Rampant Bitcoin mining could hamper efforts to keep climate change under control
Nations may struggle to reach their carbon reduction targets set by the Paris Agreement due to high energy usage from Bitcoin farmers a study has shown.
Bitcoin uses a proof-of-work system, generally dubbed bitcoin mining, which rewards miners with fractions of the cryptocurrency. The process uses powerful computers to solve complex, computational problems, an activity that is inherently energy intensive.
A study published in Energy Research & Social Science evaluates the financial and legal options available to lawmakers to moderate blockchain-related energy consumption and foster a sustainable and innovative technology sector. It recommends an approach that uses financial disincentives to ward people away from high energy usage blockchain systems in favour of more environmentally friendly technologies.
In May a report found that Bitcoin is using around 0.5 per cent of the entire world’s electricity, a massive percentage considering the relatively niche use case.
The report suggests imposing new taxes, charges, or restrictions to reduce demand by users, miners, and miner manufacturers who employ polluting technologies, and offer incentives that encourage developers to create less energy-intensive/carbon-neutral blockchains.
“Digital currency mining is the first major industry developed from Blockchain, because its transactions alone consume more electricity than entire nations,” said Jon Truby, assistant professor at Qatar University who worked on the research. “It needs to be directed towards sustainability if it is to realise its potential advantages. Many developers have taken no account of the environmental impact of their designs, so we must encourage them to adopt consensus protocols that do not result in high emissions.
“Taking no action means we are subsidising high energy-consuming technology and causing future Blockchain developers to follow the same harmful path. We need to de-socialise the environmental costs involved while continuing to encourage progress of this important technology to unlock its potential economic, environmental, and social benefits.”
Blockchain technology has been advocated as being capable of delivering environmental and social benefits under the UN’s Sustainable Development Goals.
However, Bitcoin’s system has been built in a way that is reminiscent of physical mining of natural resources – costs and efforts rise as the system reaches the ultimate resource limit and the mining of new resources requires increasing hardware resources, which consume huge amounts of electricity. Putting this into perspective, Truby said: “the processes involved in a single Bitcoin transaction could provide electricity to a British home for a month – with the environmental costs socialised for private benefit.
“Bitcoin is here to stay, and so, future models must be designed without reliance on energy consumption so disproportionate on their economic or social benefits.”