The Long Future Foundation, an Australian sustainability think tank, recently expressed concern over the negative impact that bitcoin mining has on our carbon footprint. A recent model by the Foundation suggests Bitcoin could eventually consume almost 30 percent of global electricity production per annum.
“If Bitcoin’s energy consumption isn’t reined in, we’ll end up being crowded out of electricity networks and sitting in the dark,” said Guy Lane Director of the Long Future Foundation. “So long as people can make money from mining bitcoins, people will spend large amounts of money, resources and electricity to acquire them.”
The Foundation released a tool to calculate the electricity required to mine bitcoin, and the numbers are extraordinarily high. The calculator shows the amount of electricity required to mine the digital currency, based on different variables such as the value of a bitcoin and the price per kilowatt-hour of electricity.
“Bitcoin need only consume a tiny amount of energy and still be an awesome new financial technology. Bitcoins are equally useful as a currency whether they are worth $1 or $1,000,000. Personally, I think that bitcoin and the blockchain is awesome, I just don't think that it has the right to harm the planet.”
- Guy Lane, Director of the Long Future Foundation
Bitcoin mining is the process of creating new bitcoins by verifying a block of transactions in the Bitcoin network. This primarily takes place with purpose built Bitcoin mining devices which solve mathematical problems, a process known as hashing. The process rewards 25 new Bitcoins per block, which is generated approximately every 10 minutes.
The rate of creation for new bitcoins stays the same, no matter if there are 100 or 100,000 miners. 25 bitcoins are rewarded for every completed block of transactions, which occurs approximately every ten minutes. This self adjusting mechanism currently awards approximately 3600 bitcoins per day, which at today's prices that equates to a little over $381 Million US per year.
The more computational power is employed to do the hashing, the more likely a reward will be earned. As a result there has been a rapid evolution from home mining, on personal computers, to large scale farms using increasingly more efficient chips, called ASICs. Industrial scale data center mining has been driven by investors, mining groups, cloud mining providers, and device manufacturers.
The operational costs to miners for verifying transactions includes the capital to buy the mining hardware, the power consumption of running the hardware, and day to day operating expenses. Guy Lane believes that mining companies are more inclined to focus on their bottom line than the environmental impact of power consumption.
“Bitcoin mining goes where power is cheap and if the cheap power is a dirty coal, they'll go there. If cheap energy if some rusty, leaky nuclear plant, they'll go there.”
Mining companies have indeed strategically placed themselves around the globe, finding locations which offer cheap energy. Lane’s concern regarding bitcoins environmental impact are clearly not unfounded. Iceland has become a hub for Bitcoin mining companies looking to source cheap energy and utilize Arctic winds to cool their rigs. While the cost of energy is cheap, the country also focuses on renewable sources.
According to Iceland.is, Iceland is a world-leader of hydroelectric and renewable geothermal energy. “Hydropower and geothermal energy are the sources of Iceland's unique ability to generate electricity in a sustainable manner. These environmentally-friendly resources produce electricity without emitting greenhouse gasses,” said the website Iceland.is “The country's state-of-the-art energy infrastructure is highly ranked on international business indices for reliability, efficiency and cost.”
Verne Global is a company operating out of Iceland, and provides 100 percent renewable energy powered data services. Since their launch in 2012, companies such as BMW, RMS, CCP Games, Datapipe, COLT have selected Verne Global’s award-winning campus to lower the costs of scaling their data center requirements.
“The unprecedented amount of new data created and processed by companies each day is forcing the industry to re-evaluate where that data resides,” said Jeff Monroe, Verne Global’s CEO. “In order to succeed in a data driven economy, power capacity, reliability of the power grid and low-cost power are imperatives for delivery. All of these factors point to Iceland as the logical choice for computing.”
BitVest is a large scale bitcoin mining company which has recently entered into a long term contract with Verne Global, securing up to 5.8 Megawatts of additional electricity, at what they describe as a very reasonable rate. “Iceland is by far the world’s best location for Bitcoin mining, and offers BitVest access to a stable supply of low cost environmentally friendly power.”
China and the US are also popular hubs for Bitcoin mining due to low energy costs. In contrast to the cheap renewable energy offered by Iceland, currently these two countries are leading the world in carbon gas emissions.
“When bitcoin sucks a gigawatt of power, there is an opportunity cost to that. The power could otherwise be used for running a hospital or making solar panels to make the world sustainable,” said Lane.
Plans are being put in place by both countries to double their renewable energy, following an agreement that was signed in November of last year.
“Together, the U.S. and China account for over one third of global greenhouse gas emissions. Today’s joint announcement, the culmination of months of bilateral dialogue, highlights the critical role the two countries must play in addressing climate change. The actions they announced are part of the longer range effort to achieve the deep decarbonization of the global economy over time.”
- White House Press Release
According to a report compiled by Bloomberg New Energy Finance $310 billion was spent on solar and wind power, electric cars and energy efficiency and storage in 2014. This figure is up 16 percent from the previous year, due to heavy government spending on solar and wind power sectors. China’s investment jumped 32 percent, to $89.5 billion. U.S. investment rose 8 percent, to $51.8 billion, the highest boost since 2012.
While governments and authorities look to spend billions on renewable energy with long timeframes for results, some are taking matters into their own hands. SolarCoin, an alternative cryptocurrency, intends to reward Solar electricity generation.
SolarCoin works like air-miles and can be claimed by anyone with photovoltaic solar panels. The project aims to incentivize 97,500 TWh of Solar energy over the next 40 years. Each coin represents 1 MWh of generated solar electricity, and the project is backed by a third party verified facility.
“Solar energy, unlike fossil fuels, does not place excess heat or carbon into the atmosphere. The long term intent is to provide an incentive to produce more solar electricity globally over the next 40 years by rewarding the generators of solar electricity.”
SolarCoins are currently awarded to participants based on proof of work, which requires mining. The founder of SolarCoin, and Partner at Thoughtful Capital Group, Nick Gogerty advises there will be a shift to proof-of-stake in the near future. “This method of securing the blockchain likely has 0.0001% of the carbon footprint bitcoin has.”
Whether it is bitcoin, large scale companies, governments or individuals contributing to carbon emissions, a solution is needed to the world's growing power demands. Financial incentives in a free market economy go a long way, and allow room for growth and development.