Why Bitcoin Miners Don't Use More Renewable Energy
Though 76% of proof-of-work miners say they use renewable energy as part of their fuel mix, renewables comprise just 39% of the total energy consumption of the world’s cryptocurrency miners, according to a survey by Cambridge University’s Centre for Alternative Finance, published late last month.
To mine cryptocurrency, computers race to solve complex computational puzzles. Since brute force is the only way of solving these puzzles, only the most powerful—and therefore most power-hungry—computers make a profit.
The Cambridge’s Bitcoin Electricity Consumption Index estimates that Bitcoin miners use a 7.55 gigawatts worth of electricity a year. An alternative metric produced by Digiconomist estimates that Bitcoin mining produces a carbon footprint comparable to that produced by Denmark, and an energy consumption that rivals Colombia’s.
From a pool of 280 major crypto companies in 59 countries, Cambridge’s survey shows that 62% of mining companies said they used hydroelectric power to power cryptocurrency miners; 17% said they used wind; 15% used solar and 8% incorporated geothermal power.
However, the survey also shows that of the total energy consumed for cryptocurrency mining, only 39% comes from renewable energy sources. The other 61% comes from non-renewable energy, such as fossil fuels like coal.
How Hydroelectric Volatility In China Makes Renewables Expensive
According to Cambridge’s Bitcoin Electricity Consumption Index (CBECI), the Asia-Pacific region produces 77% of Bitcoin’s hashpower. And according to the survey, 65% of hashers from that region said they relied equally on hydroelectricity and coal.
This is because Chinese mining companies rely on cheap hydroelectric power in the wet season of Sichuan province, then up sticks once the dry season starts in October and relocate to colder provinces, like Xinjiang, where they rely on fossil fuels but scrimp on cooling costs.
Alex de Vries, founder of Digiconomist and creator of the Bitcoin Energy Consumption Index, told Decrypt, “Bitcoin miners would probably love to have access to cheap excesses of renewables like this throughout the whole year, but the reality is that those excesses simply aren't there outside the summer period.”
De Vries said that climate change could make the cheap hydroelectric power of Sichuan less attractive to miners, since shifting rainfall patterns, draughts and floods make it difficult to get a steady supply of cheap electricity.
“It shouldn't come as a surprise that we actually see significant increases in mining activity
in (fossil fuel dependent) countries like Kazakhstan and Iran,” he said, as Cambridge found those regions powered 10% of the Bitcoin hashrate, according to data from September.
“Bitcoin mining is a 24/7 operation, all year long. They require both cheap AND consistent energy. You're simply not going to get that from renewable energy sources alone,” he said. In places like Kazakhstan and Iran, which offer cheap fossil fuels, “miners can obtain cheap energy all year round.”
How "green" is the #Bitcoin mining network over time, visualized. pic.twitter.com/9v3zdzVEc7
— Digiconomist (@DigiEconomist) September 7, 2020
A chart from Digiconomist illustrates this point. Miner competition and cost efficiency has made Bitcoin mining less “green” over time. Unless less energy-intensive mining algorithms are developed or breakthroughs in renewable energy discovered, the environmental footprint of Bitcoin mining will only get worse.