Carbon footprint and the environmental impact of Bitcoin mining

In the ever-evolving landscape of digital currency, Bitcoin has emerged as a front-runner, captivating the attention of investors, technologists, and environmentalists alike. At the heart of its operations lies Bitcoin mining, a process pivotal to the maintenance and growth of this decentralized network. However, this process is not without its environmental costs. The substantial energy requirements of Bitcoin mining have sparked a global conversation about its carbon footprint and the wider ecological implications. This blog post delves into the intricacies of Bitcoin mining's energy consumption, its impact on the environment, and explores potential pathways to a more sustainable future for this digital currency giant.

Table of Contents

• Why is Bitcoin Mining Energy Intensive?
• Factors That Affect the Carbon Footprint of Bitcoin Mining
• The Impact of Bitcoin Mining on The Environment
• What Can Be Done to Reduce the Carbon Footprint of Bitcoin Mining?

Why is Bitcoin Mining Energy Intensive?

Bitcoin mining operates on a Proof of Work protocol, mandating miners to solve intricate computational puzzles for transaction validation and blockchain expansion. Miners engage in a race to generate valid block header hashes by iterating through various nonce values. When a miner discovers a hash meeting the preset difficulty level, the block is added to the blockchain. As more miners join, the collective computational power escalates, forcing the difficulty higher.

This escalating difficulty is the root of Bitcoin mining's substantial energy consumption. Modern ASIC miners can execute trillions of hash calculations per second, demanding substantial electricity. At the time of writing, energy consumption stood at 131.57 TWh⁽¹⁾, but during the 2022 bull market, it surged to 204.5 TWh⁽¹⁾. The mining incentive structure, combining rewards and transaction fees, compels miners to continuously enhance their mining power, sparking an ongoing arms race.

Factors That Affect the Carbon Footprint of Bitcoin Mining

Mining Difficulty

Rising competition between Bitcoin miners leads to greater hash rate, which in turn escalates the difficulty level. This escalating difficulty necessitates more powerful ASICs, resulting in a further increase in hash rate and energy consumption. Consequently, as time progresses and difficulty rises, the energy consumption of Bitcoin mining also surges.

Due to the close relationship between energy consumption and carbon footprint, the growing mining difficulty has significantly expanded the carbon footprint. To illustrate, a Bitcoin mined in 2021 emits 126 times the CO₂e (carbon dioxide equivalent) compared to one mined in 2016—rising from 0.9 to 113 tonnes CO₂e per coin from 2016 to 2021⁽²⁾.

Hardware Efficiency

The efficiency of ASICs in Bitcoin mining is typically measured in joules per terahash (J/TH), representing the energy consumption required to perform one trillion hashes. A more energy-efficient ASIC (lower J/TH ratio) requires less electricity to perform the same amount of computational work. This results in a reduced carbon footprint compared to what a less efficient ASIC would produce for the same computational workload, assuming both ASICs use the same energy source.

Additionally, more efficient miners can be economically viable in regions with higher electricity costs, encouraging mining operations in areas with cleaner energy sources. On the other hand, less efficient miners might be concentrated in regions with cheap but environmentally unfriendly energy sources, contributing to a higher carbon footprint.

Mining Location and Grid Energy Mix

The environmental impact of ASIC miners is heavily influenced by their geographical location and the energy sources accessible there. Bitcoin mining operations rely on local energy resources, which significantly affect their carbon emissions. Furthermore, even though a grid may incorporate renewable energy, it doesn't guarantee a lower carbon footprint for Bitcoin mining operations. If renewable energy is not in surplus, using it for mining can cause deficits in the grid, which are typically compensated by fossil fuels, thus not necessarily reducing the overall carbon impact⁽³⁾.

While it's possible to approximate the distribution of Bitcoin's hash rate across different geographic regions, it's important to note that not all mining activities in a specific country or province rely solely on the local grid and its corresponding energy mix. In certain instances, a portion of the hash rate is derived from Bitcoin mining operations that are off-grid, or from activities that utilize gas flaring or venting.

The Impact of Bitcoin Mining on The Environment

Carbon Footprint Estimation

After examining the key factors influencing the Bitcoin Network's carbon footprint, we're now equipped to approximate its environmental impact.

Energy Mix Powering the Bitcoin Network

Firstly, let's delve into the energy mix fueling Bitcoin. According to the Cambridge Center for Alternative Finance, their analysis of geographic hash rate patterns reveals that fossil fuels, predominantly coal at 36.55%, account for 62.41% of Bitcoin's energy consumption in 2022. In contrast, renewable sources contributed only 26.28%. It's important to note, however, that while this model serves as a standard for estimating Bitcoin's greenhouse gas emissions, it isn't without its limitations.

One of the biggest limitations is the assumption that the energy mix of a region, including the electricity used for Bitcoin mining, mirrors the general energy mix of that region. This might not accurately reflect the actual carbon footprint of Bitcoin mining, as mining operations could be using different energy sources. Furthermore, the model excludes significant factors such as off-grid mining operations, the gas flaring/venting mining operations, and specific cases like ERCOT miners in the US. These exclusions could lead to either an overestimation or underestimation of the actual environmental impact⁽⁵⁾⁽⁶⁾.

Daniel Batten introduced an alternative model, BEEST (Bitcoin Energy & Emissions Sustainability Tracker), to address the shortcomings of the CCAF model. BEEST considers several critical elements overlooked by CCAF, notably two key areas: ERCOT's (Electric Reliability Council of Texas) role and off-grid mining operations. These factors are substantial, representing 24.99% and 27.9% of total Bitcoin mining operations, summing up to 52.89%. BEEST's analysis estimates that off-grid operations use an energy mix of 81% low-emission sources (renewables and nuclear) and 19% fossil fuels⁽⁷⁾. ERCOT's energy sources, as per their website, comprise 47.7% low-emission and 52.3% fossil fuel sources⁽⁸⁾.

Another critical area where the CCAF's data is not accurate is in the geographic distribution of hash rate, particularly in Kazakhstan. The CCAF estimated Kazakhstan's share of the global hash rate at 13.22%⁽¹⁰⁾. Originally, Kazakhstan was a major Bitcoin mining hub, predominantly fuelled by fossil fuels (87.6%). However, this scenario changed dramatically when Kazakh authorities cracked down on Bitcoin mining, leading to a massive exodus of mining operations. As a result, the hash rate share from Kazakhstan plummeted to an estimated 6.4%, a significant reduction from the CCAF's initial estimate⁽¹¹⁾.

Another aspect not adequately represented in the CCAF study is the transition of Marathon Digital Holdings. They relocated 100,000 of their ASICs, approximately 325MW, from coal-based to wind and solar-powered sites, a move not reflected in CCAF's analysis⁽⁹⁾.

The absence of carbon-negative Bitcoin mining operations in the CCAF study is another crucial omission. These operations, which use flare gas for their activities, effectively convert methane into CO₂. Methane is significantly more harmful to the environment than CO₂, being about 120 times worse over a 1-year period, 84 times more impactful over a 20-year period, and 28 times more damaging over a 100-year period. This conversion process thus plays a crucial role in reducing the environmental impact of these gases⁽¹²⁾. The BEEST model found that such carbon-negative operations contribute 1.15% to the total Bitcoin hash rate⁽⁷⁾.

Incorporating these factors, the BEEST model recalculates Bitcoin's energy mix, offering a contrasting view to the CCAF's findings. Coal, previously estimated by CCAF as the primary energy source at 36.55%, is now shown to be only 23.99% of the mix. The primary source is hydropower at 24.34%, followed by coal, gas (22%), wind (11.09%), nuclear (8.84%), solar (4.53%), other renewables (2.38%), other fossil fuels (1.69%), and flared gas (1.14%). This recalibration suggests that low-emission sources constitute 52.32% of Bitcoin's energy mix, while fossil fuels make up 47.68%⁽⁷⁾.

Bitcoin Mining Rig Efficiency

With an understanding of the Bitcoin Network's energy mix and global hash rate, we're close to determining its emission intensity. However, a key element is still missing: the efficiency of Bitcoin mining rigs.

Bitcoin mining technology has evolved dramatically, from the early days of CPU miners with kilohash per second (KH/s) capacities to today's highly efficient ASIC miners operating in terahashes per second (TH/s). Focusing on hardware from the three major manufacturers – Bitmain, MicroBT, and Canaan, which collectively hold an estimated market share of at least 85%⁽¹³⁾, – the CCAF estimated the average efficiency of Bitcoin mining rigs. They calculated a theoretical efficiency of 20.80 joules per terahash (J/TH) assuming the use of the most efficient ASIC miners, and 67.00 J/TH under the assumption of the least efficient yet profitable ASIC miners⁽¹⁴⁾.

However, in practice, miners often use a variety of equipment models, leading the CCAF to estimate a more realistic "best-guess" efficiency of 33.26 J/TH⁽¹⁴⁾. This estimate is based on a nonce distribution analysis method that identifies the type of hardware in use by their unique nonce generation patterns⁽¹⁵⁾. The method is further refined by considering factors like profitability, hardware depreciation, and delivery delays. Despite its thoroughness, this model has limitations. It can only estimate profitability based on electricity costs and other expenses, and the exact composition of operational hardware remains largely unknown. Additionally, the model doesn't account for other variables, such as unreleased or more efficient hardware used by manufacturers and discrepancies in hardware specifications⁽¹³⁾.

Estimating Bitcoin's Emissions

With the gathered data, we're now able to estimate the emissions associated with the Bitcoin Network. First, we calculated the average hash rate at 370.27 EH/s using daily hash rate data from Blockchain.com⁽¹⁶⁾ and the best-guess average mining hardware efficiency, which we computed at 33.61 J/TH from CCAF data⁽¹⁴⁾, for 2023. By assigning the hash rate share to each energy source and multiplying it with the average hardware efficiency, we can estimate the annual energy consumption for Bitcoin mining per energy source. The total emissions for each energy source are then calculated by multiplying the energy consumption in kWh with the emission factors, summing up to 40,485,164.75 tCO₂e/year.

Next, we factored in the impact of carbon-negative mining operations. Data from Crusoe, a mining company utilizing otherwise flared gas, indicates that 1MW of Bitcoin mining operations can reduce emissions by 9,482 tCO₂e/year⁽¹⁷⁾. Applying this to the consumption of Bitcoin mining operations using this energy source, we arrived at a mitigation of 1,345,335.544 tCO₂e/year. This figure was then subtracted from the emissions generated by other energy sources, resulting in a total of 39,139,829.21 tCO₂e for the Bitcoin Network's emissions in 2023.

In comparison to the CCAF's method, which estimated the annual emissions related to the Bitcoin Network at 70.94 MtCO₂⁽⁴⁾, accounting for 0.15% of global emissions⁽¹⁸⁾, our estimation is 52.93% lower at 39.14 MtCO₂, representing just 0.078% of global emissions.

It's crucial to note that this analysis solely considers emissions directly linked to Bitcoin mining, excluding associated energy-related emissions from cooling, internet, lighting, and other operational needs.

E-Waste Problematic

E-waste encompasses discarded electrical or electronic equipment and poses a growing environmental hazard. This includes the release of toxic chemicals and heavy metals into soils and the pollution of air and water due to improper recycling, which accounted for 82.6% of all e-waste in 2019⁽¹⁹⁾.

Bitcoin Mining and E-Waste Generation

A 2021 study estimated the e-waste generated by Bitcoin mining, calculating the average lifespan of ASIC miners at 1.29 years, based on factors like network hash rate, mining hardware efficiency, and profitability at electricity costs of 5 cents/kWh.

Considering the average weight of the hardware⁽¹⁹⁾, the study estimated Bitcoin's e-waste generation at 76.29 metric kilotons as of December 4th, 2023⁽²⁰⁾. The study's limitations center around the presumption that Bitcoin mining devices become e-waste when they are no longer profitable and cannot be repurposed. However, these devices could become viable again if Bitcoin's value significantly increases, leading miners to store rather than discard them⁽¹⁹⁾.

Three Key Points on E-Waste Estimation

• Pace of Hardware Development: The study's e-waste estimations coincide with a period where Bitcoin mining hardware development was outpacing Koomey's law (energy efficiency of computers doubles approximately every 18 months⁽²¹⁾. This rapid advancement, reaching the physical limits of silicon semiconductors, suggests that unless new technology emerges, the industry might slow down, potentially prolonging the lifespan of ASIC miners.
• Secondary Market for Hardware: Many ASIC miners aren't discarded or stored as the study suggests. Instead, they often find a second life in markets with lower energy costs, where they are still profitable.
• Type and Recyclability of E-Waste: The study doesn't delve into the specific types of e-waste and their recyclability within the Bitcoin mining industry.

Analyzing E-Waste Composition

The study's limitations center around the presumption that Bitcoin mining devices become e-waste when they are no longer profitable and cannot be repurposed. However, these devices could become viable again if Bitcoin's value significantly increases, leading miners to store rather than discard them⁽¹⁹⁾.

ASIC miners primarily consist of aluminum (used in cases and electronic components), silicon, copper, and iron (found in various electrical components). Plastics like Acrylonitrile Butadiene Styrene and polyesters, along with resins such as epoxy and fiberglass, are also common in components like fans and printed circuit boards. Other materials, in smaller quantities (<1%), include tin, lead, germanium, germanium arsenide, indium, zirconium, silver, and various rare earth elements. While we can't be certain that all these materials are used, as the exact composition of each electrical component varies, they are commonly found in similar devices.

Most of these materials are recyclable and do not contribute to e-waste toxicity. The primary toxic elements in this e-waste category, if present in ASIC miners, include lead, some rare earth elements, chromium, and germanium arsenide⁽²⁸⁾, but it's important to note that these toxic components, if they occur, are found in very small quantities. Therefore, while the Bitcoin mining industry does generate e-waste, the toxicity level of this waste differs significantly from other types of e-waste, partly due to the minimal presence of these hazardous substances.

Furthermore, Bitcoin mining could potentially help reduce toxic e-waste produced by batteries. Many renewable energy storage systems use batteries, predominantly Li-ion, which made up 95% of battery storage systems in 2015⁽²⁹⁾, to prevent energy curtailment. The Bitcoin mining industry, by utilizing surplus renewable energy, might indirectly reduce the demand for such battery systems, thereby mitigating toxic e-waste generation.

What Can Be Done to Reduce the Carbon Footprint of Bitcoin Mining?

Embracing Renewable Energy

A key approach to reduce the environmental impact of Bitcoin mining is to lessen reliance on fossil fuels and shift towards renewable or low-emission energy sources. However, this is often challenging, as many miners depend on national grids powered by varying energy sources. Although relocating to countries with greener energy grids is an option, it's not always feasible. But as nations globally aim to reduce fossil fuel use, Bitcoin mining is likely to become greener.

Off-Grid Bitcoin Mining: An Innovative Solution

Off-grid Bitcoin mining can address the common issues of renewable energy production: timing and location mismatches. This method could resolve problems like stranded energy and curtailment⁽³⁰⁾, leading to reduced emissions and increased profitability by pairing Bitcoin mining with renewable energy generation.

Adopting Carbon-Negative Energy Sources

Some Bitcoin mining operations, particularly those on oil fields using otherwise-flared gas, effectively create carbon-negative impacts by reducing methane emissions, which are 84 times more potent than CO₂ over a 20-year period⁽¹²⁾. With the extensive reach of the oil industry, there's significant potential for collaboration between these sectors to further reduce carbon emissions.

Moreover, Bitcoin miners are exploring the use of landfill gas, composed of about 50% methane⁽³²⁾, to power their operations. Utilizing landfill gas not only provides a power source but also helps in reducing methane emissions, further diminishing the carbon footprint of Bitcoin mining.

Maintaining the Protocol: Why Altering Bitcoin's Core Mechanism Isn't the Optimal Solution

Bitcoin operates on the Proof-of-Work (PoW) protocol, which is central to its transaction verification process. In PoW, miners compete to solve complex problems and validate transactions, necessitating substantial power use. This high energy demand is why PoW is known as an energy-intensive protocol⁽³³⁾.

A popularly suggested “solution” for reducing Bitcoin’s carbon footprint is to switch from PoW to Proof-of-Stake (PoS). In PoS, validators are chosen based on their stake in the blockchain, essentially the amount of cryptocurrency they commit to holding. This means those with larger holdings have more influence. PoS eliminates the need for energy-intensive puzzle-solving, significantly lowering energy consumption, as validators are mainly tasked with transaction verification and earn transaction fees⁽³³⁾.

However, the energy requirements of PoW are not as detrimental as often portrayed. While they contribute to Bitcoin's carbon footprint, this energy use is also what safeguards the Bitcoin Network. Crucially, it maintains Bitcoin's decentralized nature, allowing anyone to participate in mining with sufficient resources. It also provides robust protection against network attacks, requiring substantial energy to compromise the system. Furthermore, as previously discussed, Bitcoin's energy usage can aid in promoting renewable energy sources and even counteract methane emissions, demonstrating the multifaceted nature of PoW’s energy consumption.

Conclusion

As we navigate the complexities of Bitcoin mining and its environmental implications, it becomes clear that this issue is multi-dimensional, requiring a balanced and informed approach. From examining the carbon footprint to exploring innovative solutions like renewable energy sources, off-grid operations, and carbon-negative mining, this journey has highlighted both the challenges and opportunities that lie ahead. While maintaining the integrity of Bitcoin's core protocol, PoW, emerges as a non-negotiable aspect for its security and decentralization, the exploration of sustainable practices showcases the potential for Bitcoin mining to evolve in harmony with environmental stewardship. As the digital currency continues to grow, so too does our responsibility to foster a sustainable framework for its existence, ensuring that Bitcoin not only thrives as a financial asset but also contributes positively to the global environmental landscape.

References

1. (1) https://digiconomist.net/bitcoin-energy-consumption
2. (2) Jones, B. A., Goodkind, A. L., Berrens, R. P. (2022). Economic estimation of Bitcoin mining’s climate damages demonstrates closer resemblance to digital crude than digital gold. Scientific Reports, 12.
3. (3) Stoll, C., Klaassen, L.,  Gallersdörfer, U. (2018). The Carbon Footprint of Bitcoin. CEEPR WP, 018.  
4. (4) https://ccaf.io/cbnsi/cbeci/ghg
5. (5) https://ccaf.io/cbnsi/cbeci/ghg/methodology
6. (6) https://batcoinz.com/BEEST/
7. (7) BEEST model
8. (8) https://www.ercot.com/gridmktinfo/dashboards/fuelmix
9. (9) https://ir.mara.com/news-events/press-releases/detail/1267/marathon-digital-holdings-expands-deployments-with-compute
10. (10) https://braiins.com/stratum-v1
11. (11) https://www.nasdaq.com/articles/the-kazakhstan-mining-exodus-has-flipped-bitcoin-to-clean-energy-dominance
12. (12) https://www.bcg.com/publications/2023/methane-global-warming-potential
13. (13) https://ccaf.io/cbnsi/cbeci/methodology
14. (14) https://ccaf.io/cbnsi/cbeci
15. (15) https://coinmetrics.substack.com/p/coin-metrics-state-of-the-network-375  
16. (16) https://www.blockchain.com/explorer/charts/hash-rate
17. (17) https://k33.com/research/archive/articles/bitcoin-miners-can-strengthen-electricity-grids
18. (18) https://ccaf.io/cbnsi/cbeci/ghg/comparisons
19. (19) De Vries, A., Stoll, C. (2021). Bitcoin's growing e-waste problem. Resources Conservation and Recycling, 175.
20. (20) https://digiconomist.net/bitcoin-electronic-waste-monitor/
21. (21) https://semiengineering.com/knowledge_centers/standards-laws/laws/koomeys-law/
22. (22) https://www.asml.com/en/technology/all-about-microchips/microchip-basics
23. (23) https://emsginc.com/resources/basics-pcb-design-composition/#The_Composition_of_a_PCB_-_Printed_Circuit_Board_Components
24. (24) https://www.zeusbtc.com/ASIC-Miner-Repair/Parts-Tools-Details.asp?ID=231
25. (25) https://www.engineering.com/story/what-raw-materials-are-used-to-make-hardware-in-computing-devices
26. https://www.zeusbtc.com/asic-miner-repair/Parts-Tools-Details.asp?ID=2832
27. (27) https://www.sciencedirect.com/science/article/abs/pii/S0957582022003160#:~:text=Toxic%20metals%20(e.g.%2C%20lead%2C,%2C%20groundwater%2C%20and%20surface%20water.
28. (28) https://www.ecsenvironment.com/what-is-e-waste/hazardous-substances-in-e-waste/#:~:text=and%20brain%20disorders.-,Mercury,damage%20if%20ingested%20or%20inhaled.
29. (29) https://www.sciencedirect.com/science/article/pii/S266620272200060X#:~:text=Batteries%20integration%20with%20renewable%20energy,deal%20with%20wind%20energy%20curtailments.
30. (30) https://www.nrel.gov/news/program/2022/reframing-curtailment.html
31. (31) https://www.coindesk.com/business/2023/11/02/bitcoin-miner-marathon-tests-btc-mining-with-methane-gas-from-waste-landfill/
32. (32) https://www.epa.gov/lmop/basic-information-about-landfill-gas
33. (33) https://cointelegraph.com/learn/proof-of-stake-vs-proof-of-work:-differences-explained