How Bitcoin’s Power Consumption Is Good for the Planet

A controversial proposition that might just hold water

Jason Deane
Nov 12, 2020 · 13 min read
Image for post
Image for post

In early 2018, an analyst called Alex De Vries at Pricewaterhouse Coopers (PwC for short, thank goodness) produced a report titled “Bitcoin’s Growing Energy Problem” which seemed to provide a plausible calculation of the power consumption of the Bitcoin network.

It seemed viable, was generally well supported and, rightly or wrongly, went on to become the basis on which many lasting assumptions about Bitcoin’s power consumption were made.

It was timely enough that I even included a detailed reference to it in one of the chapters of the book I was writing at the time, called “How to Explain Bitcoin to Your Mum.”

The chapter was called “Why Bitcoin WON’T work,” which was a counterpoint to the preceding chapter entitled, surprisingly enough, “Why Bitcoin WILL work.”

Some, however, questioned the validity of the underlying assumptions about the type of equipment used a reference point to calculate power consumption. Others questioned whether renewable energy had been given enough consideration overall.

While both points are far from resolved, the latter was revisited by the same analyst a year later when he produced another report entitled “Renewable Energy Will Not Solve Bitcoin’s Sustainability Problem,” the main conclusion of which is probably self explanatory.

De Vries had done the best he could with the data available, as had many others when trying to answer the question of just how much power Bitcoin consumes, but the actual number varies considerably depending on who you ask and at what point in Bitcoin’s history you need an answer for — and with good reason.

The Bitcoin Energy Consumption Index has long since estimated total power consumption and, as of today, estimates a figure of 74 TWh (Terrawatt Hour), which is roughly equivalent to the entire power consumption of Venezuela. Well, at least as far as we can tell. Their latest official estimate is from 2015 which highlights another issue.

It turns out getting accurate energy consumption data by country is surprisingly hard and often the range of official estimates varies according to which source you refer to.

No single source, in fact, appears to have a consistently up-to-date list of energy consumption levels, a point I find interesting in itself, but is beyond the scope of this article.

Nevertheless, it is certainly possible that Bitcoin’s current power consumption is more than Denmark, Hungary, Hong Kong, Portugal, Singapore, Bangladesh, Israel, Greece, Kuwait, Switzerland, Chile and Austria to mention just a few.

In fact, assuming this data is correct and Bitcoin was classed a country it would be ranked 39th in the world according to the official list of countries by power consumption provided, interestingly, by the CIA. Yes, that CIA. (Note: there are other lists, but they are not dissimilar)

Just the mere possibility of that is astonishing, but the reality is that it could be even higher. Recently, a note appeared on the official Bitcoin Energy Consumption Index that simply read:

Study reveals Bitcoin’s electricity consumption is underestimated … (August 2020).

Following the link provided leads to a new report that concludes that, as of the end of 2019, the conservative estimate was actually 87.1 TWh of power, not 42 TWh as shown on the chart. By that reasoning, and using the same formula, does it mean consumption is actually closer to 150 TWh today?

If so, that ranks Bitcoin’s consumption at number four on the planet. Bitcoin would therefore consume more power than every other country except the entire European Union combined, the United States and of course, China.

Could this really be the case, and if so, what does it mean for sustainability and Bitcoin’s future?

Before we get all carried way with this revelation, it should already be clear that there is significant doubt over just how accurate this data is.

After all, if countries themselves are unable to provide good, solid data for their own consumption figures, how can we possibly say with any accuracy what the true consumption of a disparate bunch of machines spread across the planet really is, especially when we don’t really know quantities or specifications?

However, even as a proponent of the ideology and practicality of Bitcoin, I will absolutely concede that it is a) “a lot” and b) set to consume more power as time goes on — at least for now, a point we will revisit shortly.

We need to examine what happens next, but since we have no universally agreed data as a starting point it is perhaps more useful to look at trends and take a broader view.

In fact, it may be the only way.

When breaking down the “a lot” figure, there are a few caveats that we need to mention, specifically different types of energy classed as renewable, stranded or unsold energy.

While it’s usually claimed that “most” Bitcoin mining is carried out via renewable energy (hydro, wind, solar etc.), the University of Cambridge’s September 2020 report challenges this — at least partially.

It certainly agrees that some 76% of miners use renewable energy as “part of their energy mix” but states that, overall, only 39% of total energy is genuinely from renewables, most commonly hydroelectric power.

This is to do with the allocation of hash power — while the Asia-Pacific (APAC) region still produces most of it, their percentage of renewable energy is only 29%, whereas it’s as high as 70% and 66% in Europe and North America, respectively, where hash output is lower.

However, since the world is, generally, moving towards renewable energy at an ever increasing rate, it is clear that this percentage will increase over time, although it’s hard to say what timescale is needed to make the difference.

In addition, there are some circumstances where there are some directly positive outcomes of Bitcoin mining.

“Stranded” energy, for example, refers to energy that would otherwise be wasted or unused, most commonly gas that has to be deliberately flared due to lack of pipeline capacity or is simply located where it is not cost efficient to transport.

In those cases, such as the mining farms created in Texas and North Dakota for exactly that reason, there is an unquantifiable benefit of avoiding that action.

Finally, there are areas in the world where too much power is produced and there’s no efficient way of transporting it anywhere or to reduce the power output in a way that makes economic sense. This is common, for example, around hydroelectric dams.

Here, power is sold very cheaply to mining operations on condition they locate themselves in these areas. This creates a win-win for the provider, consumer AND environmentalists since no extra power is technically produced.

Mining farms are one of the few industries that can operate pretty much anywhere, as long as an internet connection is available.

However, in truth there is currently no way of quantifying the beneficial aspects against the obvious negative ones of coal or oil fired power generation, but we can safely assume that the former is much smaller than the latter and the net effective is still a negative one.

The bigger question would have to be this: if ALL Bitcoin mining was done on a renewable energy basis, would that ultimately be considered a satisfactory outcome for all concerned? For some, yes, but for others, no.

Even without the power issue, there are still environmental concerns. ASICs (the machines used by Bitcoin miners) can only do one task and when they reach of life, they are not easy to recycle, if at all. Almost certainly, millions of these machines have found their way into landfill with the promise of more to come.

Not only that, but mining rigs produce a lot of heat and either need more power to cool them (this is, in fact, a significant part of the quoted power consumption figures) OR they need to be located where it is cold.

In the latter case, could there by a long term environmental issue caused by dumping a giant heater in a cold place? Logic would dictate that there certainly could be.

It seems the problems for Bitcoin keep mounting up.

But, of course, we’ve been here before.

Any “gold rush” for new tech leaves a path of destruction behind it. It has always been the case and probably always will be.

Whilst trying to think of a solid analogy, I decided (after rejecting many other possibilities) the best one was probably the PC itself.

After all, the explosive growth in PC use is still within living memory, the global tech development race was similar and these items were all designed to be used as tools to support and use the main non-sovereign, non-physical product that was initially hard for people to get their heads around — i.e. the internet.

According to historical data collated by Gartner and presented on Wikipedia, between 1996 and 2003, some 922 million PC units were sold globally.

I chose these dates because this was the era of proper ‘first gen’ home computing, where connectivity to the net, such as it was, was possible, but difficult.

After 2004, ADSL lines and other solutions started to become widely available and the tech began to change accordingly.

That’s a huge amount of boxes, but how many of those do we still use today? The answer, almost certainly, is none. Well, apart from the one my mum keeps in her spare room to play solitaire on occasionally.

Almost a billion units have been thrown away and, since these were the days before recycling, they also probably made it to the landfills too.

And what about the billion or so modems we produced in the days before ADSL? Now all gone too.

It was expensive both in terms of environment and dollars, but things have settled down considerably since then.

Last year, just 261 million units were shipped compared to the peak in 2011 of 353 million, a drop of 102 million units in a trend that is still falling.

We use other devices these days instead of just computers and we tend to upgrade far less frequently anyway as the gap between hardware and software capability has narrowed.

The PCs we do use are far more energy efficient than their ancestors, especially in terms of monitors, so as the amount of connections to the internet have increased over the years, it’s likely that power consumption hasn’t increased proportionately.

My view is that, over time, we will see the same with Bitcoin.

Right now, we’re in an arms race where even a slightly better machine is sought after at almost any price in the same way a 66Mhz processor was favored over a 33Mhz processor in the early, frantic days of computing.

But like PCs, over time this will settle down and many of the issues will be resolved, something I may seem overly confident about.

And here’s why:

Although I am a self-confessed optimist on, well, pretty much everything really, I am also quite cynical about certain aspects of human nature.

The bottom line is that, collectively, we just won’t care enough about things like the environment unless a) it affects us directly and b) it makes us money.

The trick, therefore, is to align global needs with selfish needs, or, to put it another way, to ensure that making money happens to coincide with things that are beneficial to the planet.

And although Bitcoin seems to be the opposite at first, from a long-term perspective, there’s a natural alliance that could actually turn out to be very beneficial all round.

Making money as a Bitcoin miner is all about efficiency and, as time goes on for technical reasons, this becomes more and more important.

Right now, we’re using the mining equivalent of the huge, extremely inefficient engines that were prevalent in American cars in the 1970s and got 8–10 miles to the gallon.

After all, why not? Fuel was cheap, plentiful and the environment (whatever that was) was fine with it, right?

But you’d never buy a new car like that now, partly due to a change in social awareness, but also because it would be too expensive to run. As soon as it becomes more about money, we pay attention.

Right now, new, sleeker tech is being developed. Each generation will produce more hash power for less energy and as these lines converge — as they always do — it simply won’t be cost effective to run older, hotter, juicier equipment that needs to be frequently upgraded.

As time goes by, and even as Bitcoin’s hash rate and influence increases, I bet you any money (Bitcoin please, not dollars) that its carbon footprint doesn’t increase in proportion to that growth.

This will be partly because of the equipment itself, but also due to the fact that earlier this year a whole swathe of reports, such as this one, came out confirming that solar and wind are now the cheapest forms of energy production on the planet.

Renewables, like Bitcoin, are here to stay and will now grow faster than any other sector as a result.

It’s about time, too.

I further bet you based on what we’ve seen historically, applications of Moore’s Law (the concept rather than the technical absolute) and the fact that we humans, collectively, are predictable when it comes to money, that this power consumption will plateau and even fall eventually.

It’s a bold statement and it’s definitely not something that will happen next year — but certainly could within the next decade — and I’m happy to go on record with that forecast.

There’s always a counter position of course, and the most relevant one in this case is the LED light argument, covered in this article.

The crux of this report is that overall power consumption in lighting has increased overall, even though much less power is now required to produce the same amount of light.

I’m sure that’s true as population, and applications have grown on a global level, but when I switched all my lights at home to latest-gen LED lighting, I noticed an immediate and significant reduction in both power consumption and energy bills as well as a far superior light.

I also have never had to replace any bulbs as yet, something I definitely would have done several times over by now using the old, hot, inefficient tech.

I think we can safely assume Bitcoin miners, on an individual level, will consistently seek to do the same. After all, their livelihoods depend on it.

And there’s also one more consideration worth noting.

It’s easy to overlook that the traditional banking and global payment processing sectors also require enormous amounts of power to run, although it’s even harder to calculate what these numbers might actually be.

There’s no single network to base assumptions on and there’s literally thousands of independent companies and organizations who are often not exactly forthcoming about their carbon footprints.

However, we can safely assume that this power consumption, globally, must be at least what Bitcoin’s requirement is.

Bitcoin, in my view, will never replace that existing banking system, nor should it, but there is at least the possibility of reducing it in the long term.

For example, for every transaction that takes places over the Bitcoin network is, mathematically speaking, a transaction that does not take place on the traditional network.

It’s a very simplified view, but on a big enough and prolonged enough scale, that makes a difference, especially when it comes to decisions about physical premises and data centers by incumbent financial institutions.

The size of that impact may ultimately be tiny or it may be significant, and my guess is that it will be somewhere between the two. On a global scale, this is therefore a redirect of power resource rather than a requirement for more, and that can be considered a benefit of the Bitcoin network.

I think the work of Alex De Vries is actually very good, as he embarked on a difficult task with little hard information. It has its limitations, but these are clearly explained through caveats.

However, I disagree entirely with the prognosis, as it assumes too much that what is happening right now will be the same as that which will ultimately happen.

The parameters will change, the tech will change and as for the rule book — well, we haven’t even got round to writing that yet.

That said, I have no doubt that De Vries work is right in the short term while we power through this crazy growth-spurt-cum-gold-rush phase of Bitcoin’s lifecycle. But the adoption and management phases will see a different, more measured approach where power efficiency will become ever more important.

This means there will be an even more absolute and direct link between the power consumption of the miners and their standard of living.

You can bet, therefore, they will continually seek out the lowest cost energy sources (already proven to be renewables), and the most efficient, lowest heat producing machines that have the best longevity. Y’know, a bit like my LED lights.

They will also do this with a level of motivation that would outweigh anything in the traditional banking sector because they would be directly incentivized to do so.

And when individual needs align with things that are good for the planet, you know they will get done, even if it’s not for the reasons we’d prefer.

Still, we’ll take it.

And so will Mother Nature.

Want articles and up to the minute analysis and opinion in your inbox? Why not subscribe to the ‘Bitcoin and Global Finance’ newsletter? Receive special offers and insider info, unsubscribe at any time.

The healing our planet saw in the few weeks of global lockdown was unprecedented — here’s my radical proposal to build on it:

Bitcoin’s role is ever expanding. Here’s an angle that could prevent people’s wealth and livelihoods being lost forever when war comes to their doorstep:

If you still don’t own any Bitcoin, here’s why it’s important and why time is of the essence:

Disclosure: The author of this opinion piece has been heavily involved with bitcoin for several years and holds a substantial cryptocurrency portfolio, including bitcoin. He also has a mining operation running the SHA-256 algorithm based in Siberia and is a published author on the subject of promoting the understanding of cryptocurrency. Jason is an analyst at Quantum Economics. This story first appeared on Voice.com

Disclaimer: This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. If you found this content interesting, and have an interest in commissioning content of your own, check out Quantum Economics’ Analysis on Demand Service.

Original Crypto Guy

Cryptocurrency opinion, discussion and passion from…

Jason Deane

Written by

I blog on things I am passionate about: Bitcoin, writing, money, life’s crazy turns and being a dad. Lover of learning, family and cheese. (jasondeane@msn.com)

Original Crypto Guy

Cryptocurrency opinion, discussion and passion from ordinary people who use, trade, mine, write books or speak about all types of cryptocurrency on a daily basis.

Jason Deane

Written by

I blog on things I am passionate about: Bitcoin, writing, money, life’s crazy turns and being a dad. Lover of learning, family and cheese. (jasondeane@msn.com)

Original Crypto Guy

Cryptocurrency opinion, discussion and passion from ordinary people who use, trade, mine, write books or speak about all types of cryptocurrency on a daily basis.

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store