Alyssa McMurtry
29 September 2022•Update: 30 September 2022
OVIEDO, Spain
Bitcoin mining in 2020 consumed 7.8% more electricity than the entire country of Austria and 55.8% more than all of Portugal, according to a study published in Nature on Thursday.
Bitcoin proponents have often claimed that the cryptocurrency is the “digital gold,” as it is set to become the ultimate store of value, while the authors of the Nature study suggest that Bitcoin, which relies on the energy-intensive ‘proof of work’ system, is more like the “digital crude” due to its enormous environmental costs.
In 2021, each new bitcoin resulted in $11,314 in climate damages on average, with the total damage of all coins mined that year exceeding $3.7 billion, the study noted.
Overall, each $1 in the Bitcoin market value was responsible for $0.35 in global climate damages from 2016 to 2021, according to the study. In terms of the market value, that falls in the range between beef production and crude oil burned as gasoline.
The researchers also said that as the industry matures, each new Bitcoin mined is causing more and more climate damage. In 2020-2021, every $1 of bitcoin value caused $0.58 in climate damage.
The authors explained that increased energy usage is in part due to Bitcoin miners competing with a growing amount of computing power.
In the "proof-of-work" system employed in Bitcoin, miners verify transactions on the blockchain by solving for a unique transaction number. Those who crack the code first are rewarded in a “winner take all system,” so miners must use powerful computer equipment to remain competitive.
It is estimated that most of the electricity used to mine Bitcoins comes from non-renewable sources. Beijing’s 2021 ban on crypto mining made that all the more true since much of the electricity used in China came from hydropower.
But the authors of the study found that even if miners increased the use of renewables by 50%, mining would still cause “large and growing climate damages.” Only if renewable electricity powered 89% of Bitcoin mining could the climate damage become similar, in relative economic terms, to that of mining gold.
While the authors suggested that the blockchain technology could still be valuable for innovation, they also recommended shifting to a "proof-of-stake" system, which the second-largest blockchain project Ethereum did just this month.
“If the industry doesn’t shift its production path away from proof of work... then this class of digitally scarce goods may need to be regulated, and delay will likely lead to increasing global climate damages,” the authors concluded.
