What is the real impact of Bitcoin mining on the environment?

As of now, the number of Bitcoin transactions per day is as high as 150,000 to 400,000. As the difficulty of Bitcoin network computing power increases, the impact of mining on the environment has become more prominent.

Introduction to Bitcoin Mining System

The Bitcoin mining system refers to the use of computer hardware to perform mathematical operations for the Bitcoin network. Miners who provide services in this process can receive a reward. Since the number of tokens issued is calculated based on the tasks completed by miners, the competition for mining is very fierce.

Bitcoin mining started with low-cost hardware such as CPUs or GPUs, but as the difficulty of Bitcoin computing has increased, Bitcoin mining now relies mainly on ASIC mining machines, which require a lot of electricity to operate.

Electricity consumption forecast

According to statistics, Bitcoin and Bitcoin Cash currently consume about 70 terawatt hours (1 terawatt hour = 1 billion kilowatt-hours) per year. This means that the Bitcoin network requires more electricity than the entire countries of Switzerland and the Czech Republic.

Some believe that Bitcoin's electricity consumption will be on par with global electricity consumption in 2020. But Morgan Stanley (International Finance Corporation) said: "It is wrong to look at mining power consumption linearly, because the industry will also develop new hardware and conduct a series of practices to improve energy utilization, so as to have a more competitive advantage. " They added that this phenomenon has also occurred during the rapid development of industries such as marijuana cultivation and data operations.

Energy Trends

Bitcoin miners are looking for areas with cheaper electricity, and renewable energy can bring lower mining costs. As we all know, China is rich in coal resources. If the proportion of renewable energy in China increases, it will have a greater impact on the Bitcoin mining industry.

Research shows that China will achieve renewable energy electricity production costs lower than fossil fuels in 2021. This means that by 2021, more miners will join Chinese mines.

How big is Bitcoin's impact on the environment?

Many media outlets believe that Bitcoin has a significant negative impact on the environment. However, compared to the legal currency system, the energy consumption of Bitcoin production is not high.

Fiat cash requires a massive infrastructure to operate. In the United States alone, there are more than 6,000 banks that process cash transactions. For non-cash transactions, they rely on third-party service providers (such as Visa, MasterCard) and banks (such as JPMorgan Chase) to process payments. To compare the energy consumed by Bitcoin, the amount of resources consumed by these companies and their hundreds of thousands of employees should be taken into account.

Bitcoin is a peer-to-peer financial network. Due to its decentralized nature, transactions can be conducted without a third party. A can send $100 to B, and the transaction information will be broadcast to all mining pools. Miners will record the transaction as a data block. In return, miners will receive incentives in Bitcoin and transaction fees. This transaction system is much more efficient than the huge legal currency network, so cryptocurrency mining consumes less electricity.

Should Bitcoin change its consensus protocol?

Some developers have called on Bitcoin to change the POW consensus mechanism to the POS equity proof mechanism. Andreas Antonopoulos, a network security and Bitcoin expert, believes:

For other public blockchain networks like Ethereum that need to process a large amount of data per second to support large-scale distributed applications, the transition from POW to POS (Proof of Stake) is necessary. But for networks like Bitcoin, which is just a value storage network, the transition from POW to POS is not necessary.

in conclusion:

The Bitcoin POW mechanism cannot accurately predict future electricity consumption, but the banking system is also difficult to calculate. It is very likely that a new industry will emerge in the future that will allow us to better track the energy consumption of the financial system. In fact, the biggest impact of Bitcoin mining on the environment is that it promotes the establishment of distributed power plants, which changes the structure of existing power plants and accelerates the development of the renewable energy industry.