Can Bitcoin Reduce Energy Consumption?

A closer look at the bitcoin energy mix shows that renewables drive much of the mining industry. While it can be argued that renewables can help mitigate the environmental impact, we note that combining the variables of renewable energy generation with the consistent demand for bitcoin mining machines is a fundamental challenge. A key factor that sets Bitcoins "energy consumption apart from most other industries is the way it is mined. 

As a result, estimates of the percentage of bitcoin mining used by renewables vary widely. In December 2019, a report suggested that 73% of Bitcoin's energy is carbon-neutral owing to the abundance of hydropower in key mining hubs like South Africa and Scandinavia. We note that the environmental impact of Bitcoin mining goes far beyond its energy consumption. 

According to the University of Cambridges Bitcoin Electricity Consumption Index (BET), bitcoin miners are expected to consume 130 Terawatt Hours of Energy (TWh), or 0.6% of global electricity consumption. That's enough electricity to power a country of tens of millions of people with an estimated environmental impact of 3.4 megatons or more of carbon dioxide emissions, according to the Bitcoin Energy Consumption Index by Digiconomists. According to international energy agency analyst George Kamiya at its current 149 terawatt hours (TWH) level which is an all-time high compared to Google's total energy consumption of 122 TWh, 200 TWh for bitcoin is used by data centers around the world for the currency. 

While critics of Bitcoin use argue that its carbon footprint is disproportionate to its social value, Bitcoin is no different from the rest of the financial system that has its own energy needs and undergoes an economic transformation that will ultimately make it worth the investment. In this respect, it makes no sense to look at the total energy generated so far and divide it by the number of transactions, since most of that energy is used to extract bitcoin and not to support transactions. If the price of bitcoin remains the same, the amount of energy consumed will rise, but if fewer bitcoins are mined, the price will fall, and the incentive to build energy-intensive mining companies will continue. 

On the other hand, it is justified to debate the energy costs of bitcoin mining and the carbon emissions resulting from mining. As has been noted in the public debate over bitcoin mining and non-fungible tokens and the associated energy consumption, it would be fair to say that cryptocurrency shares have had a rough ride in the recent review of their environmental impact. Renewable energy pioneer Elon Musk took a 180-degree turn on bitcoin when he announced that Tesla would no longer accept bitcoin as a payment method, after realizing that Bitcoin mining transactions consume as much electricity as fossil fuels can generate. 

Tesla stated on Wednesday that it would no longer accept bitcoin as payment for its electric vehicles based on its energy consumption and coal use by miners. 

In a blog post on May 18, Carl Beekhuizen, researcher at the Ethereum Foundation, a nonprofit organization that organizes the Monetary Union of Miners, Programmers and Investors, claimed that plans to switch to new calculation methods could reduce 99.5% of its energy consumption, which would be lower than Bitcoin's size and market. His method of calculating has been questioned by at least one hacker whose story refuted reports that Bitcoin is destroying the environment with Agarbagea because of economic assumptions and his proposed alternative would encourage blockchain management to reduce its energy needs. One of them is Nic Carter, a partner of Castle Island Ventures, a venture capital fund focused on blockchain companies, whose main point is that Bitcoin does not have the same future energy needs, in part because halving the currency and developing its own settlement system would reduce the number of transactions needed to validate the currency. 

Kaloudis said that while Bitcoin could benefit from a cleaner energy mix, there had been no meaningful investment in renewable energy for bitcoin mining. In 2019, the investment firm Coinshare published a study that estimated that 73% of bitcoin miners generate at least some of their electricity from renewable sources, including hydropower from China's vast dams. Mining machinery giant Bitmain is driving the rise in energy consumption through the market price of bitcoin and its no-return policy for its machines. 

Kohler said if miners were serious about reducing energy use from bitcoin mining, switching to another consensus mechanism would be the most obvious step, but he was not aware of any other approach that could lead to a comparable reduction in energy consumption. Solving the problem of Bitcoins "energy consumption near the continent requires not a return to a centralized system, but the elimination of middlemen like card networks and their concentrated power over finance. Understanding the costs of bitcoin mining and the workings of the mining equipment market is one of the keys to predicting bitcoin energy consumption and regulatory changes, he said. 

In a new commentary published in the journal Joule on Thursday, Bitcoin researchers behind a controversial study that claims cryptocurrencies are killing the planet are criticizing the use of renewable energy sources by Bitcoins to process transactions that consumed 623 terawatt hours over the course of 2018 more than the energy consumed by the entire country. The paper, authored by the data scientist Alex de Vries, runs a Bitcoin energy consumption index that examines the impact of exploding bitcoin prices - energy consumption, higher prices, regulations that have locked the world into years of increased mining emissions and the use of fossil fuels in areas of high security risks and resource scarcity. Determining energy consumption is relatively easy because one can only extrapolate the carbon emissions associated with it without knowing the exact energy mix and composition of the various energy sources used by computers that mine Bitcoin.