China Banished Cryptocurrencies. Now, ‘Mining’ Is Even Dirtier.
China’s crackdown on cryptocurrencies upended the world of Bitcoin last year, triggering a mass exodus of “miners” — who use power-hungry computers to mine, or create, new Bitcoins — to new locations around the world.
Now, research has found that the exodus likely made cryptomining, which already uses more electricity than many countries, even worse for the climate. According to the peer-reviewed study, which appears in the journal Joule, the Bitcoin network’s use of renewable energy sources like wind, solar or hydropower dropped from an average of 42 percent in 2020 to 25 percent in August 2021.
One likely reason: Bitcoin miners lost their access to hydropower from regions within China that had powered their computers with cheap, plentiful, renewable energy during the wet summer months. Instead, a substantial number of miners migrated to nearby Kazakhstan, as well as farther afield to the United States.
In those countries, miners have been using more fossil fuels, mainly coal in Kazakhstan and natural gas in America. Coal and natural gas are both drivers of climate change because burning fossil fuels pumps vast amounts of planet-warming carbon dioxide into the atmosphere.
The researchers, from Vrije Universiteit Amsterdam, Technical University of Munich, ETH Zurich and the Massachusetts Institute of Technology, estimated that Bitcoin mining may be responsible for about 65 megatons of carbon dioxide a year, comparable with the emissions of Greece. “It’s bad news for Bitcoin owners because their holdings just got more dirty,” said Alex de Vries, a co-author of the paper.
“There was a lot of optimism that China banning Bitcoin mining would make mining more green,” Mr. de Vries said. “But the fact is, it was already a dirty business and it just got worse.”
The latest research adds to the debate about Bitcoin mining’s environmental effects at a time when the cryptocurrency’s standing in mainstream finance has grown. Mining for Bitcoin, in particular, has come under scrutiny because it is designed to become more difficult as more miners participate, making mining each Bitcoin more energy-intensive. (Ethereum, another cryptocurrency, is working on an alternative method that would use far less energy.)
There have been widely varying past estimates of the share of renewable energy sources that Bitcoin miners use. A survey by the Cambridge Centre for Alternative Finance put the global average of renewables used in mining at around 40 percent. The Bitcoin Mining Council, an industry group, has said the number was closer to 60 percent. And Coinshares, the digital-asset investment firm, has estimated that as much as 73 percent of the electricity Bitcoin miners use is powered by renewables.
One big reason for those differences is that it’s difficult to pinpoint the exact locations of all of the world’s miners of Bitcoin, by far the largest cryptocurrency. For several years now, Cambridge researchers have complied data on the global distribution of miners, based on information collected from four “mining pools,” or groups of miners that combine their computational resources. But that covered only about 44 percent of total Bitcoin mining activity as of October 2021.
The new research used the Cambridge location data, matching it with data on how carbon-intensive the electricity generation is in that country.
For the United States, the study used data from Foundry USA, a mining pool that allows for a further breakdown of miners’ locations, which is important because how electricity is generated, and how much renewables figure as part of the energy mix, varies across the country. But for other countries, that breakdown wasn’t available.
Chris Bendiksen, the Bitcoin research lead at Coinshares, said that his firm tapped location data gathered from financial disclosures, as well as proprietary industry data, to arrive at its estimates of renewable use. It also accounted for the fact that a growing number of miners in the United States were entering into contracts with natural gas drillers to use excess gas that would otherwise have been “flared” — intentionally burned off as waste — or else simply released into the atmosphere unburned and unused.
A Guide to Cryptocurrency
A glossary. Cryptocurrencies have gone from a curiosity to a viable investment, making them almost impossible to ignore. If you are struggling with the terminology, let us help:
Ultimately, the Bitcoin industry’s aim remained aligned with climate goals, he said. “I think we all agree that we need to move away from fossil fuels. We need to focus on building out and decarbonizing the grid,” he said.
Bitcoin could even support that goal, he said, by creating demand for any excess power generated by renewables, but shutting down instantly during a supply crunch. (In most of the world, however, excess renewable energy is rare.)
Benjamin A. Jones, an assistant professor in economics at the University of New Mexico whose research involves the environmental effects of cryptomining, said the latest findings seemed consistent with what he would expect, given the exodus of cryptominers from China, where they had enjoyed access to renewable hydropower.
“It is not a shock to me that when China banned mining there, miners left and went to other countries and these other countries tend to have less available spare renewable capacity for the mining camps,” he said. “If true, their implication is that Bitcoin mining is moving in the wrong direction.”
For all the latest business News Click Here