Bitcoin (BTC) is currently the biggest cryptocurrency in the world and has been for some time. And with its massive popularity comes an enormous electricity consumption. A recent BanklessTimes.com data presentation shows that BTC accounts for as high as 77% of the electricity consumed on cryptos.
The Bitcoin network currently uses between 90 to 145 billion kWh annually, of which the U.S. accounts for 38% of the total hashrate. By mid-August 2022, estimates put the U.S’ share of global BTC electricity usage at between 33 and 55 billion kWh per year, which is comparable to the consumption of some nations, states, or critical energy services.
This could have serious environmental consequences. The American Crypto industry currently emits between 25 and 50 million metric tons of CO2 annually, of which the BTC network accounts for the most emissions. Growing BTC popularity threatens to escalate these emissions to dangerous levels.
Why is Bitcoin Such an Energy Guzzler?
Bitcoin’s high electricity consumption can be attributed to its proof-of-work algorithm and the block size limit. The proof-of-work algorithm requires miners to solve complex mathematical problems to verify transactions.
This process consumes a lot of energy since miners must use powerful computers to solve these problems. The block size limit also contributes to high electricity consumption since it requires more transactions to be verified.
Recently, there have been calls for new forms of mining that don’t require such a large amount of electricity. There are also plans to abandon proof-of-work mining altogether and move towards more sustainable models like proof-of-stake mining. If these changes are made, it could go a long way towards alleviating some of Bitcoin’s environmental concerns.
Bitcoin’s Link To America’s Climate Conservation Moves
As climate change continues to be a pressing global issue, it is important to discuss its potential risks and consequences. One major consequence of climate change is its financial impact. In 2021, climate disasters set back the United States $145 billion.
This number is only expected to rise in the coming years as climate change becomes more severe. Moreover, climate change risks reducing the U.S. GDP by 3% to 10% and U.S. federal revenue by 7% annually by the end of the century.
The United States is committed to reducing greenhouse gas emissions by 50% to 52% below 2005 levels by 2030 and achieving a carbon pollution-free electricity grid by 2035. This will put it on track to reach net-zero emissions no later than 2050.
Possible Policy Interventions
The U.S. must focus its crypto-asset policy on several key areas to meet these objectives. First, the policy should aim to reduce GHG emissions from crypto-asset operations. Second, it should avoid processes that will increase the cost of electricity to consumers or reduce the reliability of electric grids.
Thirdly, the policy should aim to support a clean energy transition that equitably benefits communities across the country. Likewise, it should target reducing electronic waste and pollution and resolve data gaps to manage electricity demand better.
By focusing on these key areas, the United States can develop a comprehensive crypto-asset policy to help it meet its climate objectives.