As cryptocurrencies have grown in popularity, proponents of these digital assets have insisted that cryptomining is as essential and lucrative as mining for gold. Beyond simply advocating for cryptomining in general, these statements are meant to assuage any worries about cryptomining’s disadvantages—particularly those related to the environment. The gist is that even if cryptomining does negatively impact the planet, digital evolution and economic gain are worth the environmental cost. But researchers at the University of New Mexico aren’t so sure.
Their study examines energy consumption relative to Bitcoin mining in particular because Bitcoin has long been the dominant proof-of-work currency. (Proof-of-stake currencies use far less energy, but few major cryptocurrencies operate under this model.) In 2020, Bitcoin miners used 75.4 terawatt hours (TWh) of electricity—more than the entire countries of Austria (69.9 TWh) or Portugal (48.4 TWh) used that same year. Not only does this put pressure on the energy grid, but all that excess energy has to come from somewhere. In a country like the US, over a quarter of that demand might be met by burning fossil fuels.
“While proponents have offered [Bitcoin] as representing ‘digital gold,’ from a climate damages perspective it operates more like ‘digital crude,’” the researchers write in their study, which was published last week in Nature Communications.
Between 2016 and 2021, there were several instances in which Bitcoin was found to be more damaging to the climate than a single Bitcoin was economically worth. In 2016, the CO2 equivalent emissions related to Bitcoin mining energy generation were 0.9 tons per coin; by 2021, this had increased 126-fold to 113 tons per coin. A single Bitcoin could be associated with more than $10,000 in climate damages, and in May 2020, $1 USD of Bitcoin market value was associated with $1.56 in global climate damages. The argument that Bitcoin mining was financially worth its environmental cost had crumbled: the practice had officially matched beef production and oil refining for climate impact.
Despite all of this, the study’s authors know “digitally scarce goods” aren’t going anywhere. Rather than calling for Bitcoin mining to stop altogether, the researchers suggest a few alterations to the crypto industry’s current practices. They advise partly basing the market price on estimated climate damages: “BTC mining should not be ‘underwater’ wherein per unit climate damages are greater than coin market prices for any appreciable period,” they write. Per-unit climate damages could also be compared with a reference benchmark of the climate damages per unit market value of other commodities, including “ones that we regulate or consider unsustainable.”
These comparisons would not only help investors make more informed financial decisions, but also signal a need for regulatory action or production alternatives. Most importantly, Bitcoin mining’s impact on the environment should gradually dwindle, not worsen, as the industry matures and more efficient mining methods (like proof-of-stake) are discovered and adopted.