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After China Ban, Cryptocurrency Mining Got Worse for Climate

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China’s crackdown on cryptocurrencies shook up the bitcoin world last year, triggering a mass exodus of “miners” – who use power-hungry computers to mine or create new bitcoins – to new places in worldwide.

Now research has found that the exodus has likely made cryptomining, which already uses more electricity than many countries, even worse for the climate. According to the peer-reviewed study, which appears in the journal Joule, the Bitcoin network’s use of renewable energy sources like wind, solar, or hydroelectricity increased from an average of 42% in 2020 at 25% in August 2021.

One likely reason: Bitcoin miners lost access to hydroelectricity from areas of China that had powered their computers with plentiful and cheap renewable energy during the wet summer months. Instead, significant numbers of miners have migrated to neighboring Kazakhstan, as well as further afield to the United States.

In these countries, miners use more fossil fuels, mainly coal in Kazakhstan and natural gas in America. Coal and natural gas are both drivers of climate change, as the burning of fossil fuels pumps large amounts of carbon dioxide into the atmosphere, which warms the planet.

The researchers, from Vrije Universiteit Amsterdam, Technical University of Munich, ETH Zurich and the Massachusetts Institute of Technology, estimated that Bitcoin mining could be responsible for around 65 megatons of carbon dioxide per year, comparable to Greece’s emissions. “This is bad news for Bitcoin owners as their holdings have become dirtier,” said Alex de Vries, co-author of the paper.

“There was a lot of optimism that China banning Bitcoin mining would make mining greener,” Mr. de Vries said. “But the thing is, it was already a bad deal and it only got worse.”

The latest research adds to the debate about the environmental effects of Bitcoin mining at a time when the cryptocurrency’s position in mainstream finance has grown. Bitcoin mining, in particular, has come under intense scrutiny as it is designed to become more difficult as more miners participate, making mining each bitcoin more energy-intensive. (Ethereum, another cryptocurrency, is working on an alternative method that would use much less energy.)

There have been widely varying past estimates of the share of renewable energy sources used by Bitcoin miners. A investigation by the Cambridge Center for Alternative Finance estimated the global average for renewable energy used in mining at around 40%. The Bitcoin Mining Council, an industry group, said the number was closer to 60%. And Coinshares, the digital asset investment company, has valued that up to 73% of the electricity used by Bitcoin miners is powered by renewable energy.

One of the main reasons for these differences is that it is difficult to determine the exact location of all Bitcoin miners in the world, by far the largest cryptocurrency. For several years now, Cambridge researchers have been compiling data on the global distribution of miners, based on information gathered from four “mining pools,” or groups of miners who combine their computing resources. But that only covered about 44% of total Bitcoin mining activity in October 2021.

The new research used location data from Cambridge, combining it with data on the carbon intensity of power generation in that country.

For the United States, the study used data from Foundry USA, a mining pool that allows for a further breakdown of miner locations, which is important because how electricity is generated and the amount of energy renewables in the energy mix vary from country to country. the country. But for the other countries, this distribution was not available.

Chris Bendiksen, head of bitcoin research at Coinshares, said his firm leveraged location data gathered from financial disclosures, as well as proprietary industry data, to arrive at its energy usage estimates. renewable. It also explained the fact that an increasing number of miners in the United States were contracting with natural gas drillers to use excess gas that would otherwise have been “flared” – intentionally burned as waste – or simply released into the pipeline. ‘atmosphere. unburned and unused.

Ultimately, the Bitcoin industry’s focus remained aligned with climate goals, he said. “I think we all agree that we need to move away from fossil fuels. We need to focus on building and decarbonizing the grid,” he said.

Bitcoin could even support this goal, he said, by creating demand for any excess energy generated by renewables, but shutting down instantly if there is a shortage of supply. (In most of the world, however, surplus renewables are rare.)

Benjamin A. Jones, an assistant professor of economics at the University of New Mexico whose research focuses on the environmental effects of cryptocurrency mining, said the latest findings seemed in line with what he expected, given of the exodus of cryptominers from China, where they had had access. to renewable hydroelectricity.

“It’s no shock to me that when China banned mining there, the miners left and went to other countries and those other countries tend to have less renewable capacity available for mining camps,” he said. “If true, their implication is that Bitcoin mining is going in the wrong direction.”