Acton Institute Powerblog

Does Bitcoin Have an Energy Problem?

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bitcoin-minerOver the past couple of years I’ve fallen into a habit of infrequently pointing out the flaws, dangers, and threats to Bitcoin as a viable cryptocurrency. While I find the experiment in alternative currency intriguing, I’m just as intrigued by criticisms made against Bitcoin. Even if Bitcoin ultimately fails, it will provide numerous valuable lessons about peer-based innovation, and the criticisms that were warranted can help us avoid pitfalls in the future.

We won’t know, of course, which criticisms are valid or what will lead to the downfall of Bitcoin until after it happens (my guess is will be due to government regulation). But some criticisms are more interesting than others. Take, for instance, this point that I had never considered before: it takes a lot of energy (and money) to produce a single Bitcoin.

I was aware that the process of Bitcoin mining requires substantial computing power and therefore must use up some amount of electricity. It just never occurred to me, until economist John Quiggin’s recent article, how much energy (and money) were required:

In the early days of Bitcoin, the computations in question could be performed on ordinary personal computers. Nowadays, however, ‘miners’ use special purpose machines optimised for the particular algorithms used by Bitcoin. With these machines, the primary cost of the system is the electricity used to run it. That means, of course, that the only way to be profitable as a miner is to have access to the cheapest possible sources of electricity.

Most of the time that means electricity generated by burning cheap coal in old plants, where the capital costs have long been written off. Even in a large grid, with multiple sources of electricity, Bitcoin mining effectively adds to the demand for coal-fired power. Bitcoin computers run continuously, so they constitute a ‘baseload’ demand, which matches the supply characteristics of coal (and nuclear). More generally, in the process of decarbonising the energy supply system, any increase in electricity demand at the margin may be regarded as slowing the pace at which fossil fuels can be phased out.

The cost of coal-fired electricity can be as low as 5c/kWh for industrial users; mining with electricity costs above 10c/kWh is usually unprofitable. With the coin price currently a little above $US200, optimized systems can break even with electricity requirements of around $150 for each coin. At 5c/kWh, that’s three megawatt-hours (MWh) per coin. That corresponds, in turn, to about three tons of carbon dioxide for coal-fired electricity. Even at 10c/kWh, each Bitcoin mined using coal-fired power is associated with 1.5 tons of CO2 emissions.

The total circulation of Bitcoin is capped at 21 million, at which point there will be no more mining. Currently, there are just over 14.7 million in circulation. That leaves 6.3 million to be mined. At a cost of $150 a coin and 1.5 tons of CO2, it will cost nearly a billion dollars and create over 9 million tons of CO2 just to produce the remaining Bitcoins.

If we assume that all Bitcoins were mined as cheaply as $150 a coin, then it cost $3.1 billion to pay the electricity costs to put all those coins in circulation. It would also have created 31.5 million tons of CO2.

You don’t have to be a hysteric about climate change to find those figures troubling. That’s a lot of wasted energy for a “make-work” project. When this externality becomes more widely known, will it cause people to cool on Bitcoin?

Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).


  • jadaman

    Um maybe some other types of energy should be considered for CO2 calc? Somewhat biased on the coal side no?

    • Coal is the example used because it’s often the cheapest forms of energy. If you want to calculate the cost of Bitcoin mining using more expensive forms that can certainly be done.

      • Tom Mornini

        Yeah, and it can certainly be done using cheaper forms of energy such as hydro, geo-thermal and solar.

  • cloudswrest

    “The total circulation of Bitcoin is capped at 21 million, at which point there will be no more mining.”

    Uhhh, no. Mining will continue. Miners will then be collecting tips (i.e., user fees). Mining is the critical step for validating/encryption signing the block chain blocks.

    • As I noted in a comment above, calling the validation process “mining” is unnecessarily confusing and leads to misunderstanding about why people engage in Bitcoin mining in the first place (i.e., to “discover” Bitcoins and to makemoney).

  • Proof of Stake beats Bitcoin’s Proof of work when it comes too energy consumption . Peercoins and Dopecoins are built on a better protocol than bitcoin and is much much greener.

  • Nanok Bie

    Yeah, why bother with research before publishing, @joecarter? Typical “economist” mindset … @JohnQuiggin @1cyrilblanc1

  • I wonder how that compares with the cost and pollution of mining gold. BTW, fiat currency isn’t so much the problem in the world as fractional reserve banking. When people start lending in bitcoins then it will become part of the problems

  • *** Love how the whole thing is written from the point of
    view of ‘when Bitcoin fails’.***

    I don’t know anyone who understands how currency regulation works that thinks
    Bitcoin can truly succeed as a mainstream form of currency.

    If your definition of success is that Bitcoin will live on
    as a form of peer-to-peer stock that can be used to buy things by a small
    minority of people, then maybe it will be a “success.” But when the U.S.
    government treats Bitcoin as property, it is never going to be used by the
    mainstream as a currency.

    *** ummm… you even know how the blockchain works? Lol***

    I realize that even after all Bitcoins are in circulation that some process for
    verifying the blockchain will continue. But to refer to that as “mining” is
    unnecessarily confusing and leads to misunderstanding about why people engage
    in Bitcoin mining in the first place (i.e., to “discover” Bitcoins and to make

    • Tom Mornini

      > I don’t know anyone who understands how currency regulation works that thinks Bitcoin can truly succeed as a mainstream form of currency.

      Funny. I don’t know anyone who understands technology who believes Bitcoin can be controlled any more effectively than Torrent networks.

  • ***You are fear monger — shame on you!***

    No, I am a realist who doesn’t brush off criticism just because it undermines a
    popular project.

    ***That’s in the next 100 years.***

    No, that is in the next 25 years. The last Bitcoin is projected
    to go into circulation in 2040 (see:

    ***Do you believe it’s a problem that Bitcoin will produce
    1/1000 (millions -vs- billions) of CO2 in the next 100 years as mankind
    currently produces per year? That doesn’t even constitute a drop in the bucket!***

    Do I think the production of millions of tons of CO2 over the
    next 25 years for a process that is needlessly energy-intensive is a problem?
    Yeah, I sort of do. And many other people will too.

    ***And do keep in mind that
    Bitcoin’s usage would surely reduce banking industry CO2 use more than it

    No it won’t. Bitcoin will never replace any sector of the banking industry. If
    it lives on, it will be as an underground form of payment, not as a mainstream
    (i.e., regulated) form of banking.