What is the real impact of Bitcoin mining on the environment?

What is the real impact of Bitcoin mining on the environment?

As the difficulty of the Bitcoin network hash rate increases, the issue of mining's impact on the environment has become more prominent.

Currently, the number of bitcoin transactions per day is as high as 150,000 to 400,000. As the difficulty of the Bitcoin network's hash rate increases, the issue of mining's environmental impact is also prominent.

An introduction to the Bitcoin mining system

The Bitcoin mining system refers to the use of computer hardware to carry out mathematical operations for the Bitcoin network. The miners who provide services in this process can get a reward. Since the number of issued tokens is calculated according to the tasks completed by the miners, the mining competition is fierce.

Bitcoin mining started with low-cost hardware such as CPUs or GPUs, but as the difficulty of Bitcoin’s hash rate has increased, today’s Bitcoin mining activities mainly rely on ASIC miners. Unfortunately, these miners require a lot of electricity to operate.

Electricity consumption forecast

According to statistics, bitcoin and bitcoin cash currently consume about 70 terawatt-hours per year (1 terawatt-hour = 1 billion kWh). This means that the Bitcoin network requires more electricity than the entire country of Switzerland and the Czech Republic consumes.

Morgan Stanley (International Finance Corporation) said: It is wrong to look at mining power consumption linearly because this industry will also develop new hardware and carry out a series of practices to improve energy efficiency and competitive advantage. They added that this phenomenon has also occurred in the period of rapid development of industries such as data operations.

How significant is Bitcoin's impact on the environment?

Many media believe that Bitcoin has a significant negative impact on the environment. However, compared with the fiat currency system, the energy consumption of the Bitcoin production process is not high.

Fiat cash operations require massive infrastructure. In the United States alone, more than 6,000 banks process cash transactions. For non-cash transactions, they rely on third-party service providers (such as Visa and MasterCard) and banks (such as JPMorgan) to process payments. To compare with the energy consumed by Bitcoin, the number of resources consumed by these companies and their hundreds of thousands of employees should be included.

Bitcoin is a peer-to-peer financial network. Due to its decentralized nature, transactions can be conducted without a third party. For example, a can send $100 to B, the transaction information will be broadcast to all mining pools, and the miners will record the transaction as a data block. In return, the miners will receive incentives in bitcoin and transaction fees. This trading system is much more efficient than the vast fiat currency network, so cryptocurrency mining consumes less electricity.

Should Bitcoin change its consensus protocol?

Some developers call on Bitcoin to change the POW consensus mechanism to a POS proof-of-stake mechanism. Cybersecurity and Bitcoin expert Andreas Antonopoulos believes:

For other public chain networks like Ethereum that need to process a large amount of data per second to support large-scale distributed applications, the conversion from POW to POS is necessary. But switching from POW to POS is unnecessary for a network like Bitcoin, which is just a store of the value network.

In conclusion:

The Bitcoin POW mechanism cannot accurately predict future electricity consumption, but it is also difficult for the banking system to calculate. A new industry will likely emerge in the future that will allow us to better track the energy consumption of the financial system. The most significant impact of Bitcoin mining on the environment is to promote the establishment of distributed power plants, which change the structure of existing power plants and accelerate the development of the renewable energy industry.