Bitcoin’s environmental impact stems from bitcoin mining. Bitcoin mining is a process whereby new bitcoins are created and awarded to computers that solves a complex series of algorithms. The system incentivises computers to do the work of running the bitcoin network, without having any centralised bureaucracy.
The process is energy-intensive, due to the complex mathematical calculations that must be completed to create each and every new bitcoin.
The environmental impact comes from the carbon emissions associated with the energy used by mining computers. Bank of America (BAC) said in a March note that bitcoin carried an “enormous environmental costs” and estimated that its carbon footprint was equivalent to the annual emissions of 1.8m cars.
“The network emits today about 60 million tons of CO2, the same as Greece,” it said in a note. “We believe ESG-minded [environmental, social, and governance] investors have to pay attention to the enormous environmental costs of Bitcoin.”
Bitcoin mining accounts for 0.7% of the world’s electricity consumption, according to the University of Cambridge. Its annual consumption is just less than Egypt and more than Malaysia and Sweden. it has soared in recent months.
Cambridge estimated the amount of electricity consumed by the bitcoin network in one year could power all tea kettles used to boil water for 33 years in the UK.
The source of bitcoin’s energy — as well as the scale — is also a worry. China leads the way by a mile in terms of hashrate, a measure of the computational power used per second when mining. In April 2020, China’s hashrate was 65%. Second on the list was the US (7.2%) followed by Russia (6.9%) and Kazakhstan (6.2%).