The Global Disparity in Bitcoin's Electricity Consumption: Data Insights

by Hossein Hassani and Steve MacFeely

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Introduction: The enigmatic realm of cryptocurrencies is often lauded for its innovation and the potential to revolutionize the financial landscape. At the forefront is Bitcoin, the original cryptocurrency, whose decentralized nature offers a level of security and freedom in financial transactions. However, beneath the allure of digital currency lies a significant environmental concern—its electricity consumption. Recent estimates place Bitcoin's annual electricity usage at a staggering 135 terawatt-hours (TWh), a figure that rivals the energy usage of some entire countries. This article delves into the implications of such consumption and examines various examples to contextualize this energy demand.

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Understanding Bitcoin’s Energy Consumption:

To understand Bitcoin's energy usage, one must first look at the mining process. Bitcoin mining is the method by which transactions are verified and added to the public ledger, known as the blockchain. This process requires computational power, as miners use specialized hardware to solve complex mathematical puzzles. The miner who solves the puzzle first is rewarded with new bitcoins and transaction fees. However, this process is energy-intensive due to the sheer amount of computational work involved.

Global Energy Comparisons:

Comparing Bitcoin's 135 TWh annual consumption to countries around the globe puts this figure into perspective. For instance:

Argentina: With an estimated energy consumption of 127 TWh in recent years, Bitcoin’s energy usage surpasses that of Argentina, highlighting the immense scale of its power requirements.

Sweden: Known for its robust commitment to renewable energy, Sweden consumed approximately 131 TWh in a recent year, just slightly less than the estimated consumption of Bitcoin.

Norway: Famous for its hydropower, Norway's annual energy usage is about 132 TWh, underlining the fact that Bitcoin’s energy consumption is not just a number—it competes with the national usage of highly developed countries. Ireland: A Beacon of Green Growth, Ireland’s total electricity consumption stood at around 33 TWh in a recent year. This represents roughly one fourth of the estimated annual electricity consumption attributed to Bitcoin operations globally. The comparison underscores the immense energy demand of cryptocurrency mining and invites critical discussions on its sustainability, especially when measured against the energy needs of entire nations.

Combining Several African Countries: If we were to combine the electricity consumption of several African countries, such as Kenya (~9 TWh), Tanzania (~7 TWh), and Ghana (~18 TWh), the sum (~34 TWh) would still be significantly less than Bitcoin's consumption. Even adding a few more countries to this list, such as Ethiopia (~9.5 TWh) and Uganda (~3.5 TWh), the total (~47 TWh) would be just about one-third of Bitcoin's energy usage.

When summed up, it becomes evident that Bitcoin's energy usage can eclipse the combined electrical consumption of multiple African nations. This comparison not only highlights the scale of Bitcoin’s energy demand but also raises questions about the global equity of energy consumption, especially when many regions still face significant energy access challenges.

Bitcoin vs. Household Consumption:

To further grasp the enormity, consider that an average Sub-Saharan African consumes about 0.5 MWh per year (500 kWh/year), though this number can vary significantly between urban and rural areas, as well as among different countries within the continent.

This means that the energy used for Bitcoin mining in one year could theoretically supply the electricity for approximately 270 million average African households annually. It's an illustration that highlights not only the significant energy demand of Bitcoin but also the vast disparity in energy consumption between high-energy-use activities such as cryptocurrency mining and the basic electricity needs of households, particularly in a context where many regions still face energy access challenges. This contrast may also feed into larger discussions about energy equity and the prioritization of energy uses in alignment with Sustainable Development Goal 7, which aims to ensure access to affordable, reliable, sustainable, and modern energy for all.

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Environmental Impact:

The environmental impact of Bitcoin’s electricity consumption is substantial. As the debate on climate change intensifies, the scrutiny of Bitcoin’s carbon footprint becomes more acute. Bitcoin's production and energy consumption have notable environmental impacts, particularly in terms of carbon emissions. Annually, the process of mining and maintaining the Bitcoin network is estimated to generate approximately 20 to 22 million metric tons of carbon dioxide. Further compounding its carbon footprint, the total emissions associated with Bitcoin's energy consumption reach roughly 65 megatons of CO2 each year. This level of emissions places Bitcoin's carbon output on par with that of many countries, marking the cryptocurrency as a significant contributor to global air pollution and climate change. These figures bring attention to the substantial environmental cost of maintaining digital currencies and fuel the debate on sustainable practices within the burgeoning crypto industry. Bitcoin as a Proxy:

It's important to emphasize that the choice of Bitcoin as a representative in this analysis, among the myriad of cryptocurrencies and digital currencies available, is primarily due to its widespread recognition and popularity. Bitcoin, often seen as the forerunner in the digital currency space, serves as an accessible and familiar example for illustrating key concepts in our analysis. However, it should be understood that the methodologies and insights derived from studying Bitcoin are not exclusive to it. In fact, these analytical approaches can be effectively applied to a broader spectrum of digital currencies. This adaptability and flexibility of our analysis mean that the findings and conclusions drawn from Bitcoin can provide valuable insights into the dynamics and characteristics of other digital currencies as well. Therefore, while Bitcoin is used as a primary example for ease of understanding and its notable status in the market, the underlying principles and analytical techniques are equally applicable to other cryptocurrencies, offering a gateway to understand the complex and evolving landscape of digital finance.

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Conclusion: Bitcoin's annual electricity consumption of 135 TWh is a figure that cannot be overlooked. It surpasses the energy usage of entire nations and raises significant environmental concerns. While the integration of renewable energy sources offers a semblance of hope, the cryptocurrency community and stakeholders worldwide must address these concerns to ensure that the quest for digital financial freedom does not come at an unsustainable environmental cost. As Bitcoin continues to mature, its energy consumption will remain a key point of discussion among advocates, critics, and observers alike.

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