Research: A fresh take on Bitcoin mining – Why using more energy can lead to abundance
Bitcoin mining and its energy consumption have recently been the subject of many heated debates. As governments and institutions around the world keep introducing new measures to combat pollution and climate change, Bitcoin’s energy-guzzling network sticks out like a sore thumb.
Various data aggregators and trackers work around the clock to provide the market with the exact amount of energy the network consumes. Many offer interesting comparisons with the goal to illustrate just how much power Bitcoin requires.
For example, some data shows that the amount of electricity consumed by the Bitcoin network in a single year could power the entire University of Cambridge for 758 years. The networks’ one-year energy consumption could also power all the tea kettles used to boil water in the U.K. for 23 years. Bitcoin also uses more power than all of the fridges and TVs, and almost twice as much power as all of the lightning in the entire U.S.
While popular, this narrative doesn’t paint a clear picture and intentionally obscures the broader context.
Data analyzed by CryptoSlate shows that Bitcoin’s share in the global consumption of energy is minuscule. According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin’s share in the global consumption of electricity is just 0.45%. This estimate might be slightly off today as it’s based on global energy statistics from 2018, but nonetheless puts Bitcoin’s consumption into a broader context.
Bitcoin’s share in the global consumption of energy (Source: The Cambridge Electricity Consumption Index)
Comparing the energy consumption of the Bitcoin network to gold further illustrates this point. Estimates from 2019 showed that gold mining consumes around 131 TWh of energy per year. Buy the effects gold mining has on the environment don’t stop with its consumption of electricity. Assessing an industry’s impact on the environment requires looking at the amount of pollution it causes — i.e. the carbon dioxide it releases into the atmosphere, the land it deforests, the water sources it contaminates, etc.
The energy consumption of gold mining compared to Bitcoin mining (Source: The Cambridge Bitcoin Electricity Consumption Index)
And while experts are still debating the sustainability of gold mining, the direct effect it has on the environment is visibly higher than Bitcoin mining.
However, governments and institutions around the world aren’t racing to instate strict bans on gold mining.
Unlike gold and other energy-guzzling industries, Bitcoin mining is extremely mobile. Without ties to any particular location, miners move wherever there is cheap and abundant power, setting up new facilities quickly and efficiently all around the world.
The mobility of Bitcoin miners was best seen in the summer of 2021 when a state-wide ban on crypto-related activities in China left thousands of mining operations seeking alternative locations. At the time, miners located in China’s hydropower-rich provinces accounted for almost three-quarters of the Bitcoin hash rate.
When faced with an imminent ban in China, miners quickly regrouped and began relocating — some to neighboring countries like Kazakhstan, and others overseas to the U.S.
Those that moved their operations to the U.S. benefited from the welcoming attitude of states like Texas and Wyoming. Bitcoin miners, besides their mobility, also have a unique advantage when it comes to energy consumption — they don’t compete with other industries for the same energy resources.
Bitcoin mining farms can tap into energy assets at the production point rather than getting their electricity through the regular power grid. This means that miners are able to soak up surplus energy that would have otherwise been lost or wasted — both reducing its impact on the environment and increasing its profitability.
According to the U.S. Energy Information Administration (EIA), around 5% of all of the electricity transmitted and distributed through power grids between 2016 and 2020 was lost. These losses accounted for around 206 TWh of electricity, which is enough to power the entire Bitcoin network 2.1 times. The natural gas lost through flaring and venting on oil fields could create 688 TWh of electricity, enough to power the entire Bitcoin network 6.9 times.
Comparing energy lost from various sources to the Bitcoin network consumption (Source: The Cambridge Bitcoin Electricity Consumption Index)
Some Bitcoin miners have seen the potential in these energy losses. Bitcoin miners in Texas have been turning off their ASICs to return power to the grid when demand is high and guzzling up excess energy when demand is low.
Several companies are also working on utilizing the natural gas found in oil fields. They use the gas that would have otherwise been flared or vented into the atmosphere to power generators that produce electricity used by Bitcoin mining machines. Killing two birds with one stone, this approach reduces the impact natural gas has on the environment and makes it profitable.
Another hugely important but often overlooked point when discussing Bitcoin’s sustainability is its effect on the economy.
Data centers around the world consume twice as much electricity as the Bitcoin network, but their economic value is so high any discussion about sustainability is out of the question. Air conditioners guzzle up almost 220 TWh of energy every year and are rarely the target of aggressive environmental marketing.
Comparing Bitcoin’s energy consumption to other large residential and industrial consumers (Source: The Cambridge Bitcoin Electricity Consumption Index)
Bitcoin’s increasing energy consumption can bring about economic prosperity that outweighs any effects it might have on the environment.
Countries with high energy usage universally rank high on the GDP per capita scale, showing that increased consumption correlates with increased living standards. Qatar, the UAE, the U.S., Switzerland, Japan, and Macao rank high when it comes to GDP and all consume high amounts of electricity per capita.
Graph showing the energy use per person compared to GDP per capita (Source: OurWorldInData.com)
Looking at Bitcoin mining through the eyes of economic prosperity and GDP shows that it’s not the environmental disaster many make it to be. While we can’t be certain that increased energy consumption effectively leads to economic abundance, we know for sure that the correlation is too high to ignore.
Growing energy consumption caused by an influx of Bitcoin miners would lead to a growth in a highly skilled workforce, bring a notable increase in income, and improve surrounding infrastructure. All while soaking up excess energy, renewable energy, and energy that would have otherwise been wasted.