Bitcoin mining in 2020 used more energy than Austria or Portugal, and its emissions as a proportion of market value were comparable to the beef industry, a new study has found.
The research, published in Scientific Reports this week, calculated energy intensity of Bitcoin mining, and annual emissions from mining between 2016 and 2021.
Using those figures, the researchers estimated the potential cost from climate and health impacts that those emissions would incur.
They found Bitcoin mining used, on average, more than 75 terawatt-hours per year — greater than the energy budget of some countries.
Between 2016 and 2021, emissions to produce each coin increased from under a tonne to 113 tonnes per coin, according to the researchers.
When they compared the potential cost of climate damages from those emissions with other industry emissions, as a proportion of their market value, they found Bitcoin mining was less costly than fossil fuel production, but slightly more costly than beef production.
Bitcoin mining's estimated health and climate impact costs, as a share of market value, were several times greater than gold mining, they found.
During periods when Bitcoin's market value slumped, the estimated climate costs from mining emissions overtook the value of the coin itself.
Bitcoin model purposefully energy intensive
Bitcoin uses the "proof of work" or PoW protocol. This gives the currency built-in security, but also makes it intentionally laborious to mine, according to economist John Hawkins from the University of Canberra.
Essentially how proof of work operates is transactions are verified by computers solving mathematical problems that, once solved, are easy to check.
But as mining competition grows, the system adjusts to make the equations more difficult.
That's created an "arms race", Dr Hawkins said, with ever-more processing power needed to mine the coins.
"When Bitcoin first started, you could solve the problem using a home computer in your bedroom.
"The only people with a chance of solving the problem first today are people who have vast warehouses of these computers whirring away."
In that regard, the code is wasteful by design, and will continue to use more energy as mining competition grows.
Though some cryptocurrency miners claim to use renewable energy for mining, placing more demand on the overall grid still increased the demand for fossil fuels, said economist John Quiggin of the University of Queensland.
"The excuses Bitcoin fans make, that they use renewable energy, sometimes don't stand up," Professor Quiggin said.
Cleaner alternatives exist
There are alternatives to the Bitcoin model.
Ethereum, one of the most popular cryptocurrencies behind Bitcoin, has switched from proof of work to "proof of stake", or PoS.
Under that system, crypto transactions are validated by other Ethereum owners who stake large quantities of their blockchain tokens or coins, as collateral.
Ethereum estimates the switch, which was made this year, will reduce emissions by as much as 99 per cent.
Though the switch in models appears to be going well for Ethereum, Dr Hawkins said it was a very difficult process, and there's likely to be resistance within the crypto community to Bitcoin following suit.
"Some people said it was like trying to change the engine in the plane while it was flying," he said.
"There are these hardline Bitcoin fanatics saying, 'you can't change Bitcoin.'"
And because the cryptocurrency is a decentralised platform, it's very difficult for governments to force them to change their practices, he said.
"It's not like there's a Bitcoin company you can take to court, or a Bitcoin CEO you can hold responsible."
However, he said governments could regulate how institutions such as banks deal or don't deal with the currency.
Greenpeace USA has launched a campaign called "Change the Code, Not the Climate" to try to pressure Bitcoin to change to a similar model to Ethereum.
In a statement last month, Greenpeace USA special project manager Rolf Skar said it was incumbent on companies using Bitcoin to force the change.
"We're in a climate crisis and everyone has a responsibility to act," Mr Skar said.
"With Ethereum's move to an energy-efficient protocol, it's time for Bitcoin to change.
"Companies promoting and profiting from Bitcoin, like Fidelity Investments, BlackRock, Paypal and Block, have a responsibility to be a part of building a better, climate-friendly Bitcoin."
