There’s been a lot of yadda about how Bitcoin is destroying the planet by doing all this ‘pointless’ mining, so it’s worth looking at how much Bitcoin is hurting Gaia now and the trends, then putting all that wicked nerdish debauchery into perspective (Note: I’ve done my estimates from scratch by looking back over the last year, but there have been other approaches that looked at it from a different perspective). You can probably guess from my tone the TL;DR from this: that the “oh noes!” is wrong and that Bitcoin compares favourably with Western Union and other economic activities (and it’s not a patch on the impact of gold and silver mining).
Firstly, let’s make it clear what Bitcoin mining is for. From a miner’s perspective mining is about making money from minting new bitcoins and collecting fees. From a Bitcoin user’s view mining is about providing a global payments system that’s practically free (compared to Visa and Western Union, at any rate). Indeed, the perspicacious Fed economist David Andolfatto points out that the latter is the purpose, and supplied by the self-interest of the former (in my opinion just one example of Satoshi’s genius in designing Bitcoin). That self-interest runs to about $2m/day at present:
Almost exactly a year ago I wrote about how Bitcoin mining works and gave some data for the (then) state-of-the-art in mining rigs: the 300MH/s of a GPU on a PC at 250W power consumption being replaced by the first generation of ASICs with 65GH/s at 350W. Here we are a year later where Avalon’s new rig does 1TH/s for 650W (about a hundred times more efficient than the GPU mining). The economics of mining have changed too. That GPU mining rig of 300MH/s costs 90¢/day in electricity to run and the revenue would be just 1¢/day (the owner would almost certainly be a part of a consortium to even achieve that). This is because the difficulty has shot up over the last year as ASICs came to replace GPUs:
It’s this ‘arms race’ that changes the economics and forces out inefficient mining rigs. Since only fools and governments spend 90¢ to make 1¢ it’s pretty certain that GPU mining has died out. A year ago the first ASIC rigs were making about 3.75BTC a day ($500 back then, $1500 today). Those same rigs today would be making 0.0053BTC a day (that’s $2.05) with a cost of $1.26. If I had one of those rigs I’d probably have scrapped it by now.
From this we can get a perspective on the energy efficiency of the Bitcoin network as a whole: it must be way better than the 833W/GH/s of the GPU rigs, better than the 5W/GH/s of the first ASIC rigs and worse than the .65W/GH/s of the newest generation. A year ago the whole Bitcoin network could do 62TH/s, and if that was done at 833W/GH/s then the Bitcoin network electricity consumption rate would have been 51MW. Today the new Avalon 1TH/s rig has an efficiency of 0.65W/GH/s and if this reflected the entire Bitcoin network efficiency that would imply a consumption at a rate of 35MW (that won’t be the case, but it can’t be that far off either). Overall, then, it’s reasonable to assume that the Bitcoin network as a whole consumes electricity at a fairly constant rate, and that efficiency improvement is a zero-sum game (as far as electricity consumption is concerned).
So let’s go with 50MW as an estimate of power consumption of the Bitcoin network and see what that looks like vis a vis kicking Gaia in the ovaries. The UK Government has produced a figure of 0.44548 kg of CO2e per kWh of grid electricity (PDF). That would imply 534 tonnes of CO2e per day, about the same as 4000 US households. Another comparison is with other related activities in the economy: Carnegie Mellon University has created the Economic Input-Output Life Cycle Assessment (EIO-LCA) method for estimating the impact of an activity based on its economic value. Putting $2m/day (the Bitcoin mining revenue) into the model gives 1320 tonnes CO2e (gold and silver mining), 200 tonnes CO2e (securities, commodity contracts, investments), and 788 tonnes CO2e (amusement parks and arcades). Bitcoin hurts Gaia far less than gold mining and even the frivolous unworthwhile activities of enjoying a ride in an amusement park. Those EIO-LCA model numbers put the economic value of the bitcoin transactions validated by the mining process as zero which is clearly wrong: this is the whole point to Bitcoin but it’s a starting point for looking at the impact. The Bitcoin mining CO2e emissions are roughly fixed so as Bitcoin scales up from 0.5 transactions per second to 2000 per second the CO2e per transaction will fall dramatically. Just for comparison Western Union did 28 transactions per second in 2012 (PDF) with 7000 employees to obtain $5.7bn of revenue. If its carbon footprint is in line with the rest of the finance industry that’s 1710 tonnes CO2e a day to run their payment network, three times that of the Bitcoin mining network (I suppose it is only fair to point out that there’s more to Bitcoin’s carbon footprint than just the mining: just as Western Union’s carbon footprint will include gadding about in corporate jets and sales conferences on how to leverage the brand in Nigeria, Bitcoin also has to account for all those SF startup launch parties with ironic vodka for the hipsters).
In short, Bitcoin does not have the “carbon footprint from hell“: a footprint of 534 tonnes CO2e/day compares favourably with other economic activities and other payment networks.
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