments in green energy have been taking place on the Bitcoin network. This happened as miners searched for more efficient ways to mine Bitcoin.
When difficulty moves higher, then it is extremely necessary for miners to be able to reduce their expenditures and become as efficient as possible. The only way to do so besides acquiring new and more efficient mining hardware is by having efficient energy sources.
While Bitcoin mining activities have been attacked for consuming large amounts of energy, people don’t realize that miners are investing in renewable energies all the time. In some cases, miners will have their own sources of energy and eventually sell energy to the electricity grid if they produced more energy than what was needed to mine Bitcoin.
In this way, they have a net positive impact not only on the grid but also on the environment as a whole. Not only do they reduce their need to use contaminating sources of energy, but they also make it possible for people to get cheap and reliable (clean) sources of energy.
The future is more than bright for Bitcoin mining activities. Thanks to the fact that China has banned mining activities on its territory, it is now even possible for miners to search for more Bitcoin friendly places that will take into consideration all the above-mentioned things.
We have heard how El Salvador became the first country in the world to make Bitcoin legal tender. Not only El Salvador did make Bitcoin legal tender, but President Nayib Bukele has also worked in order to mine Bitcoin using volcano energy.
This is something that could help the country secure the currency they are now using on a regular basis and to use energy that would otherwise be wasted. The goal is, in the end, to build a “Bitcoin city” at the base of a volcano.
This could be one of the first examples on how governments and large-scale mining projects could have a positive impact not only on the environment but also on the Bitcoin network. If other countries start engaging in different mining activities, it could be possible to use excess energy in order to mine Bitcoin.
If Bukele’s project of Volcano mining is profitable and ends up bringing benefits to society as a whole, it could be implemented in other countries as well.
Using Excess Energy
It has been discussed many times that some power plants (including hydroelectric power) produce excess energy. The problem is that it is currently very difficult to be able to store this excess energy and use it in the future. Batteries are usually able to last just for a short period of time, which makes it difficult for excess energy to be used in the future.
This is where Bitcoin could become very valuable. By using the excess energy produced by different energy sources, it is possible not only to mine Bitcoin and be rewarded for these activities but also to protect the network even further,
Hence, we see that there is a very positive impact of using Bitcoin by large electricity companies to store value (and use it in the future) without having to rely on batteries. They might not be storing energy, but they are not losing the value that this energy can produce.
These coins can then be sold to the market and used to finance new investment projects or give bonuses to employees at the end of the year.