A cryptocurrency is a digital or virtual currency. As the name implies, it uses cryptography to improve the security of communications, at least in principle. Many cryptocurrencies are based on blockchain technology, a system that enables transactions to be gathered into blocks, recorded in a ledger, and then shared in decentralized networks. Bitcoin and Ethereum are two popular cryptocurrencies.
At the heart of cryptocurrencies like Bitcoin is crypto mining, the process that verifies and adds new transactions to the blockchain. Powerful computers–and lots of them–are required to perform up to trillions of calculations per second. Bitcoin mines–the physical locations of these computer clusters–require prodigious amounts of electricity.
The New York Times and Watt Time, a tech company focused on clean energy, recently assessed the electricity use and carbon dioxide emissions from 34 Bitcoin mines in 14 states in the United States.1 Their analysis showed that the Bitcoin mines exhibit enormous energy and carbon footprints. For example, the NYT/Watt Time analysis found that the Riot Platforms’ mine in Rockdale, Texas, uses about the same amount of electricity as the nearest 300,000 homes, making it the most electricity-intensive Bitcoin mining operation in the country. Many bitcoin mines are plugged into electric grids that are heavily reliant on fossil fuels, meaning that the mines cause significant emissions of carbon dioxide, the most important greenhouse gas driving climate change. Other analyses document how crypto mining has placed upward pressure on electricity prices, and increased local air, water, and noise pollution.2
The Cambridge Centre for Alternative Finance estimated that in April 2023 the world’s Bitcoin mines required about 14.4 gigawatts (GW) of electric generation capacity.3 To put that number in perspective, the entire wind industry in the United States had an installed capacity of about 144 GW in 2022. Bitcoin consumes electricity at an average annual rate of about 127 TWh per year, which is roughly equivalent to the total electricity use in the Netherlands.
Why single out cryptocurrency for its energy consumption habits? While there is considerable debate about the long-run fate of cryptocurrency, there is no mistaking the rapid increase in its energy use and the ongoing investment in new mines. More importantly, the cryptocurrency mining industry lacks transparency: reporting standards are weak, there is little or no formal tracking of mining operations, and scant primary data to judge the energy and climate claims of cryptocurrency supporters. Given the significant energy and carbon footprint of crypto mines and their impact on local and regional communities, we need greater scrutiny. Unified regulation of the industry is needed to judge the economic benefit relative to the economic, social, energy, and environmental costs that crypto mines impose on society.
1 Dance, Gabriel J. X., Tim Wallace, and Zach Levitt. “The Real-World Costs of the Digital Race for Bitcoin.” The New York Times, April 10, 2023, https://www.nytimes.com/2023/04/09/business/bitcoin-mining-electricity-pollution.html
2 DeRoche, M., Fisher, J., Thorpe, N., and Wachspress, M., “The Energy Bomb: How Proof-of-Work Cryptocurrency Mining Worsens the Climate Crisis and Harms Communities Now” (Sept. 2022), https://earthjustice.org/wp-content/uploads/energy_bomb_bitcoin_white_paper_101322.pdf
3 Cambridge Bitcoin Electricity Consumption Index (CBECI), Cambridge Centre for Alternative Finance, University of Cambridge, https://ccaf.io/cbnsi/cbeci, accessed May 1, 2023