Joydeep Dey

What is the Carbon Footprint of Cryptocurrency? Cryptocurrency Bitcoin Blockchain technology has its roots in the cryptocurrency Bitcoin, which was the first successful attempt to validate transactions via a decentralized data protocol. For a Bitcoin transfer to be executed and validated, a mathematical puzzle must be solved by an arbitrary computer in the global Bitcoin network. The network, which anyone can join, rewards the puzzle solvers in Bitcoin. The Bitcoin network uses a computationally-intensive process called "mining" to ensure the system's integrity, which has increased rapidly in recent years. The Carbon Footprint – Why and How? Participation in the Bitcoin blockchain validation process requires specialized hardware and vast amounts of electricity, translating into a significant carbon footprint. The associated electricity consumption and carbon footprint of Bitcoin mining have received attention from researchers and policymakers alike. Previous research shows that the electricity input to generate a $1 market value by Bitcoin mining (17 MJ) is higher than that of precious metal mining (5, 7, and 9 MJ for gold, platinum, and rare earth oxides, respectively). Though the carbon footprint of Bitcoin has drawn wide attention, Bitcoin's longterm impact on the climate remains uncertain. The future carbon footprint of Bitcoin strongly depends on the decarbonization pathway of the electricity sector. Let's assume, if the electricity sector achieves carbon neutrality by 2050, Bitcoin's carbon footprint will have peaked already. However, in the business-as-usual scenario, emissions could sum up to 2 Gigatons until 2100, an amount comparable to 7% of global emissions in 2019. The Bitcoin price spike at the end of 2020 shows that progressive development of market capitalization could yield an electricity consumption of more than 100 TWh in 2021 and lead to cumulative emissions of over 5 Gigatons by 2100. Research Findings Interestingly, the researchers from the Technical University of Munich (TUM) in Germany carried out the most detailed calculation of the Bitcoin system's carbon footprint to date. The team began by calculating the power consumption of the network, which depends primarily on the hardware used for Bitcoin mining. The researchers determined the annual electricity consumption by Bitcoin, as of November 2018, to be 45.8 TWh. Live tracking data from the mining pools provided decisive information on how much energy is emitted by carbon dioxide using this energy. The IP addresses in the two biggest pools' statistics showed that miners tend to join pools in or near their home countries. Based on these data, the team could localize 68 percent of the Bitcoin network computing power in Asian countries, 17 percent in European countries, and 15 percent in North America. The researchers cross-checked this conclusion against the results of another method by localizing individual miners' IP addresses using an IoT search engine. They then combined their results with statistics on the carbon intensity of power generation in the various countries. Impact on Climate Change As Bitcoin becomes a more salient element of the global financial system, its growing carbon footprint has raised concerns about its role in climate change. The Bitcoin system has a carbon footprint of between 22 and 22.9 megatonnes per year. That is comparable to the footprint of such cities as Hamburg, Vienna, or Las Vegas. Consequently, the Bitcoin boom raises questions about whether the cryptocurrency is imposing an additional burden on the climate. Several studies have attempted to quantify the CO2 emissions caused by Bitcoin mining. CO2 emission factors of the electricity used for mining are needed to translate the electricity consumption into carbon emissions. Since the carbon intensity of electricity generation varies greatly globally, the geographic distribution of mining activities is key to calculate the average CO2 emission factor of the consumed electricity. However, the most comprehensive publicly available cryptocurrency mining map published by the Cambridge Center for Alternative Finance only covers 35% of the Bitcoin network's hash rate (September 2020). The Road Ahead Though bigger factors contribute to climate change, the carbon footprint is big enough to make it worth the discussion. The possibility of regulating cryptocurrency mining in regions where power generation is especially carbon-intensive could be explored. Another option might be to link more mining farms to additional renewable generating capacity to improve the ecological balance.