According to the research, hydro-power dominates the bitcoin mining energy source, and the energy consumption figures previously fed to the public are massively overblown.
Christopher Bendiksen, head of research, and Samuel Gibbons, analyst at at CoinShares Research, published a study evaluating whether mainstream claims stating Bitcoin mining’s energy consumption was excessive. And according to them, such claims are unfounded and overblown.
The energy consumption scare is one regularly used as an argument against Proof of Work (PoW)—which legacy Bitcoin (BTC) and Bitcoin Cash (BCH) follow, especially by those who push for the Proof of Stake (PoS) algorithm—towards which Ethereum will be switching, in the PoW vs PoS debate.
Below are some of the points from the CoinShares Research. For those who are intersted in reading their full paper, you can find it here.
Bitcoin mining’s energy consumption is overblown
According to the research, the mainstream ruckus surrounding the energy consumption of mining activities has no solid foundation, and is “sensationalist narrative.”
“The electricity consumption of the Bitcoin network is a hot topic, with much sensationalist narrative focused on the sustainability and carbon footprint of its power sources. There are widely cited sources claiming that the Bitcoin network has an overall power demand exceeding 65 TWh on an annualised basis and that its annual carbon footprint exceeds 32 million tonnes of CO2. Our findings strictly contradict both of these figures and we believe that they rest on incorrect assumptions resulting from inadequate research,” Bendiksen and Gibbons (2018).
Based on their calculations, previous numbers fed to the mass public about how much energy bitcoin mining uses up are massively and exponentially blown out of proportion.
“From our combined estimates of mining market composition, we calculate the current Bitcoin mining industry to draw approximately 4 GW of power. In contrast, the IEA estimates global cumulative installed capacity (2015) at 2760 GW. From these figures we calculate the total power usage of the Bitcoin mining network at 0.14% of 2015 global capacity. On an annualised basis this consumption corresponds to approximately 35 TWh, less than the annual energy consumption of Luxembourg, a country of 585,000 people. For comparison, the banking industry in London alone employed 148,000 people in February 2017.”
Miners are choosing renewable energy sources (hydro), and ‘recycle’ excess energy that would otherwise be wasted
As businesses would naturally gravitate towards lowering overhead costs to maximize profit, finding lower cost electricity sources makes sense. In fact, Chinese miners, I’ve been told, also turn to renewable energy sources for mining—in China, there are many sources not connected to the national power grid, and thus cannot be monitored by the government. This lets miners stay under the radar, since the government has been imposing energy restrictions for miners and will launch an investigation when large power consumption is detected. Bendiksen and Gibbons’ findings are consistent with this.
“Overall, we find that contrary to previously reported assumptions, bitcoin mining is largely driven on cheap renewable energy, dominated by hydro,” the research asserts, adding that fossil fuels are just not a very viable option for miners and are thus, used minimally for mining.
“Fossil fuels are not that popular in bitcoin mining for the simple reason that they are too expensive,” the research notes.
Additionally, much of the energy used are excess energy that would have otherwise been wasted. According to them, the same trend happens in Quebec, with Bitcoin miners flocked to utilize energy overflow from hydro power stations—which are also the go-to power source for miners in the north-western US, Norway, and Sweden.
“…some miners circumvented policies by the argument that bitcoin mining represents a form of energy recycling, somewhat akin to a battery, whereby excess electricity otherwise wasted is instead converted into an exchangeable store of value. This could represent a wider global opportunity for renewable power plants struggling with periodic overproduction.”
Overall, the researchers maintain that “the Bitcoin mining industry is relatively healthy, profitable and continues to grow at breakneck speeds,” adding that miners “have shown a strong will and ability to seek out the cheapest possible sources, wherever they may be.”