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The Environmental Impact of Bitcoin: Everything You Should Know

Is Bitcoin bad for the planet? Here's everything you need to know about the environmental impact of Bitcoin.

Written by
Tehrene Firman

Cryptocurrency has been a hot topic lately. It's not just something that's on environmentalists' minds, though. Last year, Elon Musk, the CEO of Tesla Motors, shared it's a major concern of his, too. So much so that Tesla decided to suspend vehicle purchases using Bitcoin.

Musk tweeted he's concerned about the "rapidly increasing use of fossil fuels for Bitcoin mining and transactions"—particularly coal, as Bitcoin is primarily mined with electricity from coal. According to the U.S. Energy Information Administration, coal is the dominant CO2 emissions source in terms of electricity generation, and accounted for 60 percent of electric power sector CO2 emissions.

"Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment," Musk says. "Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy."

Instead, Musk said he would be looking at other cryptocurrency options that use less than one percent of Bitcoin's energy use for transactions. But what's the environmental impact of Bitcoin and other cryptocurrencies? And is there really a way to make it more eco-friendly?

The Environmental Impact of Bitcoin

Bitcoin mining generates 38 million tons of CO2 per year, which is more than the carbon footprint of Slovakia. In addition, a 2018 study published in Nature Climate Change found Bitcoin emissions alone could raise Earth’s temperature by two degrees.

"Bitcoin is a proof-of-work blockchain, meaning it uses a proof-of-work (PoW) consensus mechanisms to secure the blockchain and verify transactions. PoW means that miners compete against each other to mine a block,” Susanne Köhler, a PhD fellow and sustainable blockchain technology researcher at Aalborg University in Denmark, tells us. "In these competitions, specialized computers generate several trillions of guesses per second to try and win. You could call it a brute-force approach. This is what requires a lot of electricity."

While a popular—and heavily cited—past survey did find 76 percent of cryptocurrency miners use some renewable energy, Forbes reports it's not that simple. The same survey also found just 39 percent of the actual power consumed is from renewables—aka a pretty big drop. "Much of the 'renewables' being counted here, of course, are hydropower from China, and that's seasonal. In dry times of the year, those same regional miners are using mostly coal-fired power," writes reporter Rob Day.

"In the end, the climate doesn’t care what percentage of your electricity mix is from renewables and which is from fossil fuels. The atmosphere only cares about how much absolute fossil fuel emissions are released," Day says. "To make this point extremely clear with an extreme hypothetical—if fossil fuels drop from 60 percent of the electricity consumption mix of Bitcoin miners to 30 percent, but the amount of electricity consumption goes up 4x, you’ve still doubled the amount of related fossil fuel emissions."

Day says you help drive down the cost of new renewables along the way, which could be beneficial down the line. "But in the more important immediate term, you're making things much worse," he notes.

Can Cryptocurrency Become More Sustainable?

There's still a lot of work to be done in order to lessen the environmental impact of Bitcoin and other types of cryptocurrency. For example, Ethereum, the world's second-largest cryptocurrency (right after Bitcoin), has "Ethereum 2.0" in the works (now referred to as "the merge” and “the docking”) in order to become more sustainable and drastically cut its energy consumption.

“Ethereum is a proof-of-work blockchain and is moving away from proof-of-work to proof-of-stake to secure their blockchain and verify transactions," Köhler says, which makes the process more sustainable. "However, this is no trivial task and takes time. Using a different (non-PoW blockchain) could also address this."

More eco-friendly options are starting to emerge, too. Take Nano, for instance, which is said to "shun traditional mining" and instead use Open Representative Voting (ORV), which TRG Datacenters says "promises minimal energy consumption and maximum efficiency."

The more the world pushes for these greener systems, the better off the planet will be.