Three quarters of all Bitcoins traded worldwide are generated by computers in China – and the trend is rising. Researchers have now investigated in more detail what consequences this has for the country’s energy consumption and carbon dioxide emissions. According to this, the Bitcoin miners in China could already need almost 300 terawatt hours of energy per year in 2024 and emit 130 million tons of CO2. This would correspond to the total annual greenhouse gas emissions of countries like the Czech Republic or Qatar. If no countermeasures are taken, this first example of applied blockchain technology alone could torpedo the climate protection goals of China, but also the world.
Blockchain technology is seen as a promising method for processing transactions in a decentralized and secure manner in the future. The blockchain structure, which is secured and distributed using cryptographic computing operations, ensures that the transactions – for example, payment with Bitcoins or a contract – cannot be subsequently changed or falsified. In concrete terms, this means: Before a new block with transactions can be attached to the chain of the globally available blockchain, a cryptographic computing operation must be carried out for it. This so-called hash function generates a quasi-random sequence of digits and numbers from a text or other data. Once created, the details of the transaction are encrypted with this hash, and on the other hand they are tamper-proof, because every subsequent change also changes the hash. This technology can be used, for example, for financial transactions, but also to secure contracts, to control supply chains and in logistics.
Bitcoin industry’s carbon footprint
The problem, however, is the computational effort for the blockchain operations, as shown by the example of the blockchain-based cryptocurrency Bitcoin. The backbone of this system are the Bitcoin miners, whose high-performance computers solve the cryptographic functions that create new blocks for blockchains. Whoever delivers the hash for a transaction first receives money in the form of bitcoins. These incentives in combination with deliberately introduced obstacles mean that the Bitcoin miners are using ever more powerful and therefore more power-hungry processors. As early as 2018, researchers estimated that the global Bitcoin system would use as much electricity a year as Ireland or Denmark. Shangrong Jiang from the Chinese Academy of Sciences and his colleagues have now investigated in more detail what consequences this has for the greenhouse gas emissions of blockchain technology and its CO2 footprint.
As a case study, the research team chose the Bitcoin miners in China – the country in which around 78 percent of all Bitcoin mining operations worldwide are currently carried out. “Because of the proximity to the manufacturers of the special hardware and the access to cheap electricity, the majority of the mining facilities are located in China,” the scientists explain. “Without appropriate interventions and measures, however, the intensive blockchain operations in China could quickly become a threat to the country’s climate protection goals.” always for the most part electricity from coal – thus driving up the country’s energy consumption and CO2 emissions.
CO2 emissions like the Czech Republic
Jiang and his colleagues used a model to study how much emissions the Bitcoin mining industry in China generates each year and how things will develop over the next three years. To do this, they first determined the carbon footprint of the Chinese Bitcoin industry and initially simulated what would happen if the current trends continued until 2024 without major government intervention. According to the simulations, Bitcoin production in China alone could then consume 297 terawatt hours of energy per year. “This means that the Chinese Bitcoin blockchain will reach the energy consumption of countries like Italy or Saudi Arabia and rank twelfth in the country ranking of the largest energy consumers,” the researchers report. Because at least part of the necessary energy is still generated by burning coal, the Bitcoin miners in China would be responsible for the annual emissions of around 130 million tons of CO2. That would correspond to the emissions of small to medium-sized countries such as the Czech Republic or Qatar.
And within China, too, the bitcoin industry is one of the largest emitters of greenhouse gases: In 2024, the annual peak CO2 emissions of the bitcoin mining industry would be the tenth largest emitter among the 42 major industrial sectors in China, ”according to the researchers. In total, Bitcoin accounts for 5.4 percent of the national CO2 emissions budget. But that means: If blockchain technology continues to experience growth as before or even stronger, then this economic sector could become a serious problem for the climate balance of China – but also the world. “The high greenhouse gas emissions are a barrier to global efforts to reduce emissions in the near future,” emphasize Jiang and his team.
In their model, they also investigated how countermeasures could be taken by examining the effect of CO2 taxes or CO2 pricing on the one hand and the effect of government regulations on the settlement of Bitcoin miners only in certain, predominantly hydropower or other alternative energies served areas on the other hand. It turned out that current measures for CO2 pricing can hardly contain the development – they would hardly be lower in 2024 than in the initial scenario. On the other hand, concrete specifications for the placement and supply of the systems could be significantly more influential. That could cut CO2 emissions from the Bitcoin industry in half, according to the researchers. In their view, blockchain technology is only a promising future technology if the emissions problem can be dealt with. “Even if blockchain technology could play an increasingly important role in the economy – ultimately the decision to use this technology lies in the hands of the people,” the team emphasizes in conclusion.
Source: Shangrong Jiang (University of Chinese Academy of Sciences, Beijing) et al., Nature Communications, doi: 10.1038 / s41467-021-22256-3