One of the main criticisms against Bitcoin is the argument that the network consumes massive amounts of energy. Specifically, Bitcoin consumes more energy in Terawatt Hours (TWh) than the majority of countries globally. Only 26 countries in the world currently surpass Bitcoin on the annual electricity consumption rates. The purpose of this blog post is to shed light on some critical questions regarding Bitcoin energy usage: Is Bitcoin harmful for the environment? Shall we impose any restrictions on Bitcoin due to its environmental impact? Is Bitcoin really the enemy here? Let’s find out.
Mining
Bitcoin miners operate in mining pools. We do not know exactly where individual miners are coming from. Even if a mining pool operates in country X, many participants (miners) of the pool may live in countries on the other side of the planet. Therefore, we can argue that Bitcoin miners are mostly anonymous. Consequently, we do not know what kind of electricity they use. This Bitcoin mining map is an estimate according to IP addresses of mining facility operators. As the methodology of this research mentions: “It is no secret in the industry that hashers in certain locations use virtual private networks (VPNs) or proxy services to hide their IP addresses in order to obfuscate their location.”
The conclusion is that Bitcoin mining can operate from anywhere in the world. Consumption and pricing depends from the miner’s location. If the operating costs are cheap, the location will attract Bitcoin miners. The cheapest form of energy is renewable and wasted energy i.e. energy which is produced but is not consumed.
In such a scenario, the supply of energy exceeds demand. This can happen from overproducing solar power in solar farms. If somehow the energy is not consumed, it will be granted as wasted. There are no additional production costs, since operators have already paid for the solar panel costs. A Bitcoin mining farm can gain cheap electricity from this kind of energy. Therefore, Bitcoin is not an enemy but can also act as an incentive to the society for the production of more solar energy.
The takeaway is that energy production and energy consumption are two different things. Energy consumption is not the same as pollution. Pollution depends from the kind of energy the public consumes. Similarly, the consumption of energy is irrelevant to how many people use Bitcoin.
The Solution for Bitcoin Energy issues
A solution to Bitcoin energy issues is obviously the switch to Proof-of-Stake. However, as we are witnessing with Ethereum, this switch is technically challenging and requires many resources while also having some drawbacks itself. Therefore, the Bitcoin community is supporting another, more efficient solution for all. The appropriate regulation of energy production and carbon dioxide emissions. The aim is to benefit the society by preventing pollution.
Currently, governments do not impose the appropriate pollution legislation. Consequently, the coal-burning industry produces cheap energy with minor taxes on carbon emissions. This incentivizes many other industries including Bitcoin miners to consume this energy, instead of shifting towards renewable forms of energy.
It is fair to say that the issue is not Bitcoin mining, but the absence of strict government regulations on emissions which would persuade industries to limit pollution. When imposing appropriate jurisdiction, we shall expect Bitcoin miners to shift towards renewable energy alternatives to operate. Besides solar energy, hydroelectric and wind power are two more primary examples of renewable energy.
Bitcoin can actually be an advocate towards renewable energy. Since Bitcoin mining is global, the industry is suitable for renewable energy practices. These forms of energy whose supply exceeds demand and do not involve distribution mechanisms seem appropriate for mining farms. For example, it is ideal to deploy solar panels and wind farms next to Bitcoin mining farms. This can also provide local communities with access to renewable energy.
Bitcoin is clearly not the problem here. It is just a demand tool for energy. Limiting the environmental impact is a matter of imposing appropriate regulations like carbon tax and environment-friendly practices. Bitcoin mining farms can actually be hubs for energy demand and production. Therefore, regulators can easily focus on specific energy producers and control their carbon emissions.
