Bitcoin’s price has jumped nearly fivefold in the past year, but the rapid run-up is leading to significantly higher energy consumption for the popular cryptocurrency worldwide.
That’s largely because more people are competing to mine bitcoin – a process that involves solving complex mathematical problems that help verify digital currency transactions. Miners who solve these problems receive a share of bitcoin, and as more people who compete to mine them, the more energy it takes.
It’s difficult to measure exactly how much energy bitcoin mining consumes, but a new analysis by the New York Times shared some staggering data that puts the energy use in perspective:
- Bitcoin mining consumes around 91 terawatt-hours of electricity annually.
- That’s more annual electricity use than all of Finland, which is a country of 5.5 million people.
- That’s almost 0.5% of all electricity consumption worldwide, and a 10 times jump from just five years ago.
- And it’s more than seven times the electricity used by all of Google’s global operations.
Given bitcoin’s massive price appreciation in recent years, it’s not hard to expect the electricity consumption to continue to grow. Bitcoin is now worth about $50,000, a roughly fivefold increase from last year. It was priced at around $500 in 2016.
With increased competition, bitcoin mining has become an industry of its own, requiring specialized machines, servers, and huge data centers with enough cooling capacity to keep the computers from overheating.
As noted, the internal mining process itself has become more complex; according to the New York Times, a single desktop computer could easily mine bitcoin back in 2011, when the cryptocurrency had little following. Now, it takes roughly “13 years of typical household electricity” to mine a single bitcoin.
For those who have been following bitcoin and the broader cryptocurrency space, the environmental impact of mining has long been a problem to reckon with. Iran was rocked by power outages earlier this year that were partly blamed on bitcoin. In March, Bill Gates warned bitcoin was “not a great climate thing.” And U.S. Treasury Secretary Janet Yellen has called its energy use “staggering.”
In response, some asset managers are looking to address crypto’s environmental concerns. Michael Hanus, a senior managing director at the alternative investments platform RealBlocks, previously told Insider that asset managers are becoming increasingly aware of crypto’s sustainability issues.
Hanus made reference to ESG analysis, an investing philosophy that encourages firms to consider an investment’s environmental, social, and corporate governance impact. “A lot of managers, if you look at ESG, were originally focused on the ‘G,’ the governance aspects, in order to improve their portfolios. I think that’s shifting now, and there is additional emphasis on the ‘E’ and the ‘S’ of ESG,” Hanus said.
In other words, asset managers are trying to balance the possible negative environmental and social aspects of cryptocurrency with the money it can potentially earn investors.