Environmentalists…fret about how much energy bitcoin uses. In a paper in Nature Communications, a group of academics…examine bitcoin’s energy use in China. They conclude that, in the absence of legal curbs, bitcoin could by 2024 become a “non-negligible” barrier to China’s efforts to decarbonize its economy.

Bitcoin’s hunger for energy stems from its design. It forgoes centralised record-keeping in favour of a “blockchain”, a transaction database that is distributed among users. The blockchain is maintained by “miners”, who validate transactions by competing to crack mathematical puzzles with solutions that are hard to find but easy to check. Each successfully mined block of transactions generates a reward, currently 6.25 bitcoins ($357,000).

The system varies the difficulty of the puzzles to ensure that one new block is created, on average, every ten minutes. High bitcoin prices make it worthwhile to spend more computing power—and therefore electricity—chasing mining rewards…

Despite the currency’s democratic ambitions, mining is concentrated among a handful of professional operators. About 70% takes place in China. Scientists have concluded that, without regulation, Chinese bitcoin mining could consume around as much energy as Italy or Saudi Arabia by 2024. Annual carbon emissions, at 130m tonnes, would approach those of Nigeria. Such numbers should be taken with a good deal of salt. Bitcoin’s energy use depends crucially on its price, which swings wildly…

But the general picture—that bitcoin is a dirty business—fits with other research. One oft-cited model, which uses publicly available blockchain data, reckons its global energy consumption is already equal to that of Kazakhstan, and that its carbon footprint matches Hong Kong’s.

Excerpts from The dirty truth: Totting up bitcoin’s environmental costs, Economist, Apr. 10, 2021