Scientists call Bitcoin ‘digital oil’ because of its climate impact

From a climate-damage perspective, Bitcoin acts more like ‘digital oil’ than ‘digital gold’. This is stated in a study by researchers in the economics department at the University of New Mexico.

Researchers found that from 2016 to 2021, for every dollar of Bitcoin’s market value created, there was an average of $0.35 in global climate damage.

“On this scale, Bitcoin mining sits somewhere between beef production and crude oil burned as fuel, and is orders of magnitude higher than wind and solar energy,” the study’s authors added.

They concluded that mining the first cryptocurrency has too many ‘red flags’ to be considered a sustainable sector of the economy. The network’s transition to the Proof-of-Stake (PoS) consensus algorithm would not radically change the situation, the researchers added.

“If the industry does not move from PoW to PoS, then this class of scarce digital commodities may need to be regulated. Such a delay is likely to lead to an increase in global climate damage,” the article says.

According to CCAF, the Bitcoin network currently consumes 94 TWh per year. By comparison, the annual energy usage of all refrigerators in the United States amounts to 104 TWh.

Meanwhile, losses in electricity transmission in the United States alone reach 206 TWh per year. This could power the Bitcoin blockchain twice as much, although power demand has fallen by 28% since mid-June.

According to CCAF, the share of green energy in mining stands at 37.6%. Bitcoin Mining Council in the second quarter of 2022 estimated this figure at 59.5%.

Earlier in September, the White House released report, in which it urged regulators to discuss imposing stringent measures on Bitcoin mining due to its large carbon footprint.

In the same month, the Environmental Working Group, a non-governmental environmental group, said there is a need for transition of Bitcoin to the Proof-of-Stake algorithm.

CCAF calculated that from the inception of the Bitcoin network up to September 21, 2022, Bitcoin miners produced 199.65 million tonnes of CO₂e. The annual figure stands at 48.35 million tonnes of CO₂, representing 0.1% of global emissions.

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