Despite its huge popularity, Bitcoin has recently come under scrutiny from environmentalists due to its energy-intensive mining process. It is well known that mining crypto assets requires significant electricity consumption. However, it is less well known that the mining industry has made strides in embracing renewable energy for its operations.
A new study has revealed that the Bitcoin mining industry has become the largest consumer of renewable energy. The data obtained from a recently developed analytical model showed that approximately 52.6% of the electrical power used in the Bitcoin network comes from renewable sources.
The Impact of Bitcoin Mining on the Environment
As the world’s largest blockchain network by market capitalization, Bitcoin consumes massive amounts of energy to power its network. This high power consumption is largely due to the complex cryptographic protocol, which uses Proof-of-Work (PoW) consensus.
In the PoW mining system, validation of new transactions and minting of coins are achieved by updating new blocks in the ledger. To create new blocks, the Bitcoin network engages miners in a fierce competition to solve complex cryptographic puzzles.
To arrive at the solution (a 64-digit hexadecimal solution called a hash), miners first use sophisticated computer hardware capable of producing billions of hashes per second. The process requires excessive amounts of electrical power and is also computationally intensive. The miner who wins this numerical guessing game adds the new block to the network and is rewarded with coins.
More computing power equals more chances of winning. For this reason, miners around the world have formed mining pools where they combine the hashing power of mining hardware to generate more guesses. This increases the demand for power to run these facilities and can sometimes even overload local infrastructure.
According to the Cambridge Bitcoin Electricity Consumption Index (CBECI), Bitcoin’s annual power consumption was estimated to be around 129 terawatt-hours (TWh). To put things in perspective, Bitcoin’s power demand exceeds the electrical energy consumed by some countries, including Norway (approximately 124 TWh/year).
The electricity generation process for Bitcoin mining also releases tons of greenhouse gases (GHG) into the environment. A renowned research center, Cambridge Center for Alternative Finance (CCAF), released a report on the greenhouse gas emissions of the Bitcoin network in September 2022. The report found that Bitcoin’s annual gas emissions amounted to nearly 48 million tons of CO2.2 equivalent (MtCO2e), about 0.10% of global greenhouse gas emissions.
Bitcoin’s shift to a greener future
While power consumption is undeniably high, Bitcoin has strived to reduce its share of the global energy crisis and climate change. Miners have opted for ways to make the hardware more efficient, but progress is still quite slow. Also, the community is turning to clean energy sources (such as solar, wind) to power their mining operations.
According to data in a recent report, the Bitcoin mining sector is recognized as the largest user of clean energy. The analysis report was presented on his website by researcher and former climate activist Daniel Batten. According to the analysis, between July 2019 and June 2023, the Bitcoin mining industry has seen an incredible increase in its renewable energy mix to nearly 52.6%.
According to the latest Q2 2022 report from the Bitcoin Mining Council (BMC), Bitcoin uses approximately 59.4% zero-emission energy sources. In contrast, the September 2022 CCAF report showed it to be only 37.6%. The analyst came up with a new model to understand the big difference in Bitcoin’s energy consumption data in these reports.
The model, Bitcoin Energy and Emissions Sustainability Tracker (BEEST), determines exactly how much green energy is driving Bitcoin mining. It includes factors that the CCAF has acknowledged in its report to exclude.
One such key parameter is off-grid mining, a mining process that uses non-traditional energy sources to reduce greenhouse gas emissions. The BEEST model also takes into account other factors including flare gas and vent gas extraction, off-grid mixed mining, current geographic hashrate, sustainable migration from Marathon, etc.
Taking all the prominent factors into account, the model depicts renewable energy sources with a staggering 52.6% share of the Bitcoin mining process. Another finding of the report states that the Bitcoin network uses approximately 4.49% more zero-emissions power each year. The analysis also debunked the CCAF report’s conclusion that the Bitcoin industry primarily uses coal as an energy source.
According to the data, Bitcoin has achieved an increase of more than 38% in its renewable energy mix over the past four years compared to other global industries (e.g. banking, gold). Therefore, Bitcoin is currently the largest user of renewable energy, while other sectors lag behind. The study also revealed that Bitcoin shows a remarkable reduction in greenhouse gas emission intensity from over 500 g/kWh (July 2021) to nearly 296 g/kWh (June 2023).
It boils down
Amid growing concerns from regulators about power consumption, Bitcoin recently emerged as the leading proponent of renewable energy. Bitcoin mining currently uses nearly 52.6% zero-emission energy resources, according to a new study. Moreover, the emission intensity has also decreased sharply over the past four years. From these recent findings, it can be safely concluded that Bitcoin mining is taking responsible steps towards a sustainable future.