Energy use has risen to the equivalent of Argentina’s annual carbon footprint, according to the Cambridge Bitcoin Index of Electricity Consumption, a tool from Cambridge University researchers that measures the currency’s energy use.
It is possible that recent interest from the major Wall Street institutions culminated in the appreciation of the currency and endorsement by Elon Musk helped push it to its highest levels.
While the recent decline has affected Musk’s fortune, Bitcoin is also a threat to the company’s mission towards a zero-emissions future and poses serious questions for governments looking to reduce their carbon footprints.
Bitcoin mining is an energy-intensive process, and mining involves solving complex mathematical problems in order to create new Bitcoins, and the miners are rewarded with Bitcoin.
Earlier in the relatively short history of Bitcoin, one could mine the currency with a regular computer.
But the way the Bitcoin mining process was established means that there is a limited number of Bitcoins that can be mined, up to 21 million.
The more mining increases, the more difficult the algorithms must be solved to obtain Bitcoin, and now the ordinary computer can no longer mine the currency after more than 18.5 million Bitcoins have been mined.
Instead, the mining process requires special computer equipment that can handle the intense processing power needed to obtain Bitcoin, and these special devices need a lot of electricity to run.
Historically, the amount of electricity used to mine the currency has been more than the electricity used by entire countries, such as Ireland, meaning that there are huge amounts of electricity used only for Bitcoin.
Proponents of the currency say: Mining is increasingly done using electricity from renewable sources as this type of energy becomes cheaper, and the energy used is much less than other energy uses that are more wasteful.
Energy wasted by connected but inactive home appliances in the US alone could occupy Bitcoin mining for 1.8 years, according to the Cambridge Bitcoin Index of Electricity Consumption.
According to the index, China has the largest number of Bitcoin mining operations of any country so far, and while the country has been slowly moving toward renewable energy, about two-thirds of its electricity comes from coal.
Given that there is no government agency or organization that officially tracks where mining is located and what type of electricity miners use, there is no way to know if miners use electricity fueled by renewable energy or fossil fuels.
And mining rigs can move from one place to another depending on where the energy is cheaper, which makes mining difficult to track.
The Cambridge Center estimates that Bitcoin’s annual electricity consumption is estimated at 115 terawatts, and according to the site, a single Bitcoin transaction has the same carbon footprint as 680,000 Visa transactions or 5,110 hours of YouTube viewing.
And a 2018 paper from the Oak Ridge Institute in Ohio found that mining one dollar of Bitcoin consumes 4.7 kilowatts of energy, more than twice the amount of energy needed to mine copper, gold and platinum worth one dollar.
Another study from the United Kingdom published last year stated that computer power required for mining quadrupled in 2019 compared to the previous year, and that mining had an impact on prices in some energy and utility markets.
As Bitcoin continues to dominate as the largest cryptocurrency, and with support from established companies and investment banks, the environmental impact of the currency is likely to grow.