From Fossil Fuels to Fossil Fools

Bitcoin mining has long been criticized for its high energy consumption and associated carbon footprint. A study published in the scientific journal Nature Communications in 2018 estimated that Bitcoin alone could produce enough carbon emissions to raise global temperatures by 2°C within less than three decades. However, the situation is changing as the Bitcoin mining industry is finding innovative ways to reduce its carbon footprint and transition towards more sustainable energy sources. The International Energy Agency (IEA) notes that by 2030, the electricity consumption of the cryptocurrency industry could be fully decarbonized. Here are some interesting ways in which the industry is growing closer to those goals:

1. Renewable Energy Sources

   The Bitcoin Mining Council (BMC), a global forum of mining companies that represents 48.4% of the worldwide bitcoin mining network, estimated that in Q4 2022, renewable energy sources, primarily hydropower, accounted for 58.9% of the electricity used to mine bitcoin, a significant improvement compared to 36.8% estimated in Q1 2021. BMC emphasized that the Bitcoin mining hashrate (computational power on network) increased by 45% YoY in Q4 2022, while sustainable power increased by 1%.

2. Heat Recovery

   Mining equipment generates a significant amount of heat, which can be utilized for heating buildings or other processes, increasing energy efficiency. A University of Cambridge study found that approximately 16% of Bitcoin mining facilities use heat generated by mining equipment for heating purposes, which would have otherwise been wasted. The study also suggests that this percentage is likely to increase as more mining operations become aware of the potential benefits of heat recovery.

3. Energy-Efficient Hardware

   Energy-efficient hardware is essential in reducing the energy consumption of Bitcoin mining. ASICs, which are designed for the specific purpose of mining Bitcoin, are much more energy-efficient than traditional CPUs and GPUs. Computers that mine bitcoin are 58 times more efficient than they were eight years ago, according to a report by the Bitcoin Mining Council. Immersion cooling, which involves submerging mining equipment in a cooling liquid may be an interesting method as it can reduce the energy consumption of Bitcoin mining by up to 23%, a study at UC Berkley found.

4. Proof-of-Stake (PoS) or Hybrid Consensus Algorithms:

   Proof-of-Work (PoW) consensus algorithms, which are used by the majority of Bitcoin mining, are energy-intensive and have a significant carbon footprint. However, some cryptocurrencies are moving towards Proof-of-Stake (PoS) or hybrid consensus algorithms that consume significantly less energy. A study by the Ethereum Foundation found that PoS is ~2000x more energy efficient based on the conservative estimates and transitioning Ethereum from PoW to PoS could reduce its energy consumption by over 99.95%. The study also notes that the transition to PoS would make Ethereum more secure, efficient, and sustainable in the long term.

The BTC mining industry is making strides towards sustainability and it is only bound to increase.The Bitcoin mining council estimates 6x improvement in mining efficiency over the next 8 years along with a fact that Satoshi’s protocol reduces energy consumption incentives by 2x every 4 years (halving) pushing miners to be more efficient with resources. In conclusion, we can safely say that Bitcoin mining is guaranteed to be dramatically more energy efficient in the next 8 years.