Bitcoin Becomes New 'Nuisance' in Environmental Pollution [Im Juhyung's Tech Talk]

Bitcoin 'Mining' Using Computer Computing Power
Massive Power Consumption... 10-Fold Increase in Electricity Use Over 3 Years
Equivalent to Annual Power Consumption of Argentina with 45 Million Population

Cryptocurrency Bitcoin. / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung] Bitcoin is being identified as a new culprit of environmental pollution. As countries around the world strive to reduce carbon emissions to combat global warming, the surge in Bitcoin investments has caused a dramatic increase in the energy consumed by related activities.

As a type of cryptocurrency maintained through a special technology called 'blockchain,' Bitcoin inherently requires powerful computer processing capabilities, which in turn demand massive amounts of electricity. Consequently, concerns have arisen that Bitcoin could become an "electricity-guzzling hippo," negatively impacting the global environment.

◆The main source of Bitcoin's power consumption: 'Mining'

Most of Bitcoin's power consumption comes from an activity called 'mining.' Mining refers to the process of using computer processing power to maintain Bitcoin's 'blockchain network' and accumulating newly issued Bitcoins as a reward.

Typically, when we conduct financial transactions using regular currency, the transactions are mediated by financial institutions such as banks or credit card companies.

However, Bitcoin, which uses blockchain technology, maintains trust and transparency by having all users participating in transactions record and share transaction details on an electronic ledger without intermediaries.

In this process, the Bitcoin system collects all transaction data every 10 minutes, records it on the electronic ledger, and accumulates newly issued Bitcoins in users' electronic wallets?this process is called mining.

The problem lies in the enormous computing power required for this mining process. Decrypting computerized information and recording transaction details on the ledger is akin to solving very difficult mathematical problems.

A cryptocurrency mining farm. It operates by connecting so-called 'cryptocurrency miners' made up of Graphics Processing Units (GPUs). / Photo by Yonhap News

Because of this, Bitcoin investors specializing in mining or mining service providers use massive computers built by arranging thousands of Graphics Processing Units (GPUs). As a result, mining operations inevitably consume a significant amount of electrical energy.

◆Bitcoin mining power consumption rivals that of a country with 45 million people

Bitcoin's power consumption has been soaring every year. According to the 'Cambridge Bitcoin Electricity Consumption Index' developed by researchers at the University of Cambridge in the UK, Bitcoin mining power consumption, which was about 6.6 terawatt-hours (TWh) in 2017, surged more than tenfold to 67 TWh as of October last year. Furthermore, as of February 22 this year, it exceeded 129 TWh annually, nearly doubling again.

The 129 TWh power consumption level is comparable to the annual electricity consumption of Argentina, a South American country with a population of approximately 45 million as of 2020. This means that in just four years, the electricity consumed by Bitcoin mining has surged to match that of an entire country. This is why concerns are growing that Bitcoin could become an "electricity-guzzling hippo" in the future.

The location of so-called 'mining farms' where mining takes place is also problematic. Bitcoin mining farms are mainly located in developing countries to access cheap electricity, with China reportedly accounting for about 70% of the world's Bitcoin mining volume.

Although electricity prices are relatively low in these developing countries, a high proportion of their total electricity production relies on fossil fuel power plants that emit large amounts of carbon. In other words, Bitcoin mining can lead to increased carbon emissions.

Production line of Bitmain, a Chinese cryptocurrency mining machine manufacturer. / Photo by Yonhap News

◆Experts: "Bitcoin is not the only problem... The power issue of online services must be addressed"

As a result, some countries have banned Bitcoin mining to protect the environment.

According to the Chinese economic media 'Caixin' on the 2nd (local time), the Development Planning Commission of the Inner Mongolia Autonomous Region recently announced plans to completely shut down Bitcoin mining farms in Inner Mongolia by the end of April. Inner Mongolia is home to one of China's largest Bitcoin mining farms.

According to the media, the commission decided to fully close the mining farms due to the energy inefficiency of cryptocurrency mining. The commission classifies cryptocurrency mining, along with steel, graphite, and coal-fired power generation, as backward and energy-excessive industries from an environmental perspective and plans to phase them out swiftly.

Experts point out that it is necessary to reconsider not only Bitcoin but also the power sources used for online networks themselves.

Andrew Hatton, an IT expert at the environmental organization Greenpeace, said in an interview with the US 'CNBC' last month, "As the data of cyber currencies grows, the amount of power required to maintain them is also increasing. But the bigger and more complex problem is the power used by online services themselves."

He added, "Currently, only one-fifth of the world's computer power, including data centers, operates on renewable energy. This is a long-term problem humanity must solve."