One of the most discussed consequences of the digital cryptocurrency Bitcoin is the environmental effects of the large electric consumption, due to the computational power needed to run the consensus algorithm Proof of Work.
TU Munich researchers Christian Stoll, Lena Klaaßen and Ulrich Gallersdörfer published a study on June 12, 2019 in the journal Joule that estimates the electric consumption of the network to 45.8 TWh and the effecting carbon emissions of the energy consumption to be ranged between 22.0 and 22.9 MtCO2. The resulting emissions are close to the environmental impact of larger cities such as Las Vegas and Hamburg or smaller countries Jordan and Sri Lanka.
You can access the study from here: https://doi.org/10.1016/j.joule.2019.05.012
Context and Scale
Blockchain technology has its roots in the cryptocurrency Bitcoin, which was the first successful attempt to validate transactions via a decentralized data protocol. This validation process requires vast amounts of electricity, which translates into a significant level of carbon emissions. Our approximation of Bitcoin’s carbon footprint underlines the need to tackle the environmental externalities that result from cryptocurrencies.
Blockchain solutions are increasingly discussed for a broad variety of use cases beyond cryptocurrencies. Although not all blockchain protocols are as energy intensive as Bitcoin’s protocol, environmental aspects, the risk of collusion, and concerns about control must not be ignored in the debate on anticipated benefits. Our findings for the first stage of blockchain diffusion and the externalities we discuss may help policy-makers in setting the right rules as the adoption journey of blockchain technology has just started.
Participation in the Bitcoin blockchain validation process requires specialized hardware and vast amounts of electricity, which translates into a significant carbon footprint. Here, we demonstrate a methodology for estimating the power consumption associated with Bitcoin’s blockchain based on IPO filings of major hardware manufacturers, insights on mining facility operations, and mining pool compositions. We then translate our power consumption estimate into carbon emissions, using the localization of IP addresses. We determine the annual electricity consumption of Bitcoin, as of November 2018, to be 45.8 TWh and estimate that annual carbon emissions range from 22.0 to 22.9 MtCO2. This means that the emissions produced by Bitcoin sit between the levels produced by the nations of Jordan and Sri Lanka, which is comparable to the level of Kansas City. With this article, we aim to gauge the external costs of Bitcoin and inform the broader debate on the costs and benefits of cryptocurrencies.