The rapid surge in the cryptocurrency market can be likened to a gold rush, but it also comes with underlying dark sides. Research conducted by the United Nations has highlighted the significant environmental impact of cryptocurrency mining, particularly Bitcoin, on climate, water, and land.
1. Analysis of Bitcoin’s Energy Consumption
The research examined the activities of 76 countries engaged in Bitcoin mining between 2020 and 2021. During this period, the global Bitcoin mining network consumed 173.42 terawatt-hours of electricity, ranking 27th in the world if considered a nation. This energy consumption exceeded even that of populous countries like Pakistan.
With such a massive energy consumption, the associated carbon emissions are equally substantial, equivalent to burning 84 billion pounds of coal or operating 190 natural gas power plants. To offset the CO2 emissions from Bitcoin mining in 2021–2022, we would need 3.9 billion trees, an area equivalent to that of the Netherlands, Switzerland, or Denmark, occupying 7% of the Amazon rainforest’s tropical forest area.
Furthermore, the research underscores the heavy reliance of Bitcoin mining on fossil energy sources, with coal accounting for 45% and natural gas at 21%. Renewable sources like hydroelectric power, despite affecting water resources, still provide 16% of the electricity demand. Nuclear energy contributes 9%, while solar and wind energy account for 2% and 5%, respectively.
In the case of hydroelectric power, Bitcoin mining operations are equivalent to the water needed to fill over 660,000 Olympic-sized swimming pools, enough to meet the current water needs of over 300 million people in sub-Saharan African rural areas. Additionally, the global land footprint of Bitcoin mining activities during this period is 1.4 times the size of Los Angeles.
Notably, the research also reveals a strong correlation between the price of Bitcoin and energy consumption for Bitcoin mining. Specifically, Bitcoin’s price increase of 400% from 2021 to 2022 led to a 140% increase in the global Bitcoin mining network’s energy consumption.
2. The Necessity of Legal Framework
It’s essential to note that these findings do not encourage the use of digital assets. Rather, they advocate for investments in legal interventions and technological advancements to improve the efficiency of the global financial system without causing harm to the environment.
“Technological innovations often come with unforeseen consequences, and Bitcoin is no exception. Our findings do not promote the use of digital assets. Instead, they encourage us to invest in legal interventions and technological advancements to enhance the efficiency of the global financial system without harming the environment.” — Professor Kaveh Madani, Head of the Research Group
Interestingly, China has emerged as the largest Bitcoin mining nation, followed by the United States, Kazakhstan, Russia, Malaysia, Canada, Germany, Iran, Ireland, and Singapore.
In light of these findings, United Nations scientists have proposed a series of recommendations to governments to monitor and minimize the environmental impact of cryptocurrencies. They also support investments in energy-efficient digital currencies that have a lesser negative impact on the environment.