Bitcoin: What are the Real Costs?

by Shannon Appelcline.

In the last few years, headlines have blared that Bitcoin has grotesque energy costs. The Bitcoin Energy Consumption Index (Footnote 1) currently estimates 78 TWh a year. More importantly, in these years of climate change, which is a real, global crisis, they note a carbon footprint of 37 Mt CO2. The sensationalist headlines usually note that this is the same as New Zealand.

Though these numbers may be technically correct, that’s the worst type of correct, because the headlines are pure clickbait. They create outrage without offering context and in doing so create a false impression. Here’s some of what they’re missing.

For a FAQ that more specifically focuses on Bitmark’s limited energy consumption, see our “Bitmark Energy Q&A”.

Bitcoin’s Consumption is Nothing Compared to the Traditional Financial Industry

The US alone has 9 million people working in the financial industry(2). Compare that to the 8,000 people who work in One World Trade Center, or the 15,000 people who work in the Empire State Building, and the staggering scope of that work force becomes obvious: it’s 750 huge skyscrapers worth of energy usage. Add in every stock exchange, every computer, every router, and every credit card machine not already included in those counts. Add in some fraction of the 200,000–300,000 armored vehicles worldwide that carry cash from one location to another (whose carbon emissions are likely worse than SUVs, which created more than 700 Mt CO2 in 2018(3)). Move on to the processes that create physical financial resources: gold mining creates .8T of CO2 for every 1 ounce of gold mined(4). Multiply that by the 2,500 tons of gold mined each year(5), and you get another 6.4 Mt CO2. (Mind you, that doesn’t even count the millions of tons of toxic waste such as cyanide and mercury released into the environment by gold and other metal mining(6).)

Obviously, none of these comparisons are apples to apples. Not all financial offices are in skyscrapers, not all of those offices use the same amounts of energy, not all cities have the same proportion of green energy production, not all armored vehicles are used in the financial industry, not as many armored vehicles fill our roads as SUVs, and not all gold is used financially. However, the difficulty in creating a precise comparison demonstrates why those poorly considered headlines about Bitcoin are possible: Bitcoin is transparent, so it’s easy to see the costs, while the traditional financial industry is full of secret subsidies.

Still, we can see enough in these partial views to heavily imply that Bitcoin’s consumption is a bare fraction of that of the traditional financial industry. With that in mind, clickbait headlines start to look a lot like the traditional financial industry punching down at a scrappy newcomer.

Bitcoin’s Consumption is Comparative to Video Gaming and Video Streaming

Another way to look at Bitcoin’s usage is to compare it to other computer energy uses. Lawrence Berkeley National Labs estimated that video gaming in California alone used 4.1 TWh of electricity each year(7). Crypt0Events extrapolated that to estimate that video gaming energy usage was 33.5 TWh yearly in the US and 104.7 TWh worldwide: 50% higher than Bitcoin(8).

Bitcoin vs Video Games, Energy and Carbon Emission Comparisons

Streaming video is another technology that has received a lot of clickbait headlines regarding its energy usage. Some estimates have put its energy usage in the hundreds of TWh, but pushback on that has revealed deep flaws in the methodologies of studies trying to estimate this usage(10). We should be similarly leery.

Bitcoin’s Consumption is Relatively Clean

A simple count of Bitcoin’s energy usage, besides not offering meaningful comparatives, also ignores the fact that Bitcoin’s energy usage is relatively clean. The majority of Bitcoin’s energy comes from renewable hydroelectricity in China that was not otherwise being used. Ya’an in China recently demonstrated this by sending out a call for blockchain users because they had 16.3 TWh of energy that was going to waste every year(11). Their overall production is 41.5 TWh of renewable energy production in a year, which is half of Bitcoin’s consumption, just from one city. Based on areas where Bitcoin mining occurs, a 2019 report put overall renewable usage conservatively at 74.1%(12).

Not All Blockchains are Equal

If the general arguments about Bitcoin’s energy usage are deeply flawed for all the things they don’t say, this is even more true for arguments against other uses of blockchains, which tend to be much smaller scale. For example, Bitmark’s crypto-rights blockchain calculations are considerably easier than Bitcoin’s(13): Bitcoin currently has a difficulty of more than 21T while Bitmark has been running less than 1G: about 20,000x less. This difference comes about because of the lower total hashing power of the Bitmark network: because there are less computers, or less powerful computers, less work is needed to secure the blockchain. The amount of energy required is correspondingly lower.

Blockchain is a Tool of the Future

Here’s the thing: we believe that the current arguments against the energy consumption of blockchains are badly framed clickbait headlines that don’t correctly consider how the energy is generated, how it’s used, and how that compares to other usages. Maybe our references have convinced you of that, maybe not.

But even if those clickbait headlines were accurate, even if the usage was as horrible as they suggest, even if all blockchains used the same energy as Bitcoin, they’d still be a great deal.

Blockchains are a technological revolution. They give us the ability to collaborate, and permanently record that collaboration, at a global scale. They allow us to remake our world’s infrastructure to better complement the borderless internet, and to do it in a way that doesn’t give corporations all the power. They ensure that changes in political power can’t change our recorded history. They allow us to have rules without rulers.

At Bitmark, we use blockchains to create crypto-rights, allowing you to manage finances, health data, creative licenses, and more without requiring you to depend upon a corporation, a registrar, or even a government. Bitcoin similarly allows individuals to manage their own payments and receipts without credit card companies or online payment services getting in the way (and potentially controlling what can be bought or funded).

Blockchains are the future of independence on the internet, of allowing us all to work together to make a better society. We’re just seeing the leading edge of that with Bitcoin. There is so much more to come, with Bitmark’s Crypto-Rights systems being just a few ideas among many.

Because we’re on the cutting edge, this work is still growing. Yes, there may be inefficiencies in blockchains currently. Yes, the energy costs may be too high: in a global crisis we can’t solely say that we’re no worse than anyone else. We want to be part of the solution too. But the first cell phones were bricks, the first personal computers had 4 kB of RAM, and the first commercial solar panels were 2% efficient. Obviously, there will be improvements in blockchains too, if we support this technology and incentivize its growth.

We reject the clickbait framing of current arguments against the energy consumption of blockchains. We all need to, because we can’t allow this revolutionary technology to be set back by someone trying to sell ads on their website.

Blockchain is an essential part of the future. We need to focus on that big picture, so that we can support independence of action and the creation of new rights, so that we can match those rights with the boundary-less nature of the digital internet, so that we can collaboratively work together in new ways — so that we can remake the world.

Footnotes:

  1. Digiconomist. Retrieved 2021. Bitcoin Energy Consumption Index. https://digiconomist.net/bitcoin-energy-consumption/.
  2. US Bureau of Labor Statistics. Retrieved 2021. Industries at a Glance: Financial Activities. https://www.bls.gov/iag/tgs/iag50.htm.
  3. Kommenda, Niko. 2019. “SUVs Second Biggest Cause of Emissions Rise, Figures Reveal”. The Guardian. https://www.theguardian.com/environment/ng-interactive/2019/oct/25/suvs-second-biggest-cause-of-emissions-rise-figures-reveal
  4. S&P Global Market Intelligence. 2020. Greenhouse Gas and Gold Mines. https://www.spglobal.com/marketintelligence/en/news-insights/blog/greenhouse-gas-and-gold-mines-nearly-1-ton-of-co2-emitted-per-ounce-of-gold-produced-in-2019.
  5. Only Gold. Retrieved 2021. Gold Facts and Statistics. https://onlygold.com/faqs/facts-and-statistics/.
  6. Brilliant Earth. Retrieved 2021. Gold Mining and the Environment. https://www.brilliantearth.com/gold-mining-environment/.
  7. Various. 2018. “Green Gaming”. https://docs.google.com/a/lbl.gov/viewer?a=v&pid=sites&srcid=bGJsLmdvdnxncmVlbmdhbWluZ3xneDo0ZDBmMTI1MTViZTViODY5.
  8. Frumkin, Daniel. 2019. “Bitcoin Mining vs Video Gaming Playing”. Crypt0 Events. https://cryptoevents.global/bitcoin-mining-vs-video-game-playing-which-consumes-more-electricity-in-total/.
  9. Extrapolated based on the ratio used by the Bitcoin Energy Consumption index. There may be some actual differences depending on the greenness of the energy consumed by each.
  10. Kamiya, George. 2020. “Factcheck: What is the Carbon Footprint of Streaming Video on Netflix?”. CarbonBrief. https://www.carbonbrief.org/factcheck-what-is-the-carbon-footprint-of-streaming-video-on-netflix.
  11. Zhao, Wolfie. 2020. “Chinese City Known for Bitcoin Mining Seeks Blockchain Firms to Burn Excess Hydropower”. Coindesk. https://www.coindesk.com/chinese-city-known-for-bitcoin-mining-seeks-blockchain-firms-to-burn-excess-hydropower.
  12. Bendiksen, Christopher and Samuel Gibbons. 2019. “The Bitcoin Mining Network”. Coin Shares. https://coinshares.com/assets/resources/Research/bitcoin-mining-network-june-2019-fidelity-foreword.pdf.
  13. Uncredited. Retrieved 2021. “Cryptocurrency Difficulty Charts”. Coinwarz. https://www.coinwarz.com/charts/difficulty-charts.

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