TORONTO — As the price of bitcoin skyrocketed over the last year, so has the amount of energy used to mine the cryptocurrency, prompting concerns about its environmental impact.
Despite the currency’s value having seen a recent decline, the energy used to harvest it has soared to a point where its annual carbon footprint is equivalent to or more than several countries including Argentina and Norway, according to an analysis published by Cambridge University.
Mining the cryptocurrency requires a deep energy-intensive process that uses extensive electrical infrastructure and complicated math algorithms in order to verify transactions. Upon solving any given calculation the miner is subsequently rewarded with a bitcoin.
“Rising bitcoin prices make mining more attractive, as the potential reward increases in value. As a result, new mining hardware will get added to the network and lead to increasing electricity consumption overall,” according to the report.
Although it’s unclear how much energy bitcoin actually uses, the study says that it consumes about 129.09 terawatt-hours (TWh) per year. The more bitcoin that is mined, the more energy that is consumed.
“The more machines a miner operates, the more likely he is to find the solution to the puzzle. However, more machines also means that more electricity is needed to run and cool the equipment, which in turn results in higher costs for the miner in question,” according to the report.
The price of a bitcoin currently sits at nearly US$44,150. There are about 18.6 million bitcoins in circulation according to digital currency exchange company Coinbase.
Recent investments from several major institutions – most notably by Tesla’s Elon Musk – is likely part of the reason for the currency’s boom, although it has also exposed problems for the electric car maker’s sustainability initiatives.
Tesla’s investment has sounded criticism from high profile critics such as U.S. Treasury Secretary Janet Yellen who recently described the digital currency as “an extremely inefficient way to conduct transactions,” and further said “the amount of energy consumed in processing those transactions is staggering.”
Now that bitcoin has reached its mining limit, average computers can no longer easily mine the cryptocurrency, leaving people to rely on intensive power sources to access it. As a result, bitcoin miners are always searching for abundant electricity sources at the lowest possible price.
Recently, China has proven itself to be a world leader in bitcoin mining, according to the report. Despite making progress in the green energy sector, China continues to predominantly rely on fossil fuels.
“Chinese pools have dominated bitcoin mining in recent years, among others because of their relatively low fee structure which has attracted numerous non-Chinese hashers,” according to the report.
The study hopes to launch an interactive geographic map that tracks the location and energy mix of bitcoin mining facilities.