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Why is Bitcoin mining worse than gold mining?

Researchers suggest potential regulation on Bitcoin mining as it has failed to meet any sustainability criteria

By Kiran N. Kumar

Researchers find digital cryptocurrency Bitcoin mining is more similar to impacting the environment with extracting and refining crude oil than gold mining.

Bitcoin mining is done by solving complex cryptographic hash puzzles to verify blocks of transactions that are updated on the decentralized blockchain ledger. When computers on the network verify and process transactions, new bitcoins are created, or mined.

Since it’s not feasible to mine just 1 Bitcoin, they mine one block, with the reward set at 6.25 Bitcoin per block. Each Bitcoin block takes 10 minutes to mine theoretically. If a miner is able to add a block to the blockchain, he gets 6.25 Bitcoins as a reward.

Read: Bitcoin may plunge below $10,000; Will it impact Web3? (August 30, 2022)

As of now, 19,164,612.5 Bitcoins or 756,338 Bitcoin blocks are in existence, which amounts to 91.260% of a supply cap of 21 million Bitcoins that can be mined.

At the current rate of 900 new bitcoins being mined per day or 144 blo, there is a scope for an additional supply of 1,835,387.5 Bitcoins before they reach 21 million cap and cease to be mined further. At the same time, the reward amount is reduced by half every four years.

In December 2021, Bitcoin had an approximately $960 billion market capitalization with a roughly 41% global market share among cryptocurrencies.

The average cost to mine bitcoin is estimated at $35,404.03, which is more than Bitcoin’s current value at around $19,441, so making 6.25 bitcoins is worth $12,150 or one-third of the value.

Moreover, mining requires huge amounts of electricity as per the Digiconomist’s Bitcoin Energy Consumption Index that estimated that one bitcoin transaction takes 1,449 kWh to complete, which is approximately equivalent to 50 days of power consumption by a US household.

Also, it produces excess heat running above 80-90 C (176-194F). In the US alone, the pollution caused by Bitcoin mining is 24.7 million tonnes of emission comparable to emissions caused by six million internal combustion cars per year, according to a study.

Read: As Bitcoin loses steam, blockchain moving into next generation (September 10, 2021)

Digital gold or climate damage?
In their publication in Scientific Reports, scientists from the University of New Mexico suggest that rather than calling it ‘digital gold’, Bitcoin should instead be compared to energy-intensive products such as natural gas and crude oil.

UNM Associate Professor Benjamin A. Jones says, “Bitcoin mining is becoming dirtier and more damaging to the climate over time. In short, Bitcoin’s environmental footprint is moving in the wrong direction.”

For the first time, the extent of Bitcoin’s climate damage was taken up for analysis by Jones and his colleagues Robert Berrens and Andrew Goodkind, who presented their estimates of climate damages from Bitcoin mining between January 2016 and December 2021.

In 2020 Bitcoin mining used 75.4 terawatt hours of electricity (TWh) – higher electricity usage than Austria (69.9 TWh) or Portugal (48.4 TWh).

“Globally, the mining, or production, of Bitcoin is using tremendous amounts of electricity, mostly from fossil fuels, such as coal and natural gas,” said Jones. “This is causing huge amounts of air pollution and carbon emissions, which is negatively impacting our global climate and our health.”

Read: Lure of Bitcoins: Greed blinds even the wise to risks (February 24, 2021)

The damage to the climate is more than a single Bitcoin is actually worth, pointed out researchers using three indicators – whether the estimated climate damages are increasing over time; whether the climate damages of Bitcoin exceeds the market price; and how the climate damages as a share of market price compared to other sectors and commodities.

They found that the CO2 equivalent emissions from electricity generation for Bitcoin mining have increased 126-fold from 0.9 tonnes per coin in 2016, to 113 tonnes per coin in 2021.

Calculations suggest each Bitcoin mined in 2021 generated $11,314 in climate damages, with total global damages exceeding $12 billion between 2016 and 2021.

Damages peaked at 156% of the coin price in May 2020, which means for each $1 of Bitcoin market value, it led to $1.56 in global climate damages.

Finally, the authors compared Bitcoin mining in terms of climate damage by other sectors such as electricity generation, crude oil processing, or precious metal mining.

Read: Gold Mining vs. Bitcoin Mining: Which Is More Harmful? (June 24, 2022)

Climate damages for Bitcoin averaged 35% of its market value between 2016 and 2021. This share for Bitcoin was slightly less than the climate damages as a share of market value of electricity produced by natural gas (46%) and gasoline produced from crude oil (41%), but more than those of beef production (33%) and gold mining (4%), they said.

Since Bitcoin has failed to meet any of the three sustainability criteria, the researchers suggest potential regulation on Bitcoin mining.

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