Bitcoin’s energy use is transparent and measurable; currently, almost half is from renewable sources. Importantly, Bitcoin is uniquely positioned to aid in our transition to renewable energy because it can help stabilize the power grid. By bringing Bitcoin to the source of power, we can more efficiently bring the power to us; this is a major technological leap in human history and could help bring energy access to every person in the world.
Bitcoin is transforming (and could completely replace) our existing financial system. Therefore, to accurately asses Bitcoin’s net impact on the environment we should compare apples to apples: Bitcoin’s energy consumption to that of our existing financial system’s. It turns out that Bitcoin is a far more efficient alternative.
Because Bitcoin is digital, as it scales up its rate of energy usage goes down; it can absorb more value without having to expend more “energy per value,” despite some of the news headlines you may have seen. Bitcoin’s energy usage per unit of value is programmed to go down every single day, forever.
Compare this to gold. Gold has to be physically transported, stored, and secured, which means the more gold there is, the more energy needed to transport, store, and secure it (more cars, planes, vaults, guns, etc). As gold scales up, its energy use scales up linearly as well.
Because Bitcoin is fully digital, this allows us to observe and record fine-grained details about its usage. We can “look inside” bitcoin and see every transaction, every online node, see the network’s difficulty level and hashrate, and from all the data estimate its energy usage.
Bitcoin mining is most profitable when cheap energy is used, and there is nothing cheaper than energy that would otherwise be completely wasted. In this way, Bitcoin is a boon for the environment. Here are two reasons why:
1. Stabilizing Renewable Energy
- The power grid is a “use it or lose it” system. Unless there are substantial batteries to store power or there is an adjacent town that could use it, any excess generated is lost.
- Furthermore, there are uncontrollable supply-and-demand dynamics that can throw a balanced system off, especially with renewable resources. The sun doesn’t always shine, the wind doesn’t always blow, and the rain doesn’t always fall. The worst situation is to have not enough supply when demand is high, but the opposite (too much supply, not enough demand) is also a problem.
- This is where Bitcoin comes in. Bitcoin is an unbiased, ever-ready, portable consumer of energy. When the wind is too soft during the day while consumer demand is high, Bitcoin miners can be turned off. If the wind picks up at night while everyone is asleep, the miners can be turned on. In this way, Bitcoin is the perfect lubricant to balance a grid relying on renewable energy.
2. capping flared natural gas
- Natural gas needs piping for transport (unlike oil, which can be barreled). If a pocket is inadvertently hit and there’s no pipe to route the resource, the gas is released into the atmosphere. To mitigate the methane, drillers will “flare” the gas (ie, light it on fire) which reduces the methane by 70-90%, but they are still releasing material into the atmosphere and missing out on using and/or monetizing the energy.
- This is where Bitcoin comes in. Bitcoin mining computers (roughly the size of personal computers) secure its network. These miners can be quickly brought in to utilize an unlocked pocket of natural gas; the gas can be short piped to a generator which powers the miners, after which 100% of the methane is prevented from entering the atmosphere and 100% of the energy is used, offsetting any losses.+
- Exxon Mobil has been piloting this very program for a year and has since expanded the operation.+
In the US, Bitcoin mining companies have formed The Bitcoin Mining Council to record and share information on energy usage. In their latest report they show that 58% of the energy used by bitcoin miners worldwide is renewable energy.+ If Bitcoin were a country, it would be the greenest country in the world.
references & Further reading
How Much Energy Does Bitcoin Actually Consume?, by Nic Carter
Mining Bitcoin Off Flared Gas, by MacKenzie Sigalos
Tesla, Block and Blockstream team up to mine bitcoin off solar power in Texas, by Mackenzie Sigalos
Impacts of Large, Flexible Data Center Operations on the Future of ERCOT by Joshua Rhodes et al.
Bitcoin Energy Consumption Debunked, by Emily Faria
Bitcoin Mining and the Grid (Part 1), by Blake King